Arizona Medicaid:

Nondisclosure of Ownership Information by Health Plans

HRD-86-10: Published: Nov 22, 1985. Publicly Released: Nov 22, 1985.

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In response to a congressional request, GAO reported on compliance with federal requirements for ownership information disclosure by prepaid health plans participating in the Arizona Health Care Cost Containment System (AHCCCS). AHCCCS is a Medicaid demonstration project set up to develop and test health care cost control innovations.

GAO found that many AHCCCS health plans have not complied with federal disclosure requirements intended to determine the appropriateness of ownership and control arrangements and related-party transactions, raising questions about: (1) the availability of federal funding for health plan operations during the periods of noncompliance; and (2) continued federal participation in AHCCCS health plans that have not complied. GAO also found that AHCCCS and the Health Care Financing Administration (HCFA) have not ensured compliance with the disclosure requirements before awarding and renewing contracts. Of the 19 health plans awarded contracts in the second year: (1) 3 did not disclose direct or indirect ownership; (2) 1 did not disclose officers or directors; and (3) 18 had their contracts renewed for a third year without assurance of compliance with disclosure requirements. GAO found that: (1) related-party transactions can enable health plans to divert program funds from their intended purpose to pay for unnecessary administrative costs or excessive profits; (2) none of the 15 plans required to submit disclosure statements on related-party transactions for the first year submitted them on time and only 4 submitted any at all; (3) 7 of the 18 plans required to submit statements for second-year operations failed to do so, and 8 that did submit them were late; and (4) federal financial participation was not denied in cases where health plans did not promptly disclose these transactions.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HCFA required disclosure of ownership information as a condition for award of fourth-year AHCCCS contracts.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to ensure that each contract between AHCCCS and a provider that does not disclose ownership and control arrangements is terminated.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: Actions previously described satisfy this recommendation. In addition, HCFA regional offices now periodically review plan disclosure reports.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to direct AHCCCS to review reported related-party transactions to ensure that they do not divert capitation payments from health care.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: HHS funded the special AHCCCS Fraud Investigation and Prosecution Unit in the Arizona Attorney General's Office. The unit will determine whether any AHCCCS plans failed to disclose with intent to defraud. HCFA will take action to recover federal funds if fraudulent activities are identified.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to obtain from each health plan, that did not provide full and complete disclosure of related-party transactions on time, an explanation of the reasons for nondisclosure and, based on an evaluation of those reasons, determine the extent to which federal financial participation should be recouped for periods of nondisclosure.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: HHS funded a special Fraud Investigation and Prosecution Unit in the Arizona Attorney General's Office to review plan disclosures. HCFA plans to recoup federal funds if fraudulent activities are identified.

    Recommendation: The Secretary of Health and Human Services (HHS) should direct the Administrator, HCFA, to review AHCCCS plan contract proposals and renewal submissions to determine whether health plans complied with the ownership and control disclosure requirements and the extent to which federal financial participation should be recouped for payments made to AHCCCS health plans that did not comply.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: HHS has taken action to ensure future proposals from state Medicaid agencies to utilize pre-paid contractors will be reviewed to ensure that financial disclosure is made prior to contract award.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to establish procedures to ensure that HCFA does not approve future Medicaid contracts that are lacking required disclosure of ownership and control arrangements.

    Agency Affected: Department of Health and Human Services

 

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