States inconsistent in checking backgrounds of health plans crossing their borders
Health Plan Background Check
April 30, 1997
5 minutes read
After years of serving Medicaid clients in Florida’s Medicaid managed care program, Physician Corporation of America (PCA), was informed recently that it would no longer be able to participate in the program if it went ahead with a proposed merger.
The problem: Not the price or quality of PCA’s services, but the blemished record of a prospective HMO executive.
With PCA about to go through with a proposed merger with Sierra Health Systems of Las Vegas, NV., Florida officials said they could not do business with the new organization. They cited a state law prohibiting the awarding of a Medicaid HMO contract to a firm in which an officer or owner with more than a 5% stake in the company has been found guilty of "any crime in any jurisdiction which directly relates to the provision of health services on a prepaid or fixed-sum basis." Sierra’s chief executive officer, cardiologist Anthony Marlon, had pleaded guilty in 1991 to a misdemeanor charge of providing false financial information for a federal contract in Nevada.
"It is the first time this law has affected a major HMO,’’ says Douglas M. Cook, director of the Florida Agency for Health Care Administration. Dr. Marlon disclosed the conviction on his application for a Florida HMO license, but insisted the charge was not serious enough for federal officials to bar him from the Medicare program, or for state regulators in Nevada or Texas to keep him from doing business there. Sierra has since called off the merger with PCA, citing matters unrelated to Dr. Marlon’s past record.
As managed care plans expand into new states to win Medicaid contracts, their performance records in other states can provide invaluable information to regulators. The question is how thoroughly are state regulators doing background checks on new companies coming into their jurisdictions.
While convictions, such as the one encountered by Florida officials for the Sierra Health Systems executive, are rare, sanctions, fines or disciplinary actions by states are more common. Knowledge of these actions in other states can help regulators make more informed decisions as they evaluate incoming plans.
"We are recognizing that we need to build a better system."—Pomeroy
Claudia Ayon, Manager of Managed Care programs for the Virginia Department of Medical Assistance Services, says her agency hired a consultant to develop a model contract for Medicaid managed care. The annual contract calls for the state to conduct background checks. "When we first did procurement, we didn’t solicit information from other states. This time we’ll be looking at that a lot more carefully,’’ Ms. Ayon says.
In some cases, background-check duties are split between a state insurance department, which tends to focus its review on financial matters, and Medicaid program officials, who are more inclined to ask questions about the HMO’s provider networks and quality assurance process than about its performance record in distant markets.
Insurance departments are the primary HMO regulators in 42 states. The health or social services departments are primary in six states, according to the National Association of Insurance Commissioners (NAIC). In some states, new HMOs that serve the Medicaid population are allowed to operate for a certain period without obtaining a state insurance license. That leaves state Medicaid officials with the sole duty to judge the financial fitness and track record of a multi-state HMO.
State insurance regulators can tap into a data bank set up by the NAIC, called the Regulatory Information Retrieval System (RIRS). Started in 1965 on index cards, the system went on-line in 1985. It holds more than100,000 disciplinary actions, from suspensions and fines to cease-and-desist orders by insurance departments. Sanctions against managed care plans are included if they were taken by insurance departments. The database is updated monthly on CD ROM for subscribers. It’s free to regulators, but is sold to the public and the insurance industry starting at $3,000 a year. Medicaid agencies are not part of the system, however.
Glenn Pomeroy, NAIC vice president and North Dakota insurance commissioner, says that including sanctions from state Medicaid agencies is "something we ought to look at." The NAIC is focusing now on reporting the names of disciplined insurance agents. "We are recognizing that we need to build a better system and we are making a lot of progress, but it won’t be done overnight," he says.
Georgia insurance regulators search the RIRS system, according to Gina Gassert, a spokeswoman for Insurance Commissioner John W. Oxendine. "We ask a lot of specific questions. If they have ever been convicted of a felony or misdemeanor we can choose not to license them,’’ she says. Georgia has about a dozen HMO license applications pending, ranging from investor-owned HMOs based out of the state to Georgia hospital groups with long histories of service in the state.
While many states say they ask contractors to list sanctions in other jurisdictions, Medicaid contract managers may lack the expertise to explore the circumstances of these decisions, or clear authority to reject HMOs with a troubled history.
Policies inconsistent
Illinois has no requirement to check into the backgrounds of HMO owners who seek approval to do business in the state, according to Jeff Martin, supervisor of the HMO financial analysis unit of the Illinois Department of Insurance in Springfield.
In Ohio, state laws don’t require much beyond checking into an insurer’s solvency, says Shelley McLane, of Ohio Attorney General Betty Montgomery’s office. "They’re not looking at the credibility and reputations of insurers coming in. It’s an unacknowledged problem.’’
Ohio requires HMOs to obtain a state insurance license, then be accepted for Medicaid through that agency’s request-for-proposal process, says Katy Taylor, senior contract analyst for the managed care division of the Ohio Department of Insurance. Insurance regulators check an HMO’s finances, provider networks, and require applicants to fill out "biographical affidavits." Among the 19 questions asked is whether the applicant has ever been in bankruptcy, been convicted of a crime, or been the subject of disciplinary proceedings by any state or federal agency. The state doesn’t require a formal background check, however.
"As they (biographical affidavits) are notarized, we assume the person is being truthful," says Ms. Taylor. Health officials evaluate whether the HMO is able to provide basic quality care. The health agency does not routinely probe a firm’s operations in other states. I don’t believe we ask about sanctions in other states," says Cynthia Burnell, chief of the managed health care section of the Ohio Department of Human Services. "It’s not an issue that has come up." Most of the 14 HMOs in Ohio’s Medicaid managed care program are home-grown companies, she added.
Michigan, which is sorting through bids received from 24 Medicaid plans, is giving preference points to firms with existing Medicaid networks in the state. Denise Holmes, director of health plan development and Medicaid policy for the Michigan Department of Community Health, says the agency will be able to examine performance records of firms presently operating in Michigan.
"It’s less clear how we are going to get that information from other states. It is difficult for us to track down all of that information in other states,’’ she says.
Ms. Holmes says her agency "would take into account" if someone playing a key role in an HMO had been convicted of health care fraud. But complaints in other states are trickier. "We can’t go allegations," she says.
— Fred Schulte
Contact the NAIC at 816-842-3600, Ms. Burnell at 614-466-4693, Ms. Holmes at 517-335-5178 or Mr. Pomeroy at 701-328-2440.
States inconsistent in checking backgrounds of health plans crossing their borders
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