HMO Complaints and Appeals: Plans' Systems Have Most Key Elements, but
Consumer Concerns Remain (Testimony, 05/19/98, GAO/T-HEHS-98-173).

GAO discussed its recent report on health maintenance organization (HMO)
complaint and appeal procedures, focusing on: (1) the elements that are
considered important to a system for processing HMO members' complaints
and appeals; (2) the extent to which HMOs' complaint and appeal systems
for members contain these elements; (3) the concerns that consumers have
regarding HMO complaint and appeals systems; (4) the information that is
available on the number and types of complaints and appeals HMOs receive
from their members; and (5) how, if at all, HMOs use their complaint and
appeal data.

GAO noted that: (1) the HMOs in its study have most elements identified
as important by regulatory, consumer, and industry groups; (2) however,
GAO found: (a) considerable variation in how the HMOs specify certain
policies; (b) poor understanding of HMO systems by members; and (c) a
lack of consistency in the way the HMOs define, collect, and maintain
data in complaints and appeals; (3) GAO examined HMOs' time periods,
decisionmaking processes, and communication with members regarding their
complaints and appeal systems; (4) consistently, the plans have 9 of the
11 key elements in their policies and procedures; (5) even where GAO
found a policy or procedure to be common across HMOs, plans exhibit
considerable variation in the specifics of certain policies; (6) most
HMOs told GAO that they include medical professionals among the appeal
decisionmakers; some plans use physicians not employed by the plan to
review appeals; (7) although the majority of HMOs' complaint and appeal
systems include most of the important elements, consumer advocates
expressed concern that such systems are not fully meeting the needs of
enrollees; (8) advocates specifically noted the lack of an independent,
external review of plan decisions on appeals and noted members'
difficulty in understanding how to use complaint and appeal systems; (9)
the most common complaints were about medical or administrative
services, quality of care, and claims issues; the most common appeals
were appeals of benefits issues, denial of payment for emergency room
visits, and referral issues; and (10) all HMOs in GAO's study told GAO
that they analyze complaint and appeal data to identify systemic
problems and opportunities for improvement.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-HEHS-98-173
     TITLE:  HMO Complaints and Appeals: Plans' Systems Have Most Key 
             Elements, but Consumer Concerns Remain
      DATE:  05/19/98
   SUBJECT:  Health maintenance organizations
             Information disclosure
             Consumer protection
             Health care planning
             Written communication
             Statistical data
             Health care programs
IDENTIFIER:  Medicare Health Maintenance Organizations Program
             
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Cover
================================================================ COVER


Before the Committee on Labor and Human Resources, United States
Senate

For Release on Delivery
Expected at 10:00 a.m.
Tuesday, May 19, 1998

HMO COMPLAINTS AND APPEALS -
PLANS' SYSTEMS HAVE MOST KEY
ELEMENTS, BUT CONSUMER CONCERNS
REMAIN

Statement of Bernice Steinhardt, Director
Health Services Quality and Public Health Issues
Health, Education, and Human Services Division

GAO/T-HEHS-98-173

GAO/HEHS-98-173T


(108375)


Abbreviations
=============================================================== ABBREV

  HCFA - Health Care Financing Administration
  HMO - health maintenance organization
  NCQA - National Committee for Quality Assurance

HMO COMPLAINTS AND APPEALS: 
PLANS' SYSTEMS HAVE MOST KEY
ELEMENTS, BUT CONSUMER CONCERNS
REMAIN
==================================================== Chapter Statement

Mr.  Chairman and Members of the Committee: 

We are pleased to be here today to discuss our recent report on
health maintenance organization (HMO) complaint and appeal
procedures.\1 As you know, our health care financing and delivery
system has undergone major changes in the past decade.  With the
growth of managed care, health plans have increased controls on
patients' access to and use of costly services.  On the one hand,
these controls have helped slow the growth of health care spending
but, on the other hand, they have added to consumers' confusion and
dissatisfaction.  A health plan's complaint and appeal system can
provide a means for enrollees to signal their dissatisfaction and
challenge denials of coverage or payment.  It is not well known,
however, what procedures HMOs have to handle members' complaints and
appeals. 

At your request, we examined the extent to which HMOs have procedures
with which enrollees can raise concerns and resolve disputes.  We
focused on (1) the elements that are considered important to a system
for processing HMO members' complaints and appeals, (2) the extent to
which HMOs' complaint and appeal systems for members contain these
elements, (3) the concerns that consumers have regarding HMO
complaint and appeal systems, (4) the information that is available
on the number and types of complaints and appeals HMOs receive from
their members, and (5) how, if at all, HMOs use their complaint and
appeal data. 

To address these issues, we obtained information from 38 HMOs in five
states on the policies and procedures established for their complaint
and appeal systems.\2 The criteria for assessment were derived from
national standards developed by the Joint Commission on Accreditation
of Healthcare Organizations and the National Committee for Quality
Assurance (NCQA), as well as policies outlined by the American
Association of Health Plans, Families USA, and the National
Association of Insurance Commissioners.  Of the elements these
organizations consider to be key to complaint and appeal systems, 11
that are common to at least two groups address timeliness, the
integrity of the decision-making process, and effective communication
with members.  (See the appendix.) These criteria allowed us to
develop some sense of whether plans have important features for
responding to members' concerns.  Although we did not determine how
well these systems are working, our review indicates the policies of
the 38 HMOs in our review. 

In brief, we found that the HMOs in our study have most elements
identified as important by regulatory, consumer, and industry groups. 
However, we found (1) considerable variation in how the HMOs specify
certain policies, (2) poor understanding of HMO systems by members,
and (3) a lack of consistency in the way the HMOs define, collect,
and maintain data on complaints and appeals. 


--------------------
\1 HMO Complaints and Appeals:  Most Key Procedures in Place, but
Others Valued by Consumers Largely Absent (GAO/HEHS-98-119, May 12,
1998). 

\2 Our report discusses systems in Colorado, Florida, Massachusetts,
Oregon, and Tennessee applicable to HMO members not enrolled in
Medicare and Medicaid.  Although a small proportion of enrollees in
HMOs were in self-insured plans, we did not focus on the procedures
applicable specifically to self-insured members. 


   HMOS HAVE MOST ELEMENTS
   CONSIDERED IMPORTANT, ALTHOUGH
   TWO ELEMENTS ARE COMMONLY
   LACKING
-------------------------------------------------- Chapter Statement:1

The HMOs in our study have most of the policies and procedures
identified as important to complaint and appeal systems.  Much of the
uniformity exhibited by HMOs may be attributed to the influential
role played by NCQA, which includes all 11 elements in its
accreditation standards.  HMOs recognize that NCQA accreditation is
important to purchasers, who view it as an indicator of plan quality. 
A growing number of plans have obtained or are seeking accreditation,
reflecting an apparent trend toward standardization within the HMO
industry in this area. 

We examined HMOs' time periods, decision-making processes, and
communication with members regarding their complaints and appeal
systems.  Consistently, the plans have 9 of the 11 key elements in
their policies and procedures.  Of the HMOs providing data, 89 to 100
percent reported that they

  -- have explicit time periods for responding to complaints and
     appeals,

  -- have an expedited appeal process available under certain
     circumstances,

  -- have a two-level appeal process,

  -- allow a member to attend at least one appeal hearing,

  -- involve medical professionals with appropriate expertise in
     appeal decisions,

  -- provide understandable written information about how to voice a
     complaint or appeal,

  -- accept oral complaints,

  -- provide a description of a patient's appeal rights in the denial
     notice, and

  -- provide written notice of appeal denials, including further
     appeal rights. 

But 2 of the 11 important elements have not been adopted by most of
the HMOs in our study.  Of the HMOs providing data, only 32 to 41
percent reported that they

  -- bar decisionmakers who had previous involvement in a case from
     hearing an appeal and

  -- accept oral appeals of adverse determinations.  (Some HMO
     officials told us that they prefer members to submit appeals in
     writing in order to ensure that their concerns are accurately
     characterized.  Of the plans requiring written appeals, however,
     three told us they provide writing assistance to members who
     request it.)

Even where we found a policy or procedure to be common across HMOs,
plans exhibit considerable variation in the specifics of certain
policies, as illustrated below. 

  -- Although many HMOs' time periods call for resolution of
     complaints or appeals within 30 days at each level, other HMOs'
     time periods vary considerably.  One HMO's policy calls for
     complaints to be resolved immediately, another HMO's within 24
     hours; another allows up to 60 days to resolve complaints.  Time
     periods for first-level appeals vary from 10 to 75 days; for
     second-level appeals, from 10 days to 2 months. 

  -- HMOs also vary considerably in the length of time they allow for
     the resolution of an expedited appeal, used when the health of
     the patient might be jeopardized by following normal time
     periods.  While the most common time period among the HMOs in
     our study is 72 hours, two HMOs' policies call for resolution
     within 24 hours, while two others allow up to 7 days for
     resolution. 

  -- All HMOs in our study reported using a committee to resolve
     second-level appeals.  Half the plans also use a committee at
     the first level, while the other half use individuals, including
     grievance coordinators or appeal coordinators, medical
     directors, or other plan officials such as the plan president. 
     Most HMOs told us that they include medical professionals among
     the appeal decisionmakers; some plans use physicians not
     employed by the plan to review appeals.  Many plans involve
     staff of various plan departments, such as marketing, claims,
     and medical management, in making appeal decisions.  Some plans
     use the board of directors, or a subset, as a decision-making
     committee; some include plan enrollees as committee members. 
     One plan reported that of its 10-member second-level appeal
     committee, half are plan enrollees and the other half plan
     physicians. 

  -- Of the HMOs allowing a member to attend at least one appeal
     hearing, less than half explicitly permit members to be
     accompanied by a representative, such as a friend or a lawyer. 
     In instances in which the member cannot attend the meeting in
     person, fewer than one-third have explicit provisions for
     members to attend the meeting by telephone or videoconference. 


   CONSUMER GROUPS EXPRESSED
   CONCERNS REGARDING CONFLICT OF
   INTEREST AND COMMUNICATION
   DIFFICULTIES
-------------------------------------------------- Chapter Statement:2

Although the majority of HMOs' complaint and appeal systems include
most of the important elements, consumer advocates expressed concern
that such systems are not fully meeting the needs of enrollees. 
Advocates specifically noted the lack of an independent, external
review of plan decisions on appeals and noted members' difficulty in
understanding how to use complaint and appeal systems.  This latter
issue, however, may be part of a broader lack of understanding about
health insurance in general and managed care in particular. 

Consumer advocates contend that member disputes may not be resolved
equitably.  Advocates told us that regardless of the particular
mechanisms plans use to resolve appeals, plan employees' reviewing
the decisions made by other plan employees suggests a conflict of
interest.  Accordingly, consumer advocates and other groups believe
that review by an independent third party is essential to ensuring
integrity in decision-making.  Among its criteria for external
review, the President's Quality Commission states that such review
should (1) be available only after consumers have exhausted all
internal processes (except in cases of urgently needed care), (2) be
conducted by health care professionals who have appropriate expertise
and who were not involved in the initial decision, and (3) resolve
appeals in a timely manner, including provisions for expedited
review.  The Commission notes, however, that several
issues--including mechanisms for financing the external review
system, sponsorship of the external review function, consumer
cost-sharing responsibilities (for example, filing fees), and methods
of overseeing and holding external appeal entities accountable--must
be analyzed to identify the most effective and efficient methods of
establishing the independent external appeal function.\3

The Medicare population has had experience with external appeals for
several years.  The Health Care Financing Administration (HCFA)
requires that appeals by Medicare HMO enrollees be reviewed by an
independent party if the initial appeal is denied by the HMO.  A HCFA
contractor, the Center for Health Dispute Resolution, hires
physicians, nurses, and other clinical staff to evaluate
beneficiaries' medical need for contested services and make
reconsideration decisions.  As of July 1997, nearly one-third of the
denials that Medicare HMOs upheld in their grievance proceedings were
overturned; for some categories of care, that rate was 50 percent. 

However, there is limited experience with external review for
commercial HMO members.  According to the National Conference of
State Legislatures, legislation or regulation mandating external
review has been enacted by 16 states.\4 In Florida, one of the states
included in our review, the program consists of a statewide panel
made up of three Florida Department of Insurance representatives and
three representatives from Florida's Agency for Healthcare
Administration.  The process is available to any enrollee who has
exhausted the HMO's internal appeals procedure and is dissatisfied
with the result.  According to Florida officials, from 1991 to 1995
an average of 350 appeals per year were heard under the program: 
Issues included quality of and access to care, emergency services,
unauthorized services, and services deemed not medically necessary. 
About 60 percent of the appeals were resolved in favor of members,
about 40 percent in favor of HMOs. 

In addition, consumers find it difficult to understand complaint and
appeal systems.  Despite the fact that most HMOs provide information
about plan procedures to members, communication difficulties were
noted by HMO officials, consumer advocates, and others.  Several HMO
officials told us that most members do not read their handbooks
carefully; officials also told us that members are not familiar with
the requirements of managed care and that many complaints and appeals
stem from this lack of understanding.  Consumer advocates we spoke
with echoed these statements, consistently noting that HMOs'
complaint and appeal systems are not well understood by members.  A
1995 national survey supports these views, stating that half of
insured respondents merely skim--or do not read at all--the materials
about their health plans and that many consumers do not understand
even the basic elements of health plans.\5 Consumer advocates cited a
variety of reasons why many HMO members, even if they understand how
to use complaint and appeal systems, are reluctant to access such
systems.  In some cases, members are incapacitated and have neither
the time nor the energy to navigate the HMO's complaint and appeal
system.  Advocates told us that in other instances, members are
intimidated by the formality and size of the HMO. 

Greater plan efforts to encourage enrollees to understand these
policies could serve to prevent misunderstandings between patients
and the plans and avoid later appeal proceedings.  For example, three
of the HMOs in our study do not give enrollees a written explanation
of their appeal rights when denying a service or payment.  Further,
plans might revise written material to make it easier to understand;
studies have found that plan material is written at the level of
college or graduate school, while writing directed at the general
public should be at the seventh or eighth grade level.\6

Alternatively, ombudsman programs designed to facilitate consumer
understanding about health plan processes, including the complaint
and appeal systems, can provide an independent external resource for
health plan information and consumer assistance.  Florida, for
example, has established ombudsman committees to act as volunteer
consumer protection and advocacy organizations on behalf of managed
care members in the state and may assist in the investigation and
resolution of complaints.  Members of the committees include
physicians, other health care professionals, attorneys, and
consumers, none of whom may be employed by or affiliated with a
managed care program. 


--------------------
\3 Advisory Commission on Consumer Protection and Quality in the
Health Care Industry, "Consumer Bill of Rights and Responsibilities: 
Report to the President of the United States," Nov.  1997. 

\4 Arizona, California, Connecticut, Florida, Michigan, Missouri, New
Hampshire, New Jersey, New Mexico, North Carolina, Ohio,
Pennsylvania, Rhode Island, Tennessee, Texas, and Vermont all require
that plan decisions be externally reviewed in certain instances. 

\5 The results of the Louis Harris and Associates "Navigating the
Changing Healthcare System" probability survey, covering 1,081 adults
nationwide, are reported in Stephen L.  Isaacs, "Consumers'
Information Needs:  Results of a National Survey," Health Affairs,
Vol.  15, No.  4 (Winter 1996). 

\6 M.  Hochhauser, "Letter to the Editor," Health Affairs, Sept.-Oct. 
1997, p.  220.  I.  S.  Kirsch and others, Adult Literacy in America: 
A First Look at the Results of the National Adult Literacy Survey
(Washington, D.C.:  U.S.  Dept.  of Education, 1993). 


   COMPLAINT AND APPEAL DATA ARE
   NEITHER COMPARABLE NOR
   ACCESSIBLE
-------------------------------------------------- Chapter Statement:3

We asked HMOs to provide us with the number of complaints and appeals
received from commercial members in 1996 and the nature of the
complaints and appeals.  The number of complaints and appeals that
HMOs reported to us varied widely.  In 1996, complaints ranged from
0.5 per 1,000 enrollees to 98.2 per 1,000 enrollees, while the number
of appeals ranged from 0.07 to 69.4 per 1,000 enrollees.  According
to the HMOs, complaints and appeals covered a variety of issues:  The
most common complaints were about medical or administrative services,
quality of care, and claims issues; the most common appeals were
appeals of benefits issues, denial of payment for emergency room
visits, and referral issues. 

However, these data may not be very meaningful, because HMOs differ
in the ways they define complaints and appeals and in the ways they
count the complaints and appeals they receive.  For example, HMOs may
use different terms--such as complaint, appeal, grievance, inquiry,
or reconsideration--to describe the same or very similar events. 
HMOs also do not count complaints and appeals consistently.  One HMO,
for example, told us that it does not count oral complaints that are
immediately resolved by plan representatives; another HMO reported
that it may count one member's contact, such as a letter or telephone
call, as several complaints if the contact involves several different
issues. 

Public records of complaints and appeals could be useful sources of
information about problems in HMOs and help purchasers and consumers
select and monitor health plans.  In addition, if the nature and
frequency of complaints were made public, HMOs might be more
motivated to make systemwide improvements.  A uniform set of
definitions and categorizations would be required for public
disclosure of complaints and appeal information.  Without such
consistency, a prospective purchaser or consumer would not be able to
compare plans in a meaningful way.  To this end, HCFA intends to
require contracting health plans to submit standardized, plan-level
appeal data.  Although HCFA and accrediting bodies such as NCQA
recognize that reporting simple complaint and appeal rates on
individual plans may not be a good indicator of members' relative
satisfaction with HMOs, such information might prove beneficial when
used in conjunction with other performance indicators. 

Documenting and analyzing complaints and appeals can help plans deal
with chronic problems by informing management about various elements
of plan performance, both clinical and administrative.  Resolution of
problems brought to a plan's attention, if widespread or recurring,
can lead to improvements in access to care, physician issues, or
quality of care, as well as changes in plan policies and procedures. 
All HMOs in our study told us that they analyze complaint and appeal
data to identify systemic problems and opportunities for improvement. 
HMOs use complaint and appeal data, together with data from other
sources, to make changes to benefits or plan processes, to change
members' behavior, and to change providers' behavior.  For example,

  -- Three HMOs reported adding a drug to their formularies; another
     added Weight Watchers coverage. 

  -- Several HMOs reported changes to their system for processing and
     paying emergency room claims.  Two HMOs, for example, increased
     the number of emergency room diagnoses that they would
     automatically pay without reviewing a claim.  Claims that would
     previously have been denied were thus paid. 

  -- Many HMOs reported using complaint and appeal data about
     specific providers as part of their processes for
     recredentialing providers; one HMO reported terminating a
     provider as a direct result of a member's complaint.  A few HMOs
     reported establishing peer review panels, in which providers
     would review information, including complaints and appeals, to
     evaluate the performance of HMO providers. 


   CONCLUSIONS
-------------------------------------------------- Chapter Statement:4

Although the HMO policies generally include most elements considered
important to complaint and appeal systems, the systems may not be
working as well as they could to serve enrollees' interests.  Better
communication and information disclosure could improve the complaint
and appeal process for the benefit of HMO members and plans. 

Even though HMO enrollment materials generally described complaint
and appeal systems in accurate detail, many members may not know of
their right to complain or appeal or might not understand how to
exercise that right.  Members' inability to navigate the complaint
process results in little formal tracking of the patterns of problems
that are encountered.  Improved consumer knowledge might lead to more
appropriate use of complaint and appeal systems and thus might
provide more information to HMOs wishing to identify and address plan
problems.  Finally, consumers lack the information they need to
compare plans in a meaningful way.  Publicly available information on
the numbers and types of complaints, the outcomes of the dispute
resolution process, and actions taken by HMOs to correct problems
would provide information about not only members' satisfaction but
also plan responsiveness to problems raised by members.  Consumers'
demand for and use of such information could have a positive
influence on plan operations and quality through market competition. 


------------------------------------------------ Chapter Statement:4.1

Mr.  Chairman, this concludes my statement.  I would be happy to
answer any questions from you and other members of the Committee. 
Thank you. 


NUMBER OF HMOS WITH AND WITHOUT
ELEMENTS IDENTIFIED AS IMPORTANT
TO A COMPLAINT AND APPEAL SYSTEM
==================================================== Appendix Appendix

                                                          HMOs
                                                  HMOs  withou    HMOs
                                                  with       t     not
                                                elemen  elemen  report
Element                                              t       t     ing
----------------------------------------------  ------  ------  ------
Timeliness
----------------------------------------------------------------------
Explicit time periods                               36       1       1
Expedited review                                    34       2       2

Integrity of the decisionmaking process
----------------------------------------------------------------------
Two-level appeal process                            38       0       0
Member attendance permitted at one appeal           36       1       1
 hearing
Appeal decisions made by medical professionals      31       4       3
 with appropriate expertise
Appeal decisions made by individuals not            15      22       1
 involved in previous denials

Effective communication
----------------------------------------------------------------------
Written information provided, in an                 34       2       2
 understandable manner, about how to register
 a complaint or appeal
Oral complaints accepted                            36       2       0
Oral appeals accepted                               12      25       1
Appeal rights included in notice of denial of       31       3       4
 care or payment of service
Written notice provided of appeal denials,          36       1       1
 including further appeal rights
----------------------------------------------------------------------

*** End of document. ***