r

_ 

Depatiment of Health and Human Services 1 

OFFICE OF 

INSPECTOR GENERAL

A REVIEW OF HMO QUALl~ 

ASSURANCE STANDARDS REQUIRED BY 

MEDICAID AGENCIES 

[ 

W“T’WBER 1992 OEI-05-g2-()()110 
OFFICE OF INSPE~OR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452 as 

amended, is to protect the integrity of the Department of Health and Human SeMces’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspections amducted by three OIG operating component the Office of Audit Stxvices, the 

Otice of Investigations, and the Office of Evaluation and Inspections. The OIG also informs 

the secretaxy of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES 

The OIGS Office of Audit SeMces (OAS) provides all auditing seMces for HHS, either by 

cxmducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors in 

-g out their respective responsibilities and are.intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. . 

OFFICE OF INVESTIGA~ONS 

The 01(3’s Office of Investigations (01) c6nducts crimina~ civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by provide= The investigative efforts of 01 lead to criminai convictions, 

administrative sanctions, or civil money penalties. The ’01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

‘TheOIGS Office of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Departmen~ 

the Congress, and the public. The iindings and recommendations contained in these inspection 

reports generate rapi~ accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. This report was prepared in the Chicago 

Regional Office under the direction of WWlam C. Mora~ Regional Inspector General and 

Natalie Coe~ Deputy Regional Inspector General. Project staf& 

REGION HEADQIMKIERS 

John hL Traqk (Project Leader) Vlcki A Greene 

Suzanne G. Johnson (Lead Analyst) 

Jean Dufresne 

Thomas F. Komaniecki 

To obtain a copy of this report, call the Chicago Regional Office at (312) 3S3-4124. 
Depa~ment of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

. 

A REVIEW OF HMO QUALl~ 

ASSUWNCE STANDARDS REQUIRED BY 

MEDICAID AGENCIES


SEPTEMBER 1992 OEI-05-g2WlI0 
--

EXECUTIVE SUMMARY


PURPOSE 

To describe health maintenance organization (HMO) quality assurance (QA) 

standards and the methods used by State Medicaid agencies to monitor compliance 

with them. 

.. 

BACKGRQ~-” .-

w	 The Federal Government has encouraged the use of “managed care” or “coordinated 

Ca;e” systems, such as HMOS, by Medicaid agencies to curb rising expenditures in 

these programs. Managed care systems reduce health care expenditures through a 

combination of preventative health care measures and by monitoring, and to some 

extent controlling, the medical utilization of both provider and patient. As of June 30, 

1991, approximately 5 percent of Medicaid recipients were enrolled in HMOS. 

The extent to which an HMO can control utilization and costs, may mean the 

difference between its financial success or failure. Consequently, the incentives for 

these providers to limit semices makes QA an essential component of managed care 

programs. Realizing this, Medicaid agencies mandate their contracting HMOS to 

perform certain QA functions to ensure that Medicaid recipients receive appropriate 

and good quality care. 

In Fiscal Year (FY) 1992, Medicaid programs will spend an estimated $127 billion for 

medical care. Almost $72.5 billion of this amount will come from Federal matching 

funds. The Federal share for FY 1993 is projected to be $84.5 billion, a 16.5 percent 

increase over FY 1992 outlays. 

METHODOLOGY 

We intemiewed Medicaid officials in 24 States and the District of Columbia 

concerning the QA functions their contracting HMOS are required to perform. 

Information and documentation was obtained on how Medicaid agencies verify HMO 

compliance with their QA standards. Additional corroborating evidence on Medicaid 

agency compliance procedures was obtained from structured intemiews yith 28 

HMos. 

FINDINGS 

Medicaid agencies use stnctur~ process and outcome QA standards to mordtor 

contractor HMOS. 

i 
. . .

. All Media-d agencies use some form of 

Str’UChld standards. 

� Structural standards offer an 

assessment of the nature of an HMO’s 

� � health care resources. These ��� �� ������ “.~a~t..m=th, 2.5.”:. resources include the facili~, staff and 

Pmgratlis the ruies of procedure. 

A&!cw’io. ca&* 2s . 

Wntteii::gil?tai ,,....,”. :.’,...q. +.;.. Mdidd agencies have Cam-ed over fee-for.. ‘-

setiee process standards to their HMO program. ...

P~ocE&:; ““. ‘. “ : ; ““’:‘:’:: .~ ~~~, ‘ , � Credentialing, utilization review, 

.;. . ............., ciiidej!iaiiii~ ’”””’‘ i:” ‘“z~.”: ~~ medical record review and other 

....,, . 

,,..,,.., . . . 

ItiiiididPatieic.‘:. .’ *6 

process standards that parallel 

; *Da~ .. . , Medicaid fee-for-service experience 

have been readily accepted by ‘“ ‘“’”util&ti.RkW.“’~ “’[~ 13 Medicaid agencies as good managed 

care QA standards. 

.:,~w.ng ~~mn , ~“ Medicaid agencies rely on complaint standards 

QuaI@ Prbblcnf 

TCiUiiititms/”: .,.J , more than patient satisfaction sumeys and health 

Cliiii’’lP&uia’ ‘‘ .: ..& outcome reviews to ensure quality. 

::GdidciitiCi:” 

� Outcome standards provide 

IWtagcment ;, . information on how patients fared 

:Omm .: . I while enrolled in the HMO. Health 

outcome standards monitor HMO 

srANDArUm ,: medical services over an extended 

“CbmpWin&At& ~~~ ““ ,Z:: period of time to ensure that they 

‘Ptiin “ .: : 3 

: “PITnxd** .: ‘ , meet accepted community standards 

Pati4&&itiaCaction ‘8. of medical practice. 

~,: ~~ 

Hdtii Outmm. ;.6 Sumeys of patient satisfaction with 

Monit&jng,~t@’ ~‘, HMO operating procedures, 

complaints and grievances provide ,. 

•Fd~tix.@mtu th~ ~[an~~	 information on recipient experiences 

in accessing and using HMO semices 

and on the soundness of HMO 

operations and procedures. 

AG13NX COIvMmm 

The Health Care Financirw Administration (HCFA) and the Assistant Secretarv for 

Planning and Evaluation (~PE) commented on our draft report. The HCFA ‘felt 

that the draft report promoted the use of outcome QA standards over structural and 

ii 
.

process standards and that a balance of QA standards was more desirable. They also 

felt that the draft report might leave some readers with the impression “...that 

enrollment in an HMO carries significant risk of inappropriate care.” 

In our response to HCF& we agree with I-ICFA that a blend of QA standards is 

desirable. The scope of this inspection did not analyze differences in quality of care 

which might exist between HMO and fee-for-service providers. Consequently, this 

issue was not addressed in this report. 

Changes to the report have been made to address comments we received from HCFA 

and ASPE. The complete text of their comments, and our response, can be found in 

Appendix C. 

. .. . . . 

... 

111

TABLE OF CONTENTS


SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . .


INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


‘FINDINGS . . . . . . . . . ..= . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. Three types ofQA standards areused by Medicaid agencies


monitor HMOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Structural standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Process standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


PAGE 

. . . . . . . . . . . . . . - i 

. . . . . . . . . . . . . . . 1 

. . . . . . . . . . . . . . . 5“ 

to


. . . . . . . . . . . . . . . 5


. . . . . . . . . . . . . . . 6


. . . . . . . . . ...8


(lutco mestandard s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13


APPENDICES 

f% Characteristics ofHMOrespondents . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l 

B:	 A State by State comparison of QA standards


for Medicaid HMOs .. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .-,,.. .0 B-1


c Agency comments and OIG l%spmrse . . . . . . . . . . . . . . . . . . ..O . . . . . c-1


D Endnotes . . . . . . . . . . . . . . .,. .,_.. . . . . . . . ..... ... . . . . . . . . . . . . . . . . D-1

� 

INTRODUCTION


PURPOSE 

To describe health maintenance organ&ition (HMO) quaIity assurance (QA) 

standards and the methods used by State Medicaid agencies to monitor compliance 

w“th them. 

BACKGROUND ~ . 

Title XIX of the Social Security Act, commonly referred to as the Medicaid program, 

provides Federal matching funds to States* for medical care. In Fiscal Year (FY) 

1992 approximately 29 million Medicaid recipients will be eligible for medical care. 

State expenditures for medical care are matched by the Federal Government on the 

basis of a formula that measures relative per capita income in each State. Matching 

rates for FY 1992 are projected to range from 50 to 79.99 percent for medical 

assistance payments, and from 50 to 100 percent for administrative costs. In FY 1992 

Medicaid programs will spend an estimated $127 billion for medical care. Almost 

$72.5 billion of this amount will come from Federal matching funds. The Federal 

share for FY 1993 is projected to be $84.5 billion, an increase of 16.5 percent over FY 

1992.1 

The Federal Government has encouraged tie use of “managed care” or “coordinated 

care” systems by Medicaid programs to curb rising expenditures in State health 

programs. Managed care reduces health care expenditures through a combination of 

preventative health care measures and by monitoring, and to some extent controlling, 

the medical utilization of both provider a.mllpatient. In FY 1991, Medicaid agencies 

paid managed care entities nearly $2 bdllam dollars for health care services. 

A number of different managed care systems exist. This report focuses on HMOS. As 

of June 30, 1991, approximately 5 percent of Medicaid recipients are enrolled in 

HMOS. Under the President’s Plan for Comprehensive Health Care Reform, which 

encourages the use of managed care, the number of Medicaid recipients enrolled in 

HMOS and other managed care systems is expected to increase, 

Twenty-five States contract with HMOS to serve their Medicaid recipients. Health 

maintenance organizations provide services to diverse Medicaid populations; however, 

the vast majority of Medicaid HMOS provide mecikai semices to families with 

dependent children (AFDC). Some HMOS also smwe aged, blind and disabled 

Supplemental Security Income recipients and othez medically needy Medicaid 

populations.2 

* Throughout this report, any reference 10 ‘States” includes the District of Columbia. 

* 

1

The 127 W-OS providing medical care to Medicaid recipients fall into 4 primary 

model types:3 

(1)	 Staff, where health care semices are delivered through a group practice 

[employees of the HMO] established by the HMO; 

(2)	 Group, where the HMO contracts with a group practice to provide health care 

services; 

(3)	 Network, where the HMO both provides for, and contracts with two or more 

group practices or physicians to provide, health care sewices; and, 

(4)	 lh&i&al Practice Association (IPA), where the HMO contracts with physicians 

in individual practice to provide health care semices. 

The extent to which an HMO can control costs related to health care, may mean the 

difference between its financial success or failure. Most Medicaid agencies contract 

with HMOS on a capitated or “at risk” basis. If the cost of providing medical setices 

to members exceeds the capitated or f~ed amount the HMO is paid, then the HMO 

risks losing money. The incentives for these HMOS and the providers within their 

network to limit services makes QA an essential component of managed care 

programs. 

Simply defined, QA is an ongoing process for evaluating and improving the medical 

and other health related sexvices. It is a rapidly evolving and complex area; 

consequently, “Standards to measure effectively the impact of care on [patient] 

outcome or to evaluate the quality of managed care itself are not well developed... .“4 

Even in the fee-for-service arena, which has been around far more than 20 years, not 

much is known about the efficacy of QA In both fee-for=service and HMO 

environments, Medicaid and other agemcies have developed QA programs to ensure 

that patients receive appropriate and gaod quality care.. 

2

---

� 

METHODOLOGY 

This study is limited to HMOS. It describes QA measures used by State Medicaid 

agencies to monitor HMOS. Medicaid fee-for-service and other medical payment 

options, such as prepaid health plans, were not reviewed. This study focuses on State 

Medicaid agency QA requirements and monitoriimg Health maintenance organizations 

are subject to reviews by other governmental and private agencies. They also conduct 

their own internal QA assessments. This inspecti.cm did not describe HMO internal 

QA standards or QA standards imposed on HMOS by -other governmental or private 

agencies. 

We conducted structured interviews with all 25 Medicaid agencies that contract with 

HMOS to provide medical care. The remaining Medicaid agencies did not contract 

with HMOS, at the time of our inspectio~ and were not contacted. 

The 25 Medicaid agencies contacted for this inspection were located in the following 

States: California, Colorado, District of COhmnhia, Florida, Hawaii, Illinois, Indiana, 

Iowa, Maryland, MassachusetW Michigan, M.imwmta, Missouri, New Hampshire, New 

Jersey, New York, North Carolina, Ohio, Oregon,, Pennsylvania, Rhode Island, 

Tennessee, Utah, Washington and Wisconsin. 

Visits were made to 16 States, the r-.ning 9;were contacted by telephone. 

Geographic location, HMO characteristimy I@40 population and other factors were 

used to select the 16 States for ansite visits, Once a State had been selected, the 

HMOS with Medicaid contracts we~e contacted and asked to participate in this study. 

In some States, the Medicaid agency had a singie contracting HMO; in others, 

multiple HMOS held contracts to provide services to: Medicaid recipients. In States 

with multiple HMO contracts, we tried to sekxt HNNls with different characteristics. 

The HMOS participating in this. stmiy were not selected, at. random; participation was 

entirely voluntary. The HMOS selected and. their charactertitics can be found in -

Appendix A. 

Using a structured intemiew guide, we discussed~ (2A. with 28 of the 127 HMOS sewing 

Medicaid recipients. These discussions, often included{ the Chief Executive Officer of 

the HMO, the medical director, marketing representative and QA coordinator. 

We compiled our list of QA standards frorm three somces 

The National Committee for Quality Assurance% (QA standards dated June 27, 

1991. 

.	 The National Association of HMO Regulators (NAHMOR)/National 

Association of Insurance Commissioners’ @&C) Recommended Operational 

Requirements for HMO QA Programs, adopted by the NAIC/NAHMOR Joint 

Task Force in December 1988. 

3

� 

. .	 The HCFA Office of Prepaid Health Care’s QA standards for HMOS and 

Competitive Medical Plans contracting with the Medicare program dated 

November 1989. 

We identified 13 standards that encompassed all of the standards endorsed bythese 

entities. Our list was not all inclusive. The detail of the standards put forth by these 

entities is extensive, and we did not attempt to address all of the nuances in this 

inspection. 

Medicaid agencies were asked to identify, from our list of QA standards, th=standards 

contracting HMOS were required to have in place. They were also asked how they 

verified HMO compliance with required standards. 

The HMOS were asked to identify which of our QA standards they had in place. They 

were also asked to identify which QA standards were required as part of their contract 

with the State Medicaid agency. Like Medicaid agency respondents, HMO 

respondents were asked how the agency verified compliance. Intetiew responses 

were compared. Discrepancies in responses were resolved by reviewing documents 

and/or recontacting respondents. 

The final step in our analysis was to classify each of our QA standards as either 

structural, process or outcome. An argument can be made for classifying a standard in 

more than one categoqq we classified them into a single category using the following 

criteria: 

�	 Standards that provided an assessment of HMO facilities, staff, resources and 

rules of procedure were classified as structural standards.s 

Standards that provided data and information on adherence to HMO internal 

policies, resource consurnptionI and choice of therapies at a freed point in time 

were classified as process standards-a 

�	 Standards that provided Medicaid. tigenciix w“fh information on the net results 

of HMO policies, practices, procedures and quality assurance measures were 

classified as outcome standards.7 

Our review was conducted in accordance wiib the Ihreti Standmis for Inspections 

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

4

FINDINGS “


MEDICAID AGENCIES USE STRU~ PROCESS AND OUTCOME QA 

STANDARDS TO MONITOR CO~CrOR HMOS. 

Health maintenance organizations enter into 

Table I : contracts with Medicaid agencies to provide 

health care and related sem”ces to Medicaid 

“.slRuctu’&u ‘&?& recipients. One function of the Medicaid agency 

ymlm%ms ‘AGEN@23 . is to ensure that their recipients receive good 

. quality care in these HMOS. To accomplish this 

“:.P@cnt Education z- goal, Medicaid agencies have adopted a number 

.,”%ogmm - of QA standards. (See Appendix B for HMO 

‘:44c8xsstocat-e* 2s: QA standards required by each State.) 

“:&fi**a;QApba ’23 

r Quality assurance standards are interactive and ., 

%W3?&” “:: “ : .,.:.., ~~~, :: :/ could fall into more than one of three categories. “;:.’~~’~:.:, “‘, : :::. ,,. ;., For example, a requirement to credential 

:“c%&&ikltig ““” 21” physicians could be considered a structural 

‘~dtidua~ standard, while one addressing how to credential Patient 16 

&ue Di@,.” physicians could be a process standard. In this 

,:

~~iilii~ion, “Rciiew 13 

report, we have divided QA standards into three 

categories: structural, process and outcome. :I&&al R&orCi .12 

.Revicw : 

‘~:&tig ~w,ti 

Struchlral standards provide an assessment of the 

7 nature of an HMO’s health care resources; its 

(juatity Pmbicm 

Tbrtttinatiomv facility, staff and the rules of procedure.8

~ tiial Practice 

.’Gtielines, 

“.. “~. 

Bocess standards assess the intermediate products 

: “,i&iciata ‘“ 

Mmagctttent: 

“3”’ 

of care such as utilization rate, choice of 

therapies and adherence to, and effectiveness of, 

I procedures.g Process standards provide data and 

“om& information on adherence to HMO internal 

~m_ ; . policies and procedures. They provide data for 

mtupIailitk&+&’” :’ 25 comparing resource consumption by the HMO’s 

; ~~&.!*,,.: ,,, ; ‘; affiliated physicians and hospitals. 

Patieti’*&uiotp “ ;. & 

Sitivqa “ ‘“:”““’”””: ‘. ?!?“” ““.’ Process medical record reviews also provide ,. 

Health Outck 6 information about the quality and appropriateness 

hfonkming and of medical care given to a patient at a specific 

E%duation point in time. These narrowly focused medical 

�FcderaJ law mandates [his standard record rew”ews may fail to detect underutilization 

of HMO services or the benefits of HMO 

preventative health care and patient 

counseling.10 

5

� 

Outcome standards focus on the net results of HMO care over an extended period of 

time. They also focus on the health of the HMO itself. Sumeys of patient satisfaction 

with HMO operating procedures, complaints and grievances and longitudinal 

assessments of medical care, all provide information on how patients fared when 

enrolled in HMOS. Outcome standards assess the clinical and nonclinical components 

of HMO care which directly impact on patients. 

Outcome standards must always be “balanced with measures of structure and process 

to ensure high quality medical care. Structural and process standards are widely used 

by HMOS, regardless of government mandates, because they are inherent in HMO 

philosophy and good business practices.ll 1213 . 

ALL MEDICAID AGENCIES USE SOME FORM OF STRUCX’UIWL 

STANDARDS. 

Structural standards (see Table 1) offer an assessment of the nature of an HMO’s 

health care resources. These resources include the facility, staff and the rules of 

procedure. 14 Some QA proponents feel structural standards “... are appropriate 

objects of scrutiny only to the extent that they are demonstrably related to valued 

outcomes.”ls For example, evaluating prenatal care patient education programs to 

determine their impact on low birth weights is appropriate because it measures the 

effect or outcome of the education program. Simply reviewing educational materials 

on prenatal care without evaluating the effect on the patient does not assess if the 

program is effective and does not provide any infofiation that might be used to 

improve the program. 

b AU Medicaid HMOS are rixpiied to develop a wn”ttenQA plan. 

A QA plan serves as a blueprint for an HMO’s entire QA activities. It is a descriptive 

outline of an HMO’s QA objectives. Implementation, monitoring and evaluation of 

the plan is designed to identify deficiencies in HMO operations and quality of care, 

and promote corrective action and irnprmwxnents.ls 

Twenty-three Medicaid agencies require their HMC% to develop a written QA plan. 

Two Medicaid agencies do not specifically stipulate this standard in their HMO 

contracts, believing it to be unnecessary as armther governmental body requires it. In 

one State, it is the State Department of Public Health. In the other, the contracting 

HMO meets Federal standards. 

Many Medicaid agencies do not use the QA plans. devel~ped by HMOS as a guide to 

evaluate the HMO’s total QA program. Most (1? of 257 Medicaid agencies review the 

written QA plans of their HMO contractors during the contracting process. The 

agency Medical Director or an RN reads the plan to de~ermine if QA standards are 

described, and if appropriate processes are in place to implement these standards. Of 

the 17 Medicaid agencies that review the HMO QA plan, at least half do not keep the 

6 
plan on file. Some Medicaid agencies, whiIe requiring the QA plan to be on file, do 

not review it. 

In five States, another agency or organization in addition to, or in place of, the 

Medicaid agency reviews the HMO’s QA plan. For example, the Department of 

Public Health, a Peer Review Organization (PRO) or State Department of Insurance 

review the plan. Coordination among these agencies varies. Several HMOS 

complained that the involvement of multiple oversight agencies results in duplicate 

efforts. 

Nineteen Medicaid agencies require their HMO contractors to have an active QA 

committee to implement and oversee the performance of the QA functions outlined in 

the HMO’s QA plan. All of these Medicaid agencies review minutes from the HMO’s 

QA amnittee meetings to verify the committee’s activities. Three Medicaid agencies 

have employees attend and participate in HMO QA meetings. 

b	 ALl Me&aid agencier are active& kvolved xk HMO patient education program 

some wofig ckbse~ with their Hh40s to develop educational materiidr on pati2nt 

benefits, righ~ and rapmsibilities. 

Patient education programs disseminate &formation on patient rights and 

responsibilities, benefits, charges, access to care and scheduling of services. This 

information is conveyed to Medicaid recipients primarily through HMO marketing 

materials. 

Federal law (42 CFR Section 434.36) requires Medicaid contracting HMOS to 

“...assure the agency that marketing plans, procedures, and materials are accurate, and 

do not mislead, confuse, or defraud either recipients or the agency.” States have 

responsibility for monitoring adherence to these standards. Some States have 

developed additional standards applicable to marketing materials. All of the Medicaid 

agencies we interviewed were activdy involved in reviewing their HMOS’ marketing 

materials. 

Some Medicaid agencies work closely with their HMOS to develop patient education 

materials. Other agencies simply advise HMOS abont the content of their patient 

education materials. Almost all Medicaid agencies review all marketing or handbook 

material the HMO supplies to Medicaid recipients. Some Medicaid agencies formally 

authorize the release of educational materials and any changes to the materials to 

further ensure the correctness of information HMOs disseminate. Those Medicaid 

agencies that are not involved in patient education rely on another State agency to 

review and approve educational materials. 

7

D	 All HMOS are reqz&d to pmti accers to care and Medicaid agencies use a 

variety of rnet/zod3 to verijjy adherence to policy. 

Federal and State laws require all HMOS providing emergency medical services to 

ensure recipient access to care at all times.17 All but 1 of the 25 Medicaid agencies 

require HMOS to ensure recipient access to health care services. The Medicaid 

ageney that does not require this standard, does not do so because it is already 

required by Federal law governing HMOS. 

Some Medicaid agencies use a variety of one or more approaches to verify 

compliance. More than half (14) of the Medicaid agencies monitor grievances and 

complaints on access. Eight agencies review HMO internal procedures and guidelines 

regarding access. Eleven take a more aggressive approach and use medical chart 

reviews or random calls to HMO clinics, physicians and answering services to ensure 

adherence to HMO policy on access to care. One agency spot checks notices posted 

in clinks on how to obtain after-hour services. Two review after-hour and 

transportation logs. Another uses recipient sumeys. Four Medicaid agencies maintain 

a 24-hour toll free hotline for Medicaid HMO recipients, should they experience 

difficulty obtaining sefices. 

MEDICAID AGENCIES HAVE CARRIED OVER FEE-FOR-SERVICE PROCESS 

STANDARDS TO THEIR HMO PROGRAM. 

process standards assess the intermediate products of care such as utilization rate, 

choice of therapies and effectiveness of procedures. 18 This category of standards is 

widely used by HMOS to: (1) minimize exposure from unqualified individuals, 

(2) monitor resource consumption, (3) assess. adherence to HMO accepted standards 

of practice, and (4) manage their care netwarik and provider behavior. 

Process standards (see Table 1) are ustmlljt ernbrarmd by HMOS regardless of 

Medicaid agency mandates because they are perceitied to be good business practices. 

They are perceived to be good tools for ovemming day to day business operations. 

Most process standards find their roots in. the fee-fbr-service system. Credentialing, 

patient care data, utilization and medical record reviews have been the cornerstone for 

assessing QA in fee-for-semice for decades- Medicaid ageney familiarity with these 

processes made them prime candidates for acceptance into most Medicaid agencies’ 

managed care QA programs. Less familiar standards> such as clinical practice 

guidelines and the management of physician conduct are somewhat unique to 

managed care and have not been as easily assimilated in Medicaid QA programs. 

Process standards are necessary to HMO QA as they minimize risk, provide 

indications of potential problems and enable corrective action. However, QA 

standards addressing credentials, data, practice guidelines and physician management 

do not, in themselves, measure the quality of care a patient received. Medical record 

8 
reviews do provide an indication of the qurdity of care provided on a given day or over 

a short period of time but are limited in their ability to provide sufficient information 

on which to judge HMO practices. 

b	 Tknty-one Medicaid agencies reqti H..OS to credentia~ most HIWOSmeet or 

exceed mandated requirements. 

Credential verification is one method used to minimize the risk of inadequate or 

harmful care to Medicaid patients from incompetent providers. This process often 

involves the Medicaid agency and other myriad cxganizations, accrediting bodies and 

providers, 

Most (21) Medicaid agencies require their HIkf@s to veri~ that the physicians and 

other health care professionals they empkay me qualified and properly credentialed. 

Four Medicaid agencies rely on another State entity to verify credentials and do not 

require their HMOS to independently credemiail their providers. In two cases, the 

HMO is only required-to veri$ that physicians in their network hold a current, valid 

license to practice medicine. 

We found that 23 of 28 HMOS had credential verification processes in place that met 

or exceeded Medicaid agency mandate%. Physician credentialing is a good business 

practice. Court decisions have held HMOS. responsible for the actions of their 

contracted physicians. 19 In addition to offering a measure of liability protection, 

physician credentialing allows HMOs to select physicians whose practice style reflects 

the HMO’s philosophy and objectives.. 

Independent confirmation of HNK3 credkmtialing results by Medicaid agencies is 

practically nonexistent. Four agena’es conduct random samples of HMO physician 

files to assess HMO adherence to cred-emtialing guidelines. Most Medicaid agency 

credential verification consists of a checik on the licensure or Medicaid participating 

status of providers. Six agencies review cmderrtkdirug methodology but do not verifj 

whether the HMO adheres to its guideti~.. 

As in other areas, Medicaid agencies oftem do not vemifyor enforce credential 

verification. Some Medicaid respondents, knew or assumed that another State entity 

verified the credentials of HMO physicians,. However, some of these respondents 

were unsure exactly which State entity might actually perform this function, or what 

the other State entity’s credential verificatim process encompassed. 

w	 Pat&m/ care data received /iom HM%9sofkrn &es not meet Medicaid agenq 

expectations. 

Patient care data is statistical information collected by HMOS from patients’ medical 

records, contract providers and patient surveys. It enables HMOS to assess patient use 

of medical services, patient satisfaction and the nature of sem”ces provided by the 

HMO’s affiliated physicians and hospitals~” 

9 
Patient care data isoften used during utilization review to eliminate unnecessa~ care 

and services; thereby, controlling costs and improving quality.21 Utilization review 

programs employed by HMOS include: (1) pre-authorization of specialty services; 

(2) mandatory second opinion; (3) concurrent review of all hospital admissions and 

discharge planning (4) high cost case managemen~ (5) pre-negotiated specialty, 

referral contracts; and, (6) education of members and providers on utilization of 

services.= 

Patient care data collected by HMOS is customized to fit individual HMO needs. 

While the content of the information HMOS collect is similar, each HMO establishes 

their own criteria for data collection. Some HMOS collect detailed claims information 

similar to that collected under the fee-for-service system; others collect aggregate data 

horn their contracted hospitals, physicians, laboratories, pharmacies and other 

suppliers and have little or no patient specific data. The data collected by HMOS is 

usually dictated by their largest subscriber since most HMOS are unable to comply 

with all their subscribers’ data requests.= 

Sixteen of 25 Medicaid agencies require HMOS to collect individual patient care data 

and 13 require HMOS to conduct internal utilization review. Medicaid agencies that 

require HMOS to provide individual patient care data often find that the information 

does not meet their expectations. For example, some agencies expect data from 

I-IMOS to mirror their fee-for-service claims data, this may not be feasible given the 

variety of HMO business arrangermmk Medicaid agencies willing to work with HMO 

data have better compliance. A similar problem appears to exist in the area of HMO 

utilization review. Medicaid agencies that attempt to impose fee-for-sexvice utilization 

rew-ew methodologies are less successful in obtaining useful HMO data than those who 

adopt HMO methodologies. 

Most Medicaid agencies are not familiar with the kinds of data HMOS collect. Until 

recently, data collection among HMOS has primarily focused on inpatient hospital 

services. Sexvice specific encounter data. is not commorm in capitated managed care 

systems that have no need to maintain detailed claims. information.24 On the other 

hand, HMOS that reimburse their contract physicians orria fee-for-service basis can 

reasonably be expected to coIlect much more detailed patient care information. 

b	 All Medicaid agenci”izrconduct epimdk mediiwl’ reunrd reviews; 12 aLro require 

contacting HMOS to conduct thek own intemrd’mrzdiizzl record reviews. 

Medical records are considered to be the best- source of information on the technical 

aspects of care .= Medical record reviews have traditionally been Medicaid’s primary 

source of information for QA.26 Medical record reviews and the methodologies used 

to conduct them are steeped in the history of the feeAcw-service system. Traditional 

medical record reviews examine the type and quality of care a patient received on a 

particular day. They are episodic rather than longitudinal in scope, consisting of a 

review of a single health care event. In the HMO environment focusing on the 

appropriateness and quality of care surrounding a single health care event may fail to 

10

----

detect underutilization of services or recognize the benefits of HMO preventative 

health care and patient counseling.27 

Federal law requires Medicaid agencies to conduct an independent, external review of 

the quality of sem-ices furnished by HMO contractors. This law requires that States 

use a PRO or a private accreditation body to perform the review.x All of the 

Medicaid agencies we interviewed are in compliance with this statutory requirement 

and contract with either PROS or private accreditation bodies to examine HMO 

medical r~ords to assess the quality of medical care. .. 

Medical record reviews may occur quarterly, hi-annually, or annually. Reviews maybe 

traditional medical record examinations of the care provided surrounding a particular 

medical episode or target specific Medicaid semices such as immunizations or groups 

of recipients such as pregnant women. If the Medicaid population in an HMO is very 

small, all Medicaid recipient medical records may be reviewed. More often, the 

number of recipients enrolled in an HMO limits the number of reviews to 2 to 10 

percent of the HMO’s Medicaid population. 

Some Medicaid agencies, in addition to the independent, external review required by 

Federal law, performed their own medical record reviews to assess the quality of 

contracting HMO services. Twelve also require their HMO contractors to conduct 

their own independent, internal medical record reviews and to report their findings to 

the Medicaid agency. 

Even when no requirement exists for HMOS to conduct their own internal medical 

record reviews, HMO respondents indicated that they do so because these reviews are 

a good business practice. They help the HMO detect unbundling of services, upcoding 

of services and rovide information on the use of services by HMO fee-for-service 

subcontractors.z r Medical record reviews cart also lead to the early detection of 

aberrant physician practice patterns. 

Seven of the 12 Medicaid agencies rely cm medical record reviews to verify HMO 

compliance, but only one audits a sample of the medical records actually reviewed by 

the HMO to veri~ its findings. Three agencies review HMO reports to assess the 

nature, completeness and accuracy of HMO rrredicai reviews. Two do not veri~ HMO 

compliance with this QA requirement. 

Health maintenance organizations are subject to numerous medical record reviews by 

multiple State and Federal agencies, independent accrediting organizations and 

contract subscribers. Duplicative, uncoordinated reviews often result in conflicting 

findings. One HMO received an exemplary rating on its medical records from one 

governmental body while another found the same records “wanting.” 

11

w	 Few (6) Medicaidagentia require use of chkicai practice gukielines establishing 

standardr of care. 

In managed care systems clinical practice guidelines can play a vital role in ensuring


good quality medical care. Practice guidelines are thought to promote the use of best


practices in medical care. They provide’’... greater consistency of care...[and reduced]


risk of harm [to the patient] resulting from omission.”3°


The involvement of para-professionals, financial incentives and -other f&ctors unique to


managed care provide the foundation for advocating-the development and use of


clinical practice guidelines by HMOS. Clinical practice guidelines are usually


developed for high risk conditions such as chronic heart disease, substance abuse,


C-sections and hypertension. = .


Most (19 out of 25) Medicaid agencies do not require HMOS to develop or use


clinical practice guidelines. The six Medicaid agencies that require their HMOS to


develop and use clinical practice guidelines vary considerably in their approach. In


two cases the Medicaid agency, HMO administrative staff and HMO providers have


worked together to establish practice guidelines. One Medicaid agency has developed


their own guidelines for specific encounters. This agency requires all of their


contracting HMOS to use these guidelines in addition to any HMO developed


guidelines. The three remaining agencies review proposed guidelines to ensure they


meet community standards of care but are not involved in the actual development of


guidelines.


Despite lack of a Medicaid agency mandate, more than 70 percent of HMOS we


reviewed have developed one or more practice guidelines. Within HMOS, consensus


grOUpSof physicians develop agreed-upon standards of practice, which are then used


to evaluate their peers and identify potential quality of care deficiencies.


Medicaid agencies that mandate clinical practice guidelines verify provider adherence


to guidelines during the medical record review process.


b O@ three Mkdicaid agencies reqtie HMOS to manage physician behavio~ 

Physicians are the pivotal decisionmakers in HMOS. 31 Their practice patterns can 

make the difference between an HMO’s financial success or failure. 32 Because 

physicians play such a critical role, HMOS provide financial and other incentives to 

manage their behavior.33 

The HMOS manage physician behavior by: (1) selecting physicians whose practice 

style reflects the HMO’s philosophy and objectives, (2) providing physician education 

and feedback on practice patterns in comparison with other HMO physicians, and 

(3) offering financial incentives directly impacted by the physician’s practice 

pattems.~ In a 1988 survey of its membership, Group Health Association of 

America (GHAA) reported that “...73 percent of all HMOS have cavitation 
� � 

arrangements with physicians, and nearly 40 percent withhold a proportion of the 

physicians’ fees or cavitation, putting them at financial risk for poor financial or 

utilization performance of the HM0.”35 

Health maintenance organizations use data collected by their systems to identi~ 

physicians whose practice patterns differ from their peers. This data, coupled w“th 

information derived from medical record reviews, is used to educate physicians who do 

not provide services within expected practice parameters. Depending on the nature of 

the @dings, the HMO may decide to: (1) educate the physician on the HMO’s policy 

and standards of practice, (2) provide remedial training to improve the physician’s 

technical skills, (3) discipline the physician, or (4) terminate the physician’s contract. 

Of the 25 Medicaid agencies that con~ract with HMOS, only 3 have QA standards ‘“ 

which directly address physician man~ge”ment. Medicaid agencies are not involved in 

physician management because they believe it is inherent in the HMO philosophy and 

a good HMO business practice. 

Seven agencies require HMOS to report to them, or other appropriate authorities, 

serious quality problems resulting in a physician’s suspension or termination. And four 

agencies require HMOS to identify providers no longer affiliated with the HMO, but 

do not require the HMO to p~ovide a reason for the provider’s termination. 

MEDICAID AGENCIES RELY ON COMPLAINT STANDARDS MORE THAN 

PATIENT SATISFACITON SURVEYS AND HEALTH OUTCOME REVIEWS TO 

ENSURE QUALITY. 

Outcome standards (see Table 1) provide infm-mation on how patients fared while 

enrolled in the HMO. They assess not mdy the end products of medical care such as 

patient health status but also the soundness of HMO operations and procedures. 

Sumeys of patient satisfaction with HMO operating procedures, complaints and 

grievances provide information on recipient experience in accessing and using HMO 

services. Health outcome medical reviews*” examine the entire spectrum of medical 

care an HMO has provided to a recipient. These outcome medical reviews differ 

from episodic medical record reviews because they take into consideration all of the 

medical care, preventative measures and education a recipient received from the 

HMO. 

Thesum healthotucorrtaiswi&~ used by ~ a~ci~ ~ d~ private seclor. The precise meaning of health 

ouscome diflm &pending on what pmabct or use the entity has in mind in k ~ the tarn health outcome reviews meatu a 

longiadnai am=mnat of W medical record(s) of an HMO patient to detcrmirte whe~a due care was aereked in providing medieal 

tics Were services under use~ were preventative measures iakq were the preventative ond medico[ interventions oppropn”ate and 

within Occqtted co rnmtutity standards of care? As used in this rcpoq our de/initiatz of heahh outcome ret,iews is not re!a[ed to the 

devehpmeru of clinica[ information daia bases dun rank pos~-vcatmetu health suww provide treannem options or other applications 

13 
+	 Alduxzgh HMOS are requiked to rerolve ptient complains and grkvances, most 

Medicaid agenckr rely on HMO reportr to verifi compliance. 

All 25 Medicaid agencies require their HMOS to have a process for resolving patient 

complaints and grievances. Federal law requires an internal grievance procedure 

which: “(a) Is approved in writing by the [Medicaid] agency; (b) Provides for prompt 

resolution; and (c) Assures the participation of individuals with authority to require 

corrective action.”% 

T@al reliance on HMOS to handle the complaints and grievances may leave the 

Medicaid agency vulnerable and put recipients at risk. In the HMO environment, 

complaints and grievances about the HMO can originate from many sources. 

Physicians and other HMO subcontractors, patients and others may complain about 

HMO practices and procedures. Complaints may provide early warning about the 

financial practices and stability of an HMO. Complaints may reveal problems with 

access to setices and patterns indicative of poor care. 

Fourteen Medicaid agencies reduce the risk associated with HMOS assessing their own 

performance by performing periodic reviews of HMO complaint files. Some Medicaid 

agencies sample complaint files, while others review all files to ensure recipient 

complaints have been properiy addressed. Reviews are conducted onsite, or through 

information provided by the HMO. 

Five Medicaid agencies operate their own complaint and grievance units. These 

agencies believe that their direct involvement in the resolution of recipient complaints 

provides them with greater insight of their HMOS’ QA. 

b	 Eight Medicaid agena”er require HMOS to conduct patient satisfaction surveys. 

Seven conduct thek own WUVeySb asws, fii[~ recipient satisfaction 

Medicaid agencies use surveys to assess recipient satisfaction with HMO services. 

Twenty-six of the 28 HMOS we interviewed conduct satisl%ction sumeys regardless of 

agency mandate. The surveys are intended to proviik information about problems 

patients encounter in scheduling and securing medical services. Surveys are also used 

to elicit patient perceptions of facilities, providers and care. 

Eight of 25 Medicaid agencies require their HMOS+m: conduct patient satisfaction 

surveys. These surveys are conducted by mail;. telepfmne or in person. Some of these 

agencies are actively involved with their HMOS in: th~ design and conduct of 

satisfaction surveys. Others leave survey desigrr and collection methods to the 

discretion of the HMO. As with complaints and. grievances, allowing HMOS to assess 

their own patient satisfaction may leave the Medicaid! agency vulnerable, unless the 

agency is integrally involved in all phases of the survey. Sampling methodologies 

leading to an underrepresentation of Medicaid recipients and HMO self-reporting 

could bias reporting. 

14

Seven Medicaid agencies conduct their ownsuweys. They believe they are gettinga 

clearer picture of what is occurring in the Medicaid population, because they are 

obtaining information firsthand from the recipient. They believe this to be particularly 

true where Medicaid recipients represent a small percentage of HMO enrollment. 

These agencies-believe their involvement in satisfaction surveys enables them to take 

an active role in corrective actions. 

b	 Medicaid agencier and HMOS find the term “heal[h outcomes” ambi~ous, 

sometimes interpreting it to mean Uh&ah-Onreview or me~icai record review. 

Health outcome rgonitoring and evaluation is a new and evolving, complex QA 

process which focuses on the net results of care. As used in this report, health 

outcome monitoring and evaluation involves a longitudinal review of an HMO 

patient’s medical record to determine if the care that recipient received met 

community standards. 

Because they examine all of the medical care a recipient received while enrolled in an 

HMO, health outcome reviews take more time and resources than do medical record 

reviews. Medical record reviews are usually episodic - they examine the application of 

medical knowledge and treatment surrounding a specific medical episode. Health 

outcome reviews look at the care provided prior to, during and after a specific health 

care event. Consequently, fewer health outcome medical reviews can be conducted 

annually. 

Proponents think that health outcome reviews are more likely to detect the benefits of 

preventative health maintenance and patient counseling, underutilization of semices 

and poor quality of care in HMOS than would episodic medical record reviews.37 

The folIowing example illustrates how health outcome medical record reviews differ 

from episodic medical reviews. An episodic medical review may determine that a 

child was seen and properly treated for measles. It may not determine if the child was 

ever immunized for measles. Health outcome medical record reviews would not only 

determine that the child was properly treated for measles but also whether the HMO 

had vaccinated the child to prevent measles. 

Medicaid agency and HMO respondents found the term “health outcome review” 

ambiguous, sometimes interpreting it to mean utilization review or episodic medical 

record reviews. Based on their own interpretation of the term, 6 of the 25 Medicaid 

agencies indicated that they required their I-fMOs to monitor and evaluate the health 

outcomes of their Medicaid patients. Medicaid agencies verify compliance by 

reviewing medical records or patient care data. 

One agency respondent doubted that any Medicaid agency or HMO was conducting 

health outcome reviews involving the examination of the care a recipient received 

from an HMO over an extended period of time. The term health outcome review was 

mentioned frequently in HMO QA literature and proposed QA standards. Despite 

15

what appears to be widespread use of the term, considerable differences apparently 

exist in defining what constitutes a health outcome review. 

-. —— AGENCY COMMENTS 

We wish to thank both the Health Care Financing Administration (HCFA) and the


Assistant Secretary for Planning and Evaluation (ASPE) for commenting on the draft


report.


The HCFA felt that the draft report promoted the use of outcome QA standatds over


structural and process standards and that a balance of QA standards was more


desirable. They also felt that the draft report might leave some readers with the


impression “...that enrollment in an HMO carries significant risk of inappropriate


care.”


In our response to HCF~ we a~ree with HCFA that a blend of QA standards is


desirable. -The scope of this ins~ection did not analyze differences in quality of care


which might exist between HMO and fee-for-semice providers. Consequently, this


issue was not addressed in this report.


Changes to the report have been made to address comments we received from HCFA


and ASPE. The complete text of their comments, and our response, can be found in


Appendix C.


16

-— 

CHARACTERISTICS OF HMO RESPONDENTS 

A -1 
niT-
TERMS USED IN APPENDIX A	

Federally Qualified: An HMO is federally qualified (FQ) if it meets certain health	

service requirements {described in Sec. 1301(b) of the Public	

Health Service Act, 42 U.S.C. 9300e(6) } and certain	

organizational and operational requirements {described in Sec.	

1301(c) of the Public Health Service Act, 42 U.S.C. S XIOe(c)}.	

State Qualified:
 Medicaid contracting HMOS that are not federally qualified must	

be State qualified (SQ). They must meet the HMO	

requirements outlined & the State Plan (Section 1902 of the	

Social Security Act); unless an exemption has been approved by	

HCFA under waiver.	

1115/Nl Waiver: Under Section 1115, HMOS operate as managed care	

demonstration programs with the option of having any section of	

the Social Security Act waived. An 1115/M waiver provides for	

mandatory enrollment of Medicaid recipients in the HMO.	

1915(b)/M Waiver: A 1915(b)/M waiver provides for mandatory enrollment of	

Medicaid recipients in an HMO or PHP or, in the case of a 

Health Insuring Organization, a choice of primary care 

physiciarm 

1915(b)/MA Waiver: 1915(b)/MA waiwer provides for mandatory alternative 

enrollment. It is used in situations where the Medicaid recipient 

is required to participate under a State’s primary care case 

management (PCCh4) program but is allowed to join a Medicaid 

contracting HiMOJor PHP as an alternative. 

75/25 Waive~
 Section 190~m)@(A](ii) of the Social Security Act requires	

that HMO enrollment composition be no more than 75 percent	

Medicare ancVor M!!dkaid eiigible enrollees. An HMO may	

obtain a waiver ta this. requirement to increase the percentage of	

its Medicare ancl/or Medicaidi emollees.	

Staff Model:
 Health care sewices are delivered through a group practice	

[employees of the HMO] established by the HMO.	

Group Model:
 The HMO contracts with a gro.u~ practice to provide health care	

setices.	

Network Model:
 The HMO both provides t’err,,and contracts with two or more	

group practices or physicians tu provide, health care services.	

IPA Model:
 The HMO contracts with physicians in individual practice to	

provide health care services.	

A -3 
APPENDIX B 

STATE BY STATE COmmlSON OF QA ST~@S 

FOR MEDIC~ Hh40s 

B- I � 
A STATE BY STATE COMPARISON OF QA STANDARDS FOR MEDICAID WOS	

-

STATE CA co DC FL IL 

........-............ 

HMO	

STANDARDS	

F

Grimanee x x x x x 

Proeedurea “ 

Palienl Eduealion x x x x x 

Pro2rams 

Access 10Care � x x x x x 

Written QA Plan x x x x x 

Credent ialing x x x x x 

Individual Pa(ient x x x 

Care Da[a 

Utilization x x x 

Review 

Medical Reeord x x	

Review	 .
 -	

Palienl Surveys x


Reporting I x x 

Physician Quality I 

Problem 

Terminations 

Clinical Praclim 

Guidelines I x 

Health Outcnme x 

Monitoring & 

Evaluation 

I Physician 

Managemen[ 

‘ Federal law mandaks this standard.	

IN MA MD M[ MN MO NC NH 

x x x x x x x x


x x x x x x x x


x x x x x x x x


x x x x x x


x x x x x x


x x x x x


x. x x x


x x x


x x ~ x


x x


x x


x


x


NJ WA WI 

x x x


x x x


x x x


x x x


x x x


x x x


x x


x


x

APPENDIX C 

AGENCY COMMENTS 

c-1 

— 
:

�

Health Cam 

.

./’-%

4

0 DEPARTMENT OF HEALTH & HUMAN SERvICm Financing Administration

: 

* —	 >


“%% JN29KW Memorandum 

Oate	

From 

Subjact 

To 

~,’ G 

w illiarnToby, Jr. e	

Acting Administrator	

OIG Draft Report: “Quality Assurance in Medicaid HM@”	

OEI-05-92-00110	

Inspector General	

~ce of the Secretary “ “	

We have reviewed the subject draft report which examines the Quality Assurance	

(QA) standards
used by Medicaid agencies to mhimize the risk of inappropriate 

medical care in Heaith Maintenance OrganizationS(HMOS). The President’s PkuI 

for Comprehensive Health Care Reform encourages the use of HMOS as part of 

coordinated care initiativeLL 

OIG intewiewed 25 Medicaid agencies that contract with HM@ and conducted	

onsite interviews at the HMOS in 16 of these 2S States. OIG identified 13 basic QA	

assessment standards that encompassed aimost d of the various standards employed	

at the sampied HM& OIG noted that all Medicaid agenaes rquire use of 4 or	

more of the basic 13 standar@ and ail were fdunci to employ some form of structural	

standards. “structural standards” as deti in thja report “provide an assessment of	

the nature of an HMO’s health care resourceK its fixility, staff and the rules of	

procedure.”	

In some q Medicaid agencies were fbund to have continued to apply fee-forsewice process standards in their QA review @ Hhf@ thOU@ such StaIltidS IIMy 

not have been appropriate yardsticks f= measmbg quality in coordinated care	

settin~ These agencies were also found to* more on complaints than patient	

satisfaction sumeys or health outcome ~ to ensure quality. To some exten~ this	

practie occurnd because both Medicaid agencks and HMOS found the texm “health	

outcomes” ambiguous. ofte~ the detemti of patient outcome was	

accomplished ~ie~ through &if-assessment by the I%IOS. 

Although this report is descriptive in natur~ d CO- no directrecommendations	

for the Health Care Fiicing Adminismtio~ we arc providinggeneraland technical	

comments. Th~ comments address both the COrjtcnt and format of this study.	

c-2 
Page 2- Inspector General	

QA is a complex area that is rapidly evoking= We were impressed by the energ and	

commitment obvious in this particular QA iswest@tiorL We appreciate the difficulty	

of the task undertaken by OIG staff in this evahmtio~ and thank you for the	

opportunity to review and comment on this draft report Please advise us whether	

you agree with our comments on the report at your earliest ccmvenience.	

Attachment	

c-3 
Comments of the HeaIth Care Fiianeirm Administration (FKFA)	

on OIG Draft Reoorc “QualitvASSWUXC	

in Medicaid HMO&”oEr-05-n-oollo	

General Comments/Observations	

Title and FurDose. The title of this repo~ “QualityAssurance (QA) in Medicaid 

HM@” implies that the report will address how QA is conducted by Heaith 

Maintenance Organizations (HMOS) contracting with Medicaid. Instea@ its subject 

matter is iimited to a descriptive summary of how State agencies monitor HMO 

compliance with certain State and federaily prescribed QA staQdarc& as well as a 

discussion of the nature of these standards. OIG should consider retitling the report and 

clar&ing its statement of purpose in order to help the audience better understand the 

materisd presentecL 

Evaluative Methodolog& The evaluative fkameworkused to analyze and compare	

Medicaid QA standards is a structur~ ~ and outcome typdogy, which is difHcuk to	

follow in the body of the rcpo~ For examplq on page 5, it is said that:	

StructuA and process standards do not tell us whether or not a patient was	

satisfied with the servi~ and may not detect under-utilization of setices or	

the benefits of preventive health care and patient counseling.	

Yet a chart on the same page defies process standards to inciud= utilization rmhew,	

individual patient care dam clinical practice guidc~ and physician management It	

seems that utilization review, individual @CSMcam da~ and clinical practice guidelines	

woujd ail be expected to address unti~n k some fo~ particularitywhen	

considering individual patients with poor ~ outcmn~ There arc no definitions of	

the items on this chart that might resoive the _ contradiction	

we strongly recommend the evaluation contaiu an initial presentation of this complex 

framework and thereafter, cotie hseif to the ~ it establishes therein. To 

assistwith development of this tiewo~ OIG may want to refer to: %fcdicare: A 

Strategy for Quality &wrance” (Institute of ~ NationalAcademy of Science&	

February 1990), for a presentation of the use of otdcusnG suucture and process	

measures. This report was commissioned by _ and is one of the principal sources	

of guidance for the Medicaid Managed Care QA program	

m. Though the report contains no recommendmkms for HCF~ it does present 

several signifmant findings. We believe theevaluativemethodologyhassignificant 

blitatio~ and therefore, we are concerned M ~ ~tations hSNC res~ted in some 

inaccuracies in the findings presented Also, many of the findings are in need of 

amompaqing explanation to provide a proper context for a more generai audience. 

c-4 
Page 2	

Technical Comments	

~. There should be a &scus@nnof the strengths and limitations of the 

evacuation design of this study, particularly since the scope of the ewduat.ion exciuded 

both QA activities conducted by independent quality review organizations under contract 

to State Medicaid agenci~ and internal QA activities performed by HMOS. OIG also 

needs to explain how the sampled Medicaid agencies and HMOS were chosem 

Outcome Standards: II& report repeatedly promotes the use of outcome-based QA	

standards in HMOS. However, this use of outcomes raises several issues:	 %	 .	

�	 This report hequentiy associates outcome measures w“thpatient satistictiom 

However, the inability of patients to judge the quality of medical care they receive 

is broadly acknowledged as a q umtesmW “ obstacle in the analysis of the health	

care marketplace. If outcome and patient satisfaction are to be tied together, this	

obstacie shouid be dixussed in the context of this report.	

�	 In medicine, outcome analysis commmdy refers to the use of clinical information 

data bases that rank post-treatmentheakh statusto select the most potentially 

successful treatment options * _ This “science”is more or less in its 

infancy such data bases do not now exist to an extent that they can be employed 

in routine medical practice. The foumdhg of the Agency for HeaJth Care Poiicy 

and Research in 1989was spurred by remgnition of the need to promote the 

development of such outcome-based research. The suggestion that this type of 

decisionrnaking be used in co~ IdMOs seems premature. 

�	 This repro also suggests that Medicaid managed care is defkient in its use of 

outcome standards, However, the N&ional Academy of science’s recent treatise 

on QA notes: 

This emphasis on outcomes&a critbil ~ Et@l not however, be	

easy to put into actio~ and it simuld.mzverbe seen as fully	

displacing process-of-care asewmem . . ....Numerous aspects of	

outcome measurement shcndd be undemtzmdbefdre being	

considered appropriate for a quality asmmnce Pm””””	

Several disadvantages are associated with owtcome measurement	

The focus on aggregate data rather tham individual or case-by-case	

analysis limits its usefulness in changing-b practice behavior for the	

individual practitioner. Review is by defE&kMhistorid, that &	

after care has been de[ivcre~ instant intmvemion in serious	

situations, where immediate action is jus- to prevent a potentially	

bad outcome is not possible. The lack of demonstrated relationships	

c-5 
.

Page 3	

between outcome and process of care for many aspects of the	

management of patients is a ~“or barrier to reliance on	

outcome measurement for QA program.	

In sho~ outcome standards must always be balanced with measures of structure and	

process to ensure high qu@ity in medical care..	

Managed Care Entities. The first paragraph on page two is confusing It contains . . -	

references to Preferred Provider Organizations (PPOS), indemnity coverage, premi~	

and out-of-pocket CQSAthough none of these items are in use in tiw Mediqaid program.	

On the n~~e, the report continues by say@ “the remaining Medicaid agencies use	

fee-for-sewice providers to sewe Medicaid recipients or contract with other managed	

care pl~ such as PPOS.” &a@ at this tirrw no Medicaid agencies contract with PPOS.	

OIG should also amend this report to reflect that CMP stands for “Competitive Medical	

Plan.” Finally, OIG should consider ~g QA in managed care settings other than 

HMOs in a future investigation. 

HMOS. Four categories of HMOS are defined in the tit two pages of this repoti: st@	

group, newor~ and Individual Practice Association (IPA). These categories have	

questionable rekvance since they are private-sector classifications not used by the	

Medicaid prow	

Page seven contains the misleading statement tha~ “Federaf and State laws require 

HMOS to submit marketing pla~ proced~ and other materials to the Medicaid 

agency for approvaL” HMOS are not required to submit such information for approval 

prior to their use. Federal law d- however, prescri%ecertain standards appkable to	

HMO marketing materia& and States have responsibility for monitoring adherence to	

these standards. Additionally, some States have inde@tdent standards applicable to	

marketing materials.	

The fourth paragraph of page nine states that: “recent court decisions hold HMOS	

financially responsible for the actions of their contracted physicians,” There are several	

different lawsuits on HMO liability, each on a Merent subjcq and each in a different	

stage of Iitigatiom Therefore, we suggest this statement be modified to reflect these	

differences and account for the possibility of appeals to these decisions.	

The fifth paragraph on page 12 outlines the actions HMOSmay take to manage	

physician behavior~ Action (3) is: “discipline the physiciam” We recommend this phrase	

be replaced with language that sounds kss punitive or is more explanatory.	

The report generally fads to make a distinction between federally qualified HMOS (as	

stipulated by Rtie 13 of the Public Health Service Act) and otier HMOS subject to State	

and other standards. HMOS have different QA requirements depending on their	

qualification.	

C-6	
Page 4	

OIG should aiso note that many HMOS contracting with States are not at full risk since	

various risk-sharing arrangements arc often in place. ‘kse HMOS may not be in the	

situation implied in the report in which the ability to contd costs is the difference	

bemeen success and tiure for an HMO, and in ~ is iikeiy to introduce negative	

incentives affecting the delivery of care to patients.	

Medicaid HMO QA All States must contract for independent quality reviews. These	

reviews provide important information to States that lead to various actions in HMO	

monitoring. This report makes several claims that States pass on QA respcmdilities to	

HMOS and that this delegation is problematic, The assumption that this arrangement is	

problematic is not supported if these independent reviews 6nd either the absence of	

problems or specific problems sin- in both these ~ States have obtained the	

information needed for corrective actions OIG should consider including information	

from States on this process in this report.	

OIG shouid aiso acknowledge that QA m the Medicaid HMO program has several	

components:	

� HMOS are required to conduct interred QA programs; 

�	 State Medicaid agencies monitor, either directly or through a contractor, HMO 

compliance with certain State and Federal@prescriid QA standarti, 

�	 States must utilize an independent contractor to review the quality of care 

provided by each HMO on an armwaibask and 

�	 Hh4~ that contract with the Me&aid program or that are Federally quaiified are 

also subject to review by Federal program. 

This evaluation focuses only on the second&* components.	

Oualitv of Medical Care. The purpose of this repum isstated ax	

To descrii the QA standards used by Medicaid agencies to mhimize the risk of	

inappropriate medical care in HMOS	

Both this wording and the number of times the purpose of the repmt is repeated may 

=use the uninfo~d reader to ass~e that e~~en$ in ~ HMO ties sign&ant 

risk of inappropriate care, despite the fact that no res~ exists to support this 

conclusion (reference: 1990 Department of HeaI& a@ HumaxISem”ce.sReport to 

Congress: “Incentive Arrangements Offered @ He~th Mtite~W Organizations and 

Competitive Medical Plans to Physicians”). -	

c-7 
—— 

. 

Page 5	

‘b effectof such I,i.ddng
 of concep~ without supper@ documematio~ could have a	

negative effect on public confidence in HMOS. T’herefor~ we retxxnmend the original	

statement of purpose and aiI succeeding statcmemtsbe amended to read	

To ciescrii the QA standards used by M&&id agencies for Medicaid contracting	

HMos.	

The statement is also rqade: “Patient &e data received fkom HMOS often does not meet	

Medicaid agency expectation Use of the term “expectations” does not make clear what	

objective data standards OIG means to cite. Medicaid agencies base their evaluations of	

HMOS on objective criterh	

Page 11 of the report says that practice guidelines aim to establish minimum standards of	

care. Practice guidelines are not minimum standan@ but often are thought to promote	

use of “best practices” in medical care.	

C-8	
OIG RESPONSE TO HCFA COMMENTS	

The HCFA felt that our draft report promoted the use of outcome based QA	

standards over structural and process standards -and- that a balance of QA standards	

was more desirable. They also felt that the draft report might leave some readers w

the incorrect impression that obtaining medical care from an HMO has greater risk	

inappropriate care. In addition to these comments, the HCFA suggested that	

technical changes be made to the report which they felt would help the reader to	

better understand the Medicaid HMO environment and the methodology we used fo

our study. .	

With regard to HCFA’S comments concerning:	

Title. Puruose. Evaluation Methodology and Quality of Care: The report has

been retitled and the purpose statement clarified. Additional information on how w

classified a particular QA standard as structural, process or outcome and on how	

Medicaid agencies and HMOS were chosen has been added to the report.	

The scope of this inspection did not analyze differences in quality of care which migh 

exist between HMO and fee-for-setice providers. Consequently, this issue was not 

addressed in this report. 

Outcome Standards: We agree with HCFA that outcome standards must	

always be balanced with measures of structure and ~rocess to ensure high aualitv	 . u, 

medical care in Medicaid contracting lM40s. We also agree that the “science” if	

health outcome analysis is “...more or less in its infancy ... ,“ We have clarified our	

definition of health outcome reviews to distinguish the health outcome medical record

review QA standard from other health outcome initiatives that would use “... clinical	

information data bases that rank post-treatment health status to select the most	

successful treatment options for patients.!’	

We believe that our clarification of heakh outcome medical record reviews addresses	

HCFA’S concern that such reviews would displace process-of-care assessments. As	

defined, health outcome medical record. reviews siirmld: enliumce process-of-care	

assessments since they would take into consideration all care provided by the HMO,	

including preventative care and patient education and, counseling.	

We further agree that most patients are unable: tojydge the technical components of

their medical care (i.e., the practice of medicine:). l%awever, recipients should not be

discouraged from reporting what they believe to be inappropriate or poor medical	

care. In assessing the quality of HMO selvicesY they cam provide information about	

HMO facilities and practices and problems they enmnmtmeci in accessing HMO	

sem”ces.	

Managed Care Entities and Medicaid QA: The HCFA felt that our discussion

of the various financial arrangements HMOS engage in was unnecessary in a report o

c-9 
Medicaid HMOs. We included this information inthebackground section of our	

report to demonstrate the complex nature of the HMO marketplace. The business	

arrangements, sources of income and methods used for ensuring compliance have a	

direct impact on any QA efforts and should not be overlooked when developing a QA	

program.	

“c-10

h-mm. D.C. m 

APR231SQ


TO:


FROM :	

SUEJECT:


Thank you	

Richard P. Kusserow	

InspecSor General


Assistant Secretary for 

Planning and Evaluation 

OIG Draft Report: ‘Quality AssWanC@ m Nedlcaid 

Hr40s , “ OEI-05-92-OOZIO 

for providing me with an opportunity to review yaur


draft report on qualitj ass~nce (QAj in Medicaid HMOS. ‘The


need for information in this area is great and growing,


especially with the emphasis on Medicaid coordinated care 

articulated in the President~s health care reform plan. ~ 

I would like to offer four comments on the draft report:	

First, the methodology section should indicate on what ba8is the 

OIG chose the 28 HMOS it contacted for this review. What factors 

(e.g., size, duration of contract) were considued in selecting


them? What percentage of the state’s Medicaid HMO enrollment do


these HZ40saccount for? Also, given the impo~nco of Arizona in


the Nedicaid HMO realm, the reasons for its omission from this 

review are of interest and should be outlined. 

Second, the report should discuss what federal legislation and 

regulations do and do not require concerning QA in Medicaid El!OS, 

both as genmal back~ound and to put the f~dings of you review 

in context. To a greater extent than the report now suggests, 

federal requirements help te explain HMOs’ and Medicaid agencies’ 

current QA practices. For example, the report implies that 

Medicaid agencies have clectad to cam over fee-for-smite 

( FFS) process standards to their HMO programs (pages ii and 8) . 

In fact, ragulat10n8 at 42 CFR 434.34 ~ that XedLcaid 

contracts with HMOS provide fur a internal QA system that is 

consistent with the utilization ccmtrol requirement for all	

Medicaid services, i.e. , for PFS Medicaid.


Third, recognizing that your review is intended to be simply 

descriptive of QA in Medicaid MMQSV mmmtheless, comparison to OX


standards and practices in FFS M~ica~a may be instructive in	

places, for example, in the dlscussia @ clinical guidelines.


HlfOS have an uphill batt~a to wage pa~:~,y hcawe, despite a laclc	

of evidence that it produces higher quality and better outcomesl 

traditional FFS is w~cialy consl~er~ ths standard of care. The 

absence from yaur report of impertant.md relevant considerations 

(e.g. , what happens in FFS, what happens ‘b private industry, the 

state of the afi in QA) makes it diffi~~t and problematic to 

assess the findings. Additional contextual information would 

make the report more useful and valuable. 

C-II	
� 

Page 2 - Richard P. Kusserow	 .	

Finally, you may wish to reflect in you report the Medicaid


quality assurance reform proposal includ~ in the FY 1993 budget


and legislativ~pa&age and/or the QA initiative now in


development in the Medicaid Bureau.


If you have any questions, please call Elise Smith at 245-1870.


.— 

Martin


C-12

. 

OIG RESPONSE TO ASPE COMMENTS	

The ASPE suggested that additional information be provided in the background and	

methodology sections of the report. They also feh that information about QA in fee­	

for-sexvice and the private sector would provide contextual information making the	

report more useful.	

In response to ASPE’S comments concerning:	

Methodology : We have revised the methodology section of our report to	

address bqth ASPE’S and HCFA’S request for greater detail concerning our Medicaid	

agency and HMO sample selections:	

Scope of studv: This study was limited to QA standards required by Medicaid	

agencies. Information about QA standards in fee-for-sewice or the private sector was	

not within the scope of our study. Arizona was not included in our study because it	

contracts with prepaid health plans to provide services to Medicaid recipients and thus	

did not meet our criteria for inclusion in this study.	

Additional Studies: The ASPE would have liked our report to provide more	

information about QA standards required by federal legislation. They would also have	

liked a comparison of HMO QA standards with fee-for-service QA standards and the	

QA standards of the private sector. Unfortunately, all of these issues were beyond the	

scope of this study, but would be worthwhile endeavors for future study.	

AS ASPE points out, HCFA is currently drafting its own QA program standards for	

managed care organizations as part of the “Quality Assurance Reform Initiative For	

Medicaid Managed Care.”	

. 

C-13

APPENDIX D 

ENDNOTES 

D-] 
1.


2. 

3* 

4. 

5. 

6.	

7. 

8. 

9.	

10.	

11.


12.	

13.	

14.	

15.	

16.	

U. S. Department of Health and Human SeMces, “Tlte Fiscal Year 1992 Budget,” and “The	

Fscal Year 1993 Budget.”	

“Medicaid Coordinated Care Enrollment Report, Summary Statistics,” DHHS/HCFNM edicaid	

Bureau, June 30, 1991.	

Beyersdorf, Cassidy, Raichel, and Schindler, “HMO’s and Preferred Provider Products: Two	

Strategic Alternatives for Affordable Health Care; Business Development Institute, 1983, p 15.	

Riley, Trish, Coburn, Andrew F.,
Kilbreth, Elizabeth H., “Medicaid Managed Care: The State “	

of the Art, A Guide of States,” National AeademV For State Health Policv, September 19W, pp	

109-110.	

BerwiclG Donald M., and Knapp, Marian Gi[bert, “Theory and Practice for Measuring Health	

Care Quality,” Health Care Financing Review, Annual Supplement 1987, pp 49-55.	

Bexwick, Donald M., and Knapp, Marian Gilbert, “Theoty and Practice for Measuring Health	

Care Quality,” Health Care Financine Review Annual Supplement 1987, pp 49-55.	

Siu, Albert L., McGlynn, Elizabeth A., Morgenstern, Hal, and Brook, Robert H,, “A Fair 

Approach to Comparing Quality of Care,” Health Affairs, Spring 1991, pp 62-75. 

Benvick, Donald M., and Knapp, Marian Gilbert, “Theory and Practice for Measuring Health	

Care Quality,” Health Care Financing Review, Annual Supplement 1987, pp 49-55.	

Benvick, Donald M., and Knapp, Marian ~ilbert, ~eoty and Practice for Measuring Health	

Care Quality,” Health Care Financitw Review, Annual Supplement 1987, pp 49-55.	

Siu, Albert L., McGlynn, Elizabeth A., Morgensterrt, Hal, and Brook, Robert H., “A Fair	

Approach to Comparing Quality of Carq” Health Affairs, Spring 1991, pp 62-75.	

Schneikart, Madeline, “Credentia}ing in Managed Care: The New Frontier,” JQA, July/August	

1990, p 7.	

Potter, John W.,‘UnderstandingUti!izankimData atwt DetectingProvider ‘Gaming,’”ToRicsin	

Health Care Financing, Spring 1990, pp 28-35.	

Porter, Michelle J., et. al., “The Interstudy Compet’it’ive Edge, Biannual Report of The	

ManagedHealth Care lndustry,mlmerstu@, 191.,.Vial..}, No. 1, p 39.	

Betwic~ Donald M., and Knapp, Marian GilberrV “Them-y and Practice for Measuring Health	

Care Quality; Health Care Financing Review, Annual Supplement 1987, pp 49-55.	

Berwick, Donald M., and Knapp, Marian Gilbert,, ‘Ti%coryand Practice for Measuring Health	

Care Quality; Health Care Financing Review, Pmnud Supplement 1987, pp 49-55.	

NCQA Standards for Accreditation, June 24, 1991 and HCFA QA definition for CLL%	

176PRE.K dated October 4, 1991.	

D-2	
17.


18.


19.


20.


21.


22.


23.


24.


25.


26.


27.


28.


29.


30.


31.


32.


33.


42 CFR 434.30 (a).	

Berwick, Donald M., and Knapp, Marian Gilbert, “Theory and Practice for Measuring Health	

Care Quality,” Health Care Financine Review, Annual Supplement 1987, pp 49-55.	

Schneikart, Madeline, “Credentiaiing in Managed Care: The New Frontier,” DA July/August	

1990, p 7.	

Siu, Albert L., McGlynn, Elizabeth A., Morgenstern, Hal, Brook, Robert H., “A Fair Approach	

to Comparing Quality of Care,” Health Affairs, Spring 1991, p 68.	

Hey, Elizabeth W., ‘Insurer-Sponsored Managed Health Care: 1990,” Health Insurance	

+%sociation of America, September 1991.	

Freund, Evan and McCoy, Catherine A., “Successful Utilization Review Requires a Physician	

Component,” Contract Healthcare, July 1988, p 29, and Hey, Elizabeth W., “Insurer-Sponsored	

Managed Health Care: 1990,” Health [nsurance Association of America, September 1991, p 10.	

“Medicaid Managed Care: The State of the Art, A Guide for States,” National Academv for	

State Health Polim September 1990, pp 93-96.	

“A Survey of State Medicaid and Insurance Officials on HCFA’S Medicaid Managed Care Draft	

Operations Report; A Report to the National Governors’ Association,” National Academv for	

State Health Policy, June 24, 1991, p 3.	

Siu, Albert L, McGlynn, Elizabeth A., Morgenstern, Hal, and Brook, Robert H., “A Fair	

Approach to Comparing Quality of Care,” Health Affairs, Spring 1991, pp 62-75.	

Bexwick, Donald, M., Knapp, Marian Gilbert, “Theory and Practice for Measuring Health Care	

Quality: Health Care Financine Review, Annual SupplemenL 1987, pp 49-55.	

Siu, Albert L, McGlynn, Elizabeth A., Morgenstern, Hal, and Brook, Robert H., “A Fair	

Approach to Comparing Quality of Care,” Health Affairs, Spring 1991, pp 62-75.	

Social Security Act, Section 1902(a)(30)(C).	

Potter, John W., “Understanding Utili~tion Data and Detecting Provider ‘Gaming’,”Topics in	

Health Care Financing, Spring 1990, Vol. 16, No. 3, pp 28-35.	

Rosen, Richard & “The Place of Health Care Standards in Quality Assurance; HMO Practice, 

vol. 3, No. 5, Pfl 173-177. 

Langwell, Kathtyn, “Structure and Performance of Health Maintenance Organizations: A	

Review,” Health Care Financing Review, Fall 1990, Vol. 12. No. 1, pp 71-79.	

Langwell, Kathryn, “Structure and Performance of Health Maintenance Organizations: A	

Review,” Health Care Financirw Review, Fall 1990, Vol. 12, No. 1, pp 71-79.	

Morrison, Luft, “Health Maintenance Organization Environments in the 1980s and Beyond,”	

Health Care Financing Review, Fall 1990, Vol. 12, No. 1, p 86.	

D-3

34.	 Lang’well, Kathryn, “Structure and Performance of Health Maintenance Organizations: A	

Review,” Health Care Financing Review, Fall 1990, Vol. 12, No. 1, pp 71-79.	

35.
 Langwell, Kathryn, “Structure and Performance of Health Maintenance Organizations: A	

Review,” Health Care Financing Review, Fall 1990, Vol. 12, No. 1, pp 71-79.	

36. 42 CFR Part 434.32,October 1, 1984.	

37.
 Siu, Albert L., McGlynn,Elizabeth A., Morgenstern, Hal, and Brook, Robert H., “A Fair	

Approach to Comparing Quality of Care,” Health Affairs, Spring 1991, pp 62-75.	

D-4