Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE HMO APPEAL AND 

GRIEVANCE PROCESSES 

Overview 
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


Linda Paddock, Project Leader Stuart Wright, Program Specialist


Jennifer Collins, Program Analyst Barbara Tedesco, Mathematical


Hugh Owens, Program Analyst Statistician


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 

Overview 

# SE RVICE$ 

@ fiaq 

+ 

%? JUNE GIBBS BROWN g

< Inspector General 2 

75 $ ‘++-- DECEMBER 1996

>

‘%d~~ 0EI-07-94-O0280 
TABLE OF CONTENTS 

PAGE 

PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1 

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

� Beneficiary Awareness 

� Communication of Denials 

. Compliance with HCFA Directives 

. Publications and Procedures 

. Statistics 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..2 

. Monitoring


. Standard Language


. Distinguishing Appeals and Grievances


. Data


. HMO/CMPManual


. Training


RELATED REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5 

Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6 

Appendix kHCFAResponse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l 
Medicare HMO Appeal And Grievance Processes 

PURPOSE 

To examine the operations of the Medicare risk-based Health Maintenance 

Organizations’ (HMOS) appeal and grievance processes. 

BACKGROUND 

The goals ofmanaged care are to provide preventive and coordinated medical care, 

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

methods of treatment and preventing unnecessary care. Because the payment 

mechanism of HMOS may provide incentives to limit services, the Social Security Act 

requires establishment of two separate and distinct processes to handle Medicare 

beneficiary complaints. 

The appeals process, which covers disputes involving denials of services or payment, 

begins within the plan and extends to outside administrative and judicial reviews. 

Regulations require a five-step appeals process and time limits for each step. 

The grievance process involves disagreements relating to services furnished for which 

the beneficiary has no further liability for payment. It also includes such issues as 

quality of care, physician behavior, waiting times for services, and involuntary 

disenrollment. Grievance regulations do not contain time frames or specific levels of 

review but call for “timely” transmission, investigation, decision and notification of 

results. 

We examined these processes through: a survey of 426 beneficiaries; a survey of 132 

risk-based HMOS; analysis of written procedures and marketing/enrollment material 

from these HMOS; and on-site reviews of 10 HMOS where we interviewed staff and 

examined 144 appeal and 148 grievance case files. 

FINDINGS 

BENEFICL4RYA W~NESS. A majo@ of beneficiaries are aware they have the right to 

fonmdly compkzin about swims and paymentx Howeve~ they have less Undentanding 

of the particular cimumstaruxx & which these righfi can be exenxkd. 

Eighty-six percent of respondents stated that they know they have the right to 

complain about their plan’s medical care or services. However, one-third of 

beneficiaries did not know or were not sure of their right to complain about specific 

problems for which filing an appeal or grievance is possible. 

1

COM’UUNKATION OF DENL4LS. The COmmunication between the HMO and the 

beneficiary that a service or payment has been dknied does not work wel 

When an HMO denies a semice or payment, the HMO is required to issue a written 

explanation for the denial, including the right to appeal. Thirty-four of 41 sumeyed 

beneficiaries who believed they had been refused referral to a specialist indicated they 

did not receive a denial letter. Also, our review of cases revealed that 39 out of 144 

files lacked documentation that service or payment denial notices were sent and an 

additional 6 cases did not include the required instructions on the beneficiaries’ right 

to appeal the decision. 

COMPLL4NCE WITH HEALTH CARE FIN4NCING ADMNI.STRATION (HCFA) 

DIRECT~S. HMOS do not frilly comp~ with HCFA directives for processing appak 

and grievances. 

Through our case reviews we noted problems involving failure to noti& beneficiaries 

of their appeal and grievance rights and lack of or delays in processing, referring, and 

resolving complaints. Furthermore, HMOS do not always correctly categorize appeals 

and grievances. Fifty percent of those we surveyed incorrectly categorized appeals as 

grievances while all 10 HMOS we visited improperly processed from 1 to 12 appeal 

cases as grievances. This distinction is important to beneficiaries because appeal cases 

are subject to independent Federal review for appropriateness of the HMO decision 

while disputes involving grievance issues are only subject to internal HMO reviews. 

PUBLICATIONS M PROCEDURES. HMOS’ numketingienrollrnent matenhk and 

operating procedures that we reviewed contain incowect or incomplete tiforrnation on 

appal and grkvance righlk 

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

HMOS use operating procedures that contain either incorrect or incomplete 

information regarding beneficiary appeal and grievance rights. 

STATISTICS. HMOS do not maintain statktical informatkm needed for the ongoing 

evaiktkm of appal and grievance practices. 

Eighteen percent of HMOS in our sample could not produce statistical information 

relating to numbers of appeal and grievance cases. This poses significant problems 

given that such statistical information is needed by HCFA, beneficiaries, and others as 

a basis for evaluating HMO performance. 

RECOMMENDATIONS 

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

appeal and grievance processes. It has created the Managed Care Appeals and 

Grievance Initiative work group organized to make program improvements in these 

functions. In 1995, they revised the annual review guidelines and standardized 

2

language in the “lock in” and “Evidence of Coverage” notices. The 1996 Medicare 

Handbook also included expanded appeal and grievance information and was sent to 

all Medicare beneficiaries. Additionally, HCFA is developing national guidelines for 

marketing materials, improving publications, educating outside entities, and 

highlighting beneficiary rights. While these efforts should favorably impact these 

processes, we believe there is still room for improvement. 

We recommend that HCFA take a number of actions to address problems highlighted 

in our studies. 

�	 MONITORING. Actively monitor HMOS to ensure bentficiati are iwued written 

determinations, ikch.iding ap~al rights, and emphasize the need for benejkiaries to 

communicate cikarly any disagreement thq have with HMO dkisions to deny 

services or 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 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, 

enrollment, and awareness sessions with Medicare beneficiaries and physicians 

should emphasize the importance of clear and open communication. 

�	 ST~ARD LANGUAGE. Work with HMOS to establkh staiu-kmdized appal and 

grievance kmguage requiremenfi in rnark@ing/enrollment materials and opmting 

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. 

3

--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. 

�	 DISTINGUISHING APPEALS AND GRIEVANCES. Ensure that HMOS correct~ 

distinguish and process appah and grievances. 

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. 

We also suggest that HCFA focus closely on whether HMOS: 

- are in compliance with all directives in processing of appeal and grievance 

cases; 

- include appeal rights in all initial determinations sent to beneficiaries; and 

- release initial determinations and reconsideration decisions in appeal cases 

according to established time frames. 

�	 DATA. Require HMOS to reprt Medicare contract specific dlzta on appal and 

griiwance 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). 

4

.	 HMO/Clk@ M4NUAL. Modijj theHMO/CMP Manual to cliuijj and specfi key 

requirements. This can be achieved by: 

- clari&ing the explanation and language required on the appeal and grievance 

issues to improve HMOS’ understanding of the differences and 

- establishing minimum requirements for documentation of appeal and 

grievance files so that an independent reviewer, based upon examining the 

files, will be able to follow and understand the adjudication by the HMO. 

� TRALMNG. Broaden ejfo~ to fomudly train HMOS on the appal and grievance 

processes. 

We noted a significant amount of turnover in HMO staff responsible for 

processing appeals and grievance cases during this inspection. In light of this 

turnover, there is a need to continue training on a routine basis. 

RELATED REPORTS 

Details concerning the findings and recommendations in these reports are 

contained in three separate technical reports. These reports are: 

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) 

Copies of these reports may be obtained from the Kansas City Regional Office, Office 

of Inspector General at (816) 426-3697. 

1 Competitive Medical Plan 

5 
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. 

6

APPENDIX A 

Health Care Financing Administration 

Response to Report 

A-1 
.fl”-’”~ 

DEPARTMENT OF HEALTH & HUMAN SERVICES Haalth Care FinancingAdministration

1 & 

%-& 

The Admhdstrator 

Waahlnston, OrC, 20201 

DATE: 

TO: 

JmoM 

su-Bi-Ec’R 

DEC1219W 

June Gibbs Brown 

Inspector Generil 

Bruce C. Vladeck 

Administrator 

Office of Inspector General (OIG) Draft Reports: CChledkueHMO Appeal 

and Grievance Processes-Ovemiew~ (OEMT-94a0280); “Medicare 

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

(C)EI-07.94-00281);‘Medicare HMO Appeal and Grievqce Processes--

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

Grievance Processes–Review of Cases,” (OEM7-94-00283) 

We reviewed the above-referenced reports that examine the operations of the Medicare 

risk-based HMOSappeal and grievance processes. We agree with the conclusion of your 

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

recommendations. Our detailed comments are attached, 

Thank you for the opportunity to review and comment cmthis report, 

Attachment 
Health Care FinanciIw Administration (HCF’A)Comments 

on 0fi5co of Iusuector General (OIG) 

Draft Reoorts: ‘%iCdiCW~ ~~tb Maintenance ~fVM.i=tiOXIS’ ~ 0) Atmeal and 

Grievance Processes “OvmieIWt’ (OEI-07-94-00280): M@iiM@WO Appe@~d 

&ievance Processes: “Beneficiaries’ Understamlim%“ fOEI-07-94-002811”%ledicare 

HMO APmal and CkievanceProcesses: “Survev of HMOsj’ (OEL07-94-00282); 

“Medicare HMO AoPeaI and Grievance Processes: “Review of Cases~’ 

(OE1-07-94-Q0283} 

OIG Reeomrnendatiom 

OIG recommends that HCFA take the follotig actions ti address probl- highlighted 

in the above stndies: 

o Actively monitor HMOS to ensure beneficiaries arc issued written determinations, 

0• Woik with 13MOsto establish standdw- ed appeal and grievantx language 

requirements in xnarketingknrollment materials and operating procedures. 

0 Ensure that HMOScorrectly distinguish and process appesls and grievances. 

0• Require HMOSto report Medicare contract-specitic data on appeal and grievance 

cases. 

0 Mod@ the KMO/CMP Manual to Glar@ and speci& key requirements. 

0 Broaden efforts to formally train IIMOS on the appeal and grievance processes. 

H(2?A Response 

We agree that improvements are needed. We have a comprehensive effort underway 

called the Medicare Appeals and fievance Initiative (MAGI) whioh includes a number 

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

objectives include identifying and meeting the information needs of beneficiaries 

regarding theu appeal rights; promoting hmlfi plan accountability by de~elopingand 

impruving information on appeals and making rneanhgfblinformation mop available; 

and refining mechanisms for monitoring and assisting in the continuous improvement of 

health plan performance. 
Page 2 

OIG and HCFAjointly ksued a Medicare benefieiwy advisory btieti entitl@ “What 

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

‘Ms easy-to-mad docu.nmt conta@ information on appeal rights, filing co~pltits, and 

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

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

managed Grimportions of the Md.ieare Handboolq which was sent to all beneficiariw this 

year. New data reporting requirements on plan-kwel reconsiderations an$under 

development and may be instituted as early as mid-1997. We also pkm to restructure and 

shorten the time lines fix handling health care decisions and reecmsiderationsby health 

plans. 

We are pleased to see the high level of lmowledge among Medicare kmrolleesregarding 

their right to appeal and fife complaints, This is an improvement over w earlier finding, 

and one we believe results from both Federal pro~am and pl~ effiwtstattxhmting 

beneficiaries and providing notices, With regard to the fintig that bewficiwies tid a 

lesser level of awareness as to when to exercise thek appe~ r@ts3 fofi~~g 

regulations clari&ing the right to appeal when services are reduced or terminated and 

when to provide notices of noncoverage at these points in care managemer$ should 

significantly help address “ti problem, We wil consider the recommendations k this 

area. 

Survev 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. Because oertttinstaff within the organizational structure of an HMO, orstaff 

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

t@@ng Gompkthh to the appealsor@ewmcetraG~it wouldbe importantoknow 

who responded to the two questions asked on this subject and what role they play in this 

particular process, We will bemotig to identi@ the S9WWpr~bl~~ns,SN~hw ski& 

tummr and confhsion over differences in Federal and statt terminology. 

The type of statistical information sought by 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 qo~ercj~ Medic~e, and Medicaid ~embers. 

New plan-level appeals reporting requirements should resolve the need for Medicare-only 

information, and respond to your recommendation 
Page 3�

We have concerns about the small sample sizes and number of cases used to present 

findings in this repofi However, the report identifies the types of mistalceshealth plain 

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

information and tmining about the Medieare managed care requirements (and how these 

differ from state requirements for thck commercial and Medieaid enrollees), We will 

consider the ~txxmmmndationspresenteiL