Medicare:

Reasonableness of Health Maintenance Organization Payments Not Assured

HRD-89-41: Published: Mar 7, 1989. Publicly Released: Mar 7, 1989.

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GAO reviewed Medicare health maintenance organizations' (HMO) adjusted community rates (ACR) process, focusing on HMO compliance with the Health Care Financing Administration's (HCFA) rate-setting guidelines and instructions.

GAO reviewed ACR data from 1985 through 1987 for 19 HMO, and found that: (1) 11 HMO based their ACR estimates in part on cost and utilization data for other HMO, which HCFA regulations did not allow; (2) only two HMO consistently followed HCFA rate-setting procedures; (3) four HMO used inconsistent source data; (4) one HMO overstated ACR by about $6 million in 1986; (5) HCFA did not consistently ensure that HMO complied with its approved methods for calculating and documenting ACR; (6) HCFA monitored only 29 percent of HMO risk contracts during a 3-year period; (7) HCFA lacked adequate mechanisms to gauge the reasonableness of HMO estimates, retroactively adjust HMO payment rates, or recover ACR overpayments; and (8) HCFA lacked authority to recover overpayments arising from inaccurate ACR.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HCFA revised its instructions to require standardized ACR submission for 1990 and 1991, and plans to revise regulations to eliminate an option that permits some HMO not to submit standardized ACR. Since 1989, each year HCFA has required HMO to submit ACR in a standardized form. HCFA officials maintain that this will continue in the future, but HCFA has not established a permanent requirement.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to revise its instructions to HMO on preparing ACR submissions to require the use of a standardized ACR submission.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: An ACR monitoring protocol was developed by HCFA but does not include on-site reviews.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to establish policies and procedures to periodically conduct on-site reviews of HMO to verify for accuracy and reasonableness the data supporting their ACR against their records and accounting system reports.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: For the 1990 and 1991 contract year, HCFA required HMO to certify the accuracy of their ACR submissions. HCFA plans to make this a permanent requirement. Since 1989, each year HCFA has required HMO to submit ACR in a standardized form. HCFA officials maintain that this will continue in the future, but HCFA has not revised its regulations to make the requirement permanent, as GAO recommended.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to revise HCFA regulations and incorporate provisions in HMO contracts to require that HMO: (1) certify the accuracy and reasonableness of their ACR submissions; and (2) explicitly authorize HCFA to recoup from HMO any excess payments that can be shown to have resulted from HMO use of data that were not accurate, current, or complete.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: HCFA revised its instructions as GAO recommended.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to revise its instructions to HMO on preparing ACR submissions to require HMO to use both volume and intensity adjustments to calculate utilization factors and adequately document the basis for the factors used.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: HCFA revised its instructions as GAO recommended.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to revise its instructions to HMO on preparing ACR submissions to stipulate the conditions under which HMO will be permitted to use cost and utilization data other than their own for computing ACR and establish a requirement that HMO not able to meet such conditions and not having complete data to support their ACR submissions be placed under a corrective action plan as a condition for contract renewal.

    Agency Affected: Department of Health and Human Services

 

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