Blue Cross accreditation tussle highlights growing HMOs issue.

A lawsuit filed in October by Woodland Hills-based CaliforniaCare Health Plans against an accrediting body could be a harbinger of disputes to come, as accreditation becomes increasingly important to HMOs and the process for obtaining the crucial seals of approval continues to evolve.

CaliforniaCare, a subsidiary of Blue Cross of California, is not the first HMO to appeal a rejection by the National Committee for Quality Assurance. But it is the first to take the Washington, D.C.-based accrediting group to court, and its lawsuit points up the mounting frustration experienced by HMO officials who argue that NCQA criteria test not the quality of care delivered, but how well HMO managers comply with artificial standards.

The NCQA was formed in 1979 by two major HMO trade associations. It broke off from its founders in 1990 to become an independent, nonprofit accrediting organization that audits HMO performance and either gives the plans its blessing or rejects them for accreditation.

In recent years, employers have taken increasing notice of the NCQA decisions. Major national companies such as GTE Corp. and Xerox Corp., both based in Stamford, Conn., have set deadlines for their health plans to achieve NCQA accreditation, or else face being dropped. As a result, a failure to achieve the coveted nod from the NCQA is perceived by managed care officials - as well as investors - as a severe blow.

CaliforniaCare filed suit in federal court in Washington, D.C., in October after being rejected by the NCQA. Among other things, the suit claims the NCQA failed to give CaliforniaCare due process, breached its accreditation contract with the HMO and failed to follow its own rules and procedures.

Expected liability

NCQA officials declined to comment on the specifics of the suit. Barry Scholl, a spokesman for the group, said disputes and appeals are an expected part of its business.

"The standards that NCQA established are not minimal; they really hold health plans up to a tough quality bar," Scholl said. "It was fully expected that not all health plans would be able to achieve immediate accreditation."

Indeed, out of 202 accreditation decisions rendered by the organization as of Nov. 30, 1995, only 33 percent of plans received the NCQA's top rating, which consists of a three-year accreditation. Forty percent of the plans received one-year accreditation, and 13 percent were given "provisional" one-year accreditation - a lower standard of approval that suggests the plan still needs work, Scholl said. Twelve percent of the plans were rejected, and the final 2 percent are under review because of appeals.

The NCQA expects to have rated more than half of the nation's 574 HMOs by the end of the first quarter of this year, Scholl said. Audits by the group are completely voluntary. Scholl said the NCQA is scheduled to perform about 90 reviews in 1996.

CaliforniaCare is not the only local HMO to complain about NCQA procedures, although few HMO officials would comment publicly on the issue for fear of jeopardizing their own accreditations. According to Ronald Spoltore, senior vice president for strategic management with Healthcare Financial Advisors Inc., a Century City health care consulting agency, the criteria used to assess HMO performance by the NCQA are somewhat subjective and inconsistent.

"(The NCQA) is flying by the seat of their pants right now," Spoltore said. "They're still in the evolutionary stage, trying to refine the way they do things."

More criticisms

The organization rates HMOs on the basis of factors that are not necessarily quantifiable, Spoltore said. Rather than relying on clinical data, which are often not available, the NCQA studies improvements made from year to year in various categories - such as member satisfaction and complaint resolution. And because the health care industry has not developed universal tools for measuring outcomes, it is very difficult to make apples-to-apples comparisons between health plans, Spoltore said.

"The results are not always based on a consistent, foolproof methodology," he said.

CaliforniaCare officials complained that NCQA procedures are unreliable, with different reviewers often giving different ratings to plans on the same functions. And the lawsuit claims that the HMO was penalized for delegating credentialing to its providers, meaning its physician groups are responsible for ensuring that their doctors meet the HMO's standards.

Even the medical groups chosen by NCQA auditors for on-site studies were the subject of dispute.

"Often, the sites (that NCQA auditors) picked for their evaluations basically came down to what was convenient for them. It may not have represented our membership at all," said Dr. Lee Hartman, CaliforniaCare's medical director.

Nonetheless, there are some in the health care industry who believe the CaliforniaCare suit is little more than a sour-grapes response to its failure to win accreditation. One prominent executive who asked not to be identified said he believes CaliforniaCare's rejection by the NCQA is a sign of failure by the HMO's management, especially because so many companies with far less resources and experience have achieved accreditation.

"From what I know about it, it seems like filing the lawsuit was bad judgement," concurred attorney Douglas Mancino, a partner in the health care law department at Century City-based McDermott, Will & Emery. "(CaliforniaCare) should have concentrated more on complying with the NCQA's criteria, instead of fighting with them."