Medicare Advantage

CMS Termination of Florida Medicare Advantage Contract Signals Stronger Enforcement

Reprinted from the Aug. 9, 2007, issue of MEDICARE ADVANTAGE NEWS, biweekly news and analysis on the Medicare (and Medicaid) managed care programs.

By terminating the contract of a Florida Medicare Advantage (MA) plan July 20, CMS is trying to send a signal to Capitol Hill that it is tough on MA plans that don't meet federal standards, an industry insider said. It is the first such immediate contract termination taken by the federal government for a Medicare risk contractor's alleged substandard care in at least two decades.

CMS notified America's Health Choice Medical Plans, Inc. of Vero Beach, Fla., on July 19 that it was terminating its MA prescription drug plan (MA-PD) contract as of midnight that day. CMS said it had determined that America's Health Choice has failed to comply with the terms of its contract and that the plan's "failure to make necessary health services available poses an imminent and serious risk to the health" of enrollees, necessitating immediate termination of the contract. The eight-page termination letter to CEO Doug Werner describes alleged "patterns of clinically significant delays in patient referrals, patterns of care rendered below generally accepted clinical standards, and clinically meaningful shortages of appropriate specialty care providers including hospitals."

Specifically, CMS cited four-month waits for cardiology consultations because of a shortage of cardiologists in the America's Health Choice network, and delays in chemotherapy treatments. A CMS official, speaking on condition of anonymity, said America's Health Choice, which entered Medicare+Choice (the predecessor to the MA program) in July 2000, had a history of noncompliance and that CMS built what it considers a solid case against the contractor.

"CMS is sending a strong message. "Plans should understand — CMS is taking noncompliance serious-ly….This isn't the end. They're certainly stepping up the enforcement activity," says John Gorman, CEO of Gorman Health Group, LLC, an MA and Part D consulting firm based in Washington, D.C. "This is really CMS saying loud and clear, 'There are two reputations at stake here: yours and Medicare's.'"

Gorman tells MAN he doesn't know of other organizations on what he describes as "the red list" (i.e., in imminent danger of losing their MA contracts). But he says there are several plans on the 'orange list,' meaning that these plans now are under federal sanction. He adds that matters remain unresolved for the seven MA organizations — including Humana Inc. and UnitedHealth Group — sponsoring private-fee-for-service products that voluntarily agreed to suspend non-group PFFS marketing until CMS reviews and approves their procedures. At last word, affected companies expected CMS visits in August and September with a view toward resuming marketing by the Oct. 1 start of the 2008 MA/Part D open-enrollment period.

According to CMS's latest enrollment report, America's Health Choice had 11,617 members in its MA HMO as of July 1, and all but 72 of them had Medicare Part D prescription-drug coverage. CMS said these MA members living in Florida's Treasure Coast service area north of Miami have been enrolled retroactively to July 1 into a UnitedHealth Group SecureHorizons regional MA plan. They said SecureHorizons was selected as the only other MA plan covering the entire America's Health Choice service area. CMS said its action does not affect a stand-alone Prescription Drug Plan (PDP) run by America's Health Choice for about 500 additional Medicare members.

Plan Says Its Focus Now Is on Transfers

America's Health Choice spokesman Jason Mankiewicz says the plan's current focus is the immediate transfer of its MA members to SecureHorizons. For this reason, he says he will not comment on any issues or discuss whether the plan is appealing CMS's decision. "We're just going to let our members know we'll work with CMS and make sure they transition properly," he explains. He adds that "there are [transfer] glitches, obviously, with this many people," but he didn't elaborate. "I'm not going to discuss what our legal recourse is going to be," he states.

The CMS official said America's Health Choice has until close of business on Aug. 3 - 15 days after the July 19 termination notice — to file a request for reconsideration, which is the first level of appeal, with the agency. He said July 30 that to his knowledge the plan had not yet filed such a request. A plan may take a series of appeal steps within CMS — from reconsideration of the case by an agency official not part of the original decision to a CMS hearing and then a final review by the CMS administrator; at that point, a plan may take its appeal to federal district court.

Brian Weible, a principal and consulting actuary with Wakely Consulting Group, Inc. of Clearwater, Fla., says his firm did some work for America's Health Choice. "From a financial standpoint, they were very sound," he tells MAN. "Solvency was never an issue." Officials with the Florida Office of Insurance Regulation confirm that America's Health Choice seems to be in full compliance with the state's financial solvency requirements.

Weible describes the transfer of about 11,000 members during the MA enrollment lock-in period as "an early Christmas gift" to United. He notes that such a membership boost adds up to a significant revenue windfall if CMS pays the typical $700 to $800 per member per month to the plan.

Gorman, a former high-level CMS staffer, asserts that CMS's action against America's Health Choice was not surprising to the industry. "There was a long and well-documented history of serious operational and quality issues with this plan [i.e., America's Health Choice]. This has been going on for years," Gorman says, citing its alleged noncompliance "in virtually every operational area - from risk adjusters to appeals and grievances to claims processing...and they were warned repeatedly by the agency."

In August 2005, CMS temporarily banned America's Health Choice from taking new members and from advertising, saying its provider networks, grievance procedures, quality assurance plan and claims systems failed to meet federal standards. Gorman explains that this was an intermediate sanction, "the last step before termination — and all of those problems persisted."

Yet America's Health Choice "didn't get a lot of attention because they were relatively small," Gorman says. "[But] now we have a new [CMS] administrator, a new Congress, and stricter enforcement." He notes that it is unusual for CMS to invoke a mid-month termination, and says it does so only when there is a concern that beneficiaries are in imminent danger.

'Chronic Inability' to Comply Cited by CMS

CMS, in its July 19 contract termination letter, said America's Health Choice has "demonstrated a chronic inability to meet Medicare program requirements." Specifically, the agency cited audits conducted in January and February 2007 that found the plan failed to meet service-access requirements. CMS said it initiated a contract nonrenewal action against the plan in April that would have terminated the plan's MA contract Dec. 31, 2007, were it not for the immediate termination. Subsequent to the January/February audits, CMS said it received unsolicited information from several former management and operations officials at America's Health Choice that provided detailed insight into the organization's "troubled operations." CMS said this information elevated its concerns, prompting another limited audit and on-site investigation June 15, which in turn prompted the notice of immediate contract termination.

"This is not the kind of action that CMS likes to take, but it became an action they felt they had to take," Gorman says of the MA contract termination. He asserts that federal regulators worried that if word of a plan's persistent compliance problems reached Capitol Hill, it would make the MA program a tougher sell. "They did what had to be done. It might have been late in coming, but they did what had to be done…and a very clear message is being sent to the industry from this one example."

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