Feds turn up heat, scrutinize health system marketing practices
August 1, 1996 5 minutes read
Feds turn up heat, scrutinize health system marketing practices
Ensure your HMO marketing efforts are within the law
If your health care system has formed its own HMO, hopes are high that all the effort for licensure and marketing -- all the investment necessary to launch such a venture -- will pay off.
Competition is fierce, and yet many health care providers are ideally suited to capture a portion of the market and deliver high-quality, cost-effective care.
Amid all this health system restructuring, the market for Medicare and Medicaid HMO enrollees -- once hardly considered worth the effort -- is taking off. In some states, new laws are mandating Medicaid beneficiaries to enroll in an HMO, adding even more to the market.
With all this profit potential, unscrupulous marketing activities are surfacing, and they are expected to garner a great deal of media and legal attention in the next year.
Because of this, your provider-based HMO's efforts to enroll Medicaid and Medicare beneficiaries must be legal and ethical, experts tell Healthcare Risk Management. If your marketing representatives are violating the law, your health care organization can face substantial fines and civil lawsuits, and even lose its provider contract with Medicaid and Medicare.
The issue is so controversial that many potential sources declined to come near the subject on the record with HRM. At the same time, legal activities and regulatory heat both are both stepping up quickly.
Several managed care organizations (MCOs) are now asking law firms to audit their marketing and sales practices related to their HMO activities, reports Barbara Mayers, JD, a partner at McDermott, Will & Emery in Washington, DC. These requests are a barometer of the government's scrutiny of HMO and MCO marketing practices.
Generally, the Baltimore-based Health Care Financing Administration, which oversees marketing of HMOs to Medicare beneficiaries, requires all marketing materials, contracts, and employee training manuals to be approved 45 days in advance of their use, says Mayers. Different state agencies also have oversight for marketing to Medicaid recipients, including insurance boards, health departments and public aid departments. Each agency has different regulatory concerns, but generally they police for deceptive practices, Mayers says.
Consider these recent cases:
* In Maryland, the state Department of Health and Mental Hygiene in Baltimore fined an HMO a total of $55,000 for violating the marketing provisions of its contracts with HMOs that provide services to state Medicaid recipients. According to published reports, the fines included one for $30,000 for misleading a Medicaid recipient about the name of the HMO and about a state requirement that all Medicaid beneficiaries remain in HMOs.
The same HMO was fined $20,000 for duping another Medicaid recipient into signing an enrollment form by telling the beneficiary that he was signing a form only to acknowledge that he had seen a presentation about the HMO.
That HMO was fined $5,000 in a separate incident after a marketing representative drove another potential enrollee, who was mentally disabled, to his home, fed her lunch, and then had sexual relations with her.
* In Illinois, the state Department of Public Aid is investigating allegations that one HMO's marketing representative is telling welfare recipients that their benefits will be denied unless they show proof of having enrolled in an HMO.
* In California, a class-action suit has been filed against an HMO for deceptive marketing practices. Legal experts familiar with marketing practices say these examples are typical of the problems many MCOs have. They urge risk managers with oversight for HMOs and other managed care plans to review their sales and marketing programs to make sure their representatives understand the law and the boundaries in which they can try to enroll new members.
Legal experts tell HRM that they expect state agencies and HCFA to tighten their watch over marketing efforts as more and more Medicare and Medicaid recipients enroll in HMOs.
Currently, existing laws for Medicaid and Medicare HMO marketing practices generally are only subject to the scrutiny of government agencies if the organization has a contract for Medicaid or Medicare beneficiaries or is marketing its plan to them. Plans that are marketed to large corporations generally do not face the same scrutiny or regulations because most companies have employee benefits personnel or insurance agents who can protect their enrollees, says Wendy Krasner, JD, a health law partner at McDermott, Will & Emery.
The law does not presume that individual Medicaid or Medicare recipients have the same sophistication and bargaining power that members of a large company have when choosing which HMO to enroll in. Therefore, federal agencies focus on regulating marketing to individual Medicare and Medicaid beneficiaries. State insurance commissioners are responsible for regulating insurers' marketing practices targeted toward non-Medicare and non-Medicaid beneficiaries.
The laws governing the marketing and enrollment of both Medicare and Medicaid beneficiaries are abundant, dense and complicated, Krasner says. It is advisable to have a lawyer familiar with all of the governing rules, regulations, and restrictions review your marketing and sales practices. With controversy brewing, the heat is expected to really pick up in the next several months.
Limit opportunities for wrongdoing
Many HMOs unwittingly run afoul of the law in their marketing, but risk managers can try to limit those opportunities by reviewing the employment status, training, regulatory compliance and compensation plans of their HMO's marketing and sales staff. Legal experts suggest the following ways to ensure fair and ethical marketing practices by the HMO:
* All marketing representatives should be employees of the HMO. Many HMOs use independent contractors to enroll their members. Independent contractors cannot be disciplined (except for loss of their job). Using employees gives the health plan tighter control over the marketing efforts.
Training of marketing representatives should include a brief, well-thought-out overview of the laws governing enrollment of Medicare and Medicaid beneficiaries and the sanctions for violating the law, suggests Krasner.
* Maintain separate marketing and enrollment staffs. This "fail-safe" promotes fair marketing practices because the enrollment staff can make sure Medicare and Medicaid beneficiaries understand they have enrolled in a plan.
This separation of duties means your enrollment staff can provide the details beneficiaries need regarding benefits provided under the plan, and any other administrative requirements, Krasner says. For example, many enrollees new to managed care are not familiar with the basics of managed care, starting with how the gatekeeper physician system works. This understanding is critical not only for patients' well-being and satisfaction, but also for your HMO to be profitable, experts note. Unless the system is used correctly, quality of care cannot be maintained, and the system is not taking advantage of its potential efficiencies.
* Eliminate commission-based compensation plans. Many HMOs pay their marketing representatives based on the number of people they enroll. This type of compensation encourages deceptive practices, Mayers says.
Instead, if sales representatives are paid on commission, the payment should be tied to retention of new enrollees, Mayers says. For example, United HealthCare Corp., an Edina, MN-based HMO, pays a commission to its sales representatives only after a new enrollee has maintained membership in the plan for 90 days, says a company spokesperson who declined to be identified on the record.
* Conduct member surveys. United Health-Care conducts random telephone surveys of new enrollees. Surveyors specifically ask about the marketing representative and the accuracy of the explanation of plan materials, according to the company. These surveys help to ensure ethical marketing behavior and help the company catch illegal behavior, the spokesperson says. *
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