Performance audit, Arizona Health Care Cost Containment System, Division of Member Services

              A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Arizona Health Care
Cost Containment
System
Division of Member Services
Performance Audit Division
JULY • 2002
REPORT NO. 02 – 05
Performance Audit
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five
senators and five representatives. Her mission is to provide independent and impartial information and specific
recommendations to improve the operations of state and local government entities. To this end, she provides financial
audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and
conducts performance audits of school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Representative Roberta L. Voss, Chair Senator Ken Bennett, Vice Chair
Representative Robert Blendu Senator Herb Guenther
Representative Gabrielle Giffords Senator Dean Martin
Representative Barbara Leff Senator Peter Rios
Representative James Sedillo Senator Tom Smith
Representative James Weiers (ex-officio) Senator Randall Gnant (ex-officio)
Audit Staff
Lisa Eddy, Manager and Contact Person
Ryan Curtis, Team leader Christopher Horton
Melinda Hardman Barbara Nichols
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553 -0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
July 31, 2002
Members of the Arizona Legislature
The Honorable Jane Dee Hull, Governor
Ms. Phyllis Biedess, Director
Arizona Health Care Cost Containment System
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Arizona Health
Care Cost Containment System (AHCCCS)—Division of Member Services. This report is in response
to an August 9, 2001, resolution of the Joint Legislative Audit Committee. The performance audit
was conducted under the authority vested in the Auditor General by Arizona Revised Statutes
(A.R.S.) §§41-1279 and 41-2951 et seq. I am also transmitting with this report a copy of the Report
Highlights for this audit to provide a quick summary for your convenience.
This is the first in a series of reports to be issued on the Arizona Health Care Cost Containment
System.
As outlined in its response, AHCCCSagrees with all of the findings and recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on August 1, 2002.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
Services:
The Division provides the following services:
1 Determining eligibility for the Arizona Long Term Care
System (ALTCS) and for other Supplemental Security
Income Medical Assistance Only (SSI/MAO) programs,
as well as for the Children’s Health Insurance Title XXI
Program called KidsCare;
2 Enrolling eligible acute care and ALTCS members and
providing member eligibility and enrollment information;
3 Performing oversight of the Department of Economic
Security’s Medicaid eligibility deteminations; and
4 Providing information to healthcare providers and
AHCCCS members through its 24-hour Communications
Center.
Facilities:
The Division performs its duties at two state-owned
buildings located at 701 and 801 East
Jefferson Street in Phoenix, Arizona, and at 18
leased field offices statewide. The total lease costs
are approximately $2.5 million annually.
Equipment:
The Division uses and owns standard equipment
such as computers, copy machines, scanners, and
fax machines. The Division owns 112 vehicles,
including pickup trucks, sport utility vehicles,
sedans, and vans. The Division’s Communications
Center also owns a phone system that allows calls
to be routed to individual operators and tracks such
information as number of calls waiting and caller
wait times.
PROGRAM FACT SHEET
Arizona Health Care Cost Containment System
Division of Member Services
Office of the Auditor General
Program staffing:
994 approved FTE (nearly 45 percent of which determine eligibility statewide)
Program revenue:
$36.2 million (fiscal year 2002, estimated)1
$31.0
$28.5
$36.2
$0
$5
$10
$15
$20
$25
$30
$35
$40
1 2 3
Fiscal Years
Millions of Dollars
1 The estimated fiscal year 2002 program revenue includes $1.2 million in
funding from the Tobacco Settlement Litigation Fund to help administer the
increased workload that resulted from Proposition 204, approved by
voters in November 2000, which expanded criteria for medical coverage
eligibility.
288 Acute Care
Administration
469 ALTCS
Eligibility
137 Member Administration
Services
Administration
55 Executive
Management and
Administrative
Support
45 Quality
Compliance
Administration
2000 2001 2002
Division Mission
To assist AHCCCS-eligible
members in
accessing
healthcare.
State of Arizona
Division goals:
1. To administer eligibility processes for ALTCS, KidsCare, SSI/MAO, and four Medicare Cost-Sharing
Programs in a timely manner.
2. To determine eligibility in an accurate manner.
3. To ensure that member information in the recipient database is accurate and updated in a timely manner.
4. To provide accurate eligibility and enrollment information to providers and members in a timely manner.
5. To ensure compliance with federal Medicaid Eligibility Quality Control requirements.
Adequacy of goals and performance measures:
The Division of Member Services’ 5 goals appear to be appropriate for its mission, and it
has established 16 performance measures that correlate to its goals. A review of the
Division’s performance measures finds that the Division has established measures that
adequately convey its performance in each of its primary areas of responsibility:
conducting timely and accurate eligibility determinations, providing information through its
Communications Center, maintaining a database of member information, and ensuring
compliance with certain federal requirements.
The Office of the Auditor General has conducted a performance audit of the Arizona
Health Care Cost Containment System’s (AHCCCS) Division of Member Services as
part of a Sunset review of the agency. This audit was conducted pursuant to an
August 9, 2001, resolution of the Joint Legislative Audit Committee. The audit was
conducted under the authority vested in the Auditor General by Arizona Revised
Statutes (A.R.S.) §§41-1279 and 41-2951 et seq. This is the first in a series of five
audits of AHCCCS, the first performance audits the Office of the Auditor General has
performed on AHCCCS since its inception. Subsequent audits will cover AHCCCS’
rate setting processes, quality-of-care, medical services contracting practices, and
the agency-wide Sunset Factors.
AHCCCS administers healthcare programs for approximately 800,000 low-income
Arizonans. Most of them receive healthcare through Medicaid, a joint federal/state
healthcare program for low-income persons. AHCCCS also administers several
other healthcare programs for low-income persons who are not eligible for Medicaid.
AHCCCS operates under a managed care system, in which it contracts with health
plans who in turn contract with healthcare providers to provide care for qualified
persons.
The Division of Member Services (DMS) is the largest division within AHCCCS and is
responsible for determining and overseeing applicant eligibility for healthcare
programs for the poor. DMS determines eligibility for some of these healthcare
programs, including Arizona’s Children’s Health Insurance Program, known as
KidsCare, the Arizona Long Term Care System (ALTCS), and other healthcare and
medical assistance programs. Additionally, the Division is responsible for overseeing
other eligibility determinations for the Medicaid program. While AHCCCS has an
intergovernmental agreement with the Department of Economic Security (DES) to
actually perform the determinations, DMS is responsible for ensuring that DES
makes the determinations in an accurate and timely manner. Finally, DMS maintains
enrollment information about all individuals enrolled in Medicaid and AHCCCS
programs and makes this information available to healthcare providers.
page i
Office of the Auditor General
SUMMARY
Changes underway to address the increase in Medicaid
applicants (see pages 7 through 11)
A November 2000 voter initiative, Proposition 204, significantly changed the State’s
Medicaid program by expanding eligibility for medical assistance to all Arizonans
whose income falls below the Federal Poverty Level and changing the eligibility
process.1 Prior to October 1, 2001, Arizona’s 15 counties were responsible for
determining individuals’ eligibility for Arizona’s state-only funded healthcare
programs for low-income individuals. However, effective October 1, 2001, Medicaid
expansion absorbed those state-funded programs and DES became responsible for
determining the eligibility for those individuals. AHCCCS and DES have an
intergovernmental agency agreement that outlines DES’ new responsibilities, how
AHCCCS will oversee this process, and the payments AHCCCS will make to DES for
performing the determinations.
Changes in determining eligibility for the State’s Medicaid program have created
many new challenges for DES, particularly in its relationship with hospitals, but DES
has taken some positive steps to address these challenges. For example, hospitals
were initially concerned that they were not receiving timely information from DES
regarding patients’ eligibility status. It is important that the hospitals have this
information as soon as possible so they can determine whether they should bill a
health plan under contract with AHCCCS or if they should try to obtain payment from
the patient. To give hospitals this information, DES sends the hospitals written
notification of each eligibility determination. According to some hospital
representatives, they are now receiving these notifications in a more timely manner
and the information is helpful for them so they will know whom to bill for services. DES
is also exploring automated ways for hospitals to access applicants’ eligibility status
information.
Hospitals were also concerned about the expansion of Medicaid criteria under
Proposition 204 and DES’ ability to enroll all eligible individuals. To better ensure that
DES can reach as many potentially eligible applicants as possible, it has stationed
eligibility staff at several hospitals 24 hours a day. According to one hospital
representative, having DES workers in the hospitals is helpful because they can
answer patients’ questions concerning AHCCCS. Finally, some problems occurred
when 650 county eligibility workers transferred to DES to help conduct Medicaid
eligibility determinations starting on October 1, 2001. Many workers had not received
training in DES’ processes before transferring, which led to problems such as
information being entered incorrectly into DES’ computer system. DES has since
developed and completed a training program for former county workers.
While DES has begun to address many early challenges associated with the
program changes, AHCCCS is ultimately responsible for ensuring that the Medicaid
page ii
1 For 2002, the Federal Poverty Level is $8,860 for an individual and $18,100 for a family of four.
State of Arizona
eligibility determinations DES performs are accurate and timely. AHCCCS has
developed a program to regularly review samples of DES’ eligibility determinations
for accuracy and timeliness and may financially sanction DES for unacceptable
amounts of errors. However, because of the program’s newness, some of AHCCCS’
procedures for overseeing DES’ activities were not yet in place when this audit was
completed.
AHCCCS has addressed problems with eligibility
determination processes (see pages 13 through 17)
AHCCCS determines eligibility for some programs, including the Arizona Long Term
Care System (ALTCS), Supplemental Security Income/Medical Assistance Only
(SSI/MAO), and the State’s Children’s Health Insurance Program (KidsCare). In
addition, AHCCCS staff calculate error rates for eligibility determinations associated
with each of these programs to identify the number of correct and incorrect eligibility
determinations. During the audit, AHCCCS substantially addressed problems in the
eligibility determination process for ALTCS and SSI/MAO. However, AHCCCS should
discontinue calculating error rates for the KidsCare program because they are neither
meaningful nor federally required.
􀁺􇩔 The Arizona Long Term Care System (ALTCS)—During the audit, AHCCCS
eliminated many ALTCS medical reassessments that appeared to be of limited
usefulness, but it needs to change its rules accordingly. ALTCS provides
healthcare to approximately 34,000 elderly or physically or developmentally
disabled persons who require a high level of care. Those who apply must meet
standards related to financial and medical conditions. Under the program’s
rules, AHCCCS must reassess their financial eligibility annually and their medical
eligibility on a regular basis. In April 2002, after finding that fewer than 1 percent
of the members whose cases were reviewed for medical eligibility were no
longer eligible for ALTCS, AHCCCS decided to stop conducting medical
reassessments in most instances. By not conducting these reassessments,
AHCCCS states that it may save on travel expenses, and have more staff
available to complete other important tasks. However, if AHCCCS continues with
this change, it needs to revise its administrative rules accordingly.
􀁺􇨠 Supplemental Security Income/Medical Assistance Only (SSI/MAO)—During
this audit, AHCCCS addressed a significant workload increase in its SSI/MAO
unit by adding staff and prioritizing staff efforts. The SSI/MAO unit performs
eligibility determinations for the elderly, blind, or disabled who may qualify for
Medicaid. After Proposition 204 expanded SSI/MAO eligibility, the number of
Medicaid enrollees in this category increased more than four-fold within 1 year,
and as of May 2002, was nearly 18,500. Due to this increased workload,
page iii
Office of the Auditor General
AHCCCS was unable to process eligibility renewal applications in a timely
manner and did not initiate renewal applications for 6 months. AHCCCS has
addressed this issue by adding additional staff to conduct eligibility
determinations and developing a new division within the unit to focus only on
renewals. AHCCCS should continue to monitor its workload because it will now
have to perform thousands more annual renewals than in the past.
􀁺􇨠 KidsCare—AHCCCS should discontinue calculating error rates for KidsCare
eligibility determinations. KidsCare provides healthcare to approximately 48,200
children who are 18 years old and younger, are not covered under private health
insurance, and do not qualify for Medicaid. As they do with other programs,
AHCCCS staff review a sample of eligibility determinations to evaluate whether
they were made correctly. These reviews allow AHCCCS to calculate an error
rate for the samples and to identify programs with high numbers of incorrect
determinations. For this program, however, the error rates do not provide
meaningful results, are not federally required, and are unnecessary because
other ways exist to ensure the quality of eligibility determinations. AHCCCS
should discontinue calculating KidsCare error rates, thus making four staff
available for other work.
Communications center has improved its services (see
pages 19 through 23)
AHCCCS has initiated various ways to improve the services its Communications
Center provides, but should take additional steps to improve. The Communications
Center provides enrollment and other information to AHCCCS members and
healthcare providers 24 hours a day. To improve the way it shares information with
healthcare providers, AHCCCS has implemented automated methods, such as a
touch-tone phone information system and swipe-card system to enable healthcare
providers to verify their patients’ enrollment in AHCCCS programs. AHCCCS is also
developing an Internet-based system for enrollment verification. AHCCCS has also
tried to improve the performance of its Communications Center staff through an
incentive program that pays operators and others up to $200 more per month for
high performance. However, some of the criteria for determining these incentive
payments need to be adjusted or replaced to better reflect the participants’
performance. Finally, AHCCCS should assess satisfaction with the Communication
Center’s services. It has never formally surveyed enrollees who have called the
Communications Center and has not surveyed healthcare providers since 1999.
page iv
State of Arizona
pagev
Office of the Auditor General
TABLE OF CONTENTS
continued
1
7
7
9
11
11
13
14
15
15
17
19
19
19
21
23
23
Introduction & Background
Finding 1: Changes underway to address the increase
in Medicaid applicants
Proposition 204 substantially changed Medicaid program
Challenges related to eligibility being addressed
AHCCCS oversight of DES is not completely implemented
Recommendations
Finding 2: AHCCCS has addressed problems with
eligibility determination processes
AHCCCS determines eligibility for some programs
Medical reassessments reduced but rule changes needed
AHCCCS is addressing increased workload in medical assistance-only
program
AHCCCS should discontinue calculating KidsCare error rates
Recommendations
Finding 3: Communications Center has improved its
services
The Communications Center provides various services
Changes help share information more effectively
The incentive program should be adjusted
AHCCCS should regularly survey communications center users
Recommendations
page vi
State of Arizona
TABLE OF CONTENTS
Agency Response
Tables:
1 Statement of revenues, expenditures, and changes in fund
balance; years ended or ending June 30, 2000, 2001, and 2002
(Unaudited)
Figures:
1 Medicaid enrollment September 2001 through May 2002
(Unaudited)
2 Comparison of effective dates for Medicaid coverage previous
system vs. Proposition 204 changes
Photo:
1 Verification unit
4
8
9
20
concluded
page1
Office of the Auditor General
INTRODUCTION
& BACKGROUND
The Office of the Auditor General has conducted a performance audit of the Arizona
Health Care Cost Containment System’s (AHCCCS) Division of Member Services as
part of a Sunset review of the agency. This audit was conducted pursuant to an
August 9, 2001, resolution of the Joint Legislative Audit Committee. The audit was
conducted under the authority vested in the Auditor General by Arizona Revised
Statutes (A.R.S.) §§41-1279 and 41-2951 et seq. This is the first in a series of five
audits of AHCCCS, the first performance audits the Office of the Auditor General has
performed on AHCCCS since its inception. Subsequent audits will cover AHCCCS’
rate setting processes, quality-of-care, medical services contracting practices, and
the agency-wide Sunset Factors.
AHCCCS’ history
AHCCCS administers Arizona’s Medicaid program, as well as several other
healthcare programs for low-income Arizonans who do not qualify for Medicaid. Prior
to 1982, Arizona’s counties were responsible for providing medical care for the
indigent. Because of the financial burden this placed on the counties, the Legislature
created AHCCCS as a means of bringing federal Medicaid funding to the State.
When AHCCCS began service on October 1, 1982, Arizona became the last state to
implement a Medicaid program but the first state to have a managed care Medicaid
program. To implement a managed care Medicaid program, Arizona had to obtain
special approval from the Health Care Financing Administration, now known as the
Centers for Medicaid and Medicare Services (CMS).
Under the managed care system, AHCCCS contracts with health plans, who in turn
contract with healthcare providers to provide medical services for health plan
members. Though for a large majority of its members AHCCCS does not directly pay
providers for services, it plays an important role in service provision by procuring
health plans and monitoring the services provided to AHCCCS members. Under the
managed care system, AHCCCS pays health plans a fixed amount in advance each
AHCCCS administers
Arizona’s Medicaid
program.
month, called a capitation rate, for each enrolled member, regardless of the number
or level of services provided. From the capitation rate, health plans pay healthcare
providers for covered services provided to AHCCCS members.
In November 2000, Arizona voters approved an initiative, Proposition 204, which
authorized the use of the State’s share of the multi-state tobacco litigation settlement
to help pay for providing medical coverage in Arizona to all individuals who fall below
the Federal Poverty Level.1 Prior to Proposition 204, many of the responsibilities for
determining whether individuals were eligible for medical coverage were held by
Arizona’s 15 counties. After Proposition 204, these responsibilities were transferred
to the Department of Economic Security (DES). While DES performs most Medicaid
eligibility determinations, AHCCCS is still ultimately responsible for overseeing DES
and ensuring that Medicaid eligibility determinations are both accurate and timely.
(See Finding 1, pages 7 through 11, for more information on Proposition 204.)
DMS’ primary responsibilities
The Division of Member Services (DMS) is the largest division in AHCCCS,
comprising 994 of AHCCCS’ 1,522 authorized FTEs. Nearly 45 percent of DMS’ staff
are eligibility workers who are located in Phoenix and in field offices statewide. DMS’
four primary responsibilities are:
1. Determining Eligibility—DMS determines eligibility for three main program areas:
the Arizona Long-Term Care System (ALTCS), Supplemental Security
Income/Medical Assistance Only (SSI/MAO), and KidsCare.
􀁺􇨠 ALTCS—ALTCS serves elderly or physically or developmentally disabled
individuals who require a high level of care and who are both financially and
medically eligible. DMS determines the financial and medical eligibility of
long-term care applicants. Once enrolled in ALTCS, an individual receives
complete medical services, and may receive care through residential
nursing facilities, assisted living facilities, or home-based care as needed.
As of May 2002, approximately 34,000 individuals were enrolled in ALTCS.
􀁺􇨠 SSI/MAO—The SSI/MAO unit determines eligibility for elderly, blind, or
disabled individuals who may qualify for healthcare coverage through
Medicaid. As of May 2002, the unit was responsible for assessing the
eligibility of nearly 18,500 elderly, blind, or disabled individuals enrolled in
Medicaid, and a program that pays a portion of their Medicare premium.
􀁺􇨠 KidsCare—KidsCare is Arizona’s Children’s Health Insurance Program
(CHIP) for children under 18 who are residents of Arizona, are not covered
by private health insurance, and do not qualify for Medicaid. DMS
page2
DMS is the largest
division in AHCCCS.
State of Arizona
Proposition 204
expanded Medicaid
coverage in Arizona.
1 For 2002, the Federal Poverty Level is $8,860 for an individual and $18,100 for a family of four.
determines the financial eligibility of families who apply for KidsCare
coverage for their children. DMS also performs yearly eligibility
reassessments of all KidsCare members. Once enrolled, children receive
coverage which includes medical, dental, and vision services, for which
there may be a premium of up to $20 per month per family. As of May 2002,
approximately 48,200 children were enrolled in KidsCare.
2. Measuring Accuracy and Timeliness of Eligibility Determinations—DMS reviews
the eligibility determinations performed by ALTCS, KidsCare, and SSI/MAO staff
for accuracy and timeliness. Likewise, the Division is also responsible for
checking DES’ Medicaid eligibility determinations for accuracy and timeliness.
3. Supplying Information To Providers and Members—DMS provides information
to AHCCCS members and to healthcare providers through its Communications
Center. The center employs 67 operators who provide members with information
about AHCCCS programs and healthcare providers with verifications of
AHCCCS members’ enrollment. DMS also works with members, healthcare
providers, and health plans to resolve eligibility and billing issues.
4. Maintaining Member Information—DMS maintains a database of member
enrollment information, which is updated daily. A member’s enrollment file
contains information such as his or her health plan, the AHCCCS programs he
or she is eligible for, and demographic information.
Budget and funding
As illustrated in Table 1 (see page 4), DMS’ estimated budget for fiscal year 2002 is
approximately $36.2 million. AHCCCS budgeted to DMS approximately $13.1 million
from its State General Fund appropriation and approximately $4.4 million from the
Children’s Health Insurance Program Fund. The CHIP Fund’s monies include state
funding from tobacco tax revenues and federal matching monies. DMS also received
approximately $17.5 million in non-CHIP federal funding. Finally, AHCCCS budgeted
DMS approximately $1.2 million from the Arizona Tobacco Litigation Fund to help pay
for additional staff, including eligibility workers hired as a result of AHCCCS’ new
Proposition 204 responsibilities.
Audit scope and methodology
This audit focused on three areas related to the Division of Member Services’
responsibilities. First, the audit reviewed challenges DES faced relating to the
Medicaid eligibility process resulting from the 2000 voter-approved initiative,
page3
Office of the Auditor General
Proposition 204, which expanded medical coverage, and AHCCCS’ oversight
process of these eligibility determinations. Second, the audit reviewed how AHCCCS
performs and monitors the accuracy of eligibility determinations for three programs:
ALTCS, Supplemental Security Income/Medical Assistance Only, and KidsCare.
Finally, the audit examined the ways AHCCCS provides information to healthcare
providers and members through its Communications Center and how staff
productivity in this center is measured.
This report contains findings in three areas:
􀁺􇨠 The Department of Economic Security has made changes in the Medicaid
eligibility determination process to address challenges resulting from
page4
State of Arizona
2000 2001 2002
(Actual) (Actual) (Estimated)
Revenues:
Appropriations:
State General Fund $11,093.9 $11,828.4 $13,136.0
Children’s Health Insurance Program Fund 1 4,031.5 3,837.6 4,424.9
Federal 13,397.8 14,928.0 17,517.7
Tobacco litigation settlement monies 2 420.3 1,160.1
Total revenues $28,523.2 $31,014.3 $36,238.7
Expenditures:
Personal services $17,743.8 $19,285.6 $23,139.4
Employee-related 4,342.5 4,762.4 6,160.7
Professional and outside services 387.4 722.6 455.1
Travel, in-state 218.2 174.9 221.6
Travel, out-of-state 4.4 8.9 6.8
Other operating 5,429.3 5,200.4 5,878.2
Equipment 397.6 859.5 376.9
Total expenditures $28,523.2 $31,014.3 $36,238.7
1 Consists of monies allocated to the Division for its role in administering the Children’s Health Insurance Program. Monies are appropriated
from the Children’s Health Insurance Program Fund and consist of tobacco taxes and matching federal monies for providing health
insurance coverage to uninsured children whose families meet certain income requirements.
2 Consists of the portion of monies obtained from a settlement with the tobacco companies that is allocated to the Division for administering
the Proposition 204 program.
Source: Auditor General staff analysis of financial information provided by the Arizona Health Care Cost Containment System for the years ended or
ending June 30, 2000, 2001, and 2002.
Statement of Revenues, Expenditures, and Changes in Fund Balance
Years Ended or Ending June 30, 2000, 2001, and 2002
(Unaudited)
Table 1
page5
Office of the Auditor General
Proposition 204, which expanded medical coverage in Arizona, and AHCCCS’
processes to oversee DES’ eligibility determinations are not yet fully
implemented.
􀁺􇩄 During this audit, AHCCCS significantly reduced the number of medical
reassessments it performs in its long-term care program and addressed
substantial growth in the workload for its Supplemental Security Income/Medical
Assistance Only program. However, because they are neither meaningful nor
federally required, AHCCCS should discontinue calculating error rates for
KidsCare eligibility determinations.
􀁺􇨠 AHCCCS has implemented a variety of automated methods at its
Communications Center to more easily provide information to healthcare
providers, and should make additional changes to further improve its services.
Auditors used a number of research methods to study the issues addressed in this
report. Specifically:
􀁺􇩔 To determine DES’ progress in adapting to significant Medicaid program
changes, auditors interviewed AHCCCS and DES staff to learn how the
agencies administer the expanded Medicaid program and work together to
ensure the program meets federal and state standards. Auditors also observed
and interviewed DES eligibility staff regarding the eligibility determination
process and changes made to address the expanded program requirements.
In addition, auditors observed and interviewed representatives from hospitals
and interviewed representatives from the Arizona Hospital and Healthcare
Association to learn how program changes have affected hospital processes
and procedures. Finally, auditors reviewed federal and state statutes, state rules,
legislation relating to the Medicaid program, and an intergovernmental agency
agreement between AHCCCS and DES signed in 2001 to understand new
procedures and oversight guidelines for DES’ Medicaid eligibility
determinations.
􀁺􇩔 To determine how AHCCCS performs eligibility determinations and how it
assesses their accuracy, auditors reviewed eligibility policies and procedures
and observed eligibility workers performing their tasks. Auditors also interviewed
AHCCCS management and staff to gain a further understanding of eligibility
determination processes. Additionally, auditors interviewed CMS
representatives to obtain their perspective regarding certain elements of
AHCCCS’ eligibility determinations. Further, auditors reviewed state statutes and
state rules to identify eligibility requirements and also reviewed federal
guidelines, which provide assistance for some aspects of the eligibility
determination process. Finally, auditors reviewed literature for trends in
assessing the accuracy of KidsCare eligibility determinations.
􀁺􇩔 To determine how AHCCCS could further improve the effectiveness of services
in its Communications Center, auditors observed and interviewed
Communications Center operators and team supervisors to learn the types of
calls they handled, how they address those calls, and how the operators were
evaluated. Auditors also interviewed representatives of call centers from four
state agencies in Arizona regarding methods they use to measure their
effectiveness.1 Additionally, auditors interviewed AHCCCS management and
staff regarding the types of automated enrollment verification currently in use
and what new methods of automation might be implemented. Auditors further
investigated the automation issue by interviewing vendors regarding how the
automation methods are used and their costs.2 Finally, auditors reviewed
literature on incentive pay programs to learn how well they work and the
characteristics of successful incentive programs.3
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the director and staff of the
Arizona Health Care Cost Containment System for their cooperation and assistance
throughout the audit.
page6
State of Arizona
1 Auditors spoke with call center management at the Arizona Department of Economic Security, Division of Child Support
Enforcement; the Arizona Department of Revenue; the Arizona Department of Transportation, Motor Vehicle Division; and
the State Compensation Fund.
2 Auditors spoke with representatives of the two companies under contract with AHCCCS to provide systems that allow
healthcare providers to verify that a patient is currently enrolled in AHCCCS.
3 In reviewing the Communications Center incentive program, auditors used multiple sources, including Pfiffner, J.P. and
D.A. Brook. Civil Service Reform and Incentives in the Public Service in The Future of Merit. The Woodrow Wilson Center
Press, 2000; United States General Accounting Office. Human Capital: Key Principles from Nine Private Sector
Organizations. Washington, D.C.: GAO, May 2, 2000; United States General Accounting Office. Human Capital: Using
Incentives to Motivate and Reward High Performance. Washington, D.C.: GAO, May 2, 2001; Swope, Christopher.
“Paying For Performance.” Governing, November, 1998. pp. 75 et seq.; Texas Comptroller of Public Accounts. “Linking
Employee Pay to Performance:” (Chapter 5, Section 2) in Challenging the Status Quo: Toward Smaller, Smarter
Government. Austin, TX: Texas Comptroller of Public Accounts, March 1999; Wiscombe, Janet. “Can Pay For
Performance Really Work?” Workforce, August 2001. pp. 28-34.
page7
1 For 2002, the Federal Poverty Level is $8,860 for an individual and $18,100 for a family of four.
Office of the Auditor General
FINDING 1
Changes underway to address the increase in
Medicaid applicants
Following the passage of a 2000 voter initiative to expand medical coverage in
Arizona, the Legislature made changes to the Medicaid eligibility determination
process and shifted all of the counties’ responsibilities for determining eligibility to the
Department of Economic Security (DES). These changes brought many challenges,
including a need to revise procedures and train new staff. DES has taken a number
of steps to address these challenges and according to some hospital
representatives, has taken some effective action. AHCCCS is responsible for
monitoring the accuracy and timeliness of DES’ eligibility determinations, but
because of the program’s newness, some of AHCCCS’ processes for overseeing
DES’ activities were not yet in place when this audit was completed.
Proposition 204 substantially changed Medicaid program
Proposition 204, passed by Arizona voters in November 2000, and subsequent
legislation changed the State’s Medicaid program in three significant ways. First, the
voter-approved initiative required the State to use monies from its share of the multi-state
tobacco litigation settlement to help pay for expanding medical coverage in
Arizona to all individuals whose income falls below the Federal Poverty Level.1
Second, the Legislature shifted all of the counties’ eligibility-determination
responsibilities to DES. Third, the Legislature also changed the date that an
individual’s coverage becomes effective, which can affect reimbursements paid to
healthcare providers.
Voter-approved initiative expanded eligibility—Proposition 204, which was
implemented by AHCCCS in three phases—April 1, July 1, and October 1, 2001,
requires the State to use its share of the multi-state tobacco litigation settlement to
Tobacco settlement
monies help pay for
expanded Medicaid
coverage.
help pay for expanding medical coverage
to all citizens who fall below the Federal
Poverty Level.1 Prior to the initiative,
medical coverage in Arizona was limited
primarily to individuals such as the elderly,
disabled, or very low-income families with
children who met specific income criteria.
Many individuals, who were not elderly or
disabled, or who did not have children,
were not eligible for medical coverage
even though they fell below the Federal
Poverty Level. To ensure that all individuals
who are now eligible receive coverage,
Proposition 204 requires the State to use
appropriated funds or federal funds to
supplement monies from the litigation
settlement as necessary. These changes
have significantly increased Medicaid
enrollment in Arizona. Not only was this
expansion due to the expanded eligibility,
but also because AHCCCS enrolled many
persons who were eligible under the
previous criteria but had not applied. In the
first 8 months after the expansion became effective, enrollment in Medicaid
increased from approximately 587,000 to almost 715,000 (see Figure 1).
Eligibility determination responsibilities shifted to DES—Following the
passage of the voter initiative, the Legislature shifted eligibility determination
responsibilities from the counties to DES effective October 2001. To assist DES with
this increased workload, approximately 650 county staff transferred to DES. In
December 2001, DES signed an intergovernmental agency agreement with
AHCCCS that outlines DES’ new responsibilities, how AHCCCS will oversee these
processes, and payments AHCCCS will make to DES for performing these
determinations. For fiscal year 2002, AHCCCS will pay an estimated $61 million to
DES for this purpose.2
Effective dates have changed—In addition to shifting responsibilities,
legislative changes have also modified the date that an individual’s Medicaid
coverage becomes effective. Once an individual is determined eligible, his or her
coverage is effective retroactively to the first day of the month of application for most
applicants.3 This change is especially important for cases that originate in hospitals,
because costs have already been incurred before the individual applies for Medicaid.
page8
1 In 1998, Arizona was 1 of 46 states to settle a lawsuit the states had filed against the manufacturers of tobacco products.
As of June 30, 2002, the State had received approximately $357 million from the multi-state tobacco litigation settlement.
2 AHCCCS passes through state and federal funds to DES to pay for the costs associated with determining eligibility. State
funds are a combination of General Fund and State Tobacco Litigation Settlement Fund monies.
3 The Medical Expense Deduction program allows individuals whose income exceeds the Federal Poverty Level to deduct
their medical expenses from their income and “spend down” to below the Federal Poverty Level. The effective date for
program eligibility is the date that the individual’s income, minus medical expenses, drops below the Federal Poverty
Level.
State of Arizona
Six-hundred fifty county
staff transferred to DES.
(Unaudited)
Source: Auditor General staff analysis of information in AHCCCS' Eligibility and Enrollment
Report for May 1, 2002.
714,802
706,603
693,288
678,902
664,871
646,043
623,902
603,805
586,691
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr May
Number of Enrollees in Thousands
Figure 1 Medicaid Enrollment
September 2001 through May 2002
(Unaudited)
In contrast, prior to this change, AHCCCS
would have only paid for the expenses
incurred during the 48 hours immediately
preceding the date of the eligibility
determination, even though the counties
had up to 30 days to make a
determination (see Figure 2). All expenses
incurred prior to that 48-hour period were
not covered by AHCCCS.
Challenges related to eligibility
being addressed
The changes associated with Proposition
204 and subsequent legislation created
new challenges for DES related to the
eligibility process. However, DES has
taken some positive steps to address
many of these challenges, as follows:
􀁺􇩎 Notifying hospitals of eligibility
determinations—In the first few
weeks following program changes,
hospitals expressed concerns that
they were not receiving information from
DES regarding the final outcome of many eligibility decisions. Without this
information, the hospitals did not know if they could bill a health plan under
contract with AHCCCS, or if they needed to try to obtain payment from the
patient. DES did not share eligibility information with hospitals without the
patient’s signed consent because of concerns that this information was
confidential. DES worked with AHCCCS and the hospitals to resolve these
issues by sending the hospitals written notification of each applicant’s eligibility
determination and altering the application to include a release form. According
to hospital representatives, this situation has improved, and they are now
receiving more timely notification of applicants’ eligibility determinations.
􀁺􇩍 Modifying application practices at hospitals—DES has modified Medicaid
application practices at hospitals because Proposition 204 expanded eligibility
to include many more potentially eligible individuals whose medical costs could
be covered by AHCCCS. To better ensure that DES can reach as many
potentially eligible applicants as possible, including treat-and-release patients, it
page9
Office of the Auditor General
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
1 2 3 4 5 6
7
8 9 10 11 12 13
14
15 16 17 18 19 20
21
22 23 24 25 26 27
28
29 30
􀁢􆈀􆈵
5
􀁢􆈽= Illustrative date AHCCCS application is initiated.
= Illustrative date eligibility determination made.
= Before Proposition 204—AHCCCS coverage was retroactive
for the 48-hour period immediately preceding the date of
the determination.
= After Proposition 204—AHCCCS coverage is retroactive to
the first day of the month in which the application was
initiated.
X
X
Source: Auditor General staff analysis of Laws 2001, Chapter 344, §36, §57.
Figure 2 Comparison of Effective Dates for Medicaid Coverage
Previous System vs. Proposition 204 changes
has stationed eligibility staff at several hospitals 24 hours a day. According to
one hospital representative, this practice should increase the number of patients
who are contacted prior to being released from the hospital, which should in turn
increase the number of applicants who are determined to be eligible for
Medicaid. Additionally, according to another hospital representative, the DES
workers stationed at the hospitals are often able to provide patients with general
information about AHCCCS that hospital staff may not know.
Additionally, when DES first began handling treat-and-release applications, DES
eligibility workers did not immediately enter applicant information into the DES
computer system. Because applications are sent to the various DES field offices
for final determination, it was not possible for hospital staff to determine if a
patient had already applied for Medicaid until the information was entered into
the computer system. Consequently, in some cases, one individual could make
multiple visits to a hospital during the determination process, resulting in the
hospitals distributing multiple applications to the same person and DES workers
performing duplicative administrative tasks for the same person. To reduce the
administrative burden this placed on DES and the hospitals, DES now requires
eligibility workers stationed in hospitals to immediately enter treat-and-release
application information into DES’ computer system.
􀁺􇩃 Conducting training for former county workers—When the program changes
became effective on October 1, 2001, many county eligibility workers who
transferred to DES had not received training on program changes and DES
processes. According to DES officials, some of the former county workers were
incorrectly coding some information into DES’ computer system. For example,
workers coded some applications as being both outpatient and inpatient. To
prevent these mistakes in the future, DES developed training materials and
guidelines for workers to refer to when they code the applications. According to
a DES official, DES completed the training for all former county employees in
December 2001 and also provides periodic follow-up training for all eligibility
workers.
􀁺􇩃 Creating automated systems—Prior to the October 2001 program changes,
hospitals in Maricopa County were able to track patients’ Medicaid application
status through an Internet-based notification and tracking system that allowed
hospital and county eligibility staff to share information. However, when the
eligibility processes were centralized from the counties to DES, DES
discontinued the system after it performed a feasibility and cost-effectiveness
analysis that showed it would not be cost effective to expand the system
statewide. DES and hospitals now maintain duplicate paper logs of the
applications received, and periodically reconcile them. DES is exploring ways for
hospitals statewide to have limited automated access to applicants’ eligibility
page10
State of Arizona
information. According to one hospital representative, this would help the
hospitals because they would need less time to obtain a patient's eligibility
status.
AHCCCS oversight of DES is not completely
implemented
Although DES has addressed many of the challenges associated with Proposition
204 and the eligibility process, AHCCCS is ultimately responsible for ensuring that
the Medicaid eligibility determinations DES performs are accurate and timely. While
AHCCCS has developed a quality control program to regularly review eligibility
determinations for accuracy, this program had not been fully implemented before this
audit was completed. As part of the intergovernmental agency agreement (IGA)
signed in December 2001, AHCCCS will not hold DES accountable for any error rates
during a 6-month transition period from April through September 2002. Following this
transition period, if error rates are above 3 percent, AHCCCS can impose financial
sanctions against DES. This is similar to AHCCCS’ oversight role with the counties
prior to the program changes.
In addition to monitoring the accuracy of DES’ eligibility determinations, AHCCCS’
quality control staff will monitor their timeliness in accordance with the IGA between
AHCCCS and DES. According to rule, DES is required to complete eligibility
determinations for hospitalized applicants within 7 days and has up to 45 days for all
other applicants. As of May 2002, AHCCCS had compiled timeliness statistics for two
of DES’ offices. According to AHCCCS, DES’ Sierra Vista office made 100 percent of
its determinations in a timely manner, and for one of the Phoenix offices, made 91
percent of the determinations in a timely manner. However, AHCCCS has not formally
evaluated the timeliness of any determinations DES performs of applications that
originate in hospitals.
Recommendations
This finding presents information only; therefore, no recommendations are
presented.
page11
AHCCCS will begin
testing accuracy in
September 2002.
Office of the Auditor General
page12
State of Arizona
page13
AHCCCS determines
eligibility for KidsCare,
ALTCS, and other
programs.
Office of the Auditor General
FINDING 2
AHCCCS has addressed problems with eligibility
determination processes
AHCCCS determines eligibility for three main programs including ALTCS, SSI/MAO, and
KidsCare. AHCCCS also calculates error rates to identify the number of correct
determinations performed for each program. During the audit, AHCCCS substantially
addressed problems in the eligibility determination processes for ALTCS and SSI/MAO,
but still needs to address one part of its process for the KidsCare program. First,
AHCCCS has significantly reduced the number of medical reassessments it performs in
its long-term care program because its data showed that the majority of the
reassessments were not necessary. Further, AHCCCS has addressed a 450 percent
growth in eligibility determinations for the elderly, blind, or disabled who may qualify for
Medicaid by adding staff and prioritizing staff efforts. Finally, although AHCCCS has made
changes in these programs, it should discontinue calculating error rates for KidsCare
because they are neither meaningful nor federally required. Staff time spent developing
these error rates could be better applied to other tasks.
AHCCCS determines eligibility for some programs
While the Department of Economic Security now determines the eligibility of most
Medicaid applicants, AHCCCS performs this function for the non-Medicaid programs the
State offers as well as for a limited number of Medicaid applicants. AHCCCS determines
applicant eligibility for the Arizona Long-Term Care System (ALTCS) for aged, blind, and
disabled applicants who may qualify for Medicaid, and for the State’s Children’s Health
Insurance Program (CHIP) known as KidsCare. Specific eligibility requirements vary for
the individual programs, but AHCCCS’ responsibilities typically involve verifying the
applicant’s Arizona residency, income, and resources, and assessing the availability of
other insurance to the applicant. Eligibility for ALTCS involves both a financial and a
medical determination. In addition to determining individuals’ eligibility upon initial
application, AHCCCS also must annually renew the eligibility of most enrollees. As of May
2002, programs for which AHCCCS determines eligibility enrolled approximately 112,000
individuals.
Medical reassessments reduced but rule changes needed
During this audit, AHCCCS eliminated many ALTCS medical reassessments that
appeared to be of limited usefulness, but it needs to change its rules accordingly. Medical
reassessments involve periodically redetermining whether patients continue to have
medical conditions that qualify them for ALTCS. While AHCCCS’ rules allow it to alter the
frequency of some reassessments, they currently do not allow it to indefinitely eliminate
reassessments for any type of long-term care enrollee.
Reduced number of medical reassessments—ALTCS, which serves the
elderly and individuals who are physically or developmentally disabled, has both a
financial and a medical requirement for eligibility. AHCCCS must reassess the financial
eligibility of all ALTCS members annually. Medical reassessments must also be done on
a regular basis although many are not required to be done annually. However, in April
2002, AHCCCS decided to significantly reduce the number of medical reassessments it
performs because its data showed that the medical condition of most ALTCS enrollees is
not likely to improve. In 2001, AHCCCS performed approximately 16,500 medical
reassessments and found only 150 individuals who were no longer medically eligible.
AHCCCS now performs medical reassessments generally for those individuals whose
medical eligibility had to be determined by a physician. Physicians are used in some
cases if the individual’s medical eligibility is considered questionable. AHCCCS will
reassess these cases because the individual’s condition may have improved to the point
that he or she may no longer need costly long-term care. AHCCCS estimates that this
change will reduce the number of medical reassessments it performs from about 16,500
annually to approximately 1,000. AHCCCS states that eliminating these reassessments
may reduce travel costs and will allow medical eligibility assessors to help perform
financial eligibility and other duties.
Rule changes needed—While AHCCCS has reduced the number of medical
reassessments it performs, its rules still require it to perform medical reassessments for
all ALTCS members. Administrative Rule R9-28-306(C) requires AHCCCS to perform a
medical reassessment of members annually, with a few specific exceptions. For example,
an ALTCS member who is over 80 years of age, and has been enrolled for at least 2
consecutive years, must be medically reassessed only every 4 years. However, the rules
do not permit AHCCCS to discontinue performing medical reassessments indefinitely for
any members. If AHCCCS continues to not perform reassessments on some members,
it needs to seek appropriate rule changes.
page14
State of Arizona
AHCCCS is addressing increased workload in medical
assistance-only program
Further, during the audit, AHCCCS largely addressed an increased workload of eligibility
determinations that developed in the SSI/MAO unit. The SSI/MAO unit, which performs
eligibility determinations for the elderly, blind, or disabled who may qualify for Medicaid,
has undergone significant expansion in its workload and process changes as a result of
Proposition 204. AHCCCS has addressed the increased workload by adding additional
staff. To avoid a backlog, AHCCCS should continue monitoring its workload to ensure
timely processing of eligibility determinations.
Program experienced rapid growth—The SSI/MAO unit’s workload significantly
increased as a result of Proposition 204, which expanded medical coverage eligibility to
individuals whose income falls below the Federal Poverty Level. These new eligibility
requirements took effect for the SSI/MAO unit April 1, 2001, and since then, the unit’s total
enrollment increased from approximately 4,000 in March 2001 to nearly 18,500 in May
2002. This was due to the expanded eligibility criteria, but also because AHCCCS
identified persons who were eligible under the previous criteria but had not applied. Due
to this increased workload, AHCCCS was unable to process eligibility renewal
applications in a timely manner and from August 2001 to February 2002, did not initiate
renewal applications. To help address the increased workload, AHCCCS more than
tripled the number of staff in the SSI/MAO unit, from 23 FTE in April 2001 to 78 in
December 2001. Then, in the first part of 2002, the unit’s management reallocated staff
and directed their efforts to processing annual eligibility renewal applications.
Continued monitoring needed—While AHCCCS has responded to its increased
workload, it should continue to monitor the SSI/MAO unit’s ability to meet these new
demands for two reasons. First, the unit must complete renewals on time to ensure that
AHCCCS does not pay for medical coverage for individuals who are no longer eligible.
Second, because enrollment significantly increased during the past year, AHCCCS will
have thousands more renewals to perform annually than it had previously.
AHCCCS should discontinue calculating KidsCare error
rates
Although AHCCCS has addressed challenges to two of its programs, it should
discontinue calculating error rates for KidsCare eligibility determinations. Quality
control staff currently review eligibility determinations for this program and calculate
the percentage of determinations that were made in error. However, these
calculations do not provide meaningful results, are not federally required, and are
page15
Enrollment in SSI/MAO
increased more than
four-fold.
Office of the Auditor General
unnecessary because other ways exist to ensure the quality of eligibility
determinations.
AHCCCS’ methods for calculating error rates do not provide
meaningful results—AHCCCS’ approach for calculating error rates does not
provide meaningful results for three reasons:
􀁺􇩆 First, quality control staff do not review the same information that the eligibility
worker used when the original decision was made. KidsCare eligibility workers
determine eligibility using the applicant’s income for the 30-day period prior to
the application date. However, quality control staff review the income earned for
a later period of time, which may be significantly different.
􀁺􇩓 Second, the eligibility workers and quality control staff use different standards for
acceptable documentation. KidsCare eligibility staff are encouraged to accept a
family’s income as the family declares it on the KidsCare application. This is
consistent with both federal policy and state law intended to make application
and enrollment into CHIP programs as simple as possible. However, quality
control reviewers are instructed to use documented income information, such as
pay stubs.
􀁺􇩔 Third, AHCCCS reviews only those applications that were approved for
KidsCare, but does not review applications that were denied. Therefore,
AHCCCS does not know how often it incorrectly denies someone for coverage.
Other methods ensure quality—Finally, not only is AHCCCS not required to
calculate error rates, it has methods in place other than calculating error rates to help
ensure that it performs KidsCare eligibility determinations correctly. Although
AHCCCS must calculate error rates and report them to CMS for Medicaid programs
such as ALTCS, the federal government does not require AHCCCS to report error
rates for KidsCare. In addition, AHCCCS has an internal system of random
supervisory reviews of completed eligibility determinations to help ensure accuracy.
These reviews are intended to help identify problems when they occur, rather than
identifying them later, when the error rates are calculated. In addition to the
supervisory reviews, AHCCCS performs annual eligibility renewals for all KidsCare
members, which prevent an ineligible child from being enrolled for more than 1 year.
If AHCCCS stopped calculating error rates in KidsCare, it could assign four staff to
other tasks.
page16
AHCCCS has other
methods to ensure
accurate KidsCare
eligibility determinations.
State of Arizona
Recommendations
1. AHCCCS needs to seek appropriate changes to its rules to allow it to
discontinue performing medical reassessments for some ALTCS members.
2. AHCCCS should continue to monitor its workload of eligibility determinations
and renewals performed by the SSI/MAO unit to ensure that they are completed
in a timely manner.
3. AHCCCS should discontinue its practice of calculating error rates for the
KidsCare program because it does not provide meaningful results, is not
required by the federal government, and other methods are in place to ensure
the quality of KidsCare eligibility determinations.
page17
Office of the Auditor General
page18
State of Arizona
page19
AHCCCS has a call
center and automated
enrollment verification
systems.
Office of the Auditor General
FINDING 3
Communications Center has improved its
services
AHCCCS has initiated various ways to improve the services its Communications
Center provides, but still needs to make additional changes. The Communications
Center provides information to AHCCCS members, healthcare providers, and others
through a 24-hour phone center and other automated systems. AHCCCS has
improved the center’s services by developing several automated ways for providers
to obtain patient enrollment information and directing members to the best sources
of information. Additionally, AHCCCS administers a performance incentive program
for its Communications Center operators in an attempt to enhance productivity and
provide quality customer service; however, AHCCCS should alter the way it gives
incentive awards. AHCCCS should also conduct regular satisfaction surveys of
Communications Center users to help assess the quality of its services.
The Communications Center provides various services
The Communications Center provides enrollment and other information to AHCCCS
members and healthcare providers through a 24-hour call center and through
automated systems. The call center employs 67 operators who handle an average
of over 100,000 calls per month, most of which come from AHCCCS members
seeking general information about their enrollment status, their health plan, and other
AHCCCS programs. Healthcare providers, such as hospitals, doctor’s offices, and
medical labs, call the center to verify that a person they are serving is currently
enrolled in AHCCCS, which helps ensure that providers will be compensated for their
services. Healthcare providers may also verify a person’s enrollment status through
various automated systems the center manages.
Changes help share information more effectively
AHCCCS has improved the ways its Communications Center shares enrollment
information with AHCCCS members and healthcare providers. AHCCCS’ strategy for
improvement has been based on developing various types of automated systems
and encouraging members to call other, more appropriate sources, such as their
health plan.
Automated systems developed—To improve its services, AHCCCS has
established two automated methods for healthcare providers to verify the enrollment
of AHCCCS members they serve, and is currently developing an Internet-based
system.
􀁺􇩅 Enrollment verification units—Several providers use enrollment verification units
that allow them to enter a patient’s AHCCCS identification number or to
swipe the patient’s AHCCCS membership card (see Photo 1). AHCCCS
established the identification number system in 1992 and the swipe
card system in 1998. The verification units function in the same manner
as a credit card machine. The system searches AHCCCS’ database to
determine if the patient is currently enrolled in AHCCCS and prints out
a small receipt showing the patient’s enrollment status. Some units
permit providers to transmit several verification requests simultaneously,
which is especially helpful for those with a high volume of patients, such
as hospitals. Healthcare providers buy or lease the unit from vendors
under contract with AHCCCS to provide this service and also pay a
subscription fee. They are also required to pay a variable transaction fee
for each inquiry.1 According to Communications Center reports, in
February 2002 providers used the verification unit system for
approximately 493,000 enrollment verifications.
􀁺􇩔 Touch-tone phone verification—Providers may also verify a patient’s
AHCCCS enrollment using a touch-tone phone. Through this
technology, which AHCCCS implemented in 1995, the provider dials into
the system, then enters a patient’s AHCCCS identification number. The system
verifies the patient’s enrollment status over the phone, but in Maricopa County,
the provider also has the option of requesting a faxed verification for
recordkeeping purposes. Unlike the enrollment verification units, the touch-tone
phone verification system is free of charge to the healthcare provider. A major
disadvantage of the phone system is that it does not allow multiple verifications
to be requested simultaneously. According to Communications Center reports,
in February 2002 the system was used to verify over 72,000 enrollments.
􀁺􇨠 Internet-based system—In addition to the above systems, AHCCCS is currently
developing an Internet-based enrollment verification system, which it plans to
page20
1 The transaction fee ranges from 20 to 35 cents, depending on the company to which the provider subscribes and on the
number of verifications a provider conducts in a month.
State of Arizona
Photo 1: Verification Unit
pilot-test in July 2002. This system would allow any healthcare provider with
Internet access to log into the AHCCCS enrollee database to perform enrollment
verifications. According to AHCCCS’ Information Services Division, this system
would have several advantages. First, the provider’s cost would be limited to the
cost of a computer and Internet connection, which many providers may already
have. Additionally, providers would not have to pay a fee for each inquiry. Further,
according to AHCCCS management, once the system is established, system
maintenance costs would be small.
Encouraging members to seek information from more appropriate
sources—AHCCCS has attempted to more effectively serve AHCCCS members
by directing their calls to more appropriate locations. Some AHCCCS members call
with questions about their health plan, such as what procedures are allowed, who is
covered under the plan, and who their primary care physician is. In an attempt to
remind members that for some of their questions, a call to their health plan would be
more appropriate, AHCCCS has begun listing the member’s health plan on the
enrollee’s AHCCCS identification card. In addition, AHCCCS plans to begin listing
the number of the enrollee’s Regional Behavioral Health Authority (RBHA) on the
identification card in an effort to direct questions related to members’ mental health
coverage to their RBHA.
The incentive program should be adjusted
The AHCCCS Communications Center has initiated a performance incentive
program designed to improve its staff’s performance. Under this program, operators
and others can receive up to $200 per month in incentive payments, but do not
always receive the full amount. However, some of the center’s measures used to
calculate the payout should be adjusted or replaced.
Incentive program uses team approach to improving
performance—The center has organized the incentive program by placing its
operators in teams headed by a team supervisor. Each operator and supervisor
typically receives the same bonus—up to $200 per month in addition to his or her
regular salary. Thus, the reward of each team member is dependent in part upon the
performance of his or her teammates. The center’s management believes that this
results in peer pressure that enhances the entire team’s performance. Performance
is evaluated on three criteria, as follows:
􀁺􇨠 Attendance—Having a fully staffed team of operators is critical to the center’s
ability to answer the number of calls that it receives; therefore, part of the
incentive program is calculated on operator attendance. This criteria is
designed to reduce the number of unplanned absences. If a team meets the
center’s attendance goal, each member can earn $80 in incentive pay.
page21
Office of the Auditor General
􀁺􇨠 Unanswered calls—The center measures the monthly percentage of calls that
disconnect before an operator can answer. Currently, if the center fails to answer
more than 10 percent of incoming calls, no center operator receives any payout
for this criterion. If the unanswered call rate is 6 percent or below, every center
operator will receive $60 in incentive pay.
􀁺􇩑 Quality of customer service—Operators are also rated on the quality of their
phone performance through evaluations performed by their supervisors.
Currently, supervisors monitor operators’ calls from a remote location and
evaluate them on the quality of their phone service and the accuracy of the
information they provide. Team members may earn up to $60 in incentive pay
based on the team’s average quality score.
While the Communications Center staff may earn up to $200 per month in incentive
payments, staff usually earn less. For example, according to Communications Center
data for January 2002, the Communications Center staff each earned an average of
$60 that month.
Changes are needed to two performance criteria—Two of the three
current criteria for making awards do not appear to be good measures to use. One
does not relate to individual performance, and the other is subject to manipulation.
􀁺􇨠 Measure for unanswered calls is not related to individuals or teams—As
currently used, the measure of unanswered calls is related to the overall
adequacy of the center’s staffing resources and not to individual operator or
team performance. Because this measure cannot be attributed to individual
performance, AHCCCS should replace it. Incentive program literature auditors
reviewed indicates that incentive programs work best when performance criteria
are clearly related to an individual’s performance. For example, a clear measure
of individual performance would be the average time spent handling a call. In
addition, auditors spoke to four other State of Arizona call centers and found that
they all measure the average time it takes each operator to handle a call.1
􀁺􇩍 Measure for quality of customer service may be subject to inflation—Because
supervisors receive the same monthly incentive payment as their team
members, supervisors may have a financial incentive to inflate their teams’
customer service quality rating. While auditors found no evidence of
wrongdoing, this potential for inflation should be removed. If AHCCCS continues
to include Communications Center supervisors in the incentive program, their
incentive payments should be based on different criteria than their teams,’ or
AHCCCS should have another team’s supervisor make the quality of customer
service assessment.
page22
1 Auditors spoke with call center management at the Department of Economic Security, Division of Child Support
Enforcement; the Department of Revenue, the Arizona Department of Transportation, Motor Vehicle Division; and the
State Compensation Fund.
State of Arizona
AHCCCS should regularly survey communications center
users
Finally, AHCCCS needs to regularly survey both providers and members in order to
reassess users’ needs and satisfaction with the center. The Governor’s Office of
Excellence in Government encourages executive agencies, such as AHCCCS, to
learn how their customers rate the agency and to seek ways to improve that rating.
However, AHCCCS has never formally surveyed AHCCCS members who have called
the Communications Center and has not surveyed healthcare providers since 1999.
Regular surveys would help better evaluate the needs and satisfaction of both
members and providers. For example, a member survey could identify whether they
want access to the automated methods of enrollment verification. Additionally, a survey
of providers could help AHCCCS identify additional ways to improve its automated
verification systems.
Recommendations
1. To better measure the individual performance of its operators for calculating
payments for its performance incentive program, the AHCCCS Communications
Center should replace the rate of unanswered calls with a different individual
performance measure, such as the average time it takes operators to handle calls.
2. If AHCCCS continues to include Communications Center supervisors in its
performance incentive program, it should remove any potential for teams’ customer
service quality ratings to be inflated by basing supervisors’ incentive payments on
different criteria than their teams’ or having another team’s supervisor perform the
quality of customer service assessments.
3. AHCCCS should implement regular satisfaction surveys of members who use the
AHCCCS Communications Center to better discern both the quality of service that it
provides and the needs of its customers.
4. AHCCCS should regularly survey its healthcare providers to assess their satisfaction
with the Communications Center and the automated verification systems.
page23
Office of the Auditor General
page24
State of Arizona
Office of the Auditor General
AGENCY RESPONSE
July 29, 2002
Debra K. Davenport, CPA
Auditor General
Office of the Auditor General
2910 North 44th St, Ste 410
Phoenix, AZ 85018
RE: Performance Audit, Draft Report dated July 19, 2002
Dear Ms. Davenport:
Thank you for the opportunity to review and comment on the AHCCCS, Division of Member
Services Audit. We appreciate the efforts of the audit team and believe that the
implementation of the findings will further enhance the efficiency and effectiveness of the
AHCCCS programs.
Below are our responses to each recommendation in the report in the order they are listed.
Recommendations: Page 17
1. AHCCCS needs to seek appropriate changes to its rules to allow it to discontinue
performing medical reassessments for some ALTCS members.
Response: The finding of the Auditor General is agreed to and a different method of dealing
with the finding will be implemented.
We believe the current rule as promulgated provides the AHCCCS administration the
flexibility to identify population groups within the ALTCS Program for which a reassessment
period greater than one year is appropriate. However, once we finalize the changes to the
reassessments, which will be based on more experience with the current pilot process to reduce
the frequency of pre-admission screening and our policies are further clarified, we will make
the appropriate changes in the rule.
To clarify the reason for AHCCCS’ actions in altering its reassessment process, less than 1%
of the 16,500 reassessments were determined to no longer require ALTCS services. More
important, more than 99% of our ALTCS members were found to be appropriately placed in
this program.
Debra K. Davenport, CPA
July 29, 2002
Page 2
2. AHCCCS should continue to monitor its workload of eligibility determinations and
renewals performed by the SSI/MAO unit to ensure that they are completed in a timely
manner.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented.
3. AHCCCS should discontinue its practice of calculating error rates for the KidsCare Program
because it does not provide meaningful results, is not required by the federal government, and
other methods are in place to ensure the quality of KidsCare eligibility determinations.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented. Current staff resources used to calculate error rates will be redirected to other
activities where we are understaffed.
We do wish to advise you that the Centers for Medicare and Medicaid Services (CMS) is
currently reassessing the need for a quality control process for the KidsCare Program. While
CMS has urged states to reduce barriers to the application and eligibility process for the State
Children’s Health Insurance Program, they are concerned with the quality of the decisions.
Also, we believe the quality control reviews completed have provided data pinpointing error
prone areas requiring further training and closer monitoring by supervisors.
Recommendations: Page 23
1. To better measure the individual performance of its operators for calculating payments for
its Performance Incentive Program, the AHCCCS Communications Center should replace the
rate of unanswered calls with a different individual performance measure, such as the average
time it takes operators to handle calls.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented.
2. If AHCCCS continues to include Communication Center supervisors in the Performance
Incentive Program, it should remove any potential for teams’ customer service quality ratings
to be inflated by basing supervisors’ incentive payments on different criteria than their teams’
or having another team’s supervisor perform the quality of customer service assessments.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented.
3. AHCCCS should implement regular satisfaction surveys of members who use the AHCCCS
Communications Center to better discern both the quality of service that it provides and the
needs of its customers.
Debra K. Davenport, CPA
July 29, 2002
Page 3
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented.
AHCCCS has in the past conducted focused, informal surveys to determine member and
provider satisfaction with our annual enrollment process and overall satisfaction with the
service provided by Communication Center operators. Limited funds and staffing resources
will impact the length and frequency of the surveys but we certainly agree to the benefit of
surveys. This note also applies to the following finding.
4. AHCCCS should regularly survey its healthcare providers to assess their satisfaction with
the Communications Center and the automated verification system.
Response: The finding of the Auditor general is agreed to and the audit recommendation will
be implemented.
Again, I would like to thank the Auditor General and staff for their time and effort in
evaluating AHCCCS. We appreciate the professional approach of the audit team as well as
their cooperative attitude with AHCCCS staff.
Sincerely,
Phyllis Biedess
Director
PBDR:gs
_______________ ARIZONA DEPARTMENT OF ECONOMIC SECURITY ________________
1717 W. Jefferson - P.O. Box 6123 - Phoenix, AZ 85005
Jane Dee Hull John L. Clayton
Governor Director
Ms. Debra K. Davenport
Auditor General
Office of the Auditor General
2910 North 44th Street
Phoenix, AZ 85018
Dear Ms. Davenport:
Thank you for giving us the opportunity to respond to the audit of AHCCCS. As you noted in your
report, Proposition 204 substantially changed the State's Medicaid program. This was the largest
transition in the history of DES and was accomplished in less than five months.
As a result of the changes in Proposition 204, in addition to determining eligibility for food stamps, cash
assistance and general assistance, DES now determines eligibility for 80% of all Medicaid categories.
Although there were no recommendations provided in the report, I would like to clarify the following
information that was provided regarding training and the implementation of Proposition 204.
The implementation of Proposition 204 required negotiating intergovernmental agreements with 15
counties and the transferring of over 650 staff into new offices statewide. We increased from 85 to 172
sites. Enrollment in the program also increased by 35 percent.
The report notes that many county workers who transferred to DES had not received training on the new
program changes and processes within DES by October 1, 2001. It is important to note that all fifteen
Counties had to continue their operations through midnight on September 20, 2001, and consequently
could not release their employees for training prior to October 1, 2001. DES worked very closely with
the counties and developed an alternative plan that allowed a portion of the county’s staff to be trained
prior to October 1, 2001. This plan included a formal training program and a “buddy system” in which
the staff that had been trained prior to October 1st, worked side by side the DES staff while the
remainder of the County employees were trained. All remaining staff was trained within a few months
of being transitioned to State service.
Ms. Debra Davenport
Page 2
This approach ensured that the counties were able to operate their programs through September 30,
2001. Additionally, the transitioned County staff had to learn new program rules and transition from a
manual to an automated eligibility process.
The transition from a County run medical program to a State run program combined with the numerous
program changes was an enormous undertaking. Given the size and complexity of the project, the
outcome was incredible. We have a great sense of accomplishment that we were able to implement all
of the changes with a minimum number of problems and at the same time alleviated the fears and
concerns of the hospital community. Our success is validated by the acknowledged improvement of the
hospital community both verbally and in writing. Please see attached letter from Banner Hospital
Systems expressing their satisfaction with the success of the program and attesting to the significant
strides of the program.
In closing, I want to stress the magnitude of DES’ and AHCCCS’ accomplishments in successfully
implementing this program in such a short period of time. We have developed collaborative
relationships with the hospitals and will continue to work closely with the hospitals and AHCCCS to
strengthen and improve the program.
Sincerely,
John L. Clayton
Enclosure
Dear Mr. Clayton:
It would be a serious understatement to say that I have been pleasantly surprised by the
outstanding performance of your staff enrolling people in AHCCCS at our Banner
Health System hospitals. (Attached is a graph reflecting DES's enrollment performance
for Banner's Samaritan and Lutheran hospitals.) The truth of the matter is that I have
been amazed by the outstanding job they are doing, and by their dedication to serving
the poor and medically needy in Arizona. Skeptical that you would be able to gear up so
quickly in assuming the responsibilities of the Arizona Counties, we had requested
DUC pool funding to compensate for our expected losses during the enrollment start-up
period. Clearly, our skepticism was unfounded.
Especially as one new to Banner and to Arizona, it is really gratifying to witness such
exceptional performance by employees in an agency that is crucial to our ability to
effectively serve this patient population. Above all, I want to thank you, and let you know
how very impressed I am with the commitment, competence and professionalism of your
people in getting an important assignment done, with excellence.
Clearly, you and your staff are determined to do the very best you can for the poor and
medically needy in our state; and in a complementary way, Banner is steadfastly
committed to providing quality health care for all Arizonans. It is a pleasure working
with you in achieving our related missions.
Sincerely,
Peter S. Fine, FACHE
President & Chief Executive Officer
cc: Governor Jane Dee Hull
Rick Collins
Debi Wells
01-18 Arizona Department of
Corrections—Administrative
Services and Information
Technology
01-19 Arizona Department of
Education—Early Childhood
Block Grant
01-20 Department of Public Safety—
Highway Patrol
01-21 Board of Nursing
01-22 Department of Public Safety—
Criminal Investigations Division
01-23 Department of Building and
Fire Safety
01-24 Arizona Veterans’ Service
Advisory Commission
01-25 Department of Corrections—
Arizona Correctional Industries
01-26 Department of Corrections—
Sunset Factors
01-27 Board of Regents
01-28 Department of Public Safety—
Criminal Information Services
Bureau, Access Integrity Unit,
and Fingerprint Identification
Bureau
01-29 Department of Public Safety—
Sunset Factors
01-30 Family Builders Program
01-31 Perinatal Substance Abuse
Pilot Program
01-32 Homeless Youth Intervention
Program
01-33 Department of Health
Services—Behavioral Health
Services Reporting
Requirements
02-01 Arizona Works
02-02 Arizona State Lottery
Commission
02-03 Department of Economic
Security—Kinship Foster Care
and Kinship Care Pilot
Program
02-04 State Parks Board—
Heritage Fund
Performance Audit Division reports issued within the last 12 months
Future Performance Audit Division reports
Arizona Health Care Cost Containment System—Rate Setting Processes
Arizona Health Care Cost Containment System—Quality-of-Care
Arizona Health Care Cost Containment System—Contracting
Department of Economic Security—Child Protective Services, Removal/Appeal Process