Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE HMO APPEAL AND 

GRIEVANCE PROCESSES 

Sutvey of HMOS 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452,


is to protect the integrity of the Department of Health and Human Services programs


as well as the health and welfare of beneficiaries served by them. This statutory


mission is carried out through a nationwide program of audits, investigations,


inspections, sanctions, and fraud alerts. The Inspector General informs the Secretary


of program and management problems and recommends legislative, regulatory, and


operational approaches to correct them.


Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the


Office of Inspector General. It conducts short-term management and program


evaluations (called inspections) that focus on issues of concern to the Department, the


Congress, and the public. The inspection reports provide findings and


recommendations on the efficiency, vulnerability, and effectiveness of departmental


programs.


The OEI’S Kansas City Regional Office prepared this report under the direction of


James H. Wolf, Regional Inspector General. Principal OEI staff included:


KANSAS CITY REGION HEADQUARTERS


Jennifer Collins, Project Leader Stuart Wright, Program Specialist


Linda Paddock, Program Inspection Barbara Tedesco, Mathematical


Assistant Statistician


Hugh Owens, Program Analyst Brian Ritchie, Program Analyst


DALLAS REGION


Judith Tyler, Program Analyst


To obtain a copy of this report, call the Kansas City Regional Office at (816)426-3697,

Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE HMO APPEAL AND 

GRIEVANCE PROCESSES 

Survey of HMOS 
EXECUTIVE SUMMARY


PURPOSE 

To evaluate the effectiveness of Health Maintenance Organizations’ (HMOS) 

processing of Medicare beneficiary appeals and grievances. 

BACKGROUND 

Beneficiaries mayjoinarisk HMO through the Medicare program. Fora 

predetermined monthly amount, the HMO provides Medicare covered medically 

necessary services. Thegoals ofthis coverage are to provide coordinated medical 

care, offer comprehensive benefits, and contain costs by using the most cost-efficient 

methods of treatment and preventing unnecessary care. As a protection for 

beneficiaries, the Social Security Act requires Medicare HMOS to have two separate 

and distinct processes, an appeal and a grievance process, to handle beneficiary 

complaints. 

In order to protect beneficiaries from inappropriate denials of services or payment, 

the Act requires that Medicare HMOS establish an appeal process to handle these 

types of complaints. If an enrollee disagrees with the HMO decision to deny services 

or payment, the enrollee has 60 days to file a request for reconsideration. If the 

HMO’s decision is against the beneficiary in whole or in part, the HMO is required to 

automatically send the case to the Network Design Group within 60 days for an 

independent Federal review. 

All other complaints such as those relating to quality of care are processed under a 

separate internal grievance procedure. Under this procedure, there are no specific 

time frames or preordained levels of review established by law. However, HMOS are 

responsible for timely transmission, an investigation, decision, and notification of the 

results. 

To determine how HMOS were implementing these processes, we surveyed 132 

Medicare risk-based HMOS that had at least 450 enrollees in April 1995. We also 

obtained and analyzed marketing/enrollment materials and operating procedures from 

these HMOS. 

FINDINGS 

HMOS z%cowectlycategorized appl and grievance iwues. 

Fifty percent of the HMOS responding to our sumey categorized appealable issues as 

grievances, while 36 percent categorized grievance issues as appeals, and 10 percent 

reported using incorrect processes for cases involving both appealable and grievable 

issues. The distinction between appeals and grievances is important to beneficiaries 

i 
because appeal cases (denials of services or payment) are subject to independent 

Federal review for appropriatenessof the HMO decision while grievances are only 

subjectto internal HMO reviews. 

HMOS’ mar4@ing@ud7ment znaterids and operating procedures that we rm”ewed contaiiz 

incomzt or incomplete informationon appeal and grievance rights. 

Sixty-six percent of the HMOS distribute materials to beneficiaries and 69 percent of


HMOS use operating procedures that contain either incorrect or incomplete


information regarding beneficia~ appeal and grievance rights. Some examples include


no information on beneficiary rights, incorrectly combined appeal and grievance


processes, and inaccurate definitions or no distinction between appeals and grievances.


HMO.Ydo not maintain statistical kfonnation neixkd for the ongoing evahuztion of 

appeal and ~“evance pmctices. 

Twenty-three HMOS (18 percent) could not produce the statistical information 

requested for this inspection relating to numbers of appeal and grievance cases. This 

poses significant problems considering that such statistical information is needed by 

the Health Care Financing Administration (HCFA), beneficiaries, and others as a 

basis for evaluating HMO performance. 

Some HMO staff report they do not have a HCFA HMO/CM~ Manual - othtm report 

need for tiprovernents in the Manual 

Eight HMOS (six percent) report that staff responsible for processing appeals and 

grievances do not have the HMO/CMP Manual, the manual created by Office of 

Managed Care for HMOS to use as guidelines in these processes. Others report a 

need for improvement in the guidelines for appeals and grievances (10 percent), 

additional services (23 percent), and emergency/urgent care (7 percent). 

RECOMMENDATIONS 

HCFA’S Office of Managed Care is making substantial efforts to improve the HMO 

appeal and grievance processes. It has recently created a work group - Managed Care 

Appeals and Grievance Initiative - organized to make program improvements in these 

functions. Currently, they are also working with HMOS to develop national guidelines 

for marketing materials, improve informational publications, research data reporting 

needs, and have obtained funds to evaluate problems in the area of appeals and 

grievances. While HCFAS efforts should favorably impact these processes, we believe 

there is still room for improvement. 

1 Competitive Medieal Plan 

11 
We recommend that HCFA 

� ensure that HMOS correctly distinguishand process appah and gn”evamxx 

HCFA can accomplish this during their annual visits to HMOS. However, we 

suggest that HCFA conduct case reviews as well as examine the operating 

procedures to determine that appeals and grievances are processed correctly. 

� work with HMOS to establkh standimdizedappeal and grievance kmguage 

requirements in marketinglenrolbnent muterid and operating procediires. 

- In marketing materials, provide up front information to beneficiaries on their 

rights under the appeal and grievance processes and 

- In enrollment materials, more thoroughly educate beneficiaries about their 

specific rights under the appeal and grievance processes, including 

--a detailed overview of the types of services, lack of services, or 

situations which may be appealed or grieved. 

--when and under what circumstances further levels of appeal are 

permitted. 

--clarification that only appeals and not grievances, are subject to 

independent Federal review. 

--the difference between the definitions of emergency and urgent care at 

the time medical services are being sought. 

�� require HMOS to repit Medicare contract spe+c data on appeal and grievance 

cases. At a minimum, include: 

- number of appeal and grievance cases (including formal and informal 

grievances); 

- number of cases resolved internally and externally, and outcomes of cases; 

- issues involved in cases; and 

- time it takes to resolve the cases (upper and lower limits, median/mean). 

AGENCY COMMENTS 

We solicited and received comments on our draft report from HCFA. They agreed 

with the conclusion of our reports that improvements are needed and indicated that 

they are working to implement a number of our recommendations. We are pleased 

that HCFA agrees that improvements are needed in the appeal and grievance 

processes, and we recognize that changes are in the process of being made through 

111 
the Medicare Appeals and Grievance Initiative (MAGI). However, because HCFA’S 

response does not specifically address the recommendations contained in our reports, 

we are unsure whether the problems identified in our report will be fully addressed 

through this initiative. As a result, it will be important for HCFA to include in their 

response to the final report an action plan that specifically addresses each 

recommendation. 

The full text of HCFA’S comments is included as an appendix to this report. 

iv 
TABLE OF CONTENTS


PAGE


EXECUTIVE SUMMARY


RELATED REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1


INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..2


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5


� Incorrectly Categorized Appeal and Grievance Issues . . . . . . . . . . . . . . . . . . . . 5


� Marketing/EnrollmentMaterials and Operating Procedures . . . . . . . . . . . . . . . . 6


� Statistical Information Not Maintained . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


�Improvement in HMO/CMP Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...9


RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...11


Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12


APPENDICES


A Most Common Grievable/Appealable Issues Reported . . . . . . . . . . . . . . . . . A-1


B: Procedural and Marketing/Enrollment Information . . . . . . . . . . . . . . . . . . . . B-1


CHCFAResponse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c-1

RELATED REPORTS


This is one of a series of four reports relating to 

Medicare risk HMO appeal and grievance processes. 

The four reports are: 

Medicare HMO Appeal and 

Overview, (OEI-07-94-O0280) 

Medicare HMO Appeal and 

Beneficiaries’ Understanding, 

Medicare HMO Appeal and 

Grievance Processes: 

Grievance Processes: 

(OEI-07-94-00281) 

Grievance Processes: 

Survey of HMOS, (OEI-07-94-00282) 

Medicare HMO Appeal and Grievance Processes: 

Review of Cases, (OEI-07-94-00283) 

1

INTRODUCTION


PURPOSE 

To evaluate the effectiveness of Health Maintenance Organizations’ (HMOS) 

processing of Medicare beneficiary appeals and grievances. 

BACKGROUND 

Lq@ation 

Sections 1833 and 1876 of the Social Security Act specify the requirements that HMOS


must meet in order to enter into a contract with the Health Care Financing


Administration (HCFA) to furnish Medicare covered services to beneficiaries. The


goals of HMO coverage are to provide access to medical care while containing costs


by using the most cost-efficient methods of treatment and preventing unnecessary care.


In addition, HMOS can reduce the medical management complexities experienced by


elderly patients with multiple chronic conditions, the paperwork burden of a


“fee for service” system, and financial barriers to obtaining preventive and medically


necessary health care.


Unlike traditional “fee for service,” HMOS are designed to coordinate care through a


primary care provider, offer comprehensive benefits, and reduce or contain the costs


of medical treatment. They operate under a fixed annual budget, based on the


prepaid premiums. Except for fees of a few dollars for each doctor’s visit or


prescription, the premium is to cover all of a patient’s medical needs which include


everything from checkups to open-heart surgery.


Risk and Cost Plans 

There are three types of Medicare HMO plans included in the Act. Generally, the 

differences involve the method used by HCFA to reimburse the HMO for providing 

services and delivering medical services to beneficiaries. The three types of contracts 

are risk-based, cost-based, and Health Care Prepayment Plan (or HCPP) HMOS. The 

latter two types are paid on a reasonable cost basis, wherein any differences in actual 

costs and interim payments are reconciled and adjusted with HCFA at the end of the 

year. Risk-based are reimbursed on a prepaid cavitation basis with no retrospective 

adjustment. While cost-based and HCPP HMOS give beneficiaries a choice of 

physicians that they see, a risk-based plan requires enrollees to be “locked’ into only 

its contracted physicians unless emergency or urgent care is needed. 

As of March 1, 1996, there were 197 risk-based HMO plans, 27 cost-based plans, and 

54 HCPPS nationwide, which accounted for almost 4 million Medicare HMO enrollees, 

or 10 percent of the total Medicare population. While Medicare enrollment in 

managed care has increased 67 percent since 1993, HCFA reports that enrollment in 

risk-based plans has grown 105 percent. 

2


Appeal & Grikvance I%nxsses�

One of the most effective ways HMOS contain costs is by using family practitioners or 

internists as “gatekeepers” to control a patient’s access to services. The patient 

chooses one doctor as a primary care physician; from then on that doctor serves as 

first arbiter for any treatment. The primary care physician provides medical 

examinations and treatments, and serves as a “gatekeeper” to specialty care, except in 

emergency and urgent care situations. 

Because the payment mechanism of HMOS provides a strong incentive to manage 

utilization of enrollee medical services (including the institution of a physician 

“gatekeeper” and use of medical practice guidelines), the Act requires that HMOS 

establish an appeal process to handle disputes Medicare enrollees have involving a 

denial of or payment for services they believe should be covered by the HMO. Other 

kinds of complaints such as quality of care received are handled under a grievance 

procedure. Prior to May 1995, only risk and cost-based plans were required to have 

these processes in place. HCPPS now must also comply with these requirements. 

HCFA directives require HMOS to inform beneficiaries of their appeal/grievance 

rights at enrollment, in member handbooks, and annually through a newsletter or 

other communication. 

Appeals Process - According to 42 CFR, Sections 417.600-638, an appeal is any 

dispute involving a denial of services or payment for services made by the HMO. 

Federal regulations and the HMO/CMP Manual require a five-step process and time 

limits for each step. HMOS must make an initial determination upon receiving an 

enrollee’s request for sewices or payment for services within established time frames 

(24 days if the case is complete and no later than 60 days if development is needed). 

Each plan is required to make a decision on information they currently have within 

this time frame. If the decision is to deny services or payment, the enrollee has 60 

days from the date of the initial determination to file a request for reconsideration 

(appeal) in writing unless “good cause” can be shown by the beneficiary for the delay. 

The HMO then has 60 days to make a reconsideration decision. 

If the HMO’s reconsideration decision is against the beneficiary in whole or in part, 

the HMO is required to automatically forward the case to HCFA for an independent 

review to determine if the decision is appropriate. Due to the increasing numbers of 

appeal cases, HCFA contracted with Network Design Group (NDG) in January of 

1989 to fulfill this function. The number of appeals reviewed by NDG has varied in 

the last 3 years from a high in 1993 of 3,806, to 2,945 in 1994, and 3,691 in 1995. 

Beneficiaries whose cases are not resolved fully in their favor at the NDG level can 

request a hearing before an Administrative Law Judge (ALJ) if the disputed amount is 

at least $100. After this level, any party (including the HMO) may request a review by 

the Department of Appeals Board if there is dissatisfaction with the ALJ’s decision or 

dismissal. The final recourse in the appeals process is a Federal court review if the 

Board denies the party’s request for review, and the amount in controversy is $1,000 

or more. 

3

Grievance Process - Grievances are any complaints about a Medicare enrollee’s 

experience with the health plan and/or its providers, excluding determinations 

involving payment for services or denial of services (which are subject to the appeals 

process). Examples of grievable issues include quality of care, physician behavior, 

involuntary disenrollment concerns, and waiting times for services. 

Guidance for processing grievances is found in 42 CFR, Sections 417.600 and 417.606, 

and in Section 2411 of the HMO/CMP Manual. The guidelines do not provide for 

time frames or specify levels of review, but call for “timely” transmission, an 

investigation, decision, and notification of the results. While appeal cases that are not 

resolved fully in favor of the beneficiaries are subject to independent HCFA, ALJ, 

Appeals Board, and Federal court review, beneficiary grievances are only subject to 

internal levels of review within the HMO. 

The Office of Managed Care (OMC) within HCFA is responsible for policy and 

oversight of HMOS and ensuring there is compliance with the appeal and grievance 

regulations. To assist plans in these processes, OMC has created the appeal and 

grievance sections in the HMO/CMP Manual. 

METHODOI-XIGY 

In this inspection, we surveyed and collected procedures and marketing/enrollment 

materials from 132 risk-based HMOS, each with at least 450 Medicare enrollees as of 

April 1995. The survey instrument was tested in three HMOS to ensure 

understandability and comprehension. Our universe of HMOS came from HCFA’S 

“Monthly Report of Medicare Prepaid Health Plans.” We did not include cost-based 

and HCPPS in the sample as the majority of Medicare beneficiaries are enrolled in 

risk-based HMOS. We received survey responses from all 132 risk-based HMOS and 

compiled this data into frequency distributions. We also conducted a content analysis 

of all materials received from the HMOS comparing them to Federal regulations and 

the HMO/CMP Manual, and whether they provide a reasonable approach for 

processing beneficiaries’ complaints. 

This report is based on our review of self-reported information and materials received 

from the HMOS. 

We conducted our review in accordance with the Qualify Standard for Iinpections 

issued by the President’s Council on Integrity and Efficiency. 

4�
FINDINGS


HMOS 1NC0RRECTL% CATEGORIZED APPEAL AND GRIEVANCE ISSUES 

� Fifiy percent of the HMOS categorized appealable iwues as grievances. 

The incorrect processing of denials of services or payment for services as


grievable issues has important implications. Because grievable issues are only


subject to HMOS’ internal review, beneficiaries are being denied due process as


established by 42 CFR 417.622 for appeal cases, and the right to an


independent Federal review of an HMO’s negative determination. Further,


beneficiaries may suffer out-of-pocket expenses and potential health related


problems from inappropriate denials.


To determine how HMOS categorize complaints, we asked the plans in two


separate survey questions to identify from a list of options which complaints are


considered appealable and which are grievable. The number of errors in


categorizing appeal and grievance issues is shown in Table 1. The table


illustrates the amount of confusion HMOS had in categorizing the issues. In


completing their surveys, some HMOS responded that certain issues were


considered as both appeals 

HMOsl LNCORIUXII.Y 

and grievances. 

Table 1 

CATEGORIZING APPEALS & GRIEVANCES 

HMOS did not consider HMOS considered these 

Appealable Issues these issues as AppeAabl# iSSUtS as Grievabl~

Emergency versus urgent care 

Grievable Issues 

Dissatisfaction with rnedkal care 

Beneficiary complaints not taken 

seriously 

Waiting times for services 

18 (14%) 

HMOS considered these 

issues asAppealable 

received 11 (8%) 

6 (5%) 

5 (4%9) 

X3(25%) 

HMOS did not mnsider 

these issues as Grievable 

7 (5%) 

10 (8%) 

6 (5%) 

1 Some HMOS considered the issue as both an appeal and grievance. 

2 Fifty percent or 66 HMOS were in error in one or more area when asked which issues they 

consider appealable. 

3 Thirty-six percent or 47 HMOS were in error in one or more area when asked which issues they 

consider grievable. 
A further analysis of the responses is provided in Appendix A (page A-1) which 

presents information on themost conzrnon grievance issues reported byHMOs. As 

noted at the bottom of the Appendix, some HMOS reported that their most common 

issues received and resolved through the grievance process were actually appealable 

issues. 

� lldy-six pement of the HMOS categotied grievance iwues as appeak. 

Although grievable issues can involve serious allegations of quality of care or 

mistreatment of beneficiaries, current regulations only require HMOS to 

process them internally. They are not subject to an independent, Federal 

review. Nevertheless, treating grievance cases as appeals adds unnecessary 

costs, HMO staff time to prepare, and can consume NDG’s time if the case 

reaches that level (NDG is responsible only for processing beneficiary appeal 

cases). Refer to Table 1 for details illustrating HMO’s confusion in 

categorizing appeal and grievance issues. 

For further details on this issue, see the lower portion of Appendix A 

(page A-2). One HMO reported the most common issue received and resolved 

through the appeals process was actually a grievable issue. 

� Some HMOS incowectly process cases with both appealable and gnkvable iwues. 

The HMO/CMp Manual Section 2400.1 requires that HMOS process 

complaints that contain both appeal and grievance issues separately and 

simultaneously rather than through one process or the other. In our survey, 

thirteen (10 percent) of 132 plans reported they do not process these issues 

separately and simultaneously. Three of these plans indicated they handle both 

appeal and grievance issues through the grievance process. 

HMOS’ MARKETING/ENROLLMENT MATERIALS AND OPERATING 

PROCEDURES THAT WE REVIEWED CONTAIN INCORRECT OR 

INCOMPLETE INFORMATION ON APPEAL AND GRIEVANCE RIGHT’S 

The HMO/CMP Manual Section 2402 requires HMOS to inform all enrollees of the 

appeal and grievance procedures and to provide a written description at the time of 

enrollment as part of the membership materials. It requires them to clearly 

distinguish between appeal and grievance issues in all written explanations. For 

appeals, HMOS are to describe all steps of the process, from the initial determination 

by the health plan to the judicial review rights after exhausting administrative appeal 

rights. It is to include time limits, amount in controversy requirements, and 

procedures for filing appeals. The grievance process explanation must include how to 

file, time limits for filing, and time limits for each step in the process. 

As part of this inspection, we requested that HMOS send us their marketing and 

enrollment materials distributed to Medicare beneficiaries. Our analysis was 

specifically based on materials received from HMOS. 

6�
We found that 66 percent of the HMOS distribute materials to beneficiaries that 

contain either incorrect or incomplete information on their appeal/grievance rights in 

HMOS. Further, we found that 69 percent of HMOS use operating procedures for 

processing appeals and grievances that are deficient. Examples are HMOS that have 

� no information on beneficiary rights. 

c	 inaccurate definitions of appeal and grievance issues, unclear distinctions 

between them, or no information included. 

�	 inaccurate definitions of emergency and urgent care, unclear distinctions 

between them, or no information related to these issues. 

� incorrect or no money amounts included within the steps of the appeal process. 

� incorrect procedures that combine appeals and grievances processes. 

� incomplete explanation of the grievance process. 

� erroneous extra steps and time added to the appeals process. 

�	 inaccurate or incomplete time frames included in explanations of steps in the 

appeals process. 

Appendix B identifies the frequency in which we noted errors by category. These 

errors could impact the level of understanding beneficiaries have of these processes. 

Incomplete or incorrect information in materials distributed to them may cause 

confusion. Further, inaccurate operating procedures may result in HMOS incorrectly 

processing appeals and grievances. 

HMOS DO NOT MAINTAIN STATISTICAL INFORMATION NEEDED FOR 

THE ONGOING EVALUATION OF APPEAL AND GRIEVANCE PRACITCES 

llventy-three HMOS could not produce the statktical information related to appeah and�

grievances.�

Although all HMOS reported that they retain statistics on appeals and grievances, and 

review data for trends and processing times, Table 2 reveals that almost one-fifth of 

the HMOS were not able to produce statistical information on appeals and grievances. 

These figures are potentially understated; they do not include those HMOS where 

incomplete statistical information was submitted with the sumey nor those that 

responded with “N/A’ when the plan meant it does not retain data in the areas we 

requested. 
TABLE 2 

HIKOSCOULD NOT PROVIDE STATISTICAL INFORMATION 

Reasons for Lack of Information Number of HMOS


Could not separate statistical information by contract on appeals


and grievances when the HMO had multiple Medicare risk contracts. 14 (11%)


Could not separate Medicare from commercial enrollees to provide


information on appeals and grievances. 3 (2%)


Could not produce data for a specified time because they either did


not retain it during the time requested or never had retained this information. 3 (2%)


Could not separate appeal cases from grievance cases in the database. 2 (1.5%)


Could not include all grievance cases filed by enrollees when the HMO processed


“formal” and “informal” grievances separately. 1 (1%)


Total Number of HMOS 23 (17.5%) 

HMOS reprted the folkmikg muin reasons for beikg unable to provhie this reformation:�

� they do not retain data separately when an HMO has multiple Medicare 

contracts and all appeals and grievances were processed at headquarters; 

� they retain combined data of commercial and Medicare complaints; and 

� they do not have the staff or computer systems to collect or retain the data. 

This results in difficulty in data collection and analysis of the data. The information 

HMOS do report may be skewed or unreliable as not all HMOS retain the same data, 

if it is retained at all. For example, one large HMO in our sample initially reported it 

had 345 grievances. However, upon further investigation, it actually had over 37,000 

grievances. The problem was that the HMO initially reported only the grievances that 

they considered as “formal” and not the “informal” grievances. Thus, it appeared the 

HMO had very few grievances when in fact it had thousands. 

Lack of consistent terminology for complaints, and the collection, retention, and 

reporting of data makes it extremely difficult to truly compare HMOS. This is highly 

problematic given that such statistical information is needed by HCFA, beneficiaries, 

and others as a basis for evaluating HMO performance. 

8�
While HMOS are not currently required to report this information to HCFA, OMC 

officials and a number of reports cite the importance and appropriateness of 

collecting, retaining, and reporting data.2 

SOME HMO STAFF REPORT THEY DO NOT HAVE A HCFA HMO/CMP 

MANUAL - OTHERS REPORT NEED FOR IMPROVEMENTS IN THE 

MANUAL 

Eight HMOS (six percent) report that staff responsible for processing appeals and 

grievances do not have the HMO/CMP Manual. This is problematic considering that 

the Manual serves as a major guidance directive for HMOS in preparing local 

guidelines and for training staff. Of these HMOS, three improperly categorized appeal 

and grievance issues. 

While most plans report this Manual is sufficient, others report areas that they believe 

need improvement. 

General Guidelines 

Thirteen HMOS (10 percent) report that guidelines for appeal and grievance 

issues in the HMO/CMP Manual are unclear and inadequate. Of these HMOS, 

six improperly categorized appeal and grievance issues. 

HMOS also indicated the need for simplified definitions of appeals and 

grievances and examples of each. They stated that providing information in 

“lay” terms on these processes would be helpful in explaining them to 

beneficiaries. HMOS indicated that appeal and grievance terminology 

established by HCFA for HMO materials is difficult for beneficiaries to 

understand. 

Additional Services 

Thirty-one HMOS (23 percent) reported that guidelines on “additional services” 

relating to appeal rights are inadequate and unclear. Of these HMOS, 

14 improperly categorized appeal and grievance issues. 

2 HCFA’S OMC has incorporated this issue in their “Managed Care Appeals & Grievance 

Initiative,” a workgroup designed to improve these processes; General Accounting Office (GAO), 

“Medicare: Federal Efforts to Enhance Patient Quality of Care (April 1996), 29; GAO, “Medicare: 

Increased HMO Oversight Could Improve Quality and Access to Care” (August 1995), 10-11; Public 

Citizen’s Health Research Group, “Serious problems for Older Americans In Health Maintenance 

Organizations” (May 1995), 10; The Columbia Law Review 1994,’’Notes: Securing Access To Care in 

Health Maintenance Organizations: Towards a Uniform Model of Grievance and Appeal Procedures” 

(June 1994), 22. 

9�
An “additional service” is one that is covered under the HMO’s plan but is not


covered under traditional fee-for-service Medicare. For example, denial of


payment or authorization for a hearing aid that the beneficiary believes is


needed, which is covered in the basic plan, is appealable. However, optional


supplemental benefits elected by the beneficiary and paid for through


additional premium payments are grievance issues.


Most HMOS reported that this issue is confusing and unclear. Very little is


included in the HMO/CMP Manual and the regulations on “additional services”


and appeal rights. The plans indicated that clearer demarcation between what


is appealable and grievable and examples of each would be helpful.


Emergency and Urgent Care 

Nine HMOS (seven percent) reported that the difference between emergency 

care and urgent care, as defined by HCFA guidelines, is problematic. 

HMOS believe that the definition of “urgent care” is very broad and requires 

the plans to cover an extremely wide range of out-of-area services. Several 

plans indicate that it would be helpful for both HMOS and beneficiaries if 

HCFA would provide working examples of each. 

Although emergency and urgent care are defined in both the regulations and 

the HMO/CMP Manual, emergency room services was the second highest 

appeals issue in cases sent to NDG in 1993 and 1994. In NDG’s 1994 data 

report, 595 (19 percent) of the appeals received involved emergency services 

disputes. Of these cases, NDG upheld 68 percent and, on average, these cases 

involved out-of-pocket liability of $579. This could be a result of beneficiary 

confusion about the difference between emergency and urgent care. 

Our companion report “Medicare HMO Appeal and Grievance Processes: 

Beneficiaries’ Understanding” also provides detailed information on beneficiary 

comprehension of billing disputes involving emergency services. In our survey, 

only 20 percent of the disenrollees and 59 percent of enrollees knew they could 

appeal their HMO’s refusal to pay a doctor or hospital for emergency care for 

which they were billed. 

10

RECOMMENDATIONS


HCFA’S Office of Managed Care is making substantial efforts to improve the HMO 

appeal and grievance processes. It has recently created a work group - Managed Care 

Appeals and Grievance Initiative - organized to make program improvements in these 

functions. Currently, they are also working with HMOS to develop national guidelines 

for marketing materials, improve informational publications, research data reporting 

needs, and have obtained funds to evaluate problems in the area of appeals and 

grievances. While HCFAS efforts should favorably impact these processes, we believe 

there is still room for improvement. 

recommend that HCFA 

ensure that HMOS cowect~ distinguishand process appah and gn”evances. 

HCFA can accomplish this during their annual visits to HMOS. However, we 

suggest that HCFA conduct case reviews as well as examine the operating 

procedures to determine that appeals and grievances are processed correctly. 

work with HMOS to estabbh standardized appeal and gn”evance language 

requiiemenfi in marketinglenrollrnentmaterials and operating procedures. 

- In marketing materials, provide up front information to beneficiaries on their 

rights under the appeal and grievance processes and 

- In enrollment materials, more thoroughly educate beneficiaries about their 

specific rights under the appeal and grievance processes, including 

--a detailed overview of the types of services, lack of services, or 

situations which may be appealed or grieved. 

--when and under what circumstances further levels of appeal are 

permitted. 

--clarification that only appeals and not grievances, are subject to 

independent Federal review. 

--the difference between the definitions of emergency and urgent care at 

the time medical sewices are being sought. 

require HMOS to report Medicare contract specijticcikta on appeal and gn”evance 

cases. At a minimum, include: 

- number of appeal and grievance cases (including formal and informal 

grievances); 

- number of cases resolved internally and externally, and outcomes of cases; 

- issues involved in cases; and 

- time it takes to resolve the cases (upper and lower limits, median/mean). 

11

AGENCY COMMENTS


We solicited and received comments on our draft report from HCFA. The complete 

text of their response is included as an appendix to this report. A summary of their 

comments and our response follows. 

The HCFA agreed with the conclusion of our reports that improvements are needed 

and indicated that they are working to implement a number of our recommendations. 

We are pleased that HCFA agrees that improvements are needed in the appeal and 

grievance processes, and we recognize that changes are in the process of being made 

through the Medicare Appeals and Grievance Initiative (MAGI). However, because 

HCFA’S response does not specifically address the recommendations contained in our 

reports, we are unsure whether the problems identified in our report will be fully 

addressed through this initiative. As a result, it will be important for HCFA to include 

in their response to the final report an action plan that specifically addresses each 

recommendation. 

Although HCFA acknowledges the case review report identifies mistakes made by 

health plans, they expressed concerns about the sample sizes and number of cases 

reviewed. We agree that this sample could not be used to make national projections 

of the incidence of mistakes. However, the number of cases reviewed and outcomes 

of the reviews are more than adequate to indicate the existence of significant problems 

in HMO processing of appeals and grievances. 

Finally, HCFA raised questions about the knowledge and expertise of the individuals 

who prepared the HMOS’ responses to our survey documents. We requested and 

must assume that knowledgeable HMO staff completed our survey. We also note that 

beneficiaries making inquiries regarding appeals and grievances are likely to be 

interacting with these same individuals or their staff. 

12

APPENDIX A


HMO SURVEY - Report on Process Operations 

MOST COMMON GRIEVABLE ISSUES REPORTED BY ~os 

Waiting time for services 19 

Phvsician demeanor 8 

Dissatisfaction with services or provider services 7 

Physician preference in medical office 1 

Podiatry disputes 1 

Total Responses 137 

1 HMOS responded with multiple issues resulting in 137 total. 

2 HMOS reported the most common issues received and resolved through the grievance 

process actually were appealable issues. These HMOS are incorrect in processing these 

issues as grievances. 

A-1

MOST COMMON APPEALABLE ISSUES REPORTED BY HMOS 

Number of I-IJUO 

Total Responses 137 

1 HMOS responded with multiple issues resulting in 137 responses. 

2 The HMO reported the most common issue received and resolved through the appeal 

process actually was a grievable issue. This HMO is incorrect in processing the issue as an 

appeal. 

A-2

APPENDIX B


PROCEDURAL AND MARKETING/ENROLLMENT 

REPORTED BY THE Hh’@ 

Procedures 

Area inError 

HMO does not mention money amounts for appeals steps


or has incorrect amounts. 11


HMO will not give a reconsideration determination unless


case is $100 or more. 1


B-1 

INFORMATION 

Marketing/ 

Enrollment? 

Ddinition 

8 

1 
Marketing/ 

Proeedur62 Enrolhned 

Area in Error Processing 

Area in Error Time Requirements 

HMO does not mention they will make the initial


determination within 60 daw of receipt of request. 15 9


1 Total number of errors is beyond 132 HMOS - many HMOS had multiple errors in the materials.


2 Sixty-nine percent or 91 HMOS had either incorrect or incomplete information in their operating procedures for


processing appeals and grievances.


3 Sixty-six percent or 87 HMOS had either incorrect or incomplete information in their marketing/enrollment


materials for processing appeals and grievances.


4 HMOS were asked to provide the HMO procedures for processing appeals, not all steps in the appeal process.


B-2

APPENDIX C 

Health Care Financing Administration 

Response to Report 

c-1 
*-E 

%

DEPARTMENT OF HEALTH& HUMAN SERVICES HaalthCare FinancingAdministratbn cc

‘%%“= 4

DATE: 

To: 

FROM 

suB&’m 

The Admlnlstrator 

waahlmton, O,G 20201 

DEC121996 

June Gibbs Brown 

Inspector General 

Bruce C. Vladeck 

Administrator 

Office of Inspector General (OIG) Draft Reports: “MedicareHMOAppeal 

and Grievance Processes-Ovcfiew~ (OE1-07-9440280); ‘Medicare 

HMO Appeal and Grievance Processes--Benefidaries’ Undemanding,” 

(0131-07-94-00281);“Medicare J3M0 Appeal and Grie~ce Processes--

Sumey of l-UviOs,”(OEI-07-94-00282); %fedicare IIM~ Appeal and 

Grievance Processes-Review of Cases,” (OEI-07-94-00283) 

we reviewed the above-referenced reports that examine the opera.tkjnsof the Mcdkxtre 

risk-based HMOSappeal snd grievance prooesses. We agreewith the conclusion of your 

report that improvements are needed and are working to implement a number of your 

recommendations. Our detailed wmments are attached, 

Thankyou for the opportunity to review and comment on this report, 

Attachment 
Health CareFinancingAdministration (HCI?A) Comments 

on Office of InsuectorGemeral (OIG} 

DraftReuorts:“MedicareHealthMaintenance~lZ-tiOIE’ (EM 0) Atmeal and 

Grievance Processes “overview.” (OEI-07-94-00280): Medicare HM O Appeal and 

Grievance Processes:” Beneficiaries’ Understan&n~” (OEI-07-94-0028 11: “Medicare 

HMO At.meal .aml Grievance Processes: “Survev of HMOs,” (OEL07-94-00282); 

“Medicare HMO APPeaI and Grl“evance ProGesses; “Review of Cases,” 

[0331-07-94-00283] 

OIG Recommendations 

OIG recommends that HCFA take the follotig actionsto aikhess problems highlighted 

in the above studies: 

o Actively monitor HMOSto ensure beneficiaries arc issued written determinations, 

o	 Work withHMOSto establish standmb‘ ed appeal and g&wan* language 

requirements in marketingkmrollrnentmaterials and operating procedures, 

o Ensure that HMOScorrectly distinguish and process appeak and grievances. 

o	 Require HMOSto report Medicare contract-specific data on appeal and &evsnce 

cases, 

o Mod.@ the HMO/CMPManualto Glai& and speci& key requirements, 

o Broadeneffortsto formally trah IIMOS on the appeiil and grievance proGesses. 

HCFA Rewonse 

We agree that improvements am needecl We have a comprehensive effort underway 

called theMedicareAppeals and Griewuwe Initiative (MAGI) whiGhincludes a number 

of objectives that are direetly related to the recommendations in your reports. Our 

objectives include identifjdng and meeting the information needs of beneficiaries 

regarding their appeal rights; promoting hmlfi plan accountability by developing and 

imprutig information on appeals and making rnemingful information mop available; 

and refining mechanisms for monitorkg andassistingin the continuousimprovement of 

health plan performance. 
Page 2 

OIG and HCFA jointly issued a Medicare benefi&uy advisory bulleti entit.l@ ‘What 

Medicare Beneficiaries Need to Know About HMO Arrangements: K.nowYour R@hts.” 

This easy-to-read docuumt contairq informationon appeal@#@ filing CWWMMS, and 

rights to erneqymcyand urgently neededserviea. Copiesof thisbulletin are being 

distributed nationally. Additionally, significant changes were made to improve the 

managedcm portionsof theMtxlkareHandbook w~* ww $entto @ W@WU@ MS 

year. New datareportingrequirements on pIan-level reconsiderations are”undex 

development andmaybe institutedas early as rnid-1997. We also pkn to restructureand 

shorten the time lines for handlinghealthewe decisions and reeansiderations by,health 

plans. 

Beneficiaries’ Understanding 

,We are pleased to see the hi~ level of knowledge among Medieareknrolkes&irding 

theirrightto appeal and file complaints, This is an improvement over w earlier finding, 

and onewebelieveresults hornbothFederalprogramandpkm@@ts%t educating 

beneficiaries and providingnotices,Withregard@thefintig thatbwwfkiwkstid a 

lesser level of awareness as to when to exercise their appeal rights, forthcoming 

regulations cku-iijdngthe right to appeal when servicek are reduced or tcrninate~ and 

when to provide notices of noncove~ageat these points in care managemen~ should 

significantly help address “&isproblem, We wiU consider the recommendations in this 

area. 

SurvevEIMOS 

Incorrect categorization of appeals as grievances is an area for improvement identiled in 

our MAGI initiative. However, we question the percentage and methodology set forth i-u 

this report. BecausecertainstafEwithinthe organizationalstructureofanHMO,orstaff 

at delegated medical groups within the HMO’s nemor~ are generally responsible for 

assigning complaintstu theappeakorgrkvanGctiaGf$it wouIdbe importantohow 

who respondedto thetwo questions asked On this subject ancl what role they play in this 

particular process,Wewillbemovingto icknti&the some problems)surhw s!..S5 

turnoveraid coml!hsionoverdifferencesin Federalandstateterminology. 

The @e of statistical tiorrnation soughtby OIG staff has not been a requirement for 

Medicare-contracting health plans. Therefore, it is not surprising that many plans 

aggregate the appeals information across ~,~erci~ MedicWe,andMedicaid~embers. 

New plan-leveI appeals r~port.ingrequirements should resolve the need for Medicare-only 

information, and respond to your recommendation. 
Page 3 

Row“CwOfc.ases 

We have concerns aboutthe smallsamplesizes andmmiberof cases usedto present 

tidings in this reporb However,thereportid-es the Iypesof mistakes healthplans 

make in operating an appeals syst~ and the needs that plans have for clear, disti.net 

inf’tion and tmining about the Medieam managed cam requirements (and how these 

Mm from state requirements for their oommereial and Medioaid enrollees), We will 

consider the nxxxnrnendations presented.