The management of the DHS “Value Report” on HMO care
By Matt Ehling and Mike Kaszuba
Three years ago, the Minnesota Legislature told state officials it wanted an independent study to investigate the value of the state’s managed health care programs. But what taxpayers got instead was a report that was heavily influenced by Department of Human Services (DHS) officials and critiqued by health management organizations (HMOs), according to documents obtained by Public Record Media (PRM), a St. Paul non-profit.
A review of scores of public documents conducted by PRM showed that both state officials and an umbrella organization representing HMOs repeatedly challenged a private consultant on conclusions that highlighted shortcomings of the managed health care system, and pushed for the report to place more emphasis on the program’s successes. The documents also illustrated the intertwined relationship between HMOs and state officials, who are tasked with monitoring Minnesota’s HMOs.
When the state’s consultant – the Boston-based Public Consulting Group (PCG) – asked to speak to critics of HMOs for the report, a top DHS official told colleagues to steer PCG away from several longtime critics. In another exchange of e-mails, the consultant told state officials it would delete a chart showing health care access complaints broken out by individual HMOs and replace it with data that showed “the issue in aggregate” without citing any one plan. In making the change, the state’s consultant said that “more research is needed to determine if the spike can be explained by a one-time anomaly.”
The report was meanwhile closely monitored by the Minnesota Council of Health Plans, a group representing the state’s HMOs. The Council’s Janny Brust, in a June 2013 e-mail, told a state official that the HMOs were “left with the impression that they would get the opportunity to review the report” before it was released. “Given the consultant’s limited knowledge of [our] structure, history, and policy, a review for accuracy seems critical,” Brust wrote. UCare executive Ghita Worcester was more critical, saying in a July 2013 e-mail that the consultant’s claim that managed care did not consistently reduce costs was a “biased statement.”
The management of the HMO “Value Report”
The “value report” commissioned by the legislature was an attempt to assess the complicated world of Minnesota’s public health care programs. Due to a legislative decision made decades ago, private entities handle the administration of such programs, as opposed to the state itself. Minnesota began experimenting with this “managed care” arrangement in the 1980s, and it later largely replaced the previous “fee-for-service” model, in which the state made direct payments to health care providers for public program work.
Under managed care, DHS pays out blocks of money to private vendors, who then reimburse doctors and hospitals for services rendered to public program enrollees – including Medicaid patients who participate in managed care under a federal waiver. According to DHS, over 800,000 Minnesotans were enrolled in some sort of public health care program in 2012, with seventy-five percent of those individuals in managed care programs administered by health management organizations. Under Minnesota law, HMOs are required to transact public program business in order to pursue other, market-based health care work.
The agency disputed that DHS or the state’s HMOs had unduly influenced the report. In a December 15 e-mail to Public Record Media, the agency said that “our standard practice for reports on managed care organizations is to give the MCOs a courtesy review; we are not required to make changes based on their suggested edits, and often don’t. We ask for this review primarily to ensure the accuracy of the factual information the MCOs have provided.”
“The consultants had the ability to reject proposed changes based on their own research and findings,” the state agency added in the email. “We did not hear specific criticisms about the report being unduly influenced by any specific party.”
Managed care controversy
While managed care has existed in Minnesota since the 1980s, it has become the subject of controversy in recent years. Beginning in 2010, questions were raised about the management of the state’s public health care programs – including questions about whether DHS was sufficiently overseeing its HMO vendors, and whether those vendors were retaining money allocated for patient care.
In the years since, the Minnesota Legislature has moved to implement additional oversight measures. Its first step was the passage of third-party audit legislation in 2011, which called for the hiring of an outside contractor to review HMO rate-setting on a biannual basis. A year later, the legislature commissioned an independent study to investigate “the value of managed care” in relation to state public health care programs.
In early 2014, PRM sought DHS documents about the compilation of the value report, and received them in November of that year. The documents chronicle the process by which the report was assembled, and also shed light on the impact that DHS and Minnesota HMOs had on the shape of the “independent study” commissioned by the legislature.
PCG selected to write value report
The legislation that authorized the managed care value report tasked DHS with hiring an independent evaluator to produce it. In December 2012, the agency selected Public Consulting Group (PCG) to develop the report. According to records obtained by PRM, PCG was the only bidder for the work. The contract was capped at $200,000.
PCG was not unfamiliar with Minnesota. The firm was an approved vendor for the state’s data analytics master contract, which attempts to have private companies help improve efficiencies in state government. The company, at one point, was approved for work in seven of the state master contract’s twelve service categories, including one involving various Human Services functions.
The proposal that PCG submitted to DHS demonstrated that the company was aware of the ongoing controversy surrounding Minnesota’s managed care programs. The company’s “technical proposal” stated that it would help the state find its way to a “thoughtful, reasoned, transparent, and unbiased assessment” of the questions surrounding the programs. DHS awarded the report contract to PCG in December 2012, and set a June, 2013 delivery date for the report.
DHS seeks to adjust scope of report
The legislation that authorized the value report contained a specific list of categories that were to be included in the final document. Internal DHS records indicate that early on in the report development process, the state agency and its consultant talked of modifying these categories, reducing their overall number, and changing the scope of the eventual report. Documents show that after a November, 2012 meeting with DHS, PCG offered to remove from its work plan several categories that the Legislature wanted examined, including reporting on “recipient and provider satisfaction; health outcomes assessment; recipient access to health services” and “delivery system impact on capacity to use different payment models.” However, all of the Legislature’s original categories for study were later included in the final report.
Similarly, a DHS document from November 8, 2012 includes a list of bullet points for further discussion with PCG. The very first point appears to re-frame the legislature’s request for a comparative study by seeking PCG’s ideas “on how to assess whether managed care is a better value than FFS.”
Complicated relationship with HMOs
Due to the industry-specific focus of the managed care value report, Minnesota’s HMOs were keenly interested in its outcome. Much of the correspondence obtained through PRM’s records request includes e-mails between DHS, PCG, and various HMO representatives about the status of this report. This correspondence provides a window into the complicated interaction between DHS and the state’s HMOs – entities that DHS is legally tasked with overseeing, as well as collaborating with, to provide public health care.
Early on in the report-writing process, DHS indicated to PCG that it was concerned about certain aspects of HMO management. For instance, on January 25, 2013, Tom Fields of DHS wrote to his colleague Mark Hudson, relating how he’d expressed concerns to PCG that the plans were “perhaps spending money on non-health things when we’d rather have them put funds into strengthening their provider payment rates.”
At the same time, however, DHS was in communication with HMO representatives about the scope of PCG’s value report. On January 28, 2013 Mark Hudson of DHS provided the Minnesota Council of Health Plans’ Janny Brust with the PCG contract and work plan – the plan that would ultimately evaluate their performance.
Other documents in PRM’s data cache illustrate a deep level of interdependence between DHS and the HMO health plans they are tasked with managing. For instance, a Feb. 15, 2013 DHS e-mail described how the agency developed the “capitation rates” it pays to HMOs for public program service. In his e-mail, Mark Hudson of DHS stated that HMO capitation rates were developed using cost data provided by the plans themselves. Hudson wrote that those costs were then “trended” forward to include legislative changes to fees and benefits.
It should be noted that this close collaboration between DHS and the health plans – including the fact that DHS had set capitation rates based largely on HMO-provided data – was at the center of much of the initial criticism over public program management in Minnesota.
In his e-mail, Hudson acknowledged that DHS rates had “yielded higher than targeted margins in the past,” resulting in “intense scrutiny for DHS over the past two years.” He closed his message by noting that DHS would start using encounter data, i.e. billing data from actual doctor visits, in the future to set more accurate rates.
Preliminary PCG report
In February, PCG began circulating the preliminary version of the value report. The early draft included critical themes, along with some language that complimented HMO performance. PCG noted that, “although states overwhelmingly have shifted to a managed care delivery system, a review of literature does not consistently support conclusions that it reduces cost.” At the same time, the draft noted that the managed care process had a grievance and appeal system that holds HMOs accountable and that “consumers are generally satisfied with the level of service provided by Medicaid managed care in Minnesota.”
DHS feedback begins to alter report
Records show that DHS staff began requesting changes to the PCG report several days after it was first presented to the agency. Some of the earliest changes appear to downplay documented problems with specific health plans, in favor of a more generalized summary of these activities.
This shift can be seen in a February 18, 2013 e-mail from PCG’s Richard Albertoni to Tom Fields of DHS (among others). Albertoni’s message stated that he made changes to the report based on DHS feedback, including the deletion of a chart showing health care access complaints broken-out by individual HMOs.
HMOs check in
Starting in early 2013, documents indicate that staff from the HMO trade group – the Minnesota Council on Health Plans (MCHP) – made repeated inquiries about the value report to both DHS and PCG.
On February 7, 2013, the MCHP’s Brust contacted PCG’s Rich Albertoni. Citing PCG’s contract with DHS, Brust wrote, “it looks like you must submit a preliminary evaluation to DHS. Could you share that with me?”
On March 14, 2013, MCHP executive director Julie Brunner sent an e-mail to Scott Leitz of DHS seeking to obtain a draft of the value report. Brunners’s message indicated that she was curious about what “direction the report is going in.” Her e-mail to Leitz came a few days before PCG was scheduled to interview HMO personnel for inclusion in the report.
Documents indicate that the preliminary value report was released to MCHP after it was presented to the legislature’s Health and Human Services committee.
Managing criticism
After conducting a series of interviews with DHS and MCHP staff, PCG sought an outside perspective for the report. “They would like to talk,” wrote Mark Hudson of DHS, “to any critics of MCOs [HMOs] as part of the value report.” The recipient of Hudson’s e-mail – DHS deputy director James Golden – replied with a pointed suggestion. “We do not want to ask Grassley, Nienow, Feinwachs, or Robinson,” he wrote. Golden’s e-mail referenced several prominent critics of HMO program administration, including Iowa Senator Charles Grassley, State Senator Sean Nienow, health care advocate Buddy Robinson, and attorney David Feinwachs. Feinwachs, in particular, was responsible for raising questions about HMO program management that later led to legislative and congressional scrutiny.
Golden’s directive to steer PCG away from speaking with vocal HMO critics appears to be similar to a previous incident involving his predecessor. 2011-era documents obtained by PRM revealed correspondence within the Centers for Medicaid and Medicare Services (CMS) indicating that David Godfrey (Minnesota’s previous Medicaid director) had likewise tried to dissuade CMS personnel from speaking with Feinwachs, Nienow, or state senator John Marty about HMO administrative problems.
The Godfrey emails were obtained by PRM through a lawsuit it filed against the federal Department of Health and Human Services in 2012, after PRM sought correspondence between CMS and Senator John Marty.
Delay granted for HMO data production
By mid-summer, PCG was seeking to obtain information for the value report directly from HMOs themselves. On June 4, 2013, Shawn Kotoske of PCG e-mailed Donna Zimmerman and Jennifer Clelland of Health Partners seeking data. “We are trying,” Kotoske wrote, “to display an intricate understanding of the various programs that are offered by the health plans.” Information requested by Kotoske included program start dates, numbers of people served since inception, and “measurable outcomes that you have recorded.” Kotoske noted that data was needed in less than one week, on June 7, but that the “worksheet does not need to be completely filled out and we will take any information you can provide.”
That same day, Jennifer Clelland e-mailed Scott Leitz and Mark Hudson of DHS, and notified them of the record request from PCG. “We wanted you to be aware of this data request from PCG,” Clelland wrote. She further stated that, “more notice and time to process this request is beneficial to the outcome.”
The next day, Stacia Cohen of Blue Cross contacted Mark Hudson and Scott Leitz of DHS to ask for a one-week extension related to PCG’s records request. “The specific information you are requesting is not readily available and will require some time to pull together,” Cohen wrote. “We are requesting at a minimum, an additional week to obtain the information.”
Later on June 5th, Jennifer Clelland of Health Partners e-mailed Hudson and Leitz of DHS, writing that, “PCG has indicated that they will not provide an extension … we will do the best we can within the abbreviated time frame.”
Internal DHS e-mails between, Leitz, Hudson, and DHS deputy James Golden revealed the agency’s deliberations about the push-back from the HMOs. Leitz stated that the Blue Cross and Health Partners requests “don’t seem unreasonable.” The following day, Mark Hudson e-mailed Jennifer Clelland, relating that he told PCG “to be flexible.” Clelland responded, thanking Hudson for following up, and noting that, “We have now received their notice granting a one-week extension.” A capstone e-mail from James Golden to Scott Leitz said: “FYI – Solved.”
Discussion of value of managed care
Several e-mails obtained by PRM reveal internal DHS discussions about the benefits and liabilities of managed care versus FFS care. A series of June, 2013 e-mails between Scott Leitz and Julie Marquart set out various perspectives on the matter. Marquart’s assessment of the value of managed care highlighted the flexibility of HMOs to have different provider networks with different rates. Thus, said Marquart, DHS did not have to negotiate rates, and HMOs could change their rates as needed.
Marquart also attributed certain cost reductions to managed care, noting that the system steered patients to more “conservative means of treatment” before specialty care was undertaken.
Marquart’s comments were delivered in response to queries from Scott Leitz regarding whether DHS would see a drop-off in program participation if HMO health plans were not an available option for public program enrollees.
HMOs continue to watch progress
On June 19th, the MCHP’s Brust e-mailed Mark Hudson regarding the status of the value report. “Thanks for the voice mail with the heads-up that the draft of the ‘value’ report may arrive next Monday afternoon. You mentioned that you weren’t sure if (or how much) of the report you could send to the health plans for review.” However, Brust also noted that, “at the last DHS/Council meeting, plans left with the impression that they would get the opportunity to review the report before it was finalized.”
Early draft critical of value of managed care
By late June, PCG had delivered a draft of its report to DHS for review. A June 26 draft of the report related several key findings, but noted that formulating a direct comparison between managed care and FFS was “limited by the lack of common measurement standards.” PCG’s findings included the observation that while Minnesota’s HMOs “increase the state’s potential for delivering high value care, that potential has yet to be realized.” The report also noted that “Minnesota’s Medicaid program is more expensive per enrollee than in most other states, while several health outcome benchmarks rank below average national Medicaid standards.”
DHS staff, HMO executives criticize draft report
DHS circulated the PCG report internally to gather feedback, which came from numerous quarters. On June 28, DHS staffer Pamela Parker wrote to Mark Hudson, stating that, “this is not a bad report, but is very confusing to me and I fear it will lead to some wrong conclusions about the programs I manage.” (Parker alluded particularly to the Special Needs managed care programs). Parker wrote that readers will incorrectly think that “we don’t have adequate care coordination requirements for seniors or people with disabilities.” Another DHS official, Robert Lloyd, called parts of the report “incorrect and misleading.”
James Golden criticized PCG’s claim about high costs, and noted that PCG relied on “really old data” to justify its conclusion, asserting that capitation rates from 2010 forward had been “flat or negative.” In response to the criticism, PCG made several changes to its draft report. On July 26, Shawn Kotoske e-mailed Marie Zimmerman of DHS, writing that “we’ve made many changes to the paper to address your concerns … We made a special effort to revise the report based on our call with Mark earlier today. He shared with us your concerns about sending the paper to the commissioner in its current form. We deleted most of the sections with which you took issue … the version of the report forwarded to the commissioner will be more in line with your feedback.”
Despite these changes, PCG preserved language about high costs for managed care in Minnesota. This triggered additional feedback from DHS staff, including Pamela Parker, one of the report’s biggest critics. “This report is very upsetting,” Parker wrote. “This seems like very shoddy research.”
In another e-mail, Parker declared, “The statements made by PCG seem to be out of the scope of work, which was not to compare Minnesota Medicaid benefit set to other states … the contractor should be told to stay within the scope of work required.”
Documents revealed that DHS staffers were not the only participants in the review process. HMO executives – those in charge of the organizations being evaluated – were also provided review copies, and registered feedback. For instance, a July 29 e-mail from UCare’s Ghita Worcester included several proposed amendments, and criticized PCG’s assertion that the Minnesota Medicaid program was more expensive than those in other states. “From what I can tell,” Worcester wrote, “PCG does not factor into account that [Minnesota] likely has a more generous benefits package.”
Additional feedback, report changes
On August 1, Scott Leitz forwarded DHS Commissioner Lucinda Jesson the draft PCG report. “Per our discussion yesterday,” he wrote, “there are some elements that we’ve had fairly detailed conversations with PCG about, and they are revising some sections based on those conversations.”
In an e-mail that same day, Hudson touted the agency’s accomplishments to PCG. “In comparison to the state’s 2010 forecast, we have saved over $1 billion dollars … we have more detail if needed,” his message noted. In addition, Hudson continued to express frustration with PCG’s conclusion (based on 2008 data) that “we are among the highest cost states and have no better than average quality.” The contractor needed to understand “where we think we are today” Hudson later wrote to another DHS official.
Around the same time, the HMO trade organization MCHP also continued to offer input on the value report. An August 1 e-mail from Julie Brunner to Scott Leitz offered to “organize a meeting on the value report tomorrow.”
Documents obtained by PRM include an agenda for an August meeting between DHS and the MCHP. The agenda included a section entitled “value report” that was slated to be addressed by both Mark Hudson and Julie Brunner. The agenda’s discussion points related to “key findings, process, communication, and dissemination.” The agenda also included a discussion with James Golden about the upcoming HMO financial audit – the other independent report commissioned by the Legislature.
DHS granted PCG an additional month to finish its report, and changes continued throughout August and into early September. In a September 13 e-mail update, Coy Jones of PCG stated that, “on the issue of high program costs … we have moderated our criticism in several ways.”
Final report
The final draft of the PCG report includes language that was significantly modified from its initial draft. Whereas the initial draft had stated that Minnesota had yet to realize the cost benefits of managed care, the final report notes that HMOs “increase the state’s potential for delivering high value health care.” It qualifies this language, however, noting that there were places for improvement on both the cost and quality sides.
The final report also states that managed care is a transparent system compared to Minnesota’s FFS programs, which remain “far more obscure when it comes to locating and eliminating system inefficiencies. For this reason alone, it is more likely that managed care rather than FFS is better positioned to deliver greater cost savings to the Medicaid program going forward.”
Word of the final delivery of the value report came from PCG on September 24, 2013. “At that point,” wrote Jeremy Drucker of DHS, “we can start the notifications.”
An internal DHS “communications and outreach plan” for the value report detailed the report’s dissemination schedule, beginning with distribution to the state’s HMOs, followed by dissemination to legislators, and finally to the press.
Talking points attached to the plan maintained that it was “important to note that our reporting methodology tends to underrepresent the quality of our publicly funded health care,” but credited the PCG report with confirming “the wisdom of the direction of the Department of Human Services … in improving its publicly funded health care programs by increasing quality and decreasing cost.”
Delivery to Legislature
The Senate’s Health and Human Services Committee was scheduled to receive the value report on September 26, with PCG’s Rich Albertoni presenting the report’s findings along with a departmental response from DHS. On September 5, DHS staffer Diogo Reis wrote that Commissioner Jessson would be “out of town the day of the committee,” and indicated that deputy Jim Golden could provide the agency’s response to the (presumably) independent report that the legislature had commissioned.
In response to Reis, Golden wrote back as if addressing the committee. “Madame Chair,” Golden wrote, “My reaction? Well, I’m shocked, just shocked!” He followed up by asking, “Maybe I’ll need some talk points?”
Jesson, the DHS commissioner, meanwhile offered her own advice to agency officials, telling them in a September, 24 e-mail that they should emphasize to lawmakers that “our Medicaid system is more expensive than many states primarily because our Legislature has wisely chosen to provide more benefits.”
In a letter to the Senate committee, the Minnesota Council of Health Plans offered its own take, though it said that “we have not had much time to review the report in detail.” The Council’s letter stated that it was “indisputable that managed care organizations have innovated and brought into being benefits that did not exist” before.
Documents available on PRM web site
PCG’s final value report is available for review on PRM’s web site, along with the most relevant of the thousands of pages of records PRM received from DHS. The full set of documents is available by request.
Disclosure – Matt Ehling, president of PRM, also serves on the board of the Minnesota Coalition on Government Information (MNCOGI), which advocates for public access to Minnesota government data, including access to data about HMO management of public health care programs.
(Supporting documents for this article can be accessed by contacting Public Record Media at admin@publicrecordmedia.org , or at 651-556-1381)