Experience Shows Ways to Improve Oversight of Health Maintenance Organizations

HRD-88-73: Published: Aug 17, 1988. Publicly Released: Aug 17, 1988.

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In response to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) efforts to deal with health maintenance organizations' (HMO) compliance problems, specifically: (1) the adequacy of data to determine the quality and cost of HMO care; (2) the adequacy of HCFA staff levels to monitor HMO; and (3) HCFA willingness to act when HMO fail to meet federal requirements.

GAO found that HCFA: (1) had no data on HMO use of physician or outpatient services and limited data on their use of inpatient services, since it compiled data primarily to monitor participants' compliance with financial solvency requirements and to calculate payments; (2) initiated HMO peer reviews and the Beneficiary Inquiry Tracking System to increase its ability to monitor HMO quality; (3) did not increase staffing or monitoring resources to keep pace with HMO growth and increased Medicare enrollments; (4) implemented new compliance monitoring procedures requiring reviews of HMO every 2 years to identify and resolve problems early; and (5) was generally successful in resolving HMO compliance problems, but was reluctant to terminate contracts with recurring compliance problems because of its concern over possible adverse effects on Medicare beneficiaries.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Public Law 101-239, the Omnibus Budget Reconciliation Act of 1989, amended the Social Security Act to give the Secretary of Health and Human Services additional authority to apply sanctions, including restricting enrollment, applying civil monetary penalties, and suspending payment. The Secretary issued implementing regulations in July 1994.

    Matter: The House Committee on Ways and Means, Subcommittee on Health, should consider increasing HCFA discretion in applying its authority to suspend Medicare enrollments. Specifically, the Subcommittee should consider developing legislation to give HCFA discretion to suspend Medicare enrollments in HMO that fail to respond to notices of noncompliance in a timely manner, have recurring compliance problems, or are encountering financial difficulties or failing to meet financial solvency requirements and not showing substantial progress in improving from one reporting period to the next.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: As of July 27, 1998, new HCFA regulations codified the purpose and criteria for granting retroactive disenrollments.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to issue regulations specifying the purpose of retroactive disenrollments and the circumstances, criteria, and procedures that must be met in authorizing such actions.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: HHS completed testing of the Compliance Activity Tracking System, which became fully operational in June 1990.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to establish a formal system for tracking through final resolution HCFA requests for corrective actions and HMO corrective actions.

    Agency Affected: Department of Health and Human Services


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