New Jersey state officials, now in the final stages of putting together HMO regulations billed as being among the most comprehensive in the country, say they plan to stick with most of the regulations as proposed, including two that have stirred some of the strongest protests from the HMO industry:
• the establishment of independent utilization review organizations (IURO) that consumers could turn to as soon as they exhausted the health plan’s internal appeals processes, and
• a requirement that HMOs must disclose how they compensate providers and other details of how they manage care.The state received more than 220 written public comments about the proposed regulations, which have been subjected to a year of exhaustive review. But Natan Szapiro, director, Office of Managed Care for the Department of Health, said he expects changes to amount mainly to minor technical changes and additional definitions of terms. The final draft of HMO regulations is scheduled to be released in November.
Among other key requirements:
• HMOs would have to report internal complaint data and data on other quality measures to state regulators and plan enrollees;
• risk-bearing by provider groups would be limited; and
• solvency requirements for HMOs would be increased.
External appeals mechanism
State officials say independent utilization review organizations (IURO), which will handle external appeals by consumers, will be established through a request for proposal process.
"Our expectation is that most utilization questions will be resolved with internal appeals," Mr. Szapiro said. "But if the results are unsatisfactory to the member or the patient, there will be an external appeals process that any member could use as a sort of stage three."
Findings of the IUROs would not be mandatory, but the HMO would be required to provide a justification for rejecting the panel’s finding. "They couldn’t just say they don’t want to do it," Mr. Szapiro said.
The New Jersey HMO Association argues that the IURO should only be available after consumers have exhausted all other state and federal administrative remedies. "There is a cost associated with these appeals," said Paul Langevin, association president. The fee is assessed against plans based on the number of appeals filed. "And if people get turned down in all the other courts because it’s a frivolous claim, I think that will be readily apparent to the external review board."
Disclosure of compensation
HMOs also are concerned about how they will be able to protect proprietary information if they must disclose how they compensate providers and other details of how they manage care. To meet the Health Department’s requirements for quality review, plans say they will not only have to disclose proprietary information to the state agency, but ultimately, through freedom of information act requests, this information may also reach the public.
"There are literally hundreds of thousands of permutations of physician compensation ... that the plan could put together that would be very effective in incenting physicians to do the right thing without being so powerful an incentive as having them withhold care. And something that was so successful ... is not something you would want to share with your competition," said Mr. Langevin.
Internal cost screens on cost per case that are used to monitor physician or hospital performance also could be disclosed, Mr. Langevin said, and used in negotiations. "All of a sudden they’re going to start the bidding at that cost screen. It certainly undermines our position from a negotiating standpoint."
Even though the regulations contain provisions for keeping proprietary information confidential, Mr. Langevin says the track record for state agencies nationwide actually keeping such information out of the hands of the media and other members of the public has been poor.
But provider representatives to the Health Department’s HMO Advisory Committee argue that even "so-called proprietary" information should be available to the department on a confidential basis for oversight purposes. Providers should have access to utilization review criteria to "in order to provide sound advice to patients," they argue, and the information should also be available to plan participants.
Delay on report cards
The New Jersey HMO Association is seeking a delay in implementation of a report card system for health plans until at least the third quarter of 1997. The draft regulations require plans to have an internal complaint process that addresses members’ concerns about service, access and provider quality. As part of a "Continuous Quality Improvement" program for HMOs, the plans would have to tabulate and annually report this internal complaint data in a "report card" issued to state regulators and plan enrollees. Results of satisfaction surveys of enrollees also would be part of the report card. The Department’s Health Data Council has yet to determine what utilization and access measures must be included in the report card, which is why the HMO association is seeking a delay. Mr. Szapiro indicated the department may be open to changing the implementation schedules for some of the requirments.
Another report card issue being debated is whether to include information from surveys of providers and heavy users of the health care system, in addition to results of surveys of enrollees.
"The instruments for fielding member satisfaction surveys are out there and fairly well developed at this point," Mr. Szapiro adds. "Doing surveys of high utilizers and specific populations is more difficult, and the instruments are not quite as clear. So it would take a while to get a valid survey that would identify the members to be interviewed."
Risk-bearing
One thing providers and HMOs agree upon is distaste for new requirements on insurance risk.
The New Jersey Hospital Association objects to rules that prohibit HMOs from shifting "some or all" of the financial risk to secondary contractors, effectively
preventing HMOs from contracting with provider-sponsored organizations (PSOs), said Valerie Sellers, lobbyist for the association. Proposed rules requiring PSOs to meet the same reserve requirements as HMOs as a safeguard against insolvencies also would essentially prevent PSOs from entering the market, she said.
The New Jersey HMO Association calls provisions requiring plans to deposit reserves equaling two-thirds of their highest-cost quarter "onerous and excessive." Such requirements could force some existing plans out of business, Mr. Langevin said.
Other provisions that would require HMOs to obtain Health Department approval for certain fund transfers and dividend payments exceed the department’s statutory authority, he said. And, HMOs feel they’ll be at a disadvantage under requirements governing coordination of benefits, typically for those individuals who have coverage both through their employers and their spouses’ employers. These would essentially allow other insurance carriers to shift costs to HMOs, the association says.
While the Department of Health has overall responsibility for implementation of the regulations and will ultimately draft the final regulations, the Department of Insurance also is reviewing the insurance-related aspects of the regulations, which it will implement. A spokeswoman said the department is reviewing provider and insurer concerns but has yet to make a decision on recommending changes.
Contact Ms. Sellers at 609- 275-4261, Mr. Langevin at 609-581-8237 or
Mr. Szapiro at 609- 984-7160
This article was written for SHW by Contributing Editor Jack Neff.
NJ officials stand by proposed HMO rules for external appeal and reporting of compensation
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