-——.——— ..— 

Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE HMO APPEAL AND 

GRIEVANCE PROCESSES 

Beneficiaries’ Understanding 
OFFICE OF INSPE~OR 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 Semites 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:


KANSASCITY REGION HEADCNJARTERS


Linda Paddock, Project Leader Stuart Wright, Program Specialist


Jennifer Collins, Program Analyst Barbara Tedesco, Mathematical


Hugh Owens, Program Analyst Statistician


Brian Ritchie, Program Analyst 

DALLASREGION 

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 

Beneficiaries’ Understanding 

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EXECUTIVE SUMMARY


PURPOSE 

To determine whether Medicare beneficiaries enrolled in risk-based Health 

Maintenance Organizations (HMOS) understand their appeal and grievance 

BACKGROUND 

Beneficiaries mayjoin arisk HMOthrough the Medicare program. Fora 

rights. 

predetermined monthly amount, theHMO provides Medicare- covered medically 

necessa~ 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. 

We collected information about beneficiaries’ experiences with appeal and grievance 

rights through a mail sumey of 222 randomly selected enrollees and 204 disenrollees. 

We supplemented the mail survey with telephone intemiews of 17 beneficiaries who 

indicated that they had filed a complaint. 

FINDINGS 

Eighty-sixpercentof respondentswereknowledgeableabout theirgeneralrightto make a 

formal comphzintabout theiiHMOISmedicalcareor services. 

Most respondents stated that they know they have the right to complain about their 

plan’s medical care or services. Sixty-six percent of respondents stated that they were 

informed of their appeal and grievance rights when they first joined the HMO. 

i 
IIoweve~ beneficimieswerelessawareof specificinstanceson whichthey mightexemise 

theirap~al andgrievancen!ghm 

The level of beneficiaries’ understanding of specific appeal and grievance situations 

was lower than their general knowledge. For example, 59 percent of enrollees were 

aware they could complain about the HMO refusing to pay for emergency care and 

only 49 percent of enrollees knew they could appeal an early discharge from the 

hospital. Also, disenrollees were significantly less informed than enrollees (e.g., 

enrollees were twice as likely as disenrollees to be knowledgeable of their right to 

appeal a non-hospital admission or early hospital discharge, and three times as 

knowledgeable of their ability to contest the plan’s refusal to pay a doctor or hospital 

for emergency care for which they were billed). 

Additionally, 45 percent of the respondents did not know, or were not sure that 

certain complaints are classified as appeals while others are classified as grievances. 

The distinction between appeals and grievances is important to beneficiaries because 

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

review for appropriateness of the HMO decision while grievances (such as quality of 

care issues) are only subject to HMO internal reviews. 

Most of the beneficiarieswho consideredtheyweredeniedsm”ces orpayment werenot 

giveninitialdeterminationnotices. 

Thirty-four of the 41 respondents who believed their primary doctor refused to refer 

them to a specialist indicated they did not receive a denial letter (called an “initial 

determination notice”), as required by Federal regulations. Also, only 21 out of 39 

respondents who reported their plan refused to pay a claim for services indicated 

receiving a letter furnishing their appeal rights. 

V&ryfew respondent reported@kg aformal compkzint.AU of thesecomplaintswere 

resolvedat the initialdisputekvel 

Only 26 respondents reported having filed complaints. Thirteen reported receiving a 

favorable resolution, seven received unfavorable decisions, five were not sure if their 

decision was favorable, and one beneficiary did not respond. All complaints were 

resolved at the initial HMO dispute level, or simply dropped by the beneficiary. No 

one requested further review of their denied complaints. 

RECOMMENDATIONS 

Health Care Financing Administration’s (HCFA) 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. Appeals language has 

been standardized in “lock in” and Evidence of Coverage notices, which are sent to all 

beneficiaries when they enroll in an HMO. In addition, appeal and grievance 

ii 
information was included in the 1996 Medicare Handbook, and expanded information 

on appeals was incorporated into HCFA’S Managed Care Directory. Currently HCFA 

is working with HMOS to develop national guidelines for marketing materials. 

HCFA also announced plans to produce a Managed Care Appeals Publication, an 

HMO Comparability Chart, a national data base of managed care “Questions and 

Answers”, and a Managed Care Fraud and Abuse Publication. They are continuing to 

educate outside entities, including advocacy groups, by providing more information on 

managed care matters, as well as highlighting beneficiary rights and protections in a 

managed care setting. While HCFAS efforts should continue to have favorable 

impact, we believe there is still room for improvement. 

To receive full benefits of the appeal and grievance protections, beneficiaries need to 

be aware of the processes, understand how the processes work, and when to use them. 

In that vein, HCFA should 

� activeZymonitorHMOS to ensurebenqjkiariesare issuedwrittendeterminations, 

includingappal rights,and emphasizethe needfor benejichzri~to cornnu.uu‘cate 

clearlyany disagreementhq have withHMO dkkions to &my sem”cesor payment 

for services. This can be accomplished by: 

- continuing HCFA’S extensive efforts to make beneficiaries aware of appeal 

and grievance provisions and of the need to communicate clearly any 

disagreement they may have with a physician’s decision to deny a requested 

service and 

- emphasizing to HMOS the requirements to make beneficiaries aware of 

appeal and grievance rights and to provide written initial determination 

notices when the patient communicates disagreement with a decision to deny 

a requested service or payment. 

Federal regulations are intended to protect the rights of beneficiaries to appeal 

the denial of services by HMOS, while maintaining the ability of the physician 

to treat the patient in line with his or her medical judgement. It is not always 

possible at the time of service for the physician to know whether a beneficiary 

believes that a service has been denied unless the beneficiary specifically 

communicates this to the physician. Therefore, future HMO marketing, 

enrollment, and awareness sessions with Medicare beneficiaries and physicians 

should emphasize the importance of clear and open communication. 

� workwithHiUOs to establishstandardizedappealand~“evance language 

requirementsin rnarketingkmrollment material and operatingprocedures. 

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

rights under the appeal and grievance processes and 

... 111 
- 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 semices are being sought. 

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 

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 REPOR’IS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1


INTRODU(XION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2


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


� Most Respondents Knowledgeable About General Rights . . . . . . . . . . . . . . . . . 5


� Beneficiaries Less Aware of Specific Issues . . . . . . . . . . . . . . . . . . . . . . . . . . ..5


� Initial Determination Notices Not Received . . . . . . . . . . . . . . . . . . . . . . . . . . . 7


�Very FewReport Filing A Formal Complaint . . . . . . . . . . . . . . . . . . . . . . . . ..9


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


Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...13


APPENDICES


k Analysis of Respondents vs. Non-respondents . . . . . . . . . . . . . . . . . . . . . . . . A-1


B: Estimates and Confidence Intervals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-l


C: HCFAResponse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..C-1

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 Grievance Processes: 

Overview, (OEI-07-94-O0280), 

Medicare HMO Appeal and Grievance Processes: 

Beneficiaries’ Understanding, (OEI-07-94-00281), 

Medicare HMO Appeal and Grievance Processes: 

Survey of HMOS, (OEI-07-94-O0282), 

Medicare HMO Appeal and Grievance Processes: 

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

1

INTRODUCTION


PURPOSE 

To determine whether Medicare beneficiaries enrolled in risk-based Health 

Maintenance Organizations (HMOs) understand their appeal and grievance rights. 

BACKGROUND 

Le@diUion 

Sections 1833and 18760fthe Social Security Act specify the requirements that HMOs


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


Administration (HCFA)to furnish Medicare covered sefices 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 by patients. 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 

semices 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

Ap~als & GrievanceBocesses 

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 seines 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. 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 m-ocess - According to 42 CFR, Sections 417.600-638, an appeal is any 

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

Federal regulations and the HMO/CMP P 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 services 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 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 (AU) 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 

~ Competitive Medical Plan 

3

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


or more.


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 semices 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 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.


METHODOIX)GY 

We identified our universe of currently enrolled and recently disenrolled beneficiaries 

from the July 1995 update of the Group Health Plan master file maintained by HCFA. 

This universe consisted of 2,171,946 beneficiaries who were enrolled on January 1, 

1995 and had not disenrolled, and 381,871 beneficiaries who had disenrolled between 

June 1, 1994 and June 30, 1995. From this universe, we selected a stratified random 

sample of 410 enrollees and 500 disenrollees. Three beneficiaries were dropped from 

the enrollment sample file as one had died and two had disenrolled since the update. 

We also dropped 113 beneficiaries from the disenrollment sample due to death. The 

final sample contained 794 beneficiaries (407 enrollees and 387 disenrollees). We 

received 426 questionnaires from respondents (222 enrollees and 204 disenrollees), 

representing a response rate of 54 percent. We analyzed the two groups (enrollees 

and disenrollees) separately. We also conducted an analysis, as explained in Appendix 

A, of respondents versus non-respondents to test for any bias of the sumey results. 

We supplemented the mail sumey with more in-depth telephone interviews with those 

individuals indicating complaint experience. Of the 426 beneficiaries who responded, 

only 26 (6 percent) said they had filed a complaint. We were able to recontact 17 of 

these beneficiaries and 10 of them indicated they filed formal complaints. 

We conducted our review in accordance with the Qualdy StandarAfor Inspections 

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

4

FINDINGS


EIGHTY-SIX PERCENT OF RESPONDENTSWERE KNOWLEDGEMM 

ABOUT THEIR GENERAL RIGHT TO MAKE A FORMAL COMPLAIIWl 

ABOUT THEIR HMOS MEDICAL CARE OR SERVICES. 

c	 In comparison, an earlier Office of Inspector General study2 found that 75 

percent of beneficiaries were aware of the ability to file appeals and grievances. 

.	 Sixty-six percent of respondents indicated they were informed of their appeal 

and grievance rights when they first joined the HMO. In the telephone follow 

up survey, six respondents who indicated they were @ informed when they 

first joined were asked when they learned. Three of the six learned of their 

right to appeal when the payment/sexvices were denied (two learned when their 

referral was refused and one called the HMO when an out-of-plan hospital bill 

was received). Of the remaining beneficiaries, two responded that they just 

knew of their rights and one was still unaware. 

HOWEVER BENEFICIARIES WERE LESSAWARE OF SPECIFIC INSTANCES 

ON WHICH THEY MIGHT EXERCISE THEIR APPEAL AND GRIEVANCE 

RIGHTS. 

�	 More than one third of beneficiaries did not know or were not sure of their 

right to complain about specific problems for which appeals and grievances are 

possible. Only 45 percent of respondents knew they could appeal when the 

plan decided to discharge them from the hospital when they believed they 

should stay. Also, 47 percent of beneficiaries were aware they could complain 

about non-admission to the hospital. (See Appendix B for the weighted 

analysis for those answering either no or not sure to these questions.) 

.	 A majority of enrollees were aware of their right to complain about specific 

problems, but the level of understanding of the specific cases was lower than 

their general knowledge. (See Table 1 for these unweighed percentages.) For 

example, 66 percent of enrollees knew they could complain about not being 

provided Medicare covered services. However, only 49 percent of enrollees 

knew they could appeal when the plan decided to discharge them from the 

hospital when they believed they should stay. 

.	 Among disenrollees the understanding was lower, as demonstrated by Table 1. 

Enrollees were twice as likely as disenrollees to be knowledgeable of their right 

to appeal a non-hospital admission or early hospital discharge. Additionally, 

20ffice of Inspector General, Department of Health and Human Setices, 1994, 

Beneficiary Perspectives of Medicare R&k HMOs. (OEI-06-91-00730). 

J 
enrollees were three times as knowledgeable of their ability to contest the 

plan’s refusal to pay a doctor or hospital for emergency care for which they 

were billed. Enrollees were also more aware of their ability to grieve about an 

HMO physician’s behavior or their HMO facilities. 

Table 1“


BeneficiaryAwareness of Appeal/Grievance Issues*


Not No, Cannot File


Sure ADDeal/Grievance Yes


Appeal Issues Disenrouees Enrollees Disenrouees Enrollees Dkenrollees Enrollees 

your HMO refusing to pay a doctor 12% 10% 68% 31% m% 59% 

or hospital for your emergency care (17) (20) (95) (59) (27) (112) 

that you were billed for? 

your HMO deciding to discharge you 10% 19% 71% 32% 19% 49% 

from the hospital when you believe (13) (35) (92) (60) (24) (92) 

you should stay? 

Not No Cannot File 

Sure AtmeaI/Grievance Yes 

Grievance rssues Enrollees Disenrotlees Enrollees DisellrolkesEnrollees 

delays in getting to see a specialist? 6% 10% 54% 30% 40% 60% 

your primary HMO doctor not taking 8% 9% 55% 27% 37% 64% 

your health complaints seriously? - (13) (17) (82) (52) (55) (125) 

*Multiple responses were permitted in the sumey document and not all beneficiariesresponded to every question. See 

Appendix B for the weighted analysk and confidence intervals for those who answered either no or not sure to these 

questions 

6

Appendix B furnishes the weighted analysis and confidence intervals for those who


answered no and not sure to these questions (see Table 1 for the unweighed


percentages). When weighted, the sample approximates the disproportionate


distribution of enrollees and disenrollees in the universe. A Chi-square test was


performed to test for independence between being informed and enrollees versus


disenrollees (see Appendix A). This test showed that these two factors are dependent


with significant chi-square test statistics. However, the response rates to these


questions were much less than the overall response rate to the survey. The


disenrollees’ responses ranged from 129-151 while the enrollees’ responses ranged


from 187-197. Therefore, the response rate for disenrollees for these questions was as


low as 33 percent and the response rate for enrollees was as low as 46 percent.


�	 Forty-five percent of the respondents did not know, or were not sure that 

certain complaints are classified as appeals while others are classified as 

grievances. The protection afforded by external, impartial review in the 

appeals process is not afforded to grievance disputes. Beneficiaries who are 

unaware that their complaint is an appeal could potentially be denied the right 

to due process, or an independent Federal medical review for appropriateness 

of the HMO decision. The effect of this lack of knowledge could cause 

beneficiaries out-of-pocket liability and health risks from denial of needed 

services. 

The distinction between appeals and grievances can be complicated. Even the


HMOS who administer this program do not completely understand it.


Additional support for this finding is found in the OIG companion reports3


which show that 50 percent of the HMOS are incorrectly identifying appeals as


grievances. Likewise, review of actual appeal and grievance case files revealed


that all of the plans visited incorrectly processed appeals as grievances in 26


percent of complaints reviewed.


MOST OF THE BENEFICIARIES WHO CONSIDERED THEY WERE DENIED


SERVICES OR PAYMENT WERE NOT GIVEN INITIAL DETERMINATION


NOTICES.


Inherent in the concept of managing care is the plan’s ability to choose among 

acceptable alternative approaches to care. This means that beneficiary access to some 

services may be restricted, even if the beneficiary wants or thinks the services are 

necessary. 

30ffice of Inspector General, Department of Health and Human Semites, 1996, 

Medicare HMO Appeal and Grievance Processes: Survey of HMOS. (OEI-07-94-00282). 

Office of Inspector General, Department of Health and Human Services, 1996, 

Medicare HMO Appeal and Grievance Processes: Review of Cases. (OEI-07-94-00283). 

7 
The issues involving these decisions not to provide or pay for particular services and


how they are resolved differ between fee-for-service and managed care. Inthe


fee-for-service environment, beneficiaries are free to seek treatment from another


provider iftheir physician does not believe aparticular seficeshould be provided. By


contrast, managed care beneficiaries’ recourses may be limited to disenrollment or


being held financially liable for obtaining services outside the plan.


Because of these lock-in provisions of risk HMOS, the appeals and grievance


regulations were established to provide a recourse for Medicare beneficiaries when


they disagree with an HMO’s denial of a setice or payment for a semice. This


indication of disagreement by the patient can be verbal or in writing, directly with the


HMO physician when receiving health services or later with designated HMO offices,


such as customer services. When a beneficiary disagrees, the HMO is required to


issue a written determination notice to the beneficiary reflecting the reasons for the


denial and the beneficiary’s right to seek a reconsideration. The HMO/CMP Manual


instructs HMOS to “Educate plan physicians and representatives on beneficiary appeal


rights, including how and when a member may file an appeal. If a physician denies an


enrollee’s request for a service, he/she should ask the enrollee if he/she would like to


appeal. The plan must issue a written determination to the member whenever the


member disagrees with the physician’s decision or wants to appeal a service denial.”


It was our design in the survey to find out if beneficiaries who believed that they had


been denied a referral to a specialist, or had been denied payment for a medical


service, had received proper written notification. Although we did not validate their


responses with their respective HMOS, our survey does indicate that some


beneficiaries who considered that they were denied services or payment were not given


initial determination notices. We found that:


�	 Forty-one respondents believed that they had been refused referral to a 

specialist. Only three of these 41 stated they received a letter explaining why 

they could not get this care. Thirty-four of the 41 indicated they did not 

receive a notice that the referral was denied. Three others were not sure if 

they got a letter and one did not respond to this question. 

�	 Thirty-nine respondents stated their plan refused to pay a claim for services. 

Of these 39, 21 indicated receiving a letter furnishing their appeal rights. Nine 

respondents did not receive a notice, six were not sure, and three did not 

answer. 

We understand that the subject of written initial determinations is quite complex. 

Patients do not always clearly express a request for referral to a specialist or clearly 

indicate to their primary care physician that they believe such a referral has been 

denied them. Likewise, this ambiguity can lead patients to believe that services have 

been denied while the prima~ care physician believes that additional diagnostic or 

alternative treatment protocols are being pursued prior to making a final decision on 

referral to a specialist. However, the explanation may simply be that the HMO has 

8

not adequately educated both the physician and the beneficiary about how and when a 

member can appeal denials of services. Furthermore, the procedures for providing 

these notifications may simply be inadequate. 

This is consistent with a companion report4 on case file reviews which found 27 

percent of appeal files lacked documentation that an initial determination was issued. 

In that inspection, we also found that five HMOS sent initial determinations in six 

cases without including the required appeal rights. 

VERY FEW RESPONDENTS REPORTED FILING A FORMAL COMPLAINT. 

ALL OF THESE COMPLAINTS WERE RESOLVED AT THE INITIAL DISPUTE 

LEVEL 

Twenty-six respondents reported filing complaints. We telephoned those who


authorized contact, to obtain greater insight into beneficiary knowledge. We were able


to reach 17 beneficiaries, 10 of which indicated they actually filed a formal complaint.


Three of the remaining seven acknowledged they did not file complaints; two


characterized their complaints as informal; one complained to the nursing home; and


one attempted telephoning the HMO but was unsuccessful. This follow-up data


suggests that only a small number of beneficiaries may be attempting to resolve access


and payment for service problems through the appeal and grievance processes.


.	 Thirteen of the 26 mail respondents who filed complaints reported they 

received a favorable resolution, however 5 were not sure (see Table 2). Seven 

received unfavorable decisions and one beneficiary did not respond. This is 

supported in the telephone survey we conducted, where only 5 of the 10 who 

formally complained indicated receiving a favorable resolution (See Table 3). 

Despite this favorable decision, two of the five beneficiaries switched to a 

different plan and one returned to fee-for-service. 

.	 Of the seven beneficiaries reporting an unsatisfactory outcome in the mail 

survey, six were disenrolles (See Table 2). We did not determine if the 

disenrollees returned to fee-for-service or whether these beneficiaries switched 

to another plan. A slightly lower percentage of disenrollment was experienced 

by those who appealed based upon our follow-up telephone survey; 4 out of 10 

received an unfavorable decision and, when asked, 3 of these 4 switched to 

another plan (See Table 3). The fourth beneficiary stayed with the HMO but 

switched their primary care physician. 

40ffice of Inspector General, Department of Health and Human Services, 1996, 

Medicare HMO Appeal and Grievance Processes: Review of Cases. (OEI-07-94-00283). 

9 
� 

� 

� 

Table 2 

Mail Survey 

Table 3 

Telephone Sumey 

Filed Complaint = 10 Yes No Not Sure 

SwitchedHMOS 2 3 1 

SwitchedPCP o 1 0 

One of the three respondents notified of a refusal to refer filed a complaint. 

Only 6 of the 34 beneficiaries @ notified filed a complaint. 

Eight of the 21 respondents notified of a claim denial filed a complaint. Only 

one of the nine who were @ notified complained. 

All complaints were resolved at the initial dispute level, or simply dropped by 

the ben~ficiary. No one in either of our surv~ys requested fur{her re~i~w oftheir denied complaints. This supports a study conducted by NDG5 in which 

they found that the majority of enrollees who “jump” out of plan (usually out of 

dissatisfaction), do not first attempt to resolve differences with plan providers 

or through plan grievance systems. 

The low number of beneficiaries who did not file a formal complaint, out of those who 

considered they were denied, could be due to many reasons. Possible reasons include: 

the beneficiaries did not want to contest the HMO decision; they agreed with the 

physician; or the beneficiaries did not know they could file an appeal. 

5Richardson, David A., James Phillips, Dean Conley, Jr., “A Study of Coverage 

Denial Disputes Between Medicare Beneficiaries and HMOS,” Network Design Group, 

Inc., under HCFA Cooperative Agreement No. 17-C-90070/2-Ol, September 1993. 

10 
RECOMMENDATIONS


Health Care Financing Administration’s (HCFA) 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. Appeals language has


been standardized in “lock in” and Evidence of Coverage notices, which are sent to all


beneficiaries when they enroll in an HMO. In addition, appeal and grievance


information was included in the 1996 Medicare Handbook, and expanded information


on appeals was incorporated into HCFA’S Managed Care Directory. Currently HCFA


is working with HMOS to develop national guidelines for marketing materials.


HCFA also announced plans to produce a Managed Care Appeals Publication, an


HMO Comparability Chart, a national data base of managed care “Questions and


Answers”, and a Managed Care Fraud and Abuse Publication. They are continuing to


educate outside entities, including advocacy groups, by providing more information on


managed care matters, as well as highlighting beneficiary rights and protections in a


managed care setting. While HCFA’S efforts should continue to have favorable


impact, we believe there is still room for improvement.


To receive full benefits of the appeal and grievance protections, beneficiaries need to


be aware of the processes, understand how the processes work, and when to use them.


In that vein, HCFA should


�	 activelymonitorHMOS to ensurebeneficiariesareksued writtendeterminations, 

includingappal rights,and emphasizethe needfor beneficiariesto commuru”cate 

clearlyany disagreementheyhave withHMO deczkionsto deny serw”cesorpayment 

for sena”cex This can be accomplished by: 

- continuing HCFA’S extensive efforts to make beneficiaries aware of appeal 

and grievance provisions and of the need to communicate clearly any 

disagreement they may have with a physician’s decision to deny a requested 

service and 

- emphasizing to HMOS the requirements to make beneficiaries aware of 

appeal and grievance rights and to provide written initial determination 

notices when the patient communicates disagreement with a decision to deny 

a requested service or payment. 

Federal regulations are intended to protect the rights of beneficiaries to appeal 

the denial of services by HMOS, while maintaining the ability of the physician 

to treat the patient in line with his or her medical judgment. It is not always 

possible at the time of service for the physician to know whether a beneficiary 

believes that a service has been denied unless the beneficiary specifically 

communicates this to the physician. Therefore, future HMO marketing, 

11 
enrollment, and awareness sessions with Medicare beneficiaries and physicians 

should emphasize the importance of clear and open communication. 

� workwithHMOS to establkhstandardtiedappal andgrievancelanguage 

requirementsin marketinglenroi+lment rateriahand operatingprocedures. 

- 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. 

12

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 

HCFAS 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. 

13

APPENDIX A


ANALYSISOF RESPONDENTSVS. NON-RESPONDENTS 

An important consideration in surveys of this type is the bias that may be introduced 

into the results if the non-respondents are different than those who responded to the 

survey. As a test for the presence of any bias, we obtained information from the 

Enrollment Database on all of the individuals whom questionnaires were sent. The 

variables we analyzed were selected because they might determine whether an 

individual would respond to the sumey, as well as affect the individuals’ actual 

response. For all 794 individuals selected for the sample, we analyzed age, race and 

sex. Race and sex are categorical variables which were tested using a chi-square with 

the appropriate degrees of freedom. Age is a continuous variable which was tested 

using the t-statistic. for a difference between means. 

The results are presented in the attached table. The Chi-square values given in the 

table provide a test of the difference in the distribution of the respondents versus the 

non-respondents for the variable of interest. Also provided in the tables are the 

response rates by the difference values of the variables. 

The Chi-square test statistic was not significant when the variable sex was analyzed. 

Therefore, we conclude that whether or not an individual responded was not related 

to their sex. 

When the respondents vs. non-respondents were analyzed by race, the response rate 

was dependent on race. Race was categorized by white vs. non-white since the 

numbers would have been too small to analyze if all five race categories were kept 

separate. To determine the effect of the relationship between response rate and race, 

we undertook an analysis of the non-respondents. Assuming that the non-responders 

would have responded the same as the responders by enrollee and disenrollee, we 

calculated a hypothetical global response to the question of being informed of 

grievance and appeal rights when first joining the HMO. This calculation gave an 

estimate of those claiming they were informed of their appeal and grievance rights 

when they first joined of 64.5 percent which differs by 2.1 percentage points from the 

66.4 percent overall rate found among responders. 

Age was analyzed using a comparison of means with the t-test. Although the t-statistic 

was significant, the difference in the mean ages for responders vs. non-responders was 

only 1.26 years. Since the sample size was 794, this small difference was significant. 

Had a smaller sample been selected this difference would not have been significant. 

Therefore, no adjustments were made based on a bias of age. 

The tables below show the results of the chi-square for the sex and race variables and 

t-test for the age variable. 

A-1

EE 

CHI-SQ= 1.70 

DF=l 

White 

Non-White 

Overall 

CHI-SQ=22.54* 

DF=l 

Respondents 

RESPONDERS VS. NON-RESPONDERS 

SEX 

SB BE 

Resp{ 

391 

32 

423 

T-TEST FOR AGE 

368 73.67 

I 1 

IINon-Respondents I 426 I 72.41 

t =2.09” 

df=792 

*Statistically significant at the 95 percent 

A-2

APPENDIX B


ESTIMATESAND CONFIDENCE INTERVALS 

The chart below summarizes the estimated proportions and the 95 percent confidence 

intervals for key statistics presented in this report. The estimates refer to the 

beneficiaries’ understanding of their appeal and grievance rights as well as their 

knowledge of various situations for which they may file complaints. 

95% 

Weighted Confidence 

Survey Question Percent Interval 

Finding #1, Most Respondents Are Knowledgeable About The General Right To Ffle Appeals And 

Grievances 

Proportion of beneficiaries who knew they have the right to


complain 86.2V0 82.2% - 90.2%


Proportion of beneficiaries who knew they could complain when


they first joined 66.47. 60.890- 72.19Z0


Finding #~ However, Beneficiaries Are Less Aware Of Speeilic Grounds On Which They Might 

Exercise Their Appeal And Grievance Rights. Proportion of beneficiaries who did not know or 

were not sure they could complain about: 

not being provided Medicare covered services 38.3T0 32.5’ZO-44.170 

delays in seeing primary physician 46.0% 40.Oqo -52. Iyo 

their HMO refusing to pay for emergency care 47.2% 41.170- 53.2% 

their primary physician’s behavior 42.7% 36.7% - 48.6% 

their prima~ physician not taking health complaints seriously 39.770 33.9% - 45.6% 

non-admission to the hospital 52.7IZo 46.6% - 58.9% 

early discharge from the hospital 55.470 49.297. - 61.6?Z0 

non-referral to a specialist 43.6% 37.6% - 49.6’%0 

delays in seeing a specialist 43.2% 37.1% - 49.2% 

the HMO facilities (such as cleanliness or safety) 44.370 38.270- 50.4% 

Finding #4, Almost Half Of The Respondents Did Not Understand The Difference Between 

AP- and Grievances 

Proportion of beneficiaries who did not know or were not sure


their complaints could be either appeals or grievances 45.070 39.2% - 50.8?Z0


B-1

APPENDIX C 

Health Care FinancingAdministration 

Response to Report 

c-1 
[%.8-’”%


DEPARTMENT OF HEALTH & HUMAN SERVICES Haalth Care Financing Administratbn 

%.m4L 

The Admlnlstratu 

Washlngtun, D,c, 20201 

DEC12W6 

DATE: 

TO;• June Gibbs Brown 

Inspector General 

FROM• BruceC. Vladeck 

Administrator 

suBi-Ec’-R Office of Inspectm General (OIG) Draft Reports: “Medkme HMO Appeal

and GrievanceProcesses-ovemiew:’ (OEI-07-9440280); ‘Medicare 

HMO Appeal and Grievance pWtMCW-B~db~eS’ Understanding,” 

(OEI-07-94-00281); ‘Medicare HMO Appealand Grie~ce Processes--

Sumey of HMOs,” (OEI-07-94-00282); “Medicare HMO Appeal and 

GrievanceProcesses–Reviewof Cases,”(OEI-07-94-00283) 

We reviewed the above-referenced reports that examine the operatkm of the Nkxbre 

risk-based HMOS appeal and grievance processes. We agreewith the conclusion of your 

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

recommendations. Our detailed wnunents are attached, 

Thrmk you for the opportunity to review and comment on this report, 

Attachment 
Health Care FimmcinE Administration (HCFA} Comments 

on Office of InsuectorGeneral(OIG) 

DraftReports:“Medicarc!HealthMaintenance@ZflIlkZ8tiOIM’ (KM 0) Atmeal and 

&iwance Processes “Overview.” @EI-07-94-00280k MedicareHMOAppe@ apd 

Grievance Processes: “Beneficiaries’ Understantig” (OEIa7-94a2811: ”~eficwe 

HMoAPDeal andGrievanceProcewes: “SurveYof Ii?l@s.” (OEI-07-94-00282);

“Medicare HMO Armeal and (3II“evance ProGesses: “Review of Cases,” 

[OEI-07-94-00283] 

OIG Racmnmendations 

OIG recommends that IICFAtake the following =tions to addressproblemsl@hl@ted 

in tic above studies: 

o Actively monitor HMOS to ensure beneficiaries am issued vnittm determinations, 

o	 Work with HMOS to establish stmkdze - d appeal and gcievan6e language 

requirements in marldngknrolhnent materhls and operating procedures, 

o Ensure that HMOS comectly distinguish and process appeak and grievances. 

o	 Require HMOS to report Medicare contract-specific data on appeal and grievance 

cases, 

o Mod@ the HMO/CMP Manual to clar& and spe@ key reqtiemmts. 

o Broaden efforts to formally train IIMOS on the appealand grimmce processes, 

EKI?A Rewonse 

We agree thatimprovements are needed. We have a comprehensive effort undemay 

called the Medicare Appeals and Gbance Initiative (MAGI) which includes a number 

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

objectivesinclude identi&ingand meetingthe information needs of beneficiaries 

regarding their appeal rights; promoting hd~ plan accmmtabiily by developing and 

inqh’ovitig inflmnation on appeals and making memingfid information mo~ available; 

and refining mechanisms for monitoring and assisting in the continuousixnpro~elnent of 

lIealth phm performance. 
Page 2 

OIG and HCFAjointly issued a Medicare beneficky advisorybulleti entitl~ “What 

Medicare Beneficiaries Need to Know About HMO Arrangements: Know Your Rights.” 

This easy-to-mad docunmt conta@ information cm appeal rights, filing compltiti, and 

rights to emergency and urgently needed services. Copies of this bulletin are being 

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

managed Gare portions of the Medkare Handbook wtich was seti to ~ bemfkmw MS 

year. New datareportingrequirements on phm-level reconsidmtions m“ under 

development andmaybe instituted as earlyasmid-1997. We also planto rwtructureand 

shortenthetimelinesfor handling health care decisions ad reconsiderations by,health 

plans. 

Beneficiaries’ Understanding 

We are pleasedto seethehighlevel of knowledge among Medicare knrollees &arding 

their right to appeal and file complaints, This is an improvement over M earlier finding, 

andonewe believeresultsfrombothFederalprogramandplw effiirts;ateducating 

beneficiaries and providingnotices, With regard t.uthe fintig that benefkiwim bd a 

lesser level of awareness as to when to exercise their appealrights, forthcotig 

regulations clari&ingthe rightto appeal when servic& are reduced or tcrminate~ and 

when to provide notices of nonGoverage at these points in ewe managemen~ should 

significantly help address‘&isproblem, We will considerthe recomnwndatkmsin this 

area. 

Survey HMOS 

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 in 

this report. Becausecertainstaffwithinthe organizationalstructureof an HMO,01staff 

at delegatedmediealgroupswithinthe HMO’snetwork are generallyresponsiblefor 

assigning Gompkintsto the appealsor @Gvance tiacl$ it wouldbe importantto how 

who responded to the two questions asked on this subject and what role i%eyplay in this 

partkular proms, Wewillbemovingto ititi@ the SQWW problem, NXh as SW


mmw and confi.tsionoverdil%eiencesin Federal and state terminology. 

The type of statistical information sought by OIG staff has not been a requirement for 

Medicare-contracting health plans. Thereforq it is not surprising that many plsns 

aggregate the appeals information across ~,o~ercj~ Medic~e, and Medicaid rqembers. 

New plan-leveI appeals reporting requirements should resolve the need fox Medicare-only 

infommtion, and respond to yow recommendation. 
Page 3 

Rew�GWOfc%ses

We have concerns about the smallsamplesizes and number of cases used to present 

findings in this repoti However, the report identifiesthetypesof mists@ healthplans 

make in operatinganappealssysterq audtheneeds thatplanshave for clear,distinct 

informationandtminingabout the Medicare managed care requirements (and how these 

diffiz ftom state requirementsfor their commercial and Me&aid enrollees), We will 

consider tie retxxnrnendationspresented.