This directive taking the government--specifically the Department of Health and Human Services--to task for its failure to develop satisfactory appeals regulations governing Medicare HMO's results from the March 3 decision in a class-action lawsuit filed with the U.S. District Court in Tucson, Ariz.

Judge Alfredo Marquez's ruling in Grijalva et al. v. Shalala lays out minimum content requirements that HMO's must include in notices informing Medicare patients that the insurer is denying some type of medical care, time limits for providing beneficiaries with such notices, a description of the appeals process including provisions for situations in which an expedited appeals response could be crucial, and instructions concerning the evidence HMO's must provide to support an enrollee's position during the appeal. All of these elements must be supplied to every Medicare enrollee in easily understandable "lay language," the judge ruled.

In addition to ordering the government to enact these patient protections, Marquez ruled that regulations must also make it clear that HMO's are prohibited from retaliating against physicians who provide a patient filing an appeal with documentation to support the patient's position.

With 5 million elderly Americans already enrolled in Medicare HMO's and dramatic growth in that number expected in the next few years--the Congressional Budget Office estimates that enrollment will top 15 million in 2007--Marquez indicated he was unwilling to wait and see what regulations the government's Health Care Financing Administration (HCFA) comes up with. HCFA Administrator Bruce Vladeck, Ph.D., has noted that the agency is in the process of developing regulations that would clarify the rights Medicare beneficiaries have to appeal when their HMO denies, reduces, or terminates medical services.

The judge's ruling says that, at minimum, regulations must ensure that HMO's give notice of a care-denial decision within five working days after the patient or a provider requests a medical service, regardless of whether the request was submitted orally or in writing. The patient must also be informed that care is being reduced or ended at least one working day before that occurs.

The only exception permitted to the five-day rule, Marquez pointed out, is in cases where "the HMO needs additional information to make a responsibly considered medical determination." In such cases, which the judge said must be characterized by "exceptional circumstances," the HMO may take up to 60 days to notify the patient and must inform him or her of the additional information it needs to arrive at its decision, the steps it is taking to obtain that information, and an estimate of the time required to complete its assessment.

The ruling emphasizes the need for the government to make certain that Medicare beneficiaries not only receive but also understand the notices and procedures. They cannot be cloaked in jargon or obscure terminology, he wrote, and must be printed in "at least 12-point type" and written in "lay language."

In addition, denial notices must describe "evidence that would support the enrollee's position," along with instructions on how patients can obtain supporting letters and medical records from their physician that might support the basis of their appeal. To further reduce the chances of patients' backing down due to obstacles in the way of getting these documents, Marquez noted that this information "shall be freely provided by the HMO."

When an expedited appeal is requested and acute care is being denied, the HMO must continue that care until a final decision is issued. The HMO has three days to make its assessment after receiving a request for expedited review.

The ruling also calls on the government to include in its regulations a warning to Medicare HMO's that federal agencies will monitor their compliance and that the secretary of HHS is prohibited from renewing Medicare contracts with HMO's that have failed to comply with the appeals regulations. The same renewal prohibition applies if the secretary learns that an HMO retaliated against a provider who assisted a Medicare patient in his or her appeal.

As of early April HHS officials had not decided whether to appeal Marquez's decision. The department's inspector general, June Gibbs Brown, acknowledged, however, that federal health officials are aware of the problem. A survey by the department's auditors uncovered the fact that more than half of these Medicare HMO's have failed to comply with existing rules for handling appeals and grievances by their elderly enrollees, according to a report in the March 18 New York Times.

In another warning shot across the bow of the managed care industry, a U.S. District Court judge in Connecticut has taken one of America's largest corporations to task for "arbitrary and capricious" behavior after it denied payments for most of the four-month psychiatric hospital stay of an employee insured through its capitated managed care plan.

(Psychiatric News, May 16, 1997)