Physician Perspectives of 

Medicare HMOs 

JUNE GIBBS BROWN 

Inspector General 

MAY 1998 

OEI-02-97-00070 
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. 

OEI’s New York Regional Office prepared this report under the direction of John I. Molnar, 

Regional Inspector General. Principal OEI staff included: 

REGION HEADQUARTERS 

Demetra Arapakos, Project Leader Brian Ritchie 

Jennifer Caves Barbara Tedesco 

Daniel Ginsberg Winnie Walker 

Stuart Wright 

To obtain copies of this report, please call the New York Regional Office at (212) 264-1998 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY 

PURPOSE 

To determine the experiences and perspectives of physicians who work with Medicare health 

maintenance organizations (HMOs). 

BACKGROUND 

The Office of Inspector General (OIG) has issued numerous reports on Medicare HMOs over the 

past several years. Some of these reports have raised concerns with the impact of HMOs on the 

access and quality of health care provided to Medicare beneficiaries. 

An HMO is a type of managed care plan that both provides and insures a set of health care 

services for enrollees. Medicare beneficiaries have the option of receiving health care either 

from private providers on a fee-for-service basis or from an HMO with an approved Health Care 

Financing Administration (HCFA) contract. These HMOs are required to contract with 

sufficient numbers of providers, including physicians, to enable them to provide adequate access 

and continuity of care to their Medicare enrollees. As of April 1, 1997, 5.2 million beneficiaries 

(approximately 13.7 percent of the total Medicare population) were members of one of 378 

HMOs, up from 4.5 million in 325 plans as of September 1, 1996. 

We used three methods of data collection for this inspection. First, we sent a mail questionnaire 

to a stratified random sample of 2,500 physicians in June 1997. We received questionnaires 

from 1,140 physicians, for an overall response rate of 46 percent. Of the 1140 questionnaires 

returned to us, 449 were from physicians with Medicare HMO contracts. All percentages 

reported in our findings are based on these 449 physicians. Second, we conducted structured 

telephone interviews with 25 physicians who volunteered to be called for a follow-up interview. 

Third, we reviewed five contracts sent to us by the physicians we interviewed by telephone. 

This report makes no comparison to physicians’ perceptions of the health care provided in a feefor-service setting, since no comparable survey work has yet been conducted in this area. While 

this report confirms many commonly expressed concerns regarding HMOs, it also contributes 

additional insights into these concerns from Medicare HMO physicians. 

FINDINGS 

Overall Physician Satisfaction With Medicare HMOs Is Low 

Close to one-half of physicians with Medicare HMO contracts (43 percent) say they are very or 

somewhat dissatisfied with the Medicare HMO, while just 18 percent are somewhat or very 

satisfied. The remaining 39 percent are neither satisfied nor dissatisfied. Half of the physicians 

who are salaried HMO employees (13 of 27) are satisfied overall, compared to just 16 percent of 

i 
all other physicians. 

Many Physicians Report Concerns With Medicare HMOs 

Referral Process 

When reporting on referral times, 79 percent of physicians who need prior approval for referrals 

usually wait 5 or more minutes to get through when calling the HMO for their referral; 16 

percent wait 1 to 3 days for the HMO to reach a decision, and 12 percent wait longer than 1 

week. Close to half of physicians (42 percent) are dissatisfied with the HMO referral process. 

Clinical Indenendence 

A majority of physicians (62 percent) believe that working in a Medicare HMO often or 

sometimes restricts their clinical independence. At least one-quarter say the HMO’s concern with 

costs always or frequently influences their referrals for specialists or tests, post-acute 

arrangements, and general treatment decisions. 

Access To Care 

Some physicians believe Medicare HMOs limit their patients’ access to care. In particular, a 

large majority say that fee-for-service is better than HMOs for access to specialists (74 percent) 

and for access to new treatments (69 percent). Additionally, 29 percent think referral restrictions 

are worse for Medicare HMOs than for all HMOs in general, and 27 percent say they often feel 

restricted in referring their Medicare HMO patients for specialists and tests. A few volunteer 

other problems specific to caring for HMO Medicare patients, such as the greater complexity of 

their health care needs, their susceptibility to dishonest HMO marketing practices, and their 

inability to understand and work the HMO system to their advantage. 

Comnlaints And Anneals 

Forty percent of physicians are dissatisfied with the way the HMO handles their complaints, and 

30 percent are dissatisfied with the formal appeals process. As their dissatisfaction with these 

procedures decreases, so too does their overall satisfaction with the Medicare HMO. Only onequarter (28 percent) have ever formally appealed an HMO decision, and one-half (53 percent) are 

generally not satisfied with how their complaints are resolved. 

Utilization And Qualitv Assurance Reviews 

While not required by regulation, less than half (40 percent) of physicians say they have ever had 

a utilization and quality assurance review. Thirty-seven percent report never having one of these 

reviews and the remaining 23 percent do not know if they have had one. Of those physicians 

who say they have had such reviews, three-quarters (73 percent) say they were done 

appropriately, but less than half (43 percent) say they were used appropriately. 

ii 
Marketing Practices 

A few physicians are concerned that Medicare beneficiaries are particularly susceptible to 

questionable HMO marketing practices. Of the fifty-five physicians who report observing fraud 

in a Medicare HMO, eleven report dishonest marketing practices. The other fraudulent practices 

reported by physicians but not related to marketing include delaying or denying medically 

necessary services and overbilling. 

Most Physicians Rate Medicare Enrollee Knowledge Of Their HMO Low 

Most physicians believe that Medicare enrollees do not understand core elements of their HMO, 

such as the referral process (70 percent), benefits (75 percent), restrictions on services (83 

percent), and the appeals and grievance process (89 percent). Physicians’ perceptions of 

Medicare enrollee knowledge and HMO referral times are linked to their perceptions of quality 

of care. They believe quality of care decreases as Medicare enrollee knowledge decreases or 

referral time increases. 

Despite The Misgivings Cited Above, Most Physicians Believe That Their Medicare Patients 

Receive Good Care 

A majority of physicians (71 percent) report that the overall quality of care Medicare enrollees 

get at their HMO is excellent or good; another 21 percent rate the care as fair, while the 

remaining 8 percent say it is poor or very poor. Similarly, most physicians (62 percent) are 

satisfied with their relationships with their Medicare patients. Furthermore, nearly all (90 

percent) believe they spend an adequate amount of time with them during office visits. 

CONCLUSION 

Needless to say, HCFA should work with physicians to address their concerns about Medicare 

HMOs and to improve the quality of services provided to Medicare HMO enrollees. We believe 

that greater physician satisfaction with the Medicare HMO program will enhance both enrollees’ 

and providers’ experiences with that program. 

This survey identifies the issues which most concern Medicare HMO physicians, many of which 

are general in nature, such as a lack of clinical independence and restrictions on access to care. 

Such concerns are most likely to be resolved through overall improvement of the HMO program. 

However, there are other distinct concerns we believe might be more amenable to specific 

solutions. In particular, physicians expressed the following concerns: 

l the appeals process 

l beneficiary knowledge 

l the referral process 

l utilization and quality assurance reviews 

. . . 111 
We believe that the implementation of the 1997 Balanced Budget Act “MedicarePlus” program 

provides HCFA with an opportunity to address physicians’ concerns about the lack of beneficiary 

HMO knowledge. This program gives beneficiaries the option of receiving their Medicare 

benefits through MedicarePlus plans, which would include HMOs and other coordinated plans 

such as Preferred Provider Organizations (PPOs). These plans will be required to provide 

specific information to beneficiaries at enrollment, and annually thereafter, about certain plan 

features such as quality of care, utilization reviews, and procedures for appeals and grievances. 

Other approaches HCFA may want to consider in addressing these issues include establishing 

HMO performance standards, such as for referral times and utilization and quality assurance 

reviews. It may be necessary to conduct further studies of specific areas of concern. Whatever 

approach is used, we believe a process of consultation between HCFA and physician groups 

would be a good first step towards resolving some of their concerns. 

The OIG plans to periodically repeat this physician survey to determine if progress is being made 

in improving physician satisfaction. We also plan to continue our surveys of Medicare 

beneficiaries to obtain their experiences and satisfaction with their HMOs. 

COMMENTS 

We received comments on the draft report from HCFA. They concur with our general 

observations and conclusion and state that the Balanced Budget Act of 1997 addresses many of 

the physicians’ concerns reported in our study. Both the Assistant Secretary for Management 

and Budget (ASMB) and HCFA provided technical comments, which have been incorporated 

into the final report when appropriate. 

The HCFA suggests that we remove a reference in our conclusion to prior OIG recommendations 

on strengthening the appeals and grievance procedures for beneficiaries. We agree with their 

suggestion and have removed this reference from our report. 

The HCFA also notes that our report does not indicate whether physician experience with 

Medicare HMOs differs from their experience with non-Medicare HMOs and suggests that it 

would be helpful to conduct a comparable survey of physicians about the Medicare fee-forservice system. We agree that it would be useful to study these comparisons; however, such 

analysis was not within the scope of our work. 

The full comments from HCFA are presented in Appendix F. 

iv 
TABLE OF CONTENTS 

EXECUTIVE SUMMARY 

PAGE 

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..l 

FINDINGS ................................................................... . 

Overall Physician Satisfaction With Medicare HMOs Is Low ......................... 6 

Physicians Report Concerns with Medicare HMOs ................................. .7 

Physicians Rate Medicare Enrollee Knowledge of HMO Low ........................ 11 

Despite Misgivings, Physicians Believe Medicare Patient Care Is Good ................ 12 

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...14 

APPENDICES 

A: Sample Selection ......................................................... A-l 

B: Profile of Medicare HMO Physicians ......................................... B-l 

C: Non-respondent Analysis ................................................... C- 1 

D: Confidence Intervals for Key Survey Questions ................................ D-l 

E: Statistical Tests for Key Findings ............................................. E-l 

F:Comments ............................................................... F-l 
PURPOSE 

To determine the experiences and perspectives of physicians who work with Medicare health 

maintenance organizations (HMOs). 

BACKGROUND 

The Office of Inspector General (OIG) has issued numerous reports on Medicare HMOs over the 

past several years. Some of these reports have raised concerns with the impact of HMOs on the 

access and quality of health care provided to Medicare beneficiaries. These previous studies 

have surveyed only Medicare HMO enrollees and administrators. This survey obtains the 

perspectives of another important player in the Medicare HMO industry, the physician. 

The HMO Industry 

A health maintenance organization (HMO) is a type of managed care plan that both provides and 

insures a set of health care services for enrollees. Most HMOs operate on a gatekeeper system, 

in which a patient selects a primary care physician from a group of approved plan providers to 

act as her or his first point of contact within the health care system. This physician must 

authorize any specialist, hospital, or other type of care the patient receives. 

Three basic models currently dominate the HMO market. In the first, a staff model, physicians 

practice solely as employees of the HMO and normally are paid a set salary. In the second, a 

group model, the HMO contracts with medical groups to provide specific covered services in 

exchange for a negotiated payment which is then distributed among the group’s physicians. 

Finally, an individual practice association (IPA) contracts with individual physicians who then 

see patients in their private practices. Unlike those in staff models, physicians in IPA and group 

HMOs can participate in multiple managed care plans. 

Medicare HMOs 

In certain geographical areas, Medicare beneficiaries have the option of receiving health care 

either from private providers on a fee-for-service basis or from an HMO. To participate in the 

Medicare program, an HMO must apply for either a risk or a cost contract from HCFA. Both 

contracts require the HMO to provide all services covered by Parts A and B of Medicare. Those 

HMOs with risk contracts are paid on a prospective per capita basis. They receive a set premium 

per Medicare enrollee, regardless of how much care each patient actually receives. Risk plans 

must assume financial responsibility for providing all necessary covered services to Medicare 

enrollees. They are required to absorb any financial losses, but are permitted to retain any 

savings. Cost plans are paid on a reasonable cost basis, with adjustments made at the end of the 

year for variations from the predicted budget. 

1 
Growth in Medicare HMOs 

The Medicare HMO program has experienced rapid growth over the past several years, adding 

new enrollees at a rate of more than 80,000 per month in 1996. As of April 1, 1997, 5.2 million 

beneficiaries (approximately 13.7 percent of the total Medicare population) were members of one 

of 378 HMOs, up from 4.5 million in 325 plans as of September 1, 1996. Participation in risk 

plans accounts for most of the recent growth in Medicare HMOs. Enrollment in HMO plans 

varies greatly among geographic locations. The proportion of beneficiaries in Medicare HMOs 

ranges from over 35 percent in California and Arizona, to none in several other States. 

Physicians in HMOs 

An HMO can choose among several methods by which to pay its affiliated physicians. First, the 

physicians can be paid a set salary which is independent of the number of patients treated and 

services utilized. Alternatively, physicians may receive payment on a capitation basis. Under 

this system the physician is paid a fixed rate per HMO member, regardless of the amount of care 

each patient actually receives. Providers can also be paid on a fee-for-service basis, in which 

they are compensated for actual services rendered. It is possible for a plan to pay some providers 

by capitation and others by fee-for-service. 

The HCFA regulations state that a Medicare HMO is required to contract with sufficient numbers 

and types of providers to enable it to provide health care services which will assure adequate 

access and continuity of care to its enrollees. The HMO can exercise its own discretion in 

determining provider payment methods and work requirements. However, to meet HCFA 

requirements, the following six points must be included in its provider contracts: 

1. The provider must agree to serve the HMO members for a specific period of time. 

2. The provider must agree to provide services to commercial and Medicare members. 

3. The provider must agree not to bill HMO members. 

4. The provider must agree to be reviewed by the utilization management and quality 

assurance staff of the HMO. 

5. Payments for services and incentive arrangements, if any, must be stated. 

6. The contract must be signed and dated by both the HMO and the provider. 

Prior Physician Surveys 

Several studies have reported on physicians’ perceptions of managed care in general but none 

have specifically surveyed physicians about the Medicare HMO program. The Physician 

Payment Review Commission (PPRC), in its Annual Renort To Congress, 1994, found that 32 

percent of physicians report serious problems in external review and limitations under capitated 

plans, while only 14 percent under Medicare fee-for-service report similar serious problems. 

Phvsicians’ Weeklv reported an AMA study of 1,010 physicians in 1996 which concluded that a 

majority of doctors feel that managed care is having a negative impact on the quality of care and 

impairing the doctor-patient relationship and that managed care is having a negative impact on 

2 
the clinical independence of doctors. On the positive side, the AMA survey also reported that 

many of the physicians see HMOs as having a positive effect on the affordability of health care 

and on preventive health care. 

A 1997 Commonwealth Fund report based on telephone interviews with a national sample of 

1,7 10 physicians reached similar conclusions. Physicians perceive that managed care negatively 

affects their time spent with patients, their ability to make good clinical decisions, and their 

ability to keep up with practice guidelines. Satisfaction rates were higher among physicians in 

group or staff model HMOs than those in other types of plans, such as IPAs. 

Prior OIG HMO Surveys 

The OIG Office of Evaluation and Inspections has been actively evaluating Medicare HMOs. 

“Medicare HMO Appeal and Grievance Processes Overview, ” OEI-07-94-00280, and three other 

related inspections on the Medicare HMO appeal and grievance processes reported problems in 

how HMOs implement requirements regarding appeals and grievances, including ineffective 

communication with Medicare enrollees. Another report, “Medicare’s Oversight of Managed 

Care: Monitoring Plan Performance,” OEI-0 l-96-001 90, found limitations in HCFA’s oversight 

of managed care plans. Additionally, the OIG is currently completing a survey of Medicare 

HMO enrollees, “Beneficiary Perspectives of Medicare Risk HMOs,” OEI-06-96-00430. This 

survey found, among other things, that most enrollees give favorable overall ratings to their 

primary doctors and HMOs but rate the ease of getting needed care under HMO rules less 

favorably. Future HMO work planned for the OIG includes a study of marketing practices of 

Medicare managed care plans. 

METHODOLOGY 

Multiple Data Collection Methods 

We used three methods of data collection for this inspection. First, we sent a mail questionnaire 

to a stratified random sample of 2,500 physicians. Second, we conducted structured telephone 

interviews with 25 physicians who volunteered to be called for follow-up interviews. Third, we 

reviewed five contracts sent to us by some of these physicians. 

Physician Mail Survey 

We were unable to specifically identify physicians with Medicare HMO contracts because 

neither the Unique Physician Identification Number (UPIN) file nor any other HCFA database 

identifies these physicians. We, therefore, selected a stratified random sample of 2,500 

physicians from the UPIN file of all physicians who are paid under the Medicare program. In 

order to maximize the number of physicians with Medicare HMO contracts, we eliminated States 

with no Medicare HMOs. We then stratified our sample into two groups -- those from States 

with high Medicare HMO enrollment and those from States with low Medicare HMO 

enrollment. The 13 States with high enrollment account for 84 percent of Medicare HMO 

3 
enrollment nationwide. We selected 1,500 physicians from the high stratum and 1,000 

physicians from the low stratum, excluding non-medical doctors such as chiropractors and 

podiatrists, residents and interns, and pediatricians. See Appendix A for further discussion of the 

physician sample selection. 

We then sent a questionnaire to each of these 2,500 physicians in June 1997. The questionnaire 

had a filter question which asked the physician if he or she had a current or recent (within the 

past year) contract with a Medicare HMO. Physicians with such a contract were instructed to fill 

out the questionnaire. Those without a Medicare HMO contract were asked to return the 

questionnaire indicating they had no such contract. 

After 8 weeks of data collection, during which time we conducted a second mailing to nonrespondents, 1,140 questionnaires were returned to us, for an overall response rate of 46 percent. 

Additionally, we were unable to locate 187 of the 2,500 physicians. Our response rates between 

strata were almost identical: 45 percent for the high stratum and 46 percent for the low stratum. 

This response rate, while less than 50 percent, compares favorably to the lower response rates 

achieved in prior physician surveys discussed in the background. 

Of the 1,140 questionnaires returned to us, 449 were from physicians with Medicare HMO 

contracts. All percentages reported in our findings are based on these 449 physicians. The other 

691 physicians we heard from had no Medicare HMO contract. Of the 449 Medicare HMO 

physicians, 328 were from the high stratum and 121 were from the low stratum. We weighted 

the data collected from these 449 surveys by stratum. See Appendix B for a profile of the 

responding Medicare HMO physicians. 

While relatively good for a survey of physicians, our response rate of 46 percent suggests the 

possibility of non-response bias. We attempted to conduct a follow-up telephone survey with 

150 randomly selected non-responding physicians, but were able to complete interviews with 

only five of them. However, we did conduct a non-respondent analysis of all 2,500 physicians in 

our sample by analyzing several variables which may have influenced responses. See Appendix 

C for this analysis. 

All differences reported between subgroups are statistically significant at the 95 percent 

confidence level. See Appendix D for confidence intervals for key survey questions and 

Appendix E for statistical tests for key findings. 

Physician Telephone Interviews and Contract Review 

On the mail questionnaire, we asked physicians if they would be willing to be called for a followup telephone interview. Seventy-nine physicians volunteered. We attempted to reach all of these 

physicians at least twice, and completed interviews with 25 of them. Our telephone interviews 

collected additional qualitative data to supplement our mail survey. 

We also asked each of the 25 physicians we interviewed for a copy of their Medicare HMO 

4 
contract. Some were reluctant to share these with us. We obtained five contracts which we 

reviewed, looking at both overall content and specific clauses which illustrated some of the 

issues cited by physicians in the mail survey. 

Reporting Findings 

The reader should keep two points in mind while reading this report. First, this report makes no 

comparison to physicians’ perceptions of the health care provided in a fee-for-service setting, 

since no comparable survey work has yet been conducted in this area. Second, while this report 

confirms many commonly expressed concerns regarding HMOs, it also contributes additional 

insights into these concerns from Medicare HMO physicians. 

This inspection was conducted in accordance with the Quality Standards for Inspections 

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

5 
OVERALL PHYSICIAN SATISFACTION WITH MEDICARE HMOs IS LOW 

Close To Half Are Dissatisfied Overall 

When asked to rate their overall satisfaction with their Medicare HMO, physicians report low 

levels of satisfaction, as illustrated in Graph A below. Forty-three percent of physicians say they 

are very or somewhat dissatisfied with their HMO. 

On the other hand, just 18 percent of physicians are somewhat or very satisfied, and the 

remaining 39 percent report that they are neither satisfied nor dissatisfied. These findings are 

similar to findings from other physician surveys noted in the background. 

Graph A 

Proportion Of Physicians Satisfied With Medicare HMOs 

EE Very Satisfied 

LaY Somewhat Satisfied 

~ Neither 

n Somewhat Dissatisfied 

R Very Dissatisfied 

Satisfaction varies among different groups of physicians. Half of the physicians who are salaried 

HMO employees (13 of 27) are satisfied overall, compared to 11 percent of physicians in solo 

practice and 16 percent of physicians in group practice. Similarly, physicians who are on the 

staff of an HMO are more satisfied overall (38 percent) than those who see their Medicare HMO 

patients in their private practices (17 percent). It appears that physicians employed full-time by a 

6 
Medicare HMO view it differently than physicians who work with the HMO on only a part-time 

basis, perhaps because they are more familiar with the HMO’s operations or are more invested in 

its success. Finally, 50 percent of specialists are dissatisfied with HMOs, compared to just 29 

percent of primary care physicians. 

Satisfaction does not vary by other physician characteristics. Physicians’ satisfaction levels do 

not appear to differ significantly based on the number of years they have been in practice or 

based on the size of their Medicare HMO practices. Satisfaction levels are also similar between 

physicians from States with high Medicare HMO enrollment and those from States with low 

enrollment. 

MANY PHYSICIANS REPORT CONCERNS WITH MEDICARE HMOs 

Confirming general opinion, physicians report several concerns with Medicare HMOs. These 

range from operational issues such as referral practices, to restrictions on their clinical 

independence. These concerns are linked to physicians’ overall dissatisfaction with Medicare 

HMOs. 

Referral Process 

A majority of physicians have some experience with their Medicare HMO’s referral process. 

Sixty-four percent routinely refer their Medicare patients to specialists or for tests, and most of 

them need prior approval for their referrals. 

Most physicians (79 percent) wait 5 or more minutes to get through to the HMO when calling for 

approval of referrals; 30 percent of these wait more than 30 minutes. One physician exclaims 

that “every time our office calls [the HMO] we are placed on hold for an average of 45 minutes!” 

Tables A below illustrates the length of time it takes physicians to get through when calling their 

HMO for approval of referrals. 

Table A 

Length Of Time To Get Through To HMO When Calling For Approval 

Right ~ Less than 5 to 30 More than 

away 5 minutes minutes 30 minutes 

6% 15% 49% 30% 

7 
One quarter (27 percent) of physicians wait 3 or more days for the HMO to make a decision on 

their referrals. Table B below illustrates the length of time for HMOs to make this decision. 

Table B 

Length Of Time For HMO To Make Decision 

Physicians note that the referral process varies widely among Medicare HMOs. This lack of 

uniformity in paperwork and procedures may create additional administrative work. Not 

surprisingly, a majority of physicians (82 percent) say they would favor a uniform referral 

process among all Medicare HMOs. 

Physicians who are salaried employees of HMOs report fewer problems with the referral process 

than physicians in other types of practices. Nearly half of salaried HMO physicians (12 of 27) do 

not need HMO approval prior to referring their Medicare HMO patients for specialists or tests. 

Of those who need pre-certification, three-quarters are able to get through to an HMO 

representative within 5 minutes, compared to less than one-quarter of physicians in other types of 

practices. 

Forty-two percent of physicians are somewhat or very dissatisfied with the HMO referral 

process. As physician satisfaction with this process decreases, so too does their overall 

satisfaction with the Medicare HMO. A majority (81 percent) who are satisfied with the HMO 

referral process are also satisfied overall, while just 7 percent of those dissatisfied with the 

referral process report being satisfied overall. 

Three of the physicians we interviewed by telephone volunteer that they are required to refer 

patients to poor quality providers (e.g., radiology groups, medical equipment suppliers) just 

because these providers have contracts with the HMO. One of the physician HMO contracts we 

reviewed stipulates this requirement with the following clause: “Referral Physician, to the extent 

possible, agrees to use those inpatient, extended care, ancillary service and other health facilities 

and health professionals which have contracted with [HMO].” Another physician, discussing a 

lab he must use, says, “They get things wrong all of the time, and the contracts prohibit the 

physicians from telling the patients to go somewhere else to get the tests done correctly.” 

Clinical Independence 

Other HMO restrictions also affect physicians’ satisfaction with the Medicare HMO. A majority 

of physicians (62 percent) believe that working in a Medicare HMO at least occasionally restricts 

their clinical independence. Twenty-three percent say they often feel restricted, and 39 percent 

say they sometimes feel restricted. Additionally, half of the physicians believe working in a 

8 
Medicare HMO only sometimes (40 percent) or rarely (15 percent) allows them to practice 

medicine the way they think is appropriate. 

Some physicians also believe that their clinical independence has been restricted by cost savings. 

One-quarter (27 percent) say the HMOs’ costs always or frequently influence referrals for 

specialists or tests, 26 percent say costs always or frequently influence post-acute arrangements 

for their Medicare patients, and 20 percent believe costs always or frequently influence general 

treatment decisions. A few physicians say that over-emphasis on the Medicare HMO’s profits 

detracts from the medical care provided to its enrollees. One respondent, expressing the views of 

many, says that HMOs are “businessmen practicing medicine without a license.” 

Many physicians also express dissatisfaction with the method or amount of their payment for 

their Medicare HMO patients. More than half (61 percent) are very or somewhat dissatisfied 

with how much they are paid by the HMO. However, fewer physicians (23 percent) say this is 

the factor which most influences their dissatisfaction with the Medicare HMO. Furthermore, a 

few say they only break even or lose money when treating Medicare HMO patients, while others 

mention that the HMO does not always pay them on time. 

Access To Care 

In assessing Medicare beneficiaries’ access to care, more than one-half of physicians rate the 

traditional fee-for-service system higher than the HMO system. A large majority say fee-forservice is better than HMOs for access to specialists (74 percent) or for access to new treatments 

(69 percent). “I have to send patients out of town to see some specialists because there are not 

enough participating HMO physicians in town,” comments one physician. Another physician 

says, “HMOs limit care through inconvenience.” Finally, half of physicians (54 percent) say feefor-service offers a wider range of benefits than HMOs for Medicare beneficiaries. 

Physicians also cite particular problems with making referrals for their Medicare HMO patients. 

Twenty-nine percent of physicians think referral restrictions are worse for Medicare HMOs than 

for all HMOs in general, and another quarter (27 percent) say they often feel restricted in 

referring their Medicare HMO patients for specialists or tests. Furthermore, some of the 

physicians we interviewed by telephone believe the referral process is problematic for Medicare 

beneficiaries because they often do not fully understand the process. “The referral process,” 

states one, “is too difficult for elderly patients.” 

A few physicians volunteer other problems in their HMO specific to the elderly. Several point 

out that due to the greater complexity of caring for Medicare patients and their comparatively 

poor health status, HMO treatment restrictions are particularly problematic for this population. 

Other physicians believe Medicare beneficiaries may not be getting the best care because they are 

not able to understand and work the system to their advantage. 

9 
Complaints and Appeals 

Forty percent of physicians are dissatisfied with the way the HMO handles physician complaints, 

and 30 percent are dissatisfied with the formal appeals process. Dissatisfaction with these 

processes also contributes to their overall dissatisfaction Most (63 percent) who are satisfied 

with the way the HMO handles physician complaints are satisfied overall, compared to just 4 

percent of those dissatisfied with how complaints are handled. Finally, 50 percent who are 

satisfied with the appeals process but only 3 percent who are dissatisfied with that process are 

satisfied overall with the Medicare HMO. 

Only one-quarter (28 percent) have ever formally appealed an HMO decision. Those who report 

their clinical independence is frequently restricted are more likely to have formally appealed an 

HMO decision (43 percent) compared to those who rarely feel restricted (17 percent). 

Furthermore, one-half of all physicians (53 percent) are generally not satisfied with how their 

complaints are resolved, and 16 percent say they have refrained from complaining to the HMO 

about something because they thought it might jeopardize their contract. 

Utilization And Quality Assurance Reviews 

Not all physicians believe utilization and quality assurance reviews are appropriately conducted. 

The HCFA has a policy that requires inclusion of a provision in HMO provider contracts that 

states “for services rendered to health plan members, the provider must agree to the review by the 

utilization management and quality assurance committees/staff.” However, even though not 

required by regulation, less than half (40 percent) of physicians say they have ever had any kind 

of quality assurance review. Thirty-seven percent report never having one of these reviews and 

the remaining 23 percent do not know if they have had one. Of those physicians who say they 

have had such reviews, three-quarters (73 percent) say they were done appropriately but less than 

half (46 percent) say they were used appropriately. 

Physicians’ experiences with utilization and quality assurance reviews is related to their overall 

satisfaction with the Medicare HMO. One-quarter (26 percent) of physicians who believe these 

reviews are done appropriately are satisfied overall, compared to just 9 percent of those who do 

not believe the reviews are done appropriately. Similarly, 33 percent of physicians who say the 

reviews are used appropriately but only 7 percent who say they are used inappropriately report 

being satisfied overall. 

Marketing Practices 

A few physicians are concerned that Medicare beneficiaries are particularly susceptible to 

questionable HMO marketing practices. Of the fifty-five physicians who report observing fraud 

in a Medicare HMO, eleven report dishonest marketing practices. “HMO sales reps,” writes one 

physician, “lie and distort to get beneficiaries to join.” Another says, “The way elderly patients 

are treated by HMO sales reps is shameful.” Seventeen of 270 physicians who volunteer 

suggestions to improve the Medicare HMO program recommend closer monitoring of marketing 

10 
practices. Other fraudulent practices reported by physicians but not related to marketing include 

delaying or denying medically necessary services and overbilling. 

MOST PHYSICIANS RATE MEDICARE ENROLLEE KNOWLEDGE OF THEIR HMO 

LOW 

A majority of physicians (at least 70 percent) believe that Medicare enrollees do not understand 

core elements of their HMO, as illustrated in Table C below. 

Physicians’ Assessment 

Plan 

Elements 

Appeals 

process 

Restrictions 

on services 

Benefits 

Referral 

procedures 

Table C 

of HMO Medicare Enrollee Knowledge 

% that do not 

17 I 83 

As one physician expresses, “Patients don’t know exactly what they sign up for.” Of the 

physicians who volunteer suggestions to improve the Medicare HMO program, the most 

frequently cited recommendation (by 19 percent of physicians) is to improve Medicare enrollee 

education. 

Some physicians believe they cannot freely inform their Medicare patients. Fifteen percent of 

physicians do not feel free to discuss one or more of the following with their Medicare HMO 

patients: referrals for tests, referrals for specialists, referrals for non-covered services, or appeals 

and grievances. Most of these physicians say they feel pressure from the HMO not to discuss 

these issues. 

11 
DESPITE THE MISGIVINGS CITED ABOVE, MOST PHYSICIANS BELIEVE THAT 

THEIR MEDICARE PATIENTS RECEIVE GOOD CARE 

Most Physicians Feel Positive About The Care Provided To Their Medicare Patients 

Physicians’ assessments of the quality of care Medicare patients receive at the HMO are 

generally positive. Almost three-quarters of physicians (71 percent) report that the overall 

quality of care Medicare enrollees get at their HMO is excellent or good. Another 21 percent 

rate the care as fair, while the remaining 8 percent say it is poor or very poor. Physicians’ 

positive assessments of quality of care may appear to contradict the other concerns they have 

about their Medicare HMO. This may be due, in part, to their interpretation of the survey 

question asking them to rate the care Medicare patients get at the HMO. These physicians seem 

to believe they can provide good care to their patients despite some of the obstacles cited above. 

A few physicians say that it is the health care providers who give good care, not the HMO. 

Primary care physicians are more likely than specialists to rate the quality of care received by 

Medicare HMO patients as high; 83 percent of the former but only 63 percent of the latter say 

this care is excellent or good. 

Similarly, most physicians (62 percent) are satisfied with their relationships with their Medicare 

patients. This was the most frequently cited factor by physicians (43 percent) for their overall 

satisfaction with the Medicare HMO. Additionally, physicians are also satisfied with the amount 

of time they spend with their Medicare patients. Almost all (92 percent) spend 10 minutes or 

more with their Medicare HMO patients for each visit. Nearly all physicians (90 percent) think 

this is an adequate amount of time. 

Physicians volunteer various suggestions for improving the care provided to Medicare patients in 

HMOs. These include improving the referral process, giving physicians greater medical 

autonomy, monitoring access to treatment, and giving Medicare patients greater provider choice. 

HMO Referral Times and Medicare Enrollee Knowledge Are Linked To Quality Of Care 

The length of the referral process is linked to physicians’ perceptions of quality of care. Ninetyfour percent of physicians whose staff gets through right away when calling the HMO for precertification rate their patients’ care as good, compared to only 62 percent of those whose staff 

takes more than 30 minutes to reach the HMO. Furthermore, one third of the physicians (36 

percent) whose HMO takes more than 7 days to reach a decision report that their patients’ quality 

of care is poor or very poor, compared to only 3 percent of physicians whose HMO reaches that 

decision within 1 hour. 

Physician perceptions of Medicare enrollee knowledge are also linked to their perceptions of 

quality of care. Eighty-six percent of physicians who believe their patients understand HMO 

service restrictions feel that overall quality of care in the Medicare HMO is good. Conversely, 

just 67 percent of physicians who do not believe their patients understand HMO restrictions on 

services believe quality of care is good. Similarly, a majority of physicians who believe 

12 
beneficiaries understand referrals, benefits, and appeals think quality of care in the HMO is good 

(8 1, 87, and 87 percent respectively), compared to fewer of those who do not believe their 

patients understand these aspects of the HMO (65, 65, and 68 percent respectively). 

13 
CONCLUSION 

Needless to say, HCFA should work with physicians to address their concerns about Medicare 

HMOs and to improve the quality of services provided to Medicare HMO enrollees. We 

believe that greater physician satisfaction with the Medicare HMO program will enhance both 

enrollees’ and providers’ experiences with that program. 

This survey identifies the issues which most concern Medicare HMO physicians, many of 

which are general in nature, such as a lack of clinical independence and restrictions on access 

to care. Such concerns are most likely to be resolved through overall improvement of the 

HMO program. 

However, there are other distinct concerns we believe might be more amenable to specific 

solutions. In particular, physicians expressed the following concerns: 

0 the appeals process 

l beneficiary knowledge 

l the referral process 

l utilization and quality assurance reviews 

We believe that the implementation of the 1997 Balanced Budget Act “MedicarePlus” program 

provides HCFA with an opportunity to address physicians’ concerns about the lack of 

beneficiary HMO knowledge. This program gives beneficiaries the option of receiving their 

Medicare benefits through MedicarePlus plans, which would include HMOs and other 

coordinated plans such as Preferred Provider Organizations (PPOs). These plans will be 

required to provide specific information to beneficiaries at enrollment, and annually thereafter, 

about certain plan features such as quality of care, utilization reviews, and procedures for 

appeals and grievances. 

Other approaches HCFA may want to consider in addressing these issues include establishing 

HMO performance standards, such as for referral times and utilization and quality assurance 

reviews. It may be necessary to conduct further studies of specific areas of concern. 

Whatever approach is used, we believe a process of consultation between HCFA and physician 

groups would be a good first step towards resolving some of their concerns. 

The OIG plans to periodically repeat this physician survey to determine if progress is being 

made in improving physician satisfaction. We also plan to continue our surveys of Medicare 

beneficiaries to obtain their experiences and satisfaction with their HMOs. 

COMMENTS 

We received comments on the draft report from HCFA. They concur with our general 

observations and conclusion and state that the Balanced Budget Act of 1997 addresses many of 

the physicians’ concerns reported in our study. Both the Assistant Secretary for Management 

14 
and Budget (ASMB) and HCFA provided technical comments, which have been incorporated 

into the final report when appropriate. 

The HCFA suggests that we remove a reference in our conclusion to prior OIG recommendations 

on strengthening the appeals and grievance procedures for beneficiaries. We agree with their 

suggestion and have removed this reference from our report. 

The HCFA also notes that our report does not indicate whether physician experience with 

Medicare HMOs differs from their experience with non-Medicare HMOs and suggests that it 

would be helpful to conduct a comparable survey of physicians about the Medicare fee-forservice system. We agree that it would be useful to study these comparisons; however, such 

analysis was not within the scope of our work. 

The full comments from HCFA are presented in Appendix F. 

15 
SAMPLE SELECTION 

The universe for this inspection consisted of all physicians in HCFA’s Unique Physician 

Identification Number (UPIN) database, excluding pediatricians, residents, interns, and nonmedical doctors, as well as physicians in States without Medicare HMOs (Maine, Mississippi, 

Montana, New Hampshire, South Dakota, and Wyoming). 

Because HCFA can not identify physicians with Medicare HMO contracts, we had to conduct a 

test. A pre-inspection probe sample indicated that approximately 30 percent of physicians in the 

UPIN database have one or more contracts with Medicare HMOs. To increase the probability of 

sampling these physicians, we grouped the physicians into two strata. The high Medicare HMO 

enrollment stratum consisted of physicians who practice in the 13 States with the highest 

percentage of Medicare HMO enrollees, and the low stratum consisted of physicians in the 

remaining States. For the 5 percent of physicians with business addresses in both strata, we 

randomly selected one address per physician and used it for stratum assignment. 

We determined that a sample size of 2,500 physicians was necessary to assure statistically valid 

conclusions, with a 95 percent confidence level and 5 percent precision level. We based this 

sample size on our estimation of the percentage of physicians with Medicare HMO contracts and 

on the assumption of a 40 percent response rate. We then randomly selected 1,500 physicians 

from the high stratum and 1,000 from the low stratum as follows: 

Strata Universe 

~~,-- Sample 

High Medicare HMO 1500 

enrollment 

Low Medicare HMO 1000 

: 

TOTAL 2,500 

We weighted the collected data by stratum, using the following formula: 

WT = Universe of nhvsicians in stratum 

Sampled physicians in stratum 

A-l 
_____~~~~~~ 

APPENDIX B 

PROFILE OF MEDICARE HMO PHYSICIANS 

I. A variety of physicians appear to be contracting with Medicare HMOs as shown in the 

following tables and charts. 

Table B-l 

Responding Physician By Primary Specialty 

Primary Specialty (UPIN 

0 1 General Practitioner 

02 General Surgery 

05 Anesthesiology 

06 Cardiology 

07 Dermatology 

08 Family Practice 

10 Gastroenterology 

11 Internal Medicine 

13 Neurology 

16 Obstetrics/Gynecology 

18 Ophthalmology 

20 Orthopedic Surgery 

26 Psychiatry 

29 Pulmonary Disease 

30 Diagnostic 

34 Urology 

53 Hematology/Oncology 

93 Emergency ~~~~~~~ Medicine 

3ther 

rOTAL 

Code) 

I 4% 

-7 3% -&- ~~ 

5% 

---+-

4% 

t-~~~~~~~~ 

I 3% ~~ ~~ 

B-l 
E 

Chart B- 1 

Responding Physician By Type Of Practice 

n Solo Practice 

L 1 Group Practice 

-1 Salaried Employee of HMO 

a Salaried Employee of Hospital 

IIT Other 

* Four physicians did not indicate type of practice 

Table B-2 

Responding Physicians By Age 

Minimum Age 28 

Maximum Age 77 

Mean Age 48 

B-2 
-- 

II. In our telephone interviews, we asked 25 physicians why they chose to contract with a 

Medicare HMO. Table B-3 shows the reasons they give. 

Table B-3 

Physicians’ Reasons For Contracting 

Reason 

Preserve relations with long-time 

Medicare patients 

Economic survival ~~-

Attractive HMO market 

HMO or Group decided 

Like HMOs 

B-3 

With Medicare HMO 

1 Physrians ~ 

1 

I 

9 -~---
APPENDIX C 

NON-RESPONDENT ANALYSIS 

When questionnaires are used to collect data, the results may be biased if non-respondents differ 

from respondents. For this inspection, a physician for whom a questionnaire was not received is 

a non-respondent. To test for the presence of any bias, we first obtained information from 

HCFA’s Unique Provider Identification Number file for all 2,500 physicians who were sent a 

mail questionnaire. A total of 1,140 questionnaires were returned, for an overall response rate of 

45.6 percent. The following table illustrates the number of responses and the response rate by 

strata: 

STRATA Number Resnonse Rate 

High Medicare HMO enrollment States 678 45% 

Low Medicare HMO enrollment States 462 46% 

Total Respondents 1140 46% 

To test for the presence of any non-response bias, we analyzed the variables that might influence 

whether an individual would respond to the survey or that might affect his or her responses. For 

the 2,500 physicians in our sample, we looked at medical specialty, type of practice, and strata. 

These categorical variables were tested using Chi-square with the appropriate degrees of 

freedom. In order for the results to be statistically significant at the 95 percent confidence level, 

the chi-square value must be higher than 3.84 with 1 degree of freedom. 

The results of this analysis are presented in tables C- 1, C-2, and C-3. The Chi-square values 

given in the tables provide a test of the difference between the distribution of the respondents and 

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

response rates by the different values of the variables. 

C-l 
------ 

Tahle --_-_- C-l - -

Medical Specialty 

~~ 

Total 1140 

CHI-SQ = .304 

Degrees of Freedom = 1 

* As classified in the UPIN file 

Non-respondents 

1360 

,~~ 

Table C-2 

Type of Practice i--~ ~~ ~~~~ ~~ 

Respondents Non-respondents 

Group 526 F-­ ---~-+!?46% 

I Solo i

A----614 54% i 

Total 1140 

CHI-SQ = 9.13 1 

Degrees of Freedom = 1 

* No data available for 2 physicians 

c-2 
Strata (Extent of Medicare HMO Enrollment in State) 

Total 1140 

CHI-SQ = .242 

Degrees of Freedom = 1 

Tables C-l and C-3 show no statistically significant differences between respondents and nonrespondents for medical specialty and extent of Medicare HMO enrollment in State. 

Table C-2 shows a statistically significant difference between respondents and non-respondents 

with respect to type of practice (group vs. solo). In order to test whether this difference 

introduced any bias, we analyzed the rates of overall dissatisfaction with Medicare HMOs, for 

differences between group and solo physicians. 

The proportion of physicians dissatisfied with Medicare HMOs differed by 10 percentage points 

between types of practice, so further analysis was required. Assuming that non-respondents and 

respondents from the same type of practice had the same level of dissatisfaction, we calculated a 

hypothetical global dissatisfaction rate for all 2,500 physicians in the sample. This calculation 

gave only a slightly lower dissatisfaction rate of 42 percent (compared to 43 percent for 

respondents). This difference is not statistically significant. 

Given the results of this analysis, we believe that the inspection findings fairly represent the 

experience and opinions of physicians to whom the questionnaires were sent. 

c-3 
APPENDIX D 

CONFIDENCE INTERVALS FOR KEY SURVEY QUESTIONS 

We calculated confidence intervals for 16 key questions from the physician mail survey. The 

response estimate and 95 percent interval are given for each of the following: 

1. What is your overall satisfaction with the Medicare HMO? 

“Very or somewhat dissatisfied” response estimate: 43 % 

Lower interval: 38 % 

Upper interval: 48% 

2. Generally, how long does it take for you or your staff to speak to an HMO 

representative when calling for approval of referrals for specialists or tests? 

“More than l/2 hour” response estimate: 30% 

Lower interval: 25% 

Upper interval: 35% 

3. Generally, how long does it take the HMO to approve or deny referrals? 

“3 or more days” response estimate: 28% 

Lower interval: 23% 

Upper interval: 33% 

4. Generally, how would you rate the overall quality of care Medicare enrollees get at 

your HMO? 

“Excellent or good” response estimate: 71% 

Lower interval: 67% 

Upper interval: 75% 

5. Do you think your Medicare patients generally understand the HMO’s procedures for 

referral? 

“No” response estimate: 70% 

Lower interval: 66% 

Upper interval: 74% 

6. Do you think your Medicare patients generally understand the HMO’s restrictions on 

services? 

“No” response estimate: 83 % 

Lower interval: 80% 

Upper interval: 86 % 

D-l 
7. ’ 

8. 

9. 

10. 

11. 

12. 

13. 

14. 

Do you think your Medicare patients generally understand their HMO benefits? 

“No” response estimate: 75 % 

Lower interval: 71% 

Upper interval: 79% 

Do you think your Medicare patients generally understand the HMO’s appeals and 

grievance process? 

“No” response estimate: 89% 

Lower interval: 86% 

Upper interval: 92% 

Overall, how satisfied are you with the Medicare HMO referral process? 

“Very or somewhat dissatisfied” response estimate: 42 % 

Lower interval: 37% 

Upper interval: 47% 

Overall, how satisfied are you with the way the Medicare HMO handles physician 

complaints? 

“Very or somewhat dissatisfied” response estimate: 40 % 

Lower interval: 35% 

Upper interval: 45% 

Overall, how satisfied are you with the formal appeals process? 

“Very or somewhat dissatisfied” response estimate: 31% 

Lower interval: 26% 

Upper interval: 36% 

Do HMOs or FFS provide better access to new treatments for Medicare patients? 

“FFS is better” response estimate: 69% 

Lower interval: 65% 

Upper interval: 73% 

Do HMOs or FFS provide better access to specialists for Medicare patients? 

“FFS is better” response estimate: 74% 

Lower interval: 70% 

Upper interval: 78% 

Has working for a Medicare HMO restricted your clinical independence? 

“Often or sometimes” response estimate: 62% 

Lower interval: 57% 

Upper interval: 67% 

D-2 
15. Do Medicare HMOs allow you to practice medicine the way you think is appropriate? 

“Sometimes or rarely” response estimate: 55% 

Lower interval: 50% 

Upper interval: 60 % 

16. Do you feel restricted in referring Medicare HMO patients for specialists or tests? 

“Often” response estimate: 27 % 

Lower interval: 23% 

Upper interval: 3 1% 

D-3 
STATISTICAL TESTS FOR KEY FINDINGS 

We computed chi-square values for differences in physicians’ overall satisfaction for six 

variables. In order for the results to be statistically significant at the 95 percent confidence level, 

the chi-square value must be higher than 3.84 with 1 degree of freedom. As shown in the tables 

below, each chi-square test exceeded this requirement. The direction of the differences noted 

below are discussed in the findings of this report. 

Table E-l 

Chi-Square Values for Testing Significance of 

Differences in Satisfaction 

I 

Variable ~ DF* 1 Chi-Square t 

Type of Practice (Salaried HMO 10.02 

employee vs. 

Specialists vs. Primary Care 14.88 

Satisfaction with Referral Process (- 79.92 ~ 

Satisfaction with Complaint Process i 55.99 ~~j I 1

Satisfaction with Appeals Process 

Quality of Care Rating 

Rating of appropriate conduct of 

utilization and quality assurance 

reviews 

~~~~~~ Rating of appropriate use of 

utilization and quality assurance 

reviews 

* Degrees of Freedom 

E-l 

27.26 

53.34 

5.38 

9.17 

I 
We also computed chi-square values for differences in physicians’ ratings for quality of care for 

four variables. Chi-square values show that differences on all four variables were significant at 

the 95 percent confidence level. 

Table E-2 

Chi-Square Values for Testing Significance of Differences 

in Quality of Care Ratings 

Variable~~ 

Beneficiary understanding of 

HMO procedures for referral ’ 

IBeneficiary understanding of i 1 : 14.27 

restrictions on services 

Beneficiary understanding of 

benefits with HMO 

Beneficiary understanding of 1 

HMO appeals and grievance 

nrocess q 

* Degrees of Freedom 

E-2 
APPENDIX F 

In this appendix, we present in full the comments from the Health Care Financing 

Administration. 

F-l 
DEPARTMENT OF HEALTH & HUMAN SERVICES Health Care Financing Administration 

.DATE: AFTI- I998 

TO: June Gibbs Brown 

Inspector General 

FROM: Administrator 

LG J The Administrator 

Washington,.D.C. 20201 _ - --.a.. ii: / 

DIG-AS 

DIG-EC / 

DIG-Et 

DIG-01 

DIG-l@ 

AlG-LC 

OGuiG 

EECSCC 

Datcsult 

Health Care Financing Administration 

SUBJECT: Office of Inspector General (OIG) Draft Report: “Physician Perspectivesof 

Medicare Health Maintenance Organizations (HMOs),” (OEI-02-97-00070) 

We reviewed the above-referencedreport that examinesthe experiencesand perspectives 

of physicians who work with Medicare HMOs. The report found that: (1) overall 

physician satisfaction with Medicare HMOs is low; and (2) most physicians rate 

Medicare enrollees’ knowledge of their HMO low. . 

The report concludesthat the Health Care Financing Administration (HCFA) should work 

with physicians to addresstheir concernsabout Medicare HMOs and improve the quality 

of servicesprovided to Medicare enrollees. 

We agreethat we should work with physicians to addressconcernsabout Medicare 

HMOs, and are already doing so. The Balanced Budget Act of 1997 (BBA) will allow us 

to addressmany of the physicians’ concerns. However, while the OIG report is 

interesting and useful, it is important to note that it doesnot indicate whether physician 

experience with Medicare HMOs differs from their experiencewith non-Medicare 

HMOs. Our detailed commentsfollow: 

. OK RetHCFA should monitor HMOs to ensurebeneficiaries are issuedwritten determinations, 

including appealsrights. 

HCFARespm 

We concur. Medicare is already in compliance with the President’s Consufl)erBill of 

Rights and Responsibilities provisions on appeals,and provides its beneficiaries with 

stronger appeal rights than those that exist in the private sector. 

HCFA is currently revising the Contractor PerformanceMonitoring Reviewer’s Guide 

which is used to review health plans and ensurecompliance with written determinations 

and appealsrights. The guide has been updated to include model language. 
2 

Our Quality Improvement System for ManagedCare (QISMC) also includes clear 

standardson how managedcare plans should inform beneficiaries on proceduresand time 

limits for resolving appeals,complaints, grievances,and other issues. We plan to review 

these standardson an annual basis at Medicare HMOs. 

OIG Recommendation#2 

HCFA should work with HMOs to establish standardizedappeal and grievancelanguage 

requirements in marketin~enrollment proceduresand operating procedures. 

HCFA Response 

We concur, and have already drafted model appeallanguageto be used in marketing 

materials, deniahotices, and notices of non-coverage. This model languagewas sent to 

all Medicare managedcare plans in July, 1997. QISMC, which also featuresmodel 

language designedso standardscan be applied fairly, objectively, and uniformly, will ’ 

allow us to work with managedcare plans to establishthesestandardsin their procedures. . 

OIG Recommendation#3 

implement the BBA “MedicarePlus” program which provides HCFA with an opportunity 

to addressphysicians’ concerns about the lack of beneficiary knowledge. 

HCFA Response 

We concur, and are currently drafting a regulation that will addressmany of these 

concerns. 

OIG Recommendation#/4 

HCFA may want to consider establishing HMO performancestandards,such as for 

referral times, and utilization and quality assurancereviews. 

HCFA Response 

We concur. We are planning to incorporate performancestandardsaddressingadditional 

HMO requirements for referral times, utilization, and quality assurancereviews in the 

BBA regulations. These standardswill be reviewed for compliance by HMOs on an 

annual basis. 

YTechnical Comments 

Page7, Referral Process- Waiting times of 3 days or less may not be unreasonablesince 

these are not emergencysituations, Physiciansconcernedabout poor quality providers 

should document and submit complaints to the appropriate HMO, since physician 

feedback is essentialfor HMOs to maintain the integrity of their delivery networks. 
3 

Physicians arejustified in complaining about the number of different authorization and 

referral procedures of numerous HMOs. However, it is generally the stti in physician 

offices who must use theseprocedures,and HCFA compliance reviews ensurethat 

Medicare contracting companiessupply their physicians with provider manuals. These 

manuals not only explain referral and authorization procedures,but also explain how to 

file complaints with the HMO. The OIG survey statedthat three interviewed physicians 

complained about poor quality providers. We hope thesephysicians also submitted their 

documented complaints to the appropriate HMO. 

Page 10, Utilization and Oualitv AssuranceReviews - There is an incorrect statementthat 

“Regulations require Medicare HMOs to provide for such reviews in their provider 

contracts.” HCFA has a policy rather than a regulatory requirement that requires 

inclusion of a provision in HMO contracts with providers which states,“For services 

rendered to health plan members,the provider must agreeto the review by the utilization 

managementand..qualityassurancecommittees/staff” The review specified is not ’ 

required to be a review of an individual provider’s operations, but is typically a review of 

aggregateddata or proceduresrelating to a specific study area. Consequently, “having 

one of these reviews” is not a relevant concept and is not required by regulation or 

statute. There is no “specified review,” but there is a general agreementto permit review 

of all clinical behavior. 

Page,lO, Marketinp Practices- There is a sentencerelating to other fraudulent practices. 

It is unclear how “delaying or denying medically necessaryservicesand over billing” 

relates to marketing practices. Also, it is unclear who is engaging in theseactions. 

Conclusion Section - The information presentedrelating to appealsis confusing. Based 

on the survey, physicians were askedif they were satisfied with the formal appeals 

process. We assumethat this relates to: (1) the processthat a physician would use to 

appeal an HMO denial of a referral or prior authorization request; and (2) the study 

results as presentedon pages9 and 10. However, the recommendationsalso include prior 

OIG report recommendationsrelating to beneficiary appeal rights. OIG should clarify 

whether it is recommending that HCFA implement physician appeal rights or beneficiary 

appeal rights. It should be noted that physician appealproceduresare generally found in 

the HMO provider manuals, and on July 22, 1997,HCFA advised HMOs of new and 

expedited appealsproceduresfor beneficiaries, aspublished in regulation. 
4 

Did the OIG survey ask the dissatisfied-physicians,what steps,if any, they had taken to 

convey their dissatisfaction to the plans and what eachplan’s responsewas? 

Has the OIG ever done comparable surveysfor original fee-for-service Medicare? If so, 

it would be helpful to have the comparisons. 

It would be useful to know if the concernsabout referrals relate to difficulties obtaining 

plan authorization to make referrals, or to inadequatecapitation paymentsfor physicians 

to pay for referral services. 

It is unclear if someconcernsrelated to beneficiaries are unique to HMOs or may also be 

the casefor beneficiaries in fee-for-service Medicare. For example,how well do fee-forservice beneficiaries understandtheir Medicare benefits? (We recognize that it is more 

important for HMO enrollees to understandthesematters,given financial incentives for 

HMO providers to render fewer servicesthan fee-for-service providers.) . 

With respectto questionable HMO practices in enrolling Medicare beneficiaries, we note 

that the Administration sought authority during the BBA deliberations to have all 

enrollment handled by a neutral third party, but the Congressdid not include this 

pro,visionin the BBA. The Congressdid, however, mandatea demonstrationof the use 

of third-party contractorsto conduct enrollment and disenrolhnent under the 

Medicare+Choice program. 

a--+- lGoL&-

Nancy-Ann Min DeParle