Report on external review requests in North Carolina

              North Carolina Department of Insurance

Healthcare Review Program Semiannual Report

for the period of January 1, 2003 – December 31, 2006

James E. Long

Commissioner of Insurance

A REPORT ON EXTERNAL REVIEW REQUESTS IN NORTH CAROLINA

Healthcare Review Program

North Carolina Department of Insurance

Dobbs Building

430 North Salisbury Street

Raleigh, N. C. 27603

Questions about the report should be directed to:

Susan D. Nestor, RN, MSN

Director

Healthcare Review Program

Telephone: ( 919) 807 - 6860

Fax Number: ( 919) 807 – 6865

E- Mail: snestor@ ncdoi. net

Healthcare Review Program Semiannual Reports

Release I July 1, 2002 – December 31, 2002

Release II July 1, 2002 – June 30, 2003

Release III July 1, 2002 – December 31, 2003

Release IV July 1, 2002 - June 30, 2004

Release V January 1, 2003 – December 31, 2004

Release VI January 1, 2005 – June 30, 2005

Release VII January 1, 2004 – December 31, 2005

Release VIII January 1, 2006 – June 30, 2006

Release IX January 1, 2003 – December 31, 2006

All Healthcare Review Program Semiannual Reports are available on the NC Department of

Insurance web site at: www. ncdoi. com

Table of Contents

Executive Summary................................................................................................................ i

I. Introduction ................................................................................................................ 1

II. Background of the Healthcare Review Program ..................................................... 1

III. Program Activities ...................................................................................................... 2

A. External Review .............................................................................................. 2

B. Oversight of IROs ........................................................................................... 2

C. Oversight of Insurers ( External Review)...................................................... 3

D. Consumer Counseling on UR and Internal Appeal and Grievance

Procedures ........................................................................................... 4

E. Community Outreach and Education on External Review and HCR

Program Services ............................................................................................ 4

IV. Program Activity Data ............................................................................................... 5

A. Consumer Contacts........................................................................................... 5

Consumer Telephone Calls .............................................................................. 5

Figure 1: Comparison of External Review and Consumer Counseling

Call Volume Received by the HCR Program by Calendar

Year, January 1, 2003 – December 31, 2006............................... 6

Consumer Web Site Contacts .......................................................................... 6

Figure 2: Comparison of HCR Program Web Site Page Access

Activity by Calendar Year, January 1, 2003 –

December 31, 2006 ........................................................................ 7

B. Consumer Counseling Activity ( Utilization Review, Appeals &

Grievances) ..................................................................................... 7

Figure 3: Comparison of Consumer Counseling Case Volume

Received by the HCR Program by Calendar Year,

January 1, 2003 – December 31, 2006......................................... 8

C. External Review Requests................................................................................ 8

Figure 4: Comparison of External Review Requests Received by the

HCR Program by Calendar Year,

January 1, 2003 – December 31, 2006......................................... 9

D. Eligibility Determinations on Requests for External Review ....................... 9

Table 1: Disposition of Incomplete Requests Made to the HCR

Program by Calendar Year, January 1, 2003 –

December 31, 2006……………………………………………… 10

Figure 5: Comparison of Disposition of External Review Requests

Received by Calendar Year, January 1, 2003 –

December 31, 2006……………………………………………... 11

Table 2: Reasons for Non- Acceptance of an External Review

Request, January 1, 2003 – December 31, 2004………………. 13

E. Outcomes of Accepted Cases……………………………………………….. 13

Figure 6: Comparison of Case Outcomes by Calendar Year,

January 1, 2003 – December 31, 2006…………………………. 14

Figure 7: Percentage of Outcomes for All Accepted Cases,

January 1, 2003 – December 31, 2006…………………………. 14

F. Types of External Review Requested……………………………………….. 15

Figure 8: Comparison of External Review Cases Accepted by Type of

Review by Calendar Year, January 1, 2003 –

December 31, 2006………………………………………………. 15

Figure 9: Comparison of Expedited External Review Requests

Received and Accepted by Calendar Year,

January 1, 2003 – December 31, 2006………………………… 15

G. Average Time to Process Accepted Cases…………………………………... 16

V. Activity by Type of Service Requested……………………………………………. 16

Figure 10: Accepted Cases by Type of Service Requested,

January 1, 2003 – December 31, 2006…………………………. 16

Figure 11: Accepted Cases by Type of Service Requested,

January 1, 2006 – December 31, 2006…………………………. 17

Table 3: Type of General Service and Specific Services Requested for

all Accepted Cases for External Review, July 1, 2002 -

December 31, 2006……………………………………………... 18

Figure 12: Outcomes of Vein Surgery Cases,

January 1, 2003 – December 31, 2006…………………………. 19

Figure 13: Outcomes of Orthognothic Surgery Cases,

January 1, 2003 – December 31, 2006………………………… 19

Figure 14: Outcomes of Gastric Bypass Surgery Cases,

January 1, 2003 – December 31, 2006………………………… 20

Figure 15: Outcomes of DOC Band Cases,

January 1, 2003 – December 31, 2006………………………… 20

Figure 16: Outcomes of Skilled Nursing Facility Cases,

January 1, 2003 – December 31, 2006………………………… 21

Figure 17: Outcomes of Inpatient Mental Health Cases,

January 1, 2003 – December 31, 2006………………………… 21

Table 4: Comparison of Percentage Share of Review Activity by

Type of Service Requested, January 1, 2003 –

December 31, 2006……………………………………………….. 23

Table 5: Comparison of Outcomes of Accepted External Review

Requests by Service Type and Denial Type by Calendar

Year, January 1, 2003 – December 31, 2006…………….……... 25

Table 6: Comparison of Outcomes of Requests by Type of Service

Requested by Type of Review Granted by Calendar Year,

January 1, 2003 – December 31, 2006…………………………... 28

A. Insurer and Type of Service Activity……………………………………….... 29

Figure 18: Insurers’ Share of Accepted External Review Requests,

January 1, 2003 – December 31, 2006………………………….. 29

A. Insurers Comprising Majority of Cases…………………… 29

B. Other Insurers………………………………………………... 29

Figure 19: Insurers with Majority of Accepted External Review

Requests, January 1, 2003 – December 31, 2006………………. 30

Table 7: Comparison of Accepted Case Activity by Insurer by

Member Months by Calendar Year, January 1, 2003 –

December 31, 2006……………………………………………….. 31

Table 8: Comparison of Accepted Case Activity by Insurer and

Type of Service Requested by Calendar Year,

January 1, 2003 – December 31, 2006…………………………... 33

Table 9: Top Five Insurers Outcomes by Case Type,

January 1, 2003 – December 31, 2006………………………….. 35

VI. Activity by IRO …………………………………………………………………….. 36

A. Summary by IRO….………………………………………………………….. 36

Table 10: Comparison of IRO Activity Summary by Calendar Year,

January 1, 2003 – December 31, 2006………………………….. 37

B. Decisions by Type of Service Requested and Insurer………………………. 38

Table 11: Comparison of All IRO Outcomes ( Percentages) by General

Service Type for All Insurers by Calendar Year,

January 1, 2003 – December 31, 2006…………………………. 39

Table 12: Comparison of IRO Decisions by Insurer by Calendar

Year, January 1, 2003 – December 31, 2006…………………... 40

VII. Cost of External Review Cases ……………………………………………………. 43

Figure 20: Yearly and Cumulative Value of Allowed Charges for

Overturned or Reversed Services, July, 1, 2002 –

December 31, 2006……………………………………………… 45

Table 13: Cost of IRO Review, Average and Cumulative Allowed

Charges by Type of Service Requested, July 1, 2002 –

December 31, 2006………………………………………………. 45

VIII. HCR Program Evaluation………………………………………………………….. 46

Table 14: Consumer Satisfaction Survey Analysis………………………. 46

IX. Conclusion…………………………………………………………………………… 46

i

Executive Summary

North Carolina’s External Review law provides consumers the opportunity to request an

independent medical review of a health plan denial of coverage, thus offering another option for

resolving coverage disputes between a covered person and their insurer. In North Carolina,

external review is available to covered persons when their insurer denies coverage for services

on the grounds that they are not medically necessary. Denials for cosmetic or

investigational/ experimental services may be eligible for external review depending on the

nature of the case.

North Carolina’s External Review law applies to persons covered under a fully insured health

plan, the North Carolina State Health Plans which includes an indemnity plan, Teachers’ and

State Employees’ Comprehensive Major Medical Plan ( State Health Plan Indemnity Plan or SHP

Indemnity Plan) and effective October 1, 2006, a Preferred Provider Organization plan, NC

SmartChoice ( State Health Plan PPO Plan or SHP PPO Plan); and the Health Insurance Program

for Children ( known as CHIP). There is no charge to the consumer for requesting an external

review.

The Healthcare Review Program ( HCR Program or Program) became effective July 1, 2002 as a

result of the enactment of the Health Benefit Plan External Review law. The law provides for

the establishment and maintenance of external review procedures by the Department of

Insurance to assure that insureds have the opportunity for an independent medical review of

denials made by their health plan. Once a case is screened for eligibility and accepted by the

Program, it is assigned to an Independent Review Organization ( IRO) for review. This report

provides a summary of external review and consumer counseling activity data over a four- year

period, from January 1, 2003 – December 31, 2006.

During the period of January 1, 2003 – December 31, 2006, the HCR Program received 967

requests for external review. In comparing year to year request activity, the volume of request

activity showed growth and stability. In the first full year of operation, 2003, the Program

received 220 requests for external review. In 2004, the Program received 201 requests, a drop of

8.6 percent from the previous year. In 2005, the number of requests increased by 44.8 percent, to

291. In 2006, 255 requests were received, a decline of 16.3 percent from the previous year. Of

the 967 requests received, 163 ( 16.8%) involved a re- submission of a request by individuals who

were previously ineligible for an external review because their request was incomplete. Thus,

804 different individuals requested an external review during this four- year period. Of these

requests, 387 ( 48.1%) were accepted during this four- year period.

Of the 387 cases that were accepted, 42.6 percent of the cases were decided in favor of the

consumer, either due to the insurer reversing its own denial ( 16 cases), or the IRO overturning

the insurer’s noncertification ( 149 cases). IROs issued decisions on 371 cases. An analysis of

the type of accepted cases that were reviewed by an IRO for this four- year period showed that 43

cases ( 11.5%) involved decisions for services that were cosmetic, 124 cases ( 33.4%) involved

decisions that services were experimental/ investigational, and 204 cases ( 55%) involved medical

necessity determinations. Of the cases accepted during this four- year reporting period, IROs

overturned 18 ( 41.8%) of the cosmetic cases, 34 ( 27.4%) of the experimental/ investigational

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cases and 97 ( 47.5%) of the medical necessity cases. Since the HCR Program began July 1,

2002, a total of 408 cases were accepted for review, resulting in coverage for the disputed service

for 43.1 percent of the consumers who requested an external review.

Throughout the four- year reporting period, surgical services represented the largest percentage of

accepted cases ( 38.5%) followed by inpatient mental health with 12.7 percent, durable medical

equipment ( DME) with 11.6 percent and skilled nursing facility care at 7.0 percent. For surgical

services, orthognothic surgery ( TMJ) represented the largest number of cases ( 29) followed by

vein surgery ( 22 cases), gastric bypass surgery ( 21 cases) and breast reduction and vagus verve

stimulator ( VNS) surgery each had 14 cases. In 2003, surgical services represented 45.6 percent

of all accepted cases and 50 percent of all overturned cases for that year. In 2004, the percentage

share of accepted surgical services cases declined to 29.8 percent and represented 25.8 percent of

all overturned cases. In 2005, the percentage share of surgical services cases rose to 35.5 percent

and represented 29.7 percent of all overturned cases that year. In 2006, surgical services

represented 41.6 percent of all accepted cases and 39 percent of all overturned cases.

Additionally, surgical services represented 11.1 percent of all reversed cases in 2005 and 16.7

percent in 2006. Also noteworthy is the number and percentage share of accepted inpatient

mental health cases that has steadily increased over the four- year reporting period. In 2003,

inpatient mental health cases represented 7.8 percent of accepted cases and five percent of all

cases overturned that year. In 2006, inpatient mental health cases comprised 17.7 percent of

accepted cases and 22 percent of all cases overturned. Also in 2006, inpatient mental health

cases represented 50 percent of all cases reversed by the insurer that year.

The average costs of allowed charges from all cases that have been reversed by the insurer or

overturned by an IRO since the Program began July 1, 2002, is $ 13,375. In 2006, the average

amount of allowed charges assumed by the insurer in the six ( 6) cases where the insurer reversed

its own noncertification was $ 8,304 ( with a total of $ 33,214.32). The average amount of allowed

charges assumed by the insurer for decisions that were overturned in favor of the consumer was

$ 10,432 ( with a total of $ 385,998). Since July 1, 2002, the cumulative total of services

provided to consumers as a result of external review is $ 2,247,010.09. Due to the

prospective nature of five ( 5) cases overturned by the IRO, the cost of the allowed charges

for these services has not yet been reported. The IRO charges for reviewing cases are per case

fees which range from $ 450 to $ 900, depending on the IRO assigned and whether the review was

conducted under a standard or expedited time frame. The average cost to insurers for the 107

reviews performed by an IRO during 2006 was $ 611. However, the average cost for all IRO

reviews since the Program began is $ 572.

A request for external review is made directly to the HCR Program. The HCR Program staff

reviews each request for completeness and eligibility. Eligible cases are assigned to a contracted

IRO on an alphabetical rotation. The HCR Program staff screen each IRO case assignment to

assure that no material conflict of interest exists between any person or organization associated

with the IRO and any person or organization associated with the case. All clinical reviewers

assigned by the IRO to conduct external reviews must be medical doctors or other appropriate

health care providers who meet the requirements under N. C. Gen. Stat. § 58- 50- 87( b)( 1 – 5).

iii

Once a case is assigned to an IRO, a decision must be rendered within the time frames mandated

under North Carolina law. For standard requests, decisions by the clinical expert are required to

be made within 45 days of the covered person’s request. For an expedited request, a decision

must be made within four ( 4) days of the request. Since July 2002, all IRO decisions have been

issued within the required time frames. The HCR Program is responsible for monitoring IRO

compliance with statutory requirements on an ongoing basis. The HCR Program audits 100

percent of all IRO decisions for compliance with requirements pertaining to the time frame for

issuing a decision and for the content of written notice of determinations.

During the period of January 1, 2006, to December 31, 2006, 13 different health benefit plans,

plus the SHP Indemnity Plan and SHP PPO Plan had a total of 113 cases that were eligible for

external review ( 15 plans total – includes SHP Indemnity and SHP PPO). Case origination from

State Health Plan’s Indemnity Plan, Blue Cross & Blue Shield of North Carolina, and

UnitedHealthcare of North Carolina, Inc. comprised 83.2 percent of the external review activity

( 3 plans – includes SHP Indemnity). Twelve other insurers made up the remaining 16.8 percent

of cases ( 12 plans – includes SHP PPO). With 48 ( 42.5%) accepted cases in 2006, the State

Health Plan’s Indemnity Plan remains the health plan with the largest number of requests for

external review. Blue Cross & Blue Shield of North Carolina, the state’s largest insurer, had the

second largest number with 29 accepted cases. UnitedHealthcare of North Carolina, Inc. had the

third largest number of accepted cases in 2006 with 17 ( 15%). While this reporting provides an

accounting of the cases accepted for review, the case volume is too small to draw conclusions

about insurers or how they compare to one another. A comparison of insurers who reported total

member months data for 2006 shows that the rate of external review activity for all HMOs

required to report data has remained relatively unchanged from previous years, with insurers still

having less than one ( 1) case per 100,000 members.

The HCR Program also provides counseling to consumers who have questions or need assistance

with issues involving their insurer’s utilization review or internal appeal and grievance process.

Consumers receive counseling from a staff of professional nurses who understand the clinical

aspects of cases as well. For the period of January 1, 2003 through December 31, 2006, the HCR

Program received 1,674 requests for assistance from consumers. A comparison of consumer

counseling case volume by year shows a steady volume of activity over the four- year period.

Beginning in 2004, the Program began collecting information on the nature of the consumer

calls. In 2004, 535 consumer calls were received and 55.7 percent of the calls involved

Program staff providing counseling on utilization review and internal appeals and grievance

issues and external review. In 2006, 370 calls were received, however 71.4 percent of the calls

involved consumer counseling on utilization review and appeals and grievance issues.

The HCR Program continues to promote consumer and provider awareness of external review

services through a comprehensive community outreach and education program. While insurers

are statutorily required to notify consumers of their right to external review, many consumers

remain unaware of the Program and do not avail themselves of this service. During this four-year

reporting period, community outreach and education activities have included participation

in health fairs, speaking engagements to consumers, physicians and office practice

administrators, hospital administration, publications, radio interviews, and mailing out written

materials. In January, 2004, a letter from the Commissioner of Insurance was sent to nearly

iv

16,000 actively practicing physicians in North Carolina which explained the importance of

external review services and included a brochure about the Program and two ( 2) external review

posters to be displayed in patient lobby areas. In November, 2005, an electronic notice about

external review services was sent to State Agencies, private sector businesses and allied health

providers. The response to that consumer outreach initiative was very positive with the Program

receiving the largest number of external review requests in December, 2005, since the Program

began. In 2006, an external review services contact card, designed to be included in an

address/ telephone file along with a Program brochure and letter from the Commissioner of

Insurance highlighting the importance of the Program was mailed to physicians practice

administrators and hospital business managers. All of these outreach activities have contributed

to informing and educating the provider community and public, of the availability of external

review services.

The HCR Program continues to utilize a consumer satisfaction survey with all accepted cases in

order to obtain feedback from consumers regarding their external review experience. Since the

Program began on July 1, 2002, 391 surveys have been sent and 219 ( 56%) consumers or

authorized representative responded. Of the 121 responders whose decision was overturned, 118

( 97.5%) stated they would tell a friend about external review. Of the 91 responders whose

decision was upheld by the IRO, 68 ( 74.7%) stated that they would also tell a friend about

external review.

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I. Introduction

The Department of Insurance ( the Department) established the HCR Program to administer

North Carolina’s External Review Law. The External Review Law ( N. C. Gen. Stat. § § 58- 50-

75 through 95) provides for the independent review of a health plan’s medical necessity denial

( known as a noncertification). The HCR Program also counsels consumers who seek guidance

and information on utilization review and internal appeals and grievance issues.

North Carolina’s External Review law applies to persons covered under a fully insured health

plan, the North Carolina State Health Plan which includes an indemnity plan, the Teachers’ and

State Employees’ Comprehensive Major Medical Plan ( State Health Plan Indemnity Plan or

SHP Indemnity Plan) and effective October 1, 2006, NC SmartChoice, a Preferred Provider

Organization Plan ( State Health Plan PPO Plan or SHP PPO Plan); and the Health Insurance

Program for Children ( known as CHIP).

This report, which is required under N. C. Gen. Stat. § 58- 50- 95, is intended to provide a

summary and comparative analysis of the HCR Program’s external review and consumer

counseling activities for the Program’s last four calendar years of operation ( January 1, 2003 –

December 31, 2006) as well as Program activity specific to 2006. Detailed information is

provided with respect to the insurers whose decisions were the subject of requests for external

review and about the independent review organizations that reviewed accepted cases. Previous

HCR Program reports provide a detailed summary and analysis of Program activities since July

1, 2002.

This report provides a cumulative review of external review and consumer counseling activities

for the last four calendar years. While the year- to- year number of requests for review and

accepted cases remains relatively small for statistical purposes, the cumulative data for this

four- year reporting period does provide the opportunity to comment on some trending seen in

types of requests, case acceptance, eligibility determinations and general type of service

requested. Data relative to specific services requested, case outcomes and insurers remains

small for statistical purposes; therefore, the validity of using the data for purposes of drawing

conclusions remains limited. The data is presented for review, both in the name of disclosure

and because its validity will increase over time as the number of requests for review and cases

accepted continues to grow.

II. Background of the Healthcare Review Program

The HCR Program became effective July 1, 2002, as part of the North Carolina Patients’ Bill of

Rights legislation. N C. Gen. Stat. § § 58- 50- 75 through 95, known as the Health Benefit Plan

External Review Law, governs the independent external review process. North Carolina’s

external review rights assure covered persons the opportunity for an independent review of an

appeal decision or second- level grievance review decision upholding a health plan’s

noncertification, subject to certain eligibility requirements.

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Requests for external review are made directly to the Department and screened for eligibility by

HCR Program staff, but the actual medical reviews are conducted by IROs that are contracted

with the Department. In addition to arranging for external review, staff also counsels

consumers on matters relating to utilization review and the internal appeal and grievance

processes required to be offered by insurers.

The HCR Program is staffed by a Director, two ( 2) Clinical Analysts and an Administrative

Assistant. The Program utilizes registered nurses with broad clinical, health plan utilization

review experiences to process external review requests and to enhance the Program’s Consumer

Counseling services.

The HCR Program contracts with two ( 2) board- certified physicians to provide on- call case

evaluations of expedited external review requests. The scope of these evaluations is limited to

determining whether a request meets medical criteria for expedited review. The consulting

physician is available to consult with Program staff and review consumer requests for expedited

review at all times.

The HCR Program contracts with five ( 5) IROs to provide clinical review of cases. IROs are

subject to many statutory requirements regarding the organizations’ structure and operations,

the reviewers that they use, and their handling of individual cases. The HCR Program engages

in a variety of activities to provide appropriate monitoring, ensuring compliance with statutory

and contract requirements.

III. Program Activities

A. External Review

The HCR Program staff is responsible for receiving requests for external review. In most cases,

external review is available only after appeals made directly to a health plan have failed to

secure coverage. A covered person or person acting on their behalf, including their health care

provider, may request an external review of a health plan’s decision within 60 days of receiving

a decision. Upon receipt, requests are reviewed to determine eligibility and completeness.

Cases accepted for review are assigned to an IRO. The IROs assign clinical experts to review

each case, issuing a determination as to whether an insurer’s denial should be upheld or

overturned. Decisions are required to be made within 45 days of the request for a standard

review. Cases accepted for expedited review require a decision to be rendered within four ( 4)

business days of the request.

B. Oversight of IROs

The IROs utilized by the Program are those companies that were determined via the solicitation

process, to meet the minimum qualifications set forth in N. C. Gen. Stat. § 58- 50- 87 and have

agreed to contractual terms and written requirements regarding the procedures for handling a

review.

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IROs are requested to perform a clinical evaluation of contested insurer decisions upholding the

initial denial of coverage based on lack of medical necessity. Specifically, the scope of service

for the IRO is to:

• Accept assignment of cases from a wide variety of insurers without the presence of conflict

of interest.

• Identify the relevant clinical issues of the case and the question to be asked of the expert

clinical peer reviewer.

• Identify and assign an appropriate expert clinical peer reviewer who is free from conflict

and who meets the minimum qualifications of a clinical peer reviewer, to review the

disputed case and render a decision regarding the appropriateness of the denial for the

requested treatment of service.

• Issue determinations that are timely and complete, as defined in the statutory requirements

for standard and expedited review.

• Notify all required parties of the decision made by the expert clinical reviewer.

• Provide timely and accurate reports to the Commissioner, as requested by the Department.

The HCR Program is responsible for monitoring IRO compliance with statutory requirements

on an ongoing basis. HCR Program staff screen each IRO case assignment to assure that no

material conflict of interest exists between any person or organization associated with the IRO

and any person or organization associated with the case. The HCR Program audits 100 percent

of all IRO decisions for compliance with requirements pertaining to the time frame for issuing a

decision and for the content of written notice of determinations. The HCR Program also

conducts on- site compliance audits of contacted IROs to determine if the IRO continues to

satisfy requirements regarding its handling of individual cases and policies and procedures, as

well as fulfill its obligation to provide an adequate network of disinterested reviewers to review

cases assigned.

C. Oversight of Insurers ( External Review)

The External Review law places several requirements on insurers. Insurers are required to

provide notice of external review rights to covered persons in their noncertification decisions

and notices of decision on appeals and grievances. Insurers are also required to include a

description of external review rights and external review process in their certificate of coverage

or summary plan description. When the HCR Program receives a request for external review,

the insurer is required to provide certain information to the Program, within statutory time

frames, so that an eligibility determination can be made. When a case is accepted for review,

the insurer is required to provide information to the IRO assigned to the case and a copy of that

same information to the covered person or the covered person’s representative. The insurer is

required to send the information to the covered person or the covered person’s representative by

the same time and same means as was sent to the IRO.

When a case is decided in favor of the covered person, the insurer must provide notification that

payment or coverage will be provided. This notice must be sent to the covered person and their

provider and is required to be sent within three ( 3) business days in the case of a standard

review decision and one ( 1) calendar day in the case of an expedited review decision. Insurers

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are required to send a copy of this notice to the HCR Program, as well as evidence of payment

once the claim is paid.

The Department’s HCR Program contracts with IROs to provide independent medical review of

insurer’s denial of coverage. As set forth in N. C. Gen. Stat. § 58- 50- 92, the insurer against

which a request for a standard or expedited external review is filed shall reimburse the

Department for the fees charged by the organization in conducting the external review,

including work actually performed by the organization for a case that was terminated due to an

insurer’s decision to reconsider a request and reverse its noncertification decision, prior to the

insurer notifying the organization of the reversal, or when a review is terminated because the

insurer failed to provide information to the review organization.

The HCR Program acts as the liaison between insurers and IROs for invoicing and payment of

IRO services. As the contracting entity with the IROs, it is the responsibility of the Department

to insure that IROs are paid in a timely manner for their services. Compliance with payment

timeframes by all insurers is monitored and reported on a weekly basis by the HCR Program

Administrative Assistant and reported to the HCR Program Director.

Overall, the Program’s experience to date has been that insurers are cooperative during the

handling of external review cases and are meeting their statutory obligations with respect to

deadlines and payment notifications.

D. Consumer Counseling on UR and Internal Appeal and Grievance Procedures

The HCR Program provides consumer counseling on utilization review and internal appeals and

grievance issues. Consumers speak with professional registered nurses who are clinically

experienced and knowledgeable regarding medical denials.

In providing consumer counseling, the HCR Program staff explain state laws that govern

utilization review and the appeal and grievance process. If asked, staff will suggest general

resources where the consumer may find supporting information regarding their case, suggest

collaboration with their physician to identify the most current scientific clinical evidence to

support their treatment, and explain how to use supporting information during the appeal

process.

In providing consumer counseling, staff will not give an opinion regarding the appropriateness

of the requested treatment, suggest alternate modes of treatment, provide specific detailed

articles or documents that relate to the requested treatment, give medical advice or prepare the

consumer’s case for them. Consumers requesting further assistance with the preparation of their

appeal or grievance, or of their external review request, are referred to the Office of Managed

Care Patient Assistance located within the Attorney General’s Office. Providing these

counseling services offers consumer’s continuity in those cases where the appeal process does

not conclude the matter and an external review is requested.

E. Community Outreach and Education on External Review and HCR Program

Services

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The HCR Program actively promotes consumer and provider awareness of external review

services through a comprehensive community outreach and education program. Strategies used

to inform and educate consumers and providers have included health fairs, group presentations,

publications, radio interviews and direct mailings to physicians, physician office administrators

and hospital business managers. In 2004, the HCR Program sought to expand its consumer

awareness campaign of external review services by displaying external review signage ( poster

size) in the patient waiting area of doctor’s offices and hospitals. A letter from the

Commissioner, along with two posters and a brochure about the Program, was sent to physician

practice administrators and hospital business managers throughout the State. In November,

2005, an electronic notice about external review services was e- mailed to State Agencies, North

Carolina Public Schools, State Universities and Community Colleges, Chambers of Commerce

and allied health providers. Recipients of the electronic notice were asked to forward the

message on to their employees, staff and colleagues. In December, 2005, HCR Program

received the largest number of requests for external review from consumers since the Program

began on July 1, 2002. In 2006, The HCR Program mailed out to physician practice

administrators and hospital business office managers, an HCR Program external review services

contact card, designed to be included in an address/ telephone file. This card, along with a

Program brochure and letter from the Commission of Insurance highlighting the importance of

the Program, was well received based on calls the Program staff received from the recipients.

Other initiatives completed during this reporting period include changes to the format on both

the main HCR Program web page and the Consumer Counseling page to facilitate ease of use

and provide additional information about services available through the Program. The online

external review request form and web page underwent revisions to become more “ user

friendly”, and clarify eligibility requirements for external review.

IV. Program Activity Data

A. Consumer Contacts

Consumer Telephone Calls

The HCR Program received 5,551 calls from consumers related to external review and consumer

counseling services during the period of January 1, 2003 – December 31, 2006. Figure 1 shows

the volume of calls received by year. In June, 2006, the HCR Program experienced an

equipment failure relating to the automated phone data collection system. While consumers

never lost the ability to contact the HCR Program staff, the ability to capture the call data was

lost. In September, 2006, a new PBX phone system was installed, including web- based software

to collect phone activity data. Therefore, the volume of phone activity reported in 2006 only

reflects eight months of data collection. During the reporting period, consumer telephone calls

include questions pertaining to external review service, as well as those from consumers and

providers seeking assistance, information and counseling relating to utilization review, an

insurer’s appeals and grievance process or external review. Overall, the number of calls remains

constant, identifying a continued need for consumer information.

- 6 -

Figure 1: Comparison of External Review and Consumer Counseling

Call Volume Received by the HCR Program by Calendar Year,

January 1, 2003 – December 31, 2006

Consumer Web Site Contacts

Over the last four years, the HCR Program has utilized the Department’s website to inform and

educate consumers about External Review Services. HCR’s web information has been refined

over the years based on Program changes, industry comments and consumer feedback.

Beginning in 2003, the Program began monitoring the number of consumers accessing different

web pages of the Program’s information. The data in Figure 2 shows that a large number of

consumers continue to access the main HCR Program website each year. In 2006, changes were

made to the Program’s website which allowed consumers to select the Consumer Counseling

page first without having to navigate through the Program’s main web page. Thus, the number

of consumers who accessed the Program’s main web page declined and the number of consumers

accessing the Consumer Counseling web page increased. The collective data shows that

consumers continue to seek additional information relating to appeals and grievances on the

consumer counseling page. The number of consumers accessing the External Review Request

Form web page has remained stable over the last four years.

1,468 1,413

1,508

1,162

0

200

400

600

800

1,000

1,200

1,400

1,600

Number of Cases

2003 2004 2005 2006

- 7 -

Figure 2: Comparison of HCR Program Web Site Page Access Activity

by Calendar Year, January 1, 2003 – December 31, 2006

B. Consumer Counseling Activity ( Utilization Review, Appeals & Grievances)

The HCR Program counseled 1,674 consumers during the period of January 1, 2003 – December

31, 2006. As shown in Figure 3, the volume of consumer counseling cases has remained steady

during this four- year reporting period. The graph also shows the percentage of consumer

counseling calls that were related to appeals and grievances issues. In 2003, the Program

collected call volume activity, but did not designate the nature of the call. In 2004, 535 calls

were received and 55.7 percent of the calls involved HCR Program staff providing consumer

counseling on utilization review, internal appeals and grievance issues, and external review. In

2005, although fewer calls were received by the Program, a higher percentage of those calls

related to counseling on appeals and grievance issues. By 2006, while only 370 calls were

received, 71.4 percent of the calls involved counseling the consumer on utilization review,

internal appeal and grievance issues, and external review.

Over the last four years, consumer counseling cases have involved the following issues:

• Insurer’s claim payment.

• Insurance coverage.

• Issues relating to insurance coverage other than health benefit plan.

• Denials made by self- funded employer plans regulated under Employee Retirement

Income Security Act ( ERISA).

• Network Access.

• Insurers not regulated under North Carolina law.

8,719

7,351

8,238

5,558

2,741

4,333 4,272

4,883

806 934 916 800

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Number of Times Web Page Accessed

HCR Program Main

Web Page

Consumer Counseling Page Request Form

2003 2004 2005 2006

- 8 -

• Insurance coverage issues.

• Pre- existing condition issues.

HCR Program staff continues to refer consumers to appropriate resources if their concern cannot

be addressed by Program staff. During the past four years, consumers have been referred to the

Department’s Consumer Services Division, United States Department of Labor, Managed Care

Patient Assistance Program and other state insurance regulatory agencies, as well as Federal

agencies ( i. e., Centers for Medicare & Medicaid Services).

Figure 3: Comparison of Consumer Counseling Case Volume Received

by the HCR Program by Calendar Year, January 1, 2003 – December 31, 2006

370

396

535

373

71.40%

55.70%

67.30%

0

100

200

300

400

500

600

2003 2004 2005 2006

0%

10%

20%

30%

40%

50%

60%

70%

80%

Number of Consumer Calls Percentage of Calls Relating to Appeals & Grievances

C. External Review Requests

During the period of January 1, 2003 - December 31, 2006, the HCR Program received 967

requests for external review. Figure 4 compares the volume of requests for each year. The data

indicates that the volume of requests received during this reporting period has remained stable.

Further analysis by the HCR Program did not find any specific patterns or trends relative to time

of year or specific months where the Program receives significantly more or less requests. The

HCR Program attributes the sustained level of activity to the ongoing community outreach

efforts to educate consumers and providers about the Program, as well as the counseling given to

consumers early in the appeal process.

- 9 -

Figure 4: Comparison of External Review Requests Received by the HCR

Program by Calendar Year, January 1, 2003 – December 31, 2006

D. Eligibility Determinations on Requests for External Review

A request for external review is made directly to the HCR Program. The HCR Program staff

reviews each request for completeness and eligibility. Upon receipt of an incomplete request, the

consumer is notified, sent a Request Form and/ or notified of the missing information, and given

a date to submit the missing information in order for the request to be complete and received by

HCR staff as set forth in statute.

Eligibility of requests received is considered on the basis of individuals who requested review

rather than each separate request. Because consumers may submit an incomplete request for

external review and subsequently submit a completed request, counting all incomplete requests

as ineligible does not accurately reflect the number of requesters who were denied an external

review.

A year- to- year analysis of consumers who submit an incomplete request, and the resulting

percentage of accepted cases is as follows:

In 2003, 220 requests were received and 46 requests were deemed to be incomplete. Of those

requestors, 32 requestors resubmitted a request that was deemed eligible for external review.

Four individuals who resubmitted requests were deemed ineligible. Of the 184 individuals

requesting an external review, 90 cases ( 48.9%) were accepted.

In 2004, 201 requests were received and 41 requests were deemed incomplete. Of those

requestors, 30 requestors resubmitted a request that was eligible for external review. Four

additional resubmitted requests were deemed ineligible. Of the 167 individuals requesting an

external review, 77 cases ( 46.1%) were accepted.

220 201

291 255

0

50

100

150

200

250

300

Number of Cases

2003 2004 2005 2006

- 10 -

For 2005, the Program saw an increase in the number of “ incomplete” requests. Of the 291

requests received in 2005, 85 were deemed to be incomplete. Of those requestors, 43 requestors

resubmitted a request that was eligible for external review. Seventeen additional resubmitted

requests were deemed ineligible. Thus, 231 individuals requested external review in 2005 and

107 cases ( 46.3%) were accepted

During 2006, the Program received 255 requests, and 47 requests were deemed incomplete. Of

those requestors, 24 resubmitted and an additional eight requests were deemed ineligible. For

this year, 222 individuals requested an external review and 113 cases ( 50.9%) were accepted.

The data shows that over the last four years, the number of individuals requesting an external

review has increased. Also, while the number of individuals requesting an external review in

2006 did decline slightly from 2005, the percentage of cases accepted rose. Table 1 explains

how the Program considers “ incomplete” requests, as it relates to the number of individuals who

request an external review.

Table 1: Disposition of Incomplete Requests Made to the HCR Program by Calendar

Year, January 1, 2003 – December 31, 2006

Disposition of Incomplete Request 2003 2004 2005 2006

Resubmitted— Accepted for External

Review 32 30 43 25

Resubmitted— Not Accepted Due to:

* Service Excluded 1 0 1 0

* No Medical Necessity Determination 0 1 2 2

* Self Funded 1 0 2 2

* Situs of Contract Not NC 1 0 1 1

* Past Required Time Frame 0 1 4 0

* Request Withdrawn 0 0 1 0

* Internal Appeals Not Exhausted 1 1 5 3

* No Denial Issued 0 0 1 0

* Expedited Criteria Not Met 0 1 0 0

Subtotal: 4 4 17 8

Never Resubmitted, Request made by:

* Provider 1 1 12 6

* Consumer 7 5 11 8

* Authorized Representative 2 1 2 0

Subtotal: 10 7 25 14

Grand Total of Incomplete Requests: 46 41 85 47

Of the 967 requests received during this four- year reporting period, 163 ( 16.8%) involved re-submission

of a request previously denied because it was incomplete. Therefore, eligibility

determinations were made on 804 different individuals requesting external review during this

time.

- 11 -

Figure 5 shows the disposition of requests for external review for the period of January 1, 2003 –

December 31, 2006. The percentage of requests that have been determined to be eligible has

generally remained constant over the last four years, as has the percentage of requests that were

determined to be ineligible for review. A year- by- year breakdown of the percentage of requests

eligible by request type is as follows:

Standard Requests:

• 2003 – 43.5% Deemed Eligible

• 2004 – 40.1% Deemed Eligible

• 2005 – 40.7% Deemed Eligible

• 2006 – 48.7% Deemed Eligible

Expedited Requests:

• 2003 – 5.4% Deemed Eligible

• 2004 – 6.0% Deemed Eligible

• 2005 – 5.6% Deemed Eligible

• 2006 – 2.2% Deemed Eligible

Figure 5: Comparison of Disposition of External Review Requests

Received by Calendar Year, January 1, 2003 – December 31, 2006

Requested

Expedited,

Eligible as

Standard, 10,

1.2%

Not Accepted,

Standard, 382,

44.3%

Not Accepted,

Expedited, 73,

8.4%

Eligible as

Requested,

Standard, 356,

41.2%

Eligible as

Requested,

Expedited, 42,

4.9%

The reason why a case would not be accepted falls into two ( 2) major categories: “ no

jurisdiction” or “ ineligible”. “ No jurisdiction” refers to those cases whose insurer did not fall

under the jurisdiction of the Department, such as self- funded employer health plans, Medicare or

those policies whose contract is sitused in a state other than North Carolina. “ Ineligibility” refers

to those cases that did not fulfill the statutory requirements for eligibility for an external review.

Table 2 shows the number of cases that were not accepted for review and the reasons for which

they were not accepted for each year of operation. During this four- year reporting period, non-

- 12 -

accepted requests due to “ ineligible” reasons rather than “ no jurisdiction” reasons continue to

make up the largest numbers for external review requests to be deemed ineligible. Consumers

who received a denial from their insurance company that did not involve a noncertification, or

had not exhausted their insurer’s appeal process prior to requesting an external review represent

the largest number of requests that were not accepted.

Incomplete requests represented a significantly higher percentage of requests not accepted in

2005 at 20.1 percent, up from 7.8 percent in 2004. The increase in the percentage of incomplete

requests in 2005 reflects the number of providers who submitted an incomplete external review

request on behalf of a consumer, but then never resubmitted a completed request ( Table 1). In

2006, the number of incomplete requests declined to 14 ( 12.8%), as did the number of

incomplete requests from providers. Also in 2006, nine requests for external review were not

accepted due to the consumer missing the insurer’s timeframe to request an appeal in order to

exhaust the internal appeal process. In previous years, this has not been a reason for non-acceptance.

Some other general observations based on the data collected over the four- year period are as

follows:

• The number of denials due to “ no medical necessity denial” has remained constant.

• The number of requests from consumers covered under a self- funded plan has steadily

increased.

• In 2006, there was a decline in the number of requests denied because the consumer did

not complete the insurer’s internal appeal process.

• In requesting an external review, 2006 was the first year that the percentage of eligible

cases ( 50.9%) was greater than the percentage of ineligible cases ( 49.1%).

The HCR Program staff contacts all consumers and providers ( when contact information is

available) who have submitted an incomplete request to instruct them on the process and

requirements for submitting a complete request.

- 13 -

Table 2: Reasons for Non- Acceptance of an External Review Request,

January 1, 2003 – December 31, 2006

Reason for Non- acceptance

Number of

Requests

INELIGIBLE 2003 2004 2005 2006

Denial Decision Pre- dates Law 1 0 0 0

Missed Insurer’s Timeframe to Complete Appeals 0 0 0 9

Health Criteria Not Met For Expedited, Not Eligible as

Standard 8 4 3 0

Not a Medical Necessity Determination 18 20 25 25

Request Withdrawn 1 4 3 4

Service Excluded 14 8 8 3

No Denial Issued 0 2 6 1

Insurer’s Expedited Appeal not Requested Prior to Request 0 0 1 0

Not Covered Under Health Plan 0 2 0 0

Retrospective Services-- Not Eligible For Expedited 0 2 1 2

Past 60 Day Request Time Frame 7 6 5 5

Insurer Appeal Process Not Exhausted 17 19 22 12

Insurance Type Not Eligible For External Review 5 5 2 4

Request is Incomplete, No Resubmission of Request 10 7 25 14

Total Ineligible 81 79 101 79

NO JURISDICTION

Contract Situs Not In NC 3 1 7 7

Self- Funded 9 10 14 23

Medicare HMO 1 0 2 0

Total No Jurisdiction 13 11 23 30

Total Requests Not Accepted 94 90 124 109

E. Outcomes of Accepted Cases

During this four- year reporting period, the HCR Program has accepted a total of 387 cases for

external review. From January 1, 2003 – December 31, 2006, the ratio of cases upheld compared

to cases overturned or reversed by the insurer has remained relatively constant. In 2003, 45.5

percent of the cases were overturned/ reversed, in 2004, 40.2 percent of the cases were

overturned, in 2005, 42.9 percent of the cases were overturned/ reversed and in 2006, 41.5

percent of the cases were overturned/ reversed. Figure 6 shows the outcomes of external reviews

performed compared by calendar year.

- 14 -

Figure 6: Comparison of Case Outcomes by Calendar Year,

January 1, 2003 – December 31, 2006

Of the 387 cases accepted for external review in this four- year reporting period, 42.6 percent of

the cases have resulted in coverage for the disputed services for consumers who requested

external review, due either to the insurer reversing its own denial or the IRO overturning the

insurer’s noncertification, as shown in Figure 7.

Figure 7: Percentage of Outcomes for All Accepted Cases,

January 1, 2003 – December 31, 2006

Upheld, 222,

57.4%

Reversed by

Insurer, 16,

4.1%

Overturned,

149, 38.5%

49 40

1

46

31

61

37

9

66

41

6

0

10

20

30

40

50

60

70

Number of Cases

2003 2004 2005 2006

Upheld Overturned Reversed by Insurer

- 15 -

F. Types of External Review Requested

The HCR Program continues to receive and accept significantly more cases to be processed on a

standard basis versus an expedited basis. In order to be eligible for expedited processing, a

contracted medical consultant, having no association with the insurer, must advise that the time

frame required to complete the insurer’s internal appeal or a standard external review is likely to

seriously jeopardize the patient’s life, health or ability to regain maximum function. Figure 8

shows a comparison of cases accepted by type of review by calendar year. Figure 9 shows a

comparison of expedited external review requests received and accepted by calendar year.

Figure 8: Comparison of External Review Cases Accepted by Type of

Review by Calendar Year, January 1, 2003 – December 31, 2006

Figure 9: Comparison of Expedited External Review Requests Received and Accepted

by Calendar Year, January 1, 2003 – December 31, 2006

80

10

67

10

94

13

108

5

0

20

40

60

80

100

120

Number of Cases

2003 2004 2005 2006

Standard Cases Expedited Cases

23

10

29

10

30

13

19

5

0

5

10

15

20

25

30

Number of Cases

2003 2004 2005 2006

Expedited Cases Received Expedited Cases Accepted

- 16 -

G. Average Time to Process Accepted Cases

When a case is assigned to an IRO for a determination, the IRO must render a decision within

the time frames mandated under North Carolina law. For a standard review, the decision must be

rendered by the 45th calendar day following the date of the HCR Program’s receipt of the

request. For an expedited request, the IRO has until the 4th business day following the HCR

Program’s receipt of the request. Most cases accepted on a standard basis are completed

between the 36th and 45th day. Most cases accepted on an expedited basis are completed between

the 3rd and 4th business day. In no case was the mandated deadline for a decision not met during

this four- year reporting period.

V. Activity by Type of Service Requested

The HCR Program classifies accepted cases into “ general” service categories. In order to give

the reader a full picture of the types of service that are the subject of external review, the

discussion of activity by type of service will first encompass cumulative activity and then

compare activity by calendar year where comparison is relevant. Figure 10 shows the

cumulative number of accepted cases by type of service requested for January 1, 2003 –

December 31, 2006. Surgical service continues to be the largest share of accepted cases,

representing 38.5 percent of the 387 accepted cases for external review. Inpatient mental health

has the second largest share of requests ( 12.7%) with durable medical equipment ( DME) with

the third largest share of requests ( 11.6%). Figure 11 shows the number of accepted cases by

type of service for 2006. The type of service requested by consumers that was subject to external

review in 2006 is proportionately similar to what the HCR Program has seen over the last four

years.

Figure 10: Accepted Cases by Type of Service Requested,

January 1, 2003 – December 31, 2006

Oncology, 13, 3.3%

Pharmacy, 30, 7.8%

Lab, Imaging, Testing,

26, 6.7%

Inpatient

Rehabilitation, 1, 0.2%

Inpatient Mental

Health, 49, 12.7%

Home Health Nursing,

2, 0.5%

Hospital Length of

Stay, 5, 1.3%

DME, 45, 11.6%

Chiropractic, 3, 0.8%

Transplant, 7, 1.8%

Surgical Services,

149, 38.5%

Outpatient Mental

Health, 6, 1.6%

Physician Services,

15, 3.9%

Rehabilitation

Services, 9, 2.3%

Skilled Nursing

Facility, 27, 7.0%

- 17 -

Figure 11: Accepted Cases by Type of Service Requested

January 1, 2006 – December 31, 2006

Pharmacy, 7, 6.1%

Oncology, 4, 3.5%

Physician Services,

2, 1.8%

Rehabilitation

Services, 2, 1.8%

Skilled Nursing

Facility, 9, 8.0%

Lab, Imaging,

Testing, 9, 8.0%

Inpatient Mental

Health, 20, 17.7%

DME, 11, 9.7%

Hospital Length of

Stay, 2, 1.8%

Surgical Services,

47, 41.6%

Although the HCR Program historically reports primarily on the basis of the general types of

services under dispute, information on specific service types is also kept by the Program to

analyze activity and identify trends.

Table 3 gives the reader a listing of the specific services, along with the number of accepted

cases for that service, that made up the general type of service category used for reporting for the

period of July 1, 2002 – December 31, 2006. As has been reported in previous years, surgical

service cases represent the largest number of accepted cases. By specific service type,

orthognothic surgery represented the largest number of cases ( 29) followed by vein surgery ( 22

cases), and gastric bypass surgery ( 21 cases). Breast reduction and vagus nerve stimulator

( VNS) surgeries each had 14 cases.

Table 3: Type of General Service and Specific Services Requested

for all Accepted Cases for External Review, July 1, 2002 – December 31, 2006

- 18 -

Type of General Services and Specific Services Requested

Chiropractics ( 3) Inpatient Mental Health ( 50) Pharmacy ( 32) Surgical Services ( 156)

• Chiropractic Services ( 3) • Admission- Acute Setting ( 5) • Botox ( 9)

DME ( 50) • Length of Stay- Acute Setting ( 25) • Synagis ( 5)

• Admission- Residential Setting ( 15) • Non- Steroidal Antiinflammatory ( 3)

• Length of Stay- Residential Setting ( 2) • Growth Hormone ( 1)

• Partial Hospitalization Level ( 3) • Remicade ( 2)

Inpatient Rehabilitation ( 1) • Steroid Injections ( 1)

• Orthopedic Rehabilitation ( 1) • IV Antibiotics for Lyme Disease ( 2)

Lab, Imaging, Testing ( 26) • Chelation Therapy ( 3)

• Provigil ( 3)

• Zelnorm ( 2)

• Prilosec ( 1)

Physician Services ( 15)

• Extracorporeal Shockwave ( 5)

• General Physician Treatment ( 2)

• Insulin Potentiation ( 1)

• Laser Treatment / Dermatology ( 7)

• Anodyne Therapy ( 2)

• Blood Monitoring Device ( 2)

• Bone Growth Stimulator ( 2)

• CPAP ( 1)

• CPM Machine ( 2)

• Cranial Banding ( 24)

• Electronic Speech Aid ( 2)

• External Insulin Pump ( 1)

• Leg Prosthesis ( 2)

• Nocturnal Enuresis Alarm ( 1)

• Orthotics ( 1)

• Oxygen Chamber ( Hyperbaric) ( 2)

• Scooter, Motorized ( 2)

• Stair Lift ( 1)

• UVB Light Machine ( 1)

• Vest Airway Clearance System ( 4)

• Cardiac Risk Assessment ( 4)

• Full Body Photography ( 1)

• Gastroenterological Testing ( 2)

• General Blood Work ( 2)

• MRI ( 4)

• Oncotype Breast Cancer Assay ( 6)

• PET Scan ( 4)

• Polysomnogram ( 1)

• Testing/ Evaluation for Taste/ Smell ( 1)

• Transcranial Doppler ( 1)

Rehabilitation Services ( 11)

Emergency Treatment ( 1) Oncology ( 13) • Biofeedback ( 1)

• Emergency Infectious Disease ( 1) • Cardiac Rehabilitation ( 2)

Home Health Nursing ( 3) • Physical Therapy ( 1)

• Private Duty Nursing ( 3) • Speech Therapy ( 7)

Hospital Length of Stay ( 5) Skilled Nursing Facility ( 28)

• SIR- Spheres Therapy ( 6)

• Renal Ablation ( 2)

• Chemotherapy ( 1)

• Mammosite Radiation ( 2)

• Intraperitoneal Chemotherapy ( 2) • Skilled Nursing Facility ( 28)

Outpatient Mental Health ( 6) Transplant ( 8)

• Cardiac ( 2)

• Cancer ( 1)

• Gastroenterology ( 1)

• Neurology ( 1)

• Psychoanalysis ( 1)

• Substance Abuse ( 4)

• Medication Management ( 1)

• Corneal Transplant ( 1)

• Stem Cell Transplant ( 7)

• Blepharoplasty ( 2)

• Brain Surgery ( 1)

• Breast Reduction ( 14)

• Capsulorrhaphy ( 2)

• Cochlear Implant ( 1)

• Craniectomy ( 1)

• Discectomy ( 2)

• Ears, Nose, Throat ( 4)

• Essure Sterilization ( 1)

• Gall Bladder Surgery ( 2)

• Gastric Bypass Surgery ( 21)

• Hysterectomy ( 4)

• IDET ( 2)

• Intrauterine Surgery ( 2)

• In Utero Surgery ( 1)

• Keloid Removal ( 1)

• Lipoma Removal ( 1)

• Liposuction ( 1)

• Lumbar Laminectomy ( 1)

• Metal on Metal Resurfacing ( 5)

• Mole Removal ( 1)

• Orthognothic/ Oral Surgery ( 29)

• Ortho Graft/ Replacement ( 7)

• Panniculectomy ( 12)

• Pectus Excavatum ( 1)

• RACZ Neurolysis ( 1)

• Vein Surgery ( 22)

• Vagus Nerve Stimulator ( 14)

- 19 -

Figure 12 demonstrates the favorable outcomes for consumers and insurers as it relates to the

cases involving vein surgery that have been received by the HCR Program over the past four

years. Case outcomes have consistently favored the insurer for this type of service, with only

four cases in four years being decided in favor of the consumer. During 2004 and 2005 there

were no cases decided in favor of the consumer.

Figure 12: Outcomes of Vein Surgery Cases,

January 1, 2003 – December 31, 2006

The information in Figure 13 represents the outcomes for orthognothic surgery for the four- year

reporting period. This specific type of service resulted in more favorable outcomes for

consumers than insurers for each of the years reported. In 2003 and 2004 there were no cases

that were decided in favor of the insurer. During 2005 and 2006, this type of service resulted in

a more than twice the positive outcome for consumers than for insurers.

Figure 13: Outcomes of Orthognothic Surgery Cases,

January 1, 2003 – December 31, 2006

0

1

2

3

4

5

6

7

8

9

2003 2004 2005 2006

Number of Cases

Decision in Favor of Consumer Decision in Favor of Insurer

0

1

2

3

4

5

6

7

8

9

2003 2004 2005 2006

Number of Cases

Decision in Favor of Consumer Decision in Favor of Insurer

- 20 -

Figure 14 shows the outcomes for gastric bypass surgery cases received by the HCR Program for

the past four years. The outcomes for this type of case are variable, showing a decline in

favorable outcomes for consumers in 2004 and 2005. The outcomes became more favorable for

consumers in 2006.

Figure 14: Outcomes of Gastric Bypass Surgery Cases,

January 1, 2003 – December 31, 2006

Figure 15 shows the outcomes for DOC Band ( cranial banding) cases received by the HCR

Program. Outcomes in 2003 and 2004 clearly showed a more favorable outcome toward

consumers than insurers. Favorable outcomes for insurers remained constant between 2004 and

2006. Outcomes for consumers show a sharp decline in 2005 and no cases were decided in favor

of the consumer in 2006.

Figure 15: Outcomes of DOC Band Cases,

January 1, 2003 – December 31, 2006

0 1

2 3

4 5

6 7

2003 2004 2005 2006

Number of Cases

Decision in Favor of Consumer Decision in Favor of Insurer

0

1

2

3

4

5

6

7

2003 2004 2005 2006

Number of Cases

Decision in Favor of Consumer Decision in Favor of Insurer

- 21 -

Figure 16 shows that in 2003 and 2004, the majority of IRO decisions for skilled nursing facility

service upheld the insurer’s decision. In 2005 and 2006, the reverse was true and the majority of

cases were overturned.

Figure 16: Outcomes of Skilled Nursing Facility Cases,

January 1, 2003 – December 31, 2006

Figure 17 shows that in 2003 and 2004, the majority of IRO decisions for inpatient mental health

cases upheld the insurer’s decision. By 2005, consumers had experienced a sharp increase in

cases decided in their favor which continued into 2006.

Figure 17: Outcomes of Inpatient Mental Health Cases,

January 1, 2003 – December 31, 2006

Table 4 shows a comparison of the percentage share that each service type held for all accepted

cases as well as for each case outcome by calendar year for the reporting period. In reviewing

the data, the following observations are noted:

0

1

2

3

4

5

6

7

2003 2004 2005 2006

Number of Cases

Decision in Favor of Consumer Decision in Favor of Insurer

0

2

4

6

8

10

12

14

2003 2004 2005 2006 Number of Cases

Decision in Favor of Consumer Decision in Favor of Insurer

- 22 -

• Throughout the four- year reporting period, surgical services have consistently had the

largest number of accepted cases.

• In year 2003, surgical cases represented 50 percent of all overturned cases. In the

following years, the percentage share of surgical cases that were overturned declined to

25.8 percent in 2004, increased to 29.7 percent in 2005, and represented 39 percent of all

overturned cases in 2006. In 2005, surgical cases also represented 11.1 percent of all

reversed cases and 16.7 percent of all reversed cases in 2006.

• The number and percentage share of accepted inpatient mental health cases has steadily

increased over the four- year reporting period. The percentage share of overturned

inpatient mental health cases has steadily increased. In 2003, inpatient mental health

cases represented 7.8 percent of accepted cases, and represented 5 percent of the cases

that were overturned. In 2006, inpatient mental health cases comprised 17.7 percent of

accepted cases and 22.0 percent of cases overturned. Also in 2006, inpatient mental

health cases represented 50 percent of all cases reversed by the insurer.

• During this four- year reporting period, the volume and percentage share of overturned

cases for skilled nursing facility services has fluctuated. In 2003, the Program accepted

nine cases which made up 10 percent of the accepted cases and 10 percent of the

overturned cases. In 2004, five cases were accepted comprising 6.5 percent of the

accepted cases and zero percent of all overturned cases. In 2005, four cases were

accepted representing 3.7 percent of accepted cases and 5.4 percent of all overturned

cases. In 2006, the volume and percentage share of overturned cases for skilled care

services grew with the Program accepting nine cases representing 8 percent of accepted

cases and 14.6 percent of all overturned cases.

Table 4: Comparison of Percentage Share of Review Activity by Type of Service Requested,

January 1, 2003 – December 31, 2006

- 23 -

2003 2004 2005 2006

Outcomes Outcomes Outcomes Outcomes

Types of Service Number of

Accepted Cases

Percentage of

Accepted Cases

% Overturned

% Reversed

% Upheld

Number of

Accepted Cases

Percentage of

Accepted Cases

% Overturned

% Upheld

Number of

Accepted Cases

Percentage of

Accepted Cases

% Overturned

% Reversed

% Upheld

Number of

Accepted Cases

Percentage of

Accepted Cases

% Overturned

% Reversed

% Upheld

Chiropractic 1 1.1 0.0 0.0 2.0 2 2.6 0.0 4.6 0 0.0 0.0 0.0 0.0 0 0.0 0.0 0.0 0.0

DME 7 7.8 12.5 0.0 4.1 14 18.2 25.8 13.0 13 12.2 8.1 11.1 14.8 11 9.7 7.3 0.0 12.2

Home Health

Nursing 2 2.2 0.0 0.0 4.1 0 0.0 0.0 0.0 0 0.0 0.0 0.0 0.0 0 0.0 0.0 0.0 0.0

Hospital Length of

Stay 2 2.2 2.5 0.0 2.0 0 0.0 0.0 0.0 1 0.9 0.0 0.0 1.6 2 1.8 0.0 0.0 3.0

Inpatient Mental

Health 7 7.8 5.0 0.0 10.2 7 9.1 9.7 8.7 15 14.0 19.0 33.4 8.2 20 17.7 22.0 50.0 12.2

Inpatient

Rehabilitation 1 1.1 0.0 0.0 2.0 0 0.0 0.0 0.0 0 0.0 0.0 0.0 0.0 0 0.0 0.0 0.0 0.0

Lab, Imaging,

Testing 3 3.3 5.0 0.0 2.0 6 7.8 6.5 8.7 8 7.5 8.1 22.2 5.0 9 8.0 7.3 16.6 7.6

Oncology 3 3.3 2.5 0.0 4.1 3 3.9 3.2 4.4 3 2.8 5.4 0.0 1.6 4 3.5 2.5 0.0 4.5

Outpatient Mental

Health 1 1.1 0.0 0.0 2.0 0 0.0 0.0 0.0 5 4.7 5.4 0.0 5.0 0 0.0 0.0 0.0 0.0

Pharmacy 6 6.8 5.0 0.0 8.2 6 7.8 16.1 2.1 11 10.3 5.4 11.1 13.1 7 6.1 7.3 16.7 4.5

Physician Services 3 3.3 0.0 0.0 6.1 4 5.2 6.5 6.5 6 5.6 10.8 0.0 3.3 2 1.8 0.0 0.0 3.0

Rehabilitation

Services 2 2.2 5.0 0.0 0.0 4 5.2 3.2 6.5 1 0.9 0.0 0.0 1.6 2 1.8 0.0 0.0 3.0

Skilled Nursing

Facility 9 10.0 10.0 0.0 10.2 5 6.5 0.0 10.8 4 3.7 5.4 11.1 1.6 9 8.0 14.6 0.0 4.5

Surgical Services 41 45.6 50.0 100.0 41.0 23 29.8 25.8 30.4 38 35.5 29.7 11.1 42.6 47 41.6 39.0 16.7 45.5

Transplant 2 2.2 2.5 0.0 2.0 3 3.9 3.2 4.3 2 1.9 2.7 0.0 1.6 0 0.0 0.0 0.0 0.0

Total 90 100 100 100 100 77 100 100 100 107 100 100 100 100 113 100 100 100 100

- 24 -

Because of the increasing types of services that are denied and the basis upon which the

noncertification is issued, it is important for the reader to differentiate between a medical

necessity denial and other types of noncertifications ( i. e., experimental/ investigational or

cosmetic). Decisions made by IROs are considered by the nature of the noncertification, as well

as the service requested. For example, an insurer may base its denial decision solely on the

medical necessity of the procedure, evaluating whether the procedure meets its guidelines for

appropriateness for the covered person’s condition. However, noncertifications are also any

situation where the insurer makes a decision about the covered person’s condition to determine

whether a requested treatment is experimental, investigational or cosmetic, and the extent of

coverage is affected by that decision. A further breakdown of case outcomes as they relate to the

service type and the nature of the noncertification are shown in Table 5.

The data in Table 5, which depicts by year, only those cases that proceeded to a full review by

the IRO, shows that there were those types of services where denial decisions were made solely

on the basis of medical necessity. Overall, the percentage share of cases accepted for each type

of noncertification remains relatively similar throughout the four- year reporting period. Medical

necessity cases continue to represent the largest share of noncertification types seen by the

Program. For these types of cases, 2006 had the greatest percentage of cases overturned by the

IRO with 56.6 percent, followed by 2003 with 48 percent, 2005 with 44.2 percent and 2004 with

37.5 percent of the cases overturned by the IRO. Outcomes in 2005 had a greater percentage of

cases overturned by the IRO ( 37.5% in 2004 and 44.2% in 2005). In 2004, cosmetic outcomes

remained relatively even between overturned and upheld. However, of the eight cases that were

overturned, six cases were for cranial banding ( durable medical equipment). Of the seven

cosmetic cases whose outcome was upheld, two of those cases were cranial banding. In 2005,

almost twice as many cosmetic cases were upheld as were overturned. A closer review of the

case type did not reveal any propensity for one type of service. For all four years, outcomes for

cases denied due to the experimental or investigational nature of the treatment for the condition,

were almost twice as ( or more) likely to be upheld as overturned. The number of cases available

for analysis remains small and cannot be relied upon to make any generalizations relating to

outcomes at this point.

- 25 -

Table 5: Comparison of Outcomes of Accepted External Review Requests by Service

Type and Denial Type by Calendar Year, January 1, 2003 – December 31, 2006

2003 2004

Medical

Necessity Exp. / Inv. Cosmetic Medical

Necessity Exp. / Inv. Cosmetic

Service Type

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Chiropractic -- 1 -- -- -- -- -- 2 -- -- -- --

DME 2 2 1 -- 2 -- 1 2 1 2 6 2

Home Health Nursing -- 2 -- -- -- -- -- -- -- -- -- --

Hospital Length of

Stay 1 1 -- -- -- -- -- -- -- -- -- --

Inpatient Mental Health 2 5 -- -- -- -- 3 4 -- -- -- --

Inpatient Rehabilitation -- 1 -- -- -- -- -- -- -- -- -- --

Lab, Imaging, Testing 2 -- -- 1 -- -- -- 2 2 2 -- --

Oncology -- -- 1 2 -- -- -- -- 1 2 -- --

Outpatient Mental

Health -- 1 -- -- -- -- -- -- -- -- -- --

Pharmacy -- 3 2 1 -- -- 2 1 2 -- 1 --

Physician Services -- 1 -- 2 -- -- 1 -- -- 1 1 1

Rehabilitation Services 2 -- -- -- -- -- -- 2 1 1 -- --

Skilled Nursing Facility 4 5 -- -- -- -- -- 5 -- -- -- --

Surgical Services 12 5 5 13 3 2 8 6 -- 5 -- 4

Transplant -- -- 1 1 -- -- -- 1 1 1 -- --

Total 25 27 10 20 5 2 15 25 8 14 8 7

Percentage of Case

Volume 58.4% 33.7% 7.9% 51.9% 28.6% 19.5%

- 26 -

Table 5: Comparison of Outcomes of Accepted External Review Requests by Service

Type and Denial Type by Calendar Year, January 1, 2003 – December 31, 2006 ( Cont.)

2005 2006

Medical

Necessity Exp. / Inv. Cosmetic Medical

Necessity Exp. / Inv. Cosmetic

Service Type

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Overturned

Upheld

Chiropractic -- -- -- -- -- -- -- -- -- -- -- --

DME 1 3 -- 4 2 2 3 4 -- 2 -- 2

Home Health Nursing -- -- -- -- -- -- -- -- -- -- -- --

Hospital Length of Stay -- 1 -- -- -- -- -- 2 -- -- -- --

Inpatient Mental Health 7 5 -- -- -- -- 9 8 -- -- -- --

Inpatient Rehabilitation -- -- -- -- -- -- -- -- -- -- -- --

Lab, Imaging, Testing 1 -- 2 3 -- -- 1 -- 2 4 -- 1

Oncology -- -- 2 1 -- -- -- -- 1 3 -- --

Outpatient Mental

Health 2 3 -- -- -- -- -- -- -- -- -- --

Pharmacy -- 3 2 5 -- -- 1 1 2 2 -- --

Physician Services 1 1 1 -- 2 1 -- -- -- 2 -- --

Rehabilitation Services -- 1 -- -- -- -- -- 2 -- -- -- --

Skilled Nursing Facility 2 1 -- -- -- -- 6 3 -- -- -- --

Surgical Services 9 11 1 9 1 6 14 6 2 20 -- 4

Transplant -- -- 1 1 -- -- -- -- -- -- -- --

Total 23 29 9 23 5 9 34 26 7 33 0 7

Percentage of Case

Volume 53% 32.7% 14.3% 56.1% 37.4% 6.5%

Table 6 compares the outcomes of all accepted external review requests by the general service

type and the type of review granted by calendar year. Cases are accepted for expedited handling

when, on the advise of a contracted medical professional, the time frame for either completing

the insurer’s internal appeal process or a standard external review, would likely seriously

jeopardize the patient’s life, health or ability to regain maximum function. During 2003, 11.1

percent of the cases accepted were processed on an expedited basis. Clinical case types

included: renal ablation, botox injections for migraine headache and myofacial pain syndrome,

SIR- Spheres therapy for colon cancer, in- utero surgery, denial of continued inpatient hospital

stay for a perforated bowel, nursing services ( LPN) for bowel program, private duty nursing.

- 27 -

During 2004, 12.9 percent of cases were approved to be handled on an expedited basis. These

cases involved the following circumstances: application of a bone growth stimulator to be

applied during surgery, SIR- Spheres therapy, “ Mammosite” radiation therapy, Synagis injection

for premature infant lung development, discharge from skilled nursing facility, tonsillectomy and

stem cell transplant.

During 2005, 12.1 percent of the cases accepted were handled on an expedited basis. The cases

involved: cardiac catheterization, intraperitoneal hyperthermic chemotherapy, “ Mammosite”

radiation, Synagis, continued stay at a skilled nursing facility, tonsillectomy, and bone marrow

transplant.

In 2006, only 4.4 percent of the cases accepted were handled on an expedited basis. The cases

involved: laser ablation of RGSV and LGSV for phlebectomy, CPAP, vagus nerve stimulator

implantation, and Zelnorm for schleroderma.

For 2003 and 2004, only 30 percent of expedited cases were decided in favor of the patient. In

2005, 61.5 percent of expedited cases were decided in favor of the patient by the IRO or reversed

by the insurer. Similarly in 2006, 60 percent of the expedited cases were either decided in favor

of the patient by the IRO or reversed by the insurer.

.

- 28 -

Table 6: Comparison of Outcomes of Requests by Type of Service Requested by

Type of Review Granted by Calendar Year, January 1, 2003 – December 31, 2006

2003 2004 2005 2006

Standard Expedited Standard Expedited Standard Expedited Standard Expedited

Service Type Overturned

Reversed

Upheld

Overturned

Reversed

Upheld

Overturned

Upheld

Overturned

Upheld

Overturned

Reversed

Upheld

Overturned

Reversed

Upheld

Overturned

Reversed

Upheld

Overturned

Reversed

Upheld

Chiropractics -- -- 1 -- -- -- -- 2 -- -- -- -- -- -- -- -- -- -- -- -- -- --

DME 5 -- 2 -- -- -- 8 5 -- 1 3 1 9 -- -- -- 2 -- 8 1 -- --

Home Health Nursing -- -- -- -- -- 2 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --

Hospital Length of Stay 1 -- -- -- -- 1 -- -- -- -- -- -- 1 -- -- -- -- -- 2 -- -- --

Inpatient Mental Health 2 -- 5 -- -- -- 3 4 -- -- 7 3 5 -- -- -- 9 3 8 -- -- --

Inpatient Rehabilitation -- -- 1 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --

Lab, Imaging, Testing 1 -- 1 1 -- -- 2 4 -- -- 3 1 3 -- 1 -- 3 1 5 -- -- --

Oncology -- -- -- 1 -- 2 1 -- -- 2 -- -- -- 2 -- 1 1 -- 3 -- -- --

Outpatient Mental

Health -- -- 1 -- -- -- -- -- -- -- 2 -- 3 -- -- -- -- -- -- -- -- --

Pharmacy 1 -- 3 1 -- 1 4 1 1 -- 2 -- 5 -- 1 3 3 -- 3 -- 1 --

Physician Services -- -- 3 -- -- -- 2 3 -- -- 4 -- 2 -- -- -- -- -- 2 -- -- --

Rehabilitation Services 2 -- -- -- -- -- 1 3 -- -- -- -- 1 -- -- -- -- -- 2 -- -- --

Skilled Nursing Facility 4 -- 5 -- -- -- -- 2 -- 3 1 -- 1 1 1 -- 6 -- 3 -- -- --

Surgical Services 20 1 19 -- -- 1 7 14 1 -- 10 1 26 1 -- -- 15 1 28 1 -- 2

Transplant 1 -- 1 -- -- -- -- 1 1 1 -- -- -- 1 -- 1 -- -- -- -- -- --

Total 37 1 42 3 0 7 28 39 3 7 32 6 56 5 3 5 39 5 64 2 1 2

Percentage of Cases 88.9% 11.1% 87% 13% 87.9% 12.1% 95.6% 4.4%

- 29 -

A. Insurer and Type of Service Activity

In 2006, cases originating from State Health Plan’s Indemnity Plan, Blue Cross & Blue Shield of

North Carolina, and UnitedHealthcare of North Carolina, Inc., comprised 83.2 percent of the

external review activity. Twelve other insurers made up the remaining 16.8 percent of cases.

Eight of the insurers had only one case, State Health Plan’s PPO Plan had four external review

cases in 2006, WellPath Select, Inc. had three cases, the North Carolina Medical Society Health

Benefit Trust had two cases as did Guardian Life Insurance Company of America. With 48

cases accepted during 2006, the State Health Plan’s Indemnity Plan remains the health plan with

the largest number of requests for external review. Blue Cross & Blue Shield of North Carolina,

the state’s largest insurer, had the second largest number with 29 accepted cases. The percentage

share of insurer activity for 2006 is depicted in Figure 18 ( A) and ( B).

Figure 18: Insurers’ Share of Accepted External Review Requests,

January 1, 2006 – December 31, 2006

A. Insurers Comprising Majority of Cases

UnitedHealthcare

of North Carolina,

Inc., 17, 15%

Blue Cross & Blue

Shield of North

Carolina, 29,

25.7%

SHP Indemnity

Plan, 48, 42.5%

Other, 19, 16.8%

B. Other Insurers

American Medical

Security Life

Insurance Company,

1, 0.9%

Coventry Health and

Life Insurance

Company, 1, 0.9%

Connecticut General

Life Insurance

Company, 1, 0.9%

World Insurance

Company, 1, 0.9%

WellPath Select, Inc.,

3, 2.7%

United Healthcare

Insurance Company,

1, 0.9%

Union Security

Insurance Company,

1, 0.9%

UniCARE Life &

Health Insurance

Compnay, 1, 0.9%

SHP PPO Plan,

4, 3.5%

North Carolina

Medical Society

Health Benefit Trust,

2, 1.7%

North Carolina Bar

Association Health

Benefit Trust, 1,

0.9%

Guardian Life

Insurance Company

of America, 2, 1.7%

- 30 -

Figure 19 shows the insurers with the majority of accepted external review requests for the

reporting period of January 1, 2003 – December 31, 2006. State Health Plan’s Indemnity plan

has consistently had the largest number and percentage share of accepted requests over the four-year

reporting period. Twenty- six other insurers, State Health Plan’s PPO plan, CHIP and two

MEWAs make up the “ Other Insurers” category for the four- year reporting period.

Figure 19: Insurers with Majority of Accepted External Review Requests

January 1, 2003 – December 31, 2006

The rate of cases accepted for external review involving any specific insurer must be compared

to the number of covered members per month in order to have meaning for prevalence of

activity. HMOs are required to report “ member month” data to the Department on an annual

basis. Insurers offering indemnity and PPO plans are not required to report member months.

Member month data for both the State Health Plan’s Indemnity and PPO plans, and for CHIP is

reported to the Program upon request.

Table 7 provides a comparison of accepted case activity by insurer by member months from

January 1, 2003 – December 31, 2006. The data compares the top five insurers who have had

the most accepted cases, and who report member month data. The data shows that the rate of

external review activity for all HMOs and the State Health Plan’s Indemnity plan has remained

constant over the four- year period, and that all have had a case rate of less than one ( 1) case per

100,000 members. Overall, there are still too few cases of external review to draw any

conclusions regarding insurers and external review activity.

SHP Indemnity Plan,

171, 44.2%

Blue Cross & Blue

Shield of North

Carolina, 84, 21.7%

UnitedHealthcare of

North Carolina, Inc., 41,

10.6%

CIGNA Healthcare of

North Carolina, Inc. ,

18, 4.7%

Other Insurers, 58,

14.9%

WellPath Select, Inc.,

15, 3.9%

- 31 -

Table 7: Comparison of Accepted Case Activity by Insurer by Member Months by Calendar Year,

January 1, 2003 – December 31, 2006

2003 2004 2005 2006

Insurer

Number of

Cases

Member

Months

Cases per

100,000

Number of

Cases

Member

Months

Cases per

100,000

Number of

Cases

Member

Months

Cases per

100,000

Number of

Cases

Member

Months

Cases per

100,000

Blue Cross & Blue Shield of North

Carolina 6 2,158,617 0.28 4 1,791,103 0.22 5

1,205,944 0.41 2 1,057,396 0.19

CIGNA Healthcare of North

Carolina, Inc. 10 1,573,647 0.64 3 1,087,330 0.27 5 898,669 0.56 0 -- 0.0

SHP Indemnity Plan 39 6,742,967 0.58 36 6,275,459 0.57 48 7,015,840 0.68 48 6,070,902 0.79

UnitedHealthcare of North

Carolina, Inc. 4 2,980,756 0.13 4 2,870,681 0.14 16 2,426,485 0.66 17 1,874,474 0.90

WellPath Select, Inc. 5 739,089 0.68 2 768,012 0.26 5 754,699 0.66 3 730,130 0.41

- 32 -

Table 8 reports information about the nature of services that were the subject of each insurer’s

external review cases and the outcome of these cases for 2006. This information is expressed in

terms of the numeric distribution of insurer’s cases, by type of service, and the outcomes for each

type of service, expressed as a percentage of total cases for the type of service.

For State Health Plan’s Indemnity plan, the percentage of their cases overturned by the IRO and

the percentage of cases upheld by the IRO has remained relatively similar from 2004 to 2006. In

2004, State Health Plan’s Indemnity plan had 38.89 percent of its accepted cases overturned, in

2005, 31.25 percent and in 2006, 33.3 percent of the accepted cases were overturned. For Blue

Cross & Blue Shield of North Carolina, the insurer has seen a decline in the percentage of

accepted cases that were overturned by an IRO between 2004 and 2006. In 2004, 35 percent of

the insurer’s cases were overturned, in 2005, 30 percent and in 2006, 27.6 percent of the cases

were overturned. For UnitedHealthcare of North Carolina, Inc., the percentage range of cases

overturned has fluctuated. In 2004, 50 percent of the insurer’s cases were overturned, in 2005,

37.5 percent and in 2006, 47 percent of the accepted cases were overturned. Due to the relatively

small number of requests per insurer, and the number of accepted cases, it remains premature to

draw any conclusions about any individual insurer’s distribution of cases or case outcomes.

- 33 -

Table 8: Comparison of Accepted Case Activity by Insurer and Type of Service

Requested by Calendar Year, January 1, 2006 – December 31, 2006

2006

Outcomes

Insurer and Type of Service Number of

Accepted

Cases

Percent

Overturned

Percent

Reversed

by

Insurer

Percent

Upheld

American Medical Security Life Insurance Company 1

• Hospital Length of Stay 1 -- -- 100.0

Total Percentage for Insurer -- -- 100.0

Blue Cross & Blue Shield of North Carolina 29

• DME 1 -- -- 100.0

• Inpatient Mental Health 7 28.6 -- 71.4

• Lab, Imaging, Testing 3 33.3 -- 66.7

• Oncology 2 -- -- 100.0

• Pharmacy 1 -- -- 100.0

• Physician Services 1 -- -- 100.0

• Surgical Services 14 35.7 -- 64.3

Total Percentage for Insurer 27.6 -- 72.4

Connecticut General Life Insurance Company 1

• Surgical Services 1 -- -- 100.0

Total Percentage for Insurer -- -- 100.0

Coventry Health and Life Insurance Company 1

• Surgical Services 1 -- -- 100.0

Total Percentage for Insurer -- -- 100.0

Guardian Life Insurance Company of America 2

• Hospital Length of Stay 1 -- -- 100.0

• Surgical Services 1 -- -- 100.0

Total Percentage for Insurer -- -- 100.0

North Carolina Bar Association Health Benefit Trust 1

• Surgical Services 1 100.0 -- --

Total Percentage for Insurer 100.0 -- --

North Carolina Medical Society Employees Benefit

Trust 2

• Inpatient Mental Health 1 100.0 -- --

• Surgical Services 1 100.0 -- --

Total Percentage for Insurer 100.0 -- --

SHP Indemnity Plan 48

• DME 8 12.5 -- 87.5

• Inpatient Mental Health 5 20.0 40.0 40.0

• Lab, Imaging, Testing 2 50.0 -- 50.0

• Pharmacy 3 33.3 -- 66.7

• Physician Services 1 -- -- 100.0

• Rehabilitation Services 2 -- -- 100.0

• Skilled Nursing Facility 9 66.7 -- 33.3

• Surgical Services 18 33.3 5.6 61.1

Total Percentage for Insurer 33.3 6.3 60.4

SHP PPO Plan 4

• DME 1 100.0 -- --

• Surgical Services 3 66.7 -- 33.3

Total Percentage for Insurer 75.0 -- 25.0

- 34 -

Table 8: Comparison of Accepted Case Activity by Insurer and Type of Service

Requested by Calendar Year, January 1, 2006 – December 31, 2006 ( Cont.)

2006

Outcomes

Insurer and Type of Service Number of

Accepted

Cases

Percent

Overturned

Percent

Reversed

by

Insurer

Percent

Upheld

UniCARE Life & Health Insurance Company 1

• Oncology 1 -- -- 100.0

Total Percentage for Insurer -- -- 100.0

Union Security Insurance Company 1

• Inpatient Mental Health 1 100.0 -- --

Total Percentage for Insurer 100.0 -- --

United HealthCare Insurance Company 1

• Pharmacy 1 -- 100.0 --

Total Percentage for Insurer -- 100.0 --

UnitedHealthcare of North Carolina, Inc. 17

• Inpatient Mental Health 4 75.0 25.0 --

• Lab, Imaging, Testing 3 33.3 33.3 33.4

• Oncology 1 100.0 -- --

• Pharmacy 2 100.0 -- --

• Surgical Services 7 14.3 -- 85.7

Total Percentage for Insurer 47.0 11.8 41.2

WellPath Select, Inc. 3

• DME 1 100.0 -- --

• Inpatient Mental Health 2 50.0 -- 50.0

Total Percentage for Insurer 66.7 -- 33.3

World Insurance Company 1

• Lab, Imaging, Testing 1 -- -- 100.0

Total Percentage for Insurer -- -- 100.0

Table 9 lists the five insurers with the largest number of accepted cases and the insurer’s

outcome for the period of January 1, 2003 – December 31, 2006. Of these five insurers, Blue

Cross & Blue Shield of North Carolina has the lowest percentage of cases overturned for the

four- year reporting period.

- 35 -

Table 9: Top Five Insurers Outcomes by Case Type,

January 1, 2003 – December 31, 2006

Insurer’s Outcome

Insurer and Type of Service

Number of

Accepted

Cases Percent

Overturned

Percent

Reversed

Percent

Upheld

Blue Cross & Blue Shield of North Carolina 84

• DME 6 50.0 -- 50.0

• Home Health Nursing 1 -- -- 100.0

• Hospital Length of Stay 1 -- -- 100.0

• Inpatient Mental Health 9 33.3 -- 66.7

• Inpatient Rehabilitation 1 -- -- 100.0

• Lab, Imaging, Testing 8 25.0 -- 75.0

• Oncology 4 50.0 -- 50.0

• Outpatient Mental Health 2 -- -- 100.0

• Pharmacy 3 33.3 -- 66.7

• Physician Services 6 50.0 -- 50.0

• Surgical Services 43 27.9 72.1

Total Percentage for Insurer 31.0 -- 69.0

CIGNA HealthCare of North Carolina, Inc. 18

• DME 1 -- -- 100.0

• Inpatient Mental Health 2 100.0 -- --

• Oncology 1 100.0 -- --

• Pharmacy 6 33.3 16.7 50.0

• Physician Services 2 -- -- 100.0

• Surgical Services 6 50.0 16.7 33.3

Total Percentage for Insurer 44.4 11.1 44.5

SHP Indemnity Plan 171

• DME 29 34.5 3.4 62.1

• Inpatient Mental Health 18 27.8 22.2 50.0

• Lab, Imaging, Testing 6 33.3 -- 66.67

• Oncology 5 -- -- 100.0

• Outpatient Mental Health 2 -- -- 100.0

• Pharmacy 8 50.0 -- 50.0

• Physician Services 5 40.0 -- 60.0

• Rehabilitation Services 7 42.9 -- 57.1

• Skilled Nursing Facility 26 42.3 3.9 53.8

• Surgical Services 58 34.5 1.7 63.8

• Transplant 7 42.9 -- 57.1

Total Percentage for Insurer 35.1 4.1 60.8

- 36 -

Table 9: Top Five Insurers Outcomes by Case Type,

January 1, 2003 – December 31, 2006 ( Cont.)

Insurer’s Outcome

Insurer and Type of Service

Number of

Accepted

Cases Percent

Overturned

Percent

Reversed

Percent

Upheld

UnitedHealthcare of North Carolina, Inc. 41

• DME 2 50.0 -- 50.0

• Inpatient Mental Health 8 50.0 12.51 37.5

• Lab, Imaging, Testing 5 60.0 20.0 20.0

• Oncology 1 100.0 -- --

• Outpatient Mental Health 2 100.0 -- --

• Pharmacy 7 42.9 -- 57.1

• Surgical Services 16 37.5 -- 62.5

Total Percentage for Insurer 48.8 4.9 46.3

WellPath Select, Inc. 15

• DME 1 1 -- --

• Inpatient Mental Health 5 3 -- 2

• Lab, Imaging, Testing 2 1 1 --

• Surgical Services 7 5 -- 2

Total Percentage for Insurer 66.7 6.7 26.6

VI. Activity by IRO

A. Summary by IRO

During the period of January 1, 2003 – December 31, 2006, IROs rendered 371 external review

decisions for consumers. Although 387 cases were accepted for external review during these

two years, 16 cases were reversed by the insurer prior to an IRO decision being rendered. The

cases sent to IROs for independent review encompass a variety of insurers, noncertification

reasons and specific types of services. Table 10 compares the number of cases assigned to each

IRO with the number and percentage of their review decisions, by calendar year. The data shows

that for three ( 3) IROs who have received a larger proportion of cases ( IPRO, Maximus CHDR,

and Permedion), their percentage of case outcomes overturned versus upheld are similar. The

number of cases assigned to an IRO under the alphabetical rotation system is dependent upon

whether a conflict of interest was determined to exist, the ability of the IRO to review the service

type and the availability of a qualified expert reviewer.

The contracting periods for IROs vary as indicated in Table 10, where “ NA” indicates not-applicable,

meaning that the IRO was not under contract with the Department at that time. The

contract period with Hayes, Plus ended June 30, 2004, NMR’s contract became effective July 1,

2005, and the contract periods for Carolina Center for Clinical Information ( 3CI) and Prest &

Associates ended on June 30, 2005. MCMC’s contract became effective July 1, 2005, but did

not receive any cases in 2005 and only one case in 2006 as a result of screening for conflict of

interest. Although Permedion’s contract to perform IRO services for the HCR Program did not

- 37 -

become effective until January 1, 2004, the case assigned to them was received on December 31,

2003, and determined to be eligible on January 7, 2004, thereby leaving Permedion eligible for

IRO assignment.

Table 10: Comparison of IRO Activity Summary by Calendar Year,

January 1, 2003 – December 31, 2006

NA- Not Applicable – Not a Contracted IRO

The Department seeks to contract with IROs that have extensive experience in providing

independent medical review of health plan coverage denials for state or government agencies.

The procurement process is accomplished by issuing a request for proposal ( RFP) for IROs to

perform reviews of health plan utilization review noncertifications. The Department issued its

first request for proposal on February 22, 2002, and from that process, five IROs ( Carolina

Center for Clinical Information, Hayes, Plus, IPRO, Maximus CHDR and Prest & Associates)

were deemed to have met the statutory requirements, and whose proposals were within

commercially reasonable fees charged for similar services in the industry. The Department has

issued the same RFP several times over the last four years to ensure a staggered schedule of IRO

contract ending dates.

2003 2004 2005 2006

Over

turned Upheld Over

turned Upheld Over

turned Upheld Over

turned Upheld

IRO

Number Assigned

Number

Percentage

Number

Percentage

Number Assigned

Number

Percentage

Number

Percentage

Number Assigned

Number

Percentage

Number

Percentage

Number Assigned

Number

Percentage

Number

Percentage

3CI 13 10 76.9 3 23.1 7 3 42.9 4 57.1 6 3 50.0 3 50.0 NA -- -- -- --

Hayes, Plus 25 6 24.0 19 76.0 6 1 16.7 5 83.3 NA -- -- -- -- NA -- -- -- --

IPRO 25 11 44.0 14 56.0 22 9 40.9 13 59.1 33 13 39.4 20 60.6 27 13 48.1 14 51.9

Maximus

CHDR 24 13 54.2 11 45.8 22 11 50.0 11 50.0 29 11 38.0 18 62.0 27 14 51.9 13 48.1

MCMC NA -- -- -- -- NA -- -- -- -- 0 0 0.0 0 0.0 1 0 0.0 1 100.0

NMR, Inc. NA -- -- -- -- NA -- -- -- -- 8 2 25.0 6 75.0 23 7 30.4 16 69.6

Permedion 1 0 0.0 1 100.0 19 7 36.8 12 63.2 22 8 36.4 14 63.6 29 7 24.1 22 75.9

Prest &

Associates 1 0 0.0 1 100.0 1 0 0.0 1 100.0 0 0 0.0 0 0.0 NA -- -- -- --

All Cases 89 40 44.9 49 55.1 77 31 40.3 46 59.7 98 37 37.7 61 62.3 107 41 38.3 66 61.7

- 38 -

In completing the Technical Application Form of the RFP, IROs are required to respond, in

detail, to the following sections:

• Qualifications and Experience,

• Clinical Reviewers,

• Quality Assurance and Confidentiality,

• Independent Review Process and Information Systems, and

• Financial Profile.

In providing a cost proposal, IROs are required to submit a price quote which, if accepted, would

remain in force for the entirety of the two- year contract period, and included an additional one-year

extension if mutually agreeable to both parties. IRO cost proposals are required to include

the following:

• A total price quote for a standard review,

• A total price quote for an expedited review,

• A total price quote for a cancellation fee for a standard review, and

• A total price quote for a cancellation fee for an expedited review.

As required under N. C. Gen. Stat. § 58- 50- 94( b), the IRO proposals were evaluated by a nine-member

evaluation committee whose membership included insurers subject to external review,

health care providers, and insureds. Proposals are evaluated to determine if an IRO satisfied the

minimum qualifications established under N. C. Gen. Stat. § 58- 50- 87. Using evaluation criteria

included in the RFP, each IRO’s technical proposal is scored on a “ points earned” basis. Only

those IROs with an acceptable technical score had their cost proposals opened and evaluated. In

evaluating cost proposals, the evaluation committee identified those proposals that are within

commercially reasonable fees charged for similar services in the industry. Those proposals

deemed to provide the best combination of technical and cost values to the State of North

Carolina are recommended to the Chief Deputy Commissioner.

B. Decisions by Type of Service Requested and Insurer

Table 11 reports the outcomes for the service type for all IRO decisions from January 1, 2003 –

December 31, 2006. This enables the reader to compare an aggregate of the IRO’s percentage of

outcomes for that same general type of service for the four- year reporting period. Outcomes for

DME cases saw a reduction in cases overturned over the four- year period. A large part of these

cases upheld involved cranial banding. External review requests for inpatient mental health

grew, with a sizeable percentage of requests being generated from one provider. Over time, the

percentage outcome of these inpatient mental health cases overturned grew. External review

requests for surgical services continues to comprise the largest volume of cases by service type,

and the percentage outcome of cases overturned versus cases upheld has remained relatively

similar.

- 39 -

Table 11: Comparison of All IRO Outcomes ( Percentages) by General Service

Type for All Insurers by Calendar Year, January 1, 2003 – December 31, 2006

2003 2004 2005 2006

Outcomes Outcomes Outcomes Outcomes

Service Type

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Chiropractics 1 -- 100.0 2 -- 100.0 -- -- -- -- -- --

DME 7 71.4 28.6 14 57.1 42.9 12 25.0 75.0 11 27.3 72.7

Home Health Nursing 2 -- 100.0 -- -- -- -- -- -- -- -- --

Hospital Length of Stay 2 50.0 50.0 -- -- -- 1 -- 100.0 2 -- 100.0

Inpatient Mental Health 7 28.6 71.4 7 42.3 57.1 12 58.3 41.7 17 52.9 47.1

Inpatient Rehabilitation 1 -- 100.0 -- -- -- -- -- -- -- -- --

Lab, Imaging, Testing 3 66.7 33.3 6 33.3 66.7 6 50.0 50.0 8 37.5 62.5

Oncology 3 -- 100.0 3 33.3 66.7 3 33.3 66.7 4 25.0 75.0

Outpatient Mental Health 1 -- 100.0 -- -- -- 5 40.0 60.0 -- -- --

Pharmacy 6 33.3 66.7 6 83.3 16.7 10 83.3 16.7 6 50.0 50.0

Physician Services 3 -- 100.0 5 40.0 60.0 6 66.7 33.3 2 -- 100.0

Rehabilitation Services 2 100.0 -- 4 25.0 75.0 1 -- 100.0 2 -- 100.0

Skilled Nursing Facility 9 44.4 56.6 5 -- 100.0 3 66.7 33.3 9 66.7 33.3

Surgical Services 40 50.0 50.0 22 36.3 63.6 37 29.7 70.3 46 34.8 65.2

Transplant 2 50.0 50.0 3 33.3 66.7 2 50.0 50.0 -- -- --

40

Table 12 shows each IRO’s decisions by individual insurer for January 1, 2003 – December 31,

2006. An IRO is assigned a case on the basis of: a) an alphabetical rotation that is required by

law, b) that the IRO has a qualified clinical expert to review the case, and c) that there is no

conflict of interest. The nature of the denial has no bearing on the assignment to an IRO.

Table 12: Comparison of IRO Decisions by Insurer by Calendar Year,

January 1, 2003 – December 31, 2006

NA- Not Applicable

2003 2004 2005 2006

Outcomes Outcomes Outcomes Outcomes

IRO and Insurer

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

3CI 13 7 6 NA

• American Medical Security Life

Insurance Company NA -- -- NA -- -- 1 0.0 100.0 NA -- --

• Celtic Insurance Company 1 100.0 0.0 NA -- -- NA -- -- NA -- --

• FirstCarolinaCare, Inc. 1 100.0 0.0 NA -- -- NA -- -- NA -- --

• Guardian Life Insurance

Company of America NA -- -- 1 100.0 0.0 NA -- -- NA -- --

• GE Group Life Assurance

Company 1 100.0 0.0 NA -- -- NA -- -- NA -- --

• Humana Insurance Company NA -- -- 1 0.0 100.0 NA -- -- NA -- --

• MAMSI Life and Health

Insurance Company NA -- -- NA -- -- 1 100.0 0.0 NA -- --

• New England Life Insurance

Company 1 0.0 100.0 NA -- -- NA -- -- NA -- --

• Optimum Choice of the

Carolinas 1 100.0 0.0 NA -- -- NA -- -- NA -- --

• Principal Life Insurance

Company 2 0.0 100.0 1 0.0 100.0 NA -- -- NA -- --

• Trustmark Insurance Company NA -- -- 1 0.0 100.0 NA -- -- NA -- --

• UnitedHealthcare of North

Carolina, Inc. 4 100.0 0.0 3 66.7 33.3 3 33.3 66.6 NA -- --

• WellPath Select, Inc. 2 100.0 0.0 NA -- -- 1 100.0 -- NA -- --

Hayes, Plus 25 6 NA -- -- NA -- --

• Blue Cross & Blue Shield of

North Carolina 5 40.0 60.0 2 50.0 50.0 NA -- -- NA -- --

• John Alden Life Insurance

Company 1 0.0 100.0 NA -- -- NA -- -- NA -- --

• NC Healthchoice for Children 1 100.0 0.0 NA -- -- NA -- -- NA -- --

• North Carolina Medical Society

Employee s Benefit Trust

( MEWA) 1 0.0 100.0 NA -- -- NA -- -- NA -- --

• SHP Indemnity Plan 17 17.7 82.3 4 0.0 100.0 NA -- -- NA -- --

41

Table 12: Comparison of IRO Decisions by Insurer by Calendar Year,

January 1, 2003 – December 31, 2006 ( Cont.)

NA- Not Applicable

2003 2004 2005 2006

Outcomes Outcomes Outcomes Outcomes

IRO and Insurer

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

IPRO 25 22 33 27

• Blue Cross & Blue Shield of

North Carolina 5 60.0 40.0 8 37.5 62.5 6 66.7 33.3 5 20.0 80.0

• CIGNA HealthCare of North

Carolina, Inc. 2 50.0 50.0 1 100.0 0.0 2 -- 100.0 NA -- --

• Connecticut General Life

Insurance Company 1 0.0 100.0 NA -- -- NA -- -- 1 0.0 100.0

• John Alden Life Insurance

Company NA -- -- 2 100.0 0.0 1 100.0 0.0 NA -- --

• NC Healthchoice for Children NA -- -- NA -- -- 2 100.0 0.0 NA -- --

• North Carolina Medical Society

Employees Benefit Trust

( MEWA) NA -- -- NA -- -- 1 100.0 0.0 NA -- --

• PARTNERS National Health

Plans of North Carolina 1 100.0 0.0 NA -- -- NA -- -- NA -- --

• Principal Life Insurance

Company 1 0.0 100.0 NA -- -- NA -- -- NA -- --

• SHP Indemnity Plan 12 41.7 58.3 10 30.0 70.0 17 23.5 76.5 10 50.0 50.0

• SHP PPO Plan NA -- -- NA -- -- NA -- -- 3 100.0 0.0

• Time Insurance Company NA -- -- 1 0.0 100.0 1 0.0 100.0 NA -- --

• Union Security Insurance

Company NA -- -- NA -- -- NA -- -- 1 100.0 0.0

• UnitedHealthcare of North

Carolina, Inc. NA -- -- NA -- -- 2 0.0 100.0 6 50.0 50.0

• United Healthcare Insurance

Company 1 0.0 100.0 NA -- -- NA -- -- NA -- --

• WellPath Select, Inc. 2 50.0 50.0 NA -- -- 1 100.0 0.0 1 0.0 100.0

42

Table 12: Comparison of IRO Decisions by Insurer by Calendar Year,

January 1, 2003 – December 31, 2006 ( Cont.)

NA- Not Applicable

2003 2004 2005 2006

Outcomes Outcomes Outcomes Outcomes

IRO and Insurer

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Maximus CHDR 24 22 29 27

• American Medical Security Life

Insurance Company NA -- -- NA -- -- NA -- -- 1 0.0 100.0

• Blue Cross & Blue Shield of

North Carolina 5 0.0 100.0 5 40.0 60.0 7 -- 100.0 7 28.6 71.4

• CIGNA HealthCare of North

Carolina, Inc. 7 57.1 42.9 NA -- -- 1 100.0 0.0 NA -- --

• Connecticut General Life

Insurance Company NA -- -- NA -- -- 1 0.0 100.0 NA -- --

• Coventry Health and Life

Insurance Company NA -- -- NA -- -- NA -- -- 1 0.0 100.0

• Federated Mutual Insurance

Company NA -- -- 1 0.0 100.0 NA -- -- NA -- --

• MAMSI Life and Health

Insurance Company NA -- -- 1 100.0 0.0 NA -- -- NA -- --

• NC Healthchoice for Children NA -- -- 1 0.0 100.0 NA -- -- NA -- --

• North Carolina Medical Society

Employees Benefit Trust NA -- -- NA -- -- NA -- -- 1 100.0 0.0

• SHP Indemnity Plan 9 77.7 22.2 12 50.0 50.0 11 36.4 63.6 12 58.3 41.7

• Time Insurance Company NA -- -- 1 100.0 0.0 NA -- -- NA -- --

• United Healthcare Insurance

Company 1 100.0 0.0 NA -- -- NA -- -- NA -- --

• UnitedHealthcare of North

Carolina, Inc. NA -- -- NA -- -- 7 54.1 42.9 4 75.0 25.0

• WellPath Select, Inc. 1 0.0 100.0 1 100.0 0.0 2 100.0 0.0 1 100.0 0.0

• World Insurance 1 100.0 0.0 NA -- -- NA -- -- NA -- --

MCMC NA NA 0 1

• World Insurance Company NA -- -- NA -- -- NA -- -- 1 0.0 100.0

NMR, Inc. NA NA 8 23

• Blue Cross & Blue Shield of

North Carolina NA -- -- NA -- -- NA -- -- 10 40.0 60.0

• CIGNA HealthCare of North

Carolina, Inc. NA -- -- NA --- -- 1 0.0 100.0 NA -- --

• Guardian Life Insurance

Company NA -- -- NA -- -- NA -- -- 1 0.0 100.0

• North Carolina Bar Association

Health Benefit Trust NA -- -- NA -- -- NA -- -- 1 100.0 0.0

• SHP Indemnity Plan NA -- -- NA -- -- 7 28.6 71.4 10 20.0 80.0

• SHP PPO Plan NA -- -- NA -- -- NA -- -- 1 0.0 100.0

43

Table 12: Comparison of IRO Decisions by Insurer by Calendar Year,

January 1, 2003 – December 31, 2006 ( Cont.)

NA- Not Applicable

The total number of cases for any IRO, and the number of assigned cases by insurer that were

reviewed by an IRO is still too small to identify trends or make any evaluative statements.

VII. Cost of External Review Cases

The cost of an external review for a specific case can be comprised of one ( 1) or two ( 2)

components. All cases incur administrative cost – the fee charged by the IRO to perform the

review. For those cases where the IRO overturns the insurer denial or where the insurer reverses

itself, there is also the cost of covering the service. Depending upon the benefit plan and where

the covered person stands in terms of meeting their deductibles and annual out- of- pocket

maximums, the insurer’s out- of- pocket cost associated with covering a service will vary.

2003 2004 2005 2006

Outcomes Outcomes Outcomes Outcomes

IRO and Insurer

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld

Number of

Decisions

Percent

Overturned

Percent

Upheld Permedion 1 19 22 29

• Blue Cross & Blue Shield of

North Carolina NA -- -- 5 20.0 80.0 7 28.6 71.4 7 14.3 85.7

• CIGNA Healthcare of North

Carolina, Inc. NA -- -- 2 50.0 50.0 NA -- -- NA -- --

• Guardian Life Insurance

Company NA -- -- NA -- -- NA -- -- 1 0.0 100.0

• Mutual of Omaha Insurance

Company NA -- -- 1 0.0 100.0 NA -- -- NA -- --

• North Carolina Medical Society

Employees Benefit Trust NA -- -- NA -- -- NA -- -- 1 100.0 0.0

• SHP Indemnity Plan 1 0.0 100.0 10 50.0 50.0 9 55.6 44.4 13 15.4 73.3

• Trustmark Insurance Company NA -- -- NA -- -- 1 0.0 100.0 NA -- --

• UniCARE Life & Health

Insurance Company NA -- -- NA -- -- NA -- -- 1 0.0 100.0

• United Healthcare Insurance

Company NA -- -- NA -- -- 1 0.0 100.0 NA -- --

• UnitedHealthcare of North

Carolina, Inc. NA -- -- 1 0.0 100.0 4 25.0 75.0 5 40.0 60.0

• WellPath Select, Inc. NA -- -- NA -- -- NA -- -- 1 100.0 0.0

Prest & Associates 1 1 NA NA

• MAMSI Life and Health

Insurance Company 1 0.0 100.0 NA -- -- NA -- -- NA -- --

• WellPath Select, Inc. NA -- -- 1 0.0 100.0 NA -- -- NA -- --

44

Currently, contracted fees for IRO services are between $ 450 and $ 725 for a standard review,

and $ 750 and $ 900 for an expedited review. These fees are fixed per- case fees bid by each IRO;

they do not vary by the type of service that is covered. An IRO may charge an insurer a

cancellation fee if the insurer reverses its own decision after the IRO has proceeded with the

review. Insurers were not charged a rate for review where the insurer reversed its own decision

prior to the IRO review beginning. The average cost to insurers for the 107 reviews performed

during 2006 was $ 611. However, the average cost for all IRO reviews since the HCR Program

began is $ 572.

For 2006, the average amount of allowed charges assumed by the insurer in the six ( 6) cases

where the insurer reversed its own noncertification was $ 8304.00 ( with a total of $ 33,214.32).

The average amount of allowed charges assumed by the insurer for decisions that were

overturned in favor of the consumer was $ 10,432 ( with a total of $ 385,998.16).

The average cost of allowed charges from all cases that have been reversed by the insurer or

overturned by an IRO since the Program began is $ 13,375. The total cost of allowed charges for

all cases reversed by the insurer or overturned by the IRO for each year are:

2002- $ 103,712.46

2003- $ 593,677.53

2004- $ 353,344.06

2005- $ 776,915.56

2006- $ 419,212.48

To date, the cumulative total of services provided to consumers as a result of external

review since the Program commenced is $ 2,247,010.09. Because of the prospective nature

of five ( 5) cases that were overturned by the IRO, the cost of the allowed charges for those

cases are not available for reporting at this time.

Figure 20 shows the cost of the allowed charges for overturned or reversed services that the HCR

Program captured each year, as well as the cumulative total of allowed charges for these

services. The total cost of services for each year may have changed with this report as a result of

capturing the cost of previously overturned services that were completed during this past year.

45

Figure 20: Yearly and Cumulative Value of Allowed Charges for

Overturned or Reversed Services, July 1, 2002 – December 31, 2006

$ 419,212.48

$ 776,915.56

$ 353,344.56

$ 103,860.46 $ 593,677.53

$ 2,247,010.09

$ 1,827,797.61

$ 1,050,882.05

$ 697,537.99

$ 0.00

$ 500,000.00

$ 1,000,000.00

$ 1,500,000.00

$ 2,000,000.00

$ 2,500,000.00

2002 2003 2004 2005 2006

Annual Cost of Service for Overturned or Reversed Cases

Cumulative Cost of Services for Overturned or Reversed Cases

Table 13 shows the average total cost of the IRO review and cost of allowed charges for cases

that were reversed by the insurer or overturned ( average and cumulative) since the Program

began operations, by type of service requested.

Table 13: Cost of IRO Review, Average and Cumulative Allowed Charges

by Type of Service Requested, July 1, 2002 – December 31, 2006

Average Costs for Requests

Type of Service Requested Reversed or Overturned

Average Costs

of IRO Review

for Requests

Upheld Cost of IRO

Review

Cost of Allowed

Charges

Cumulative Total

Allowed Charges for

Overturned or Reversed

Service

Chiropractics $ 408 $ 0 $ 0 $ 0

DME 566 605 5002 110,047

Emergency Treatment 0 450 1,096 1,096

Home Health Nursing 498 450 55,230 55,230

Hospital Length of Stay 530 300 788 788

Inpatient Mental Health 618 525 17,838 499,478

Inpatient Rehabilitation 450 0 0 0

Lab, Imaging, Testing 552 462 1,730 22,491

Oncology 729 738 41,511 207,557

Outpatient Mental Health 506 450 716 1,432

Pharmacy 630 573 1,990 27,860

Physician Services 528 625 1,103 6,618

Rehabilitation Services 489 500 1,948 7,794

Skilled Nursing Facility 629 525 4,245 46,696

Surgical Services* 573 556 12,550 715,351

Transplant 673 758 181,524 544,572

All Cases $ 581 $ 557 $ 13,375 $ 2,247,010

* Outstanding cost of allowed charges remains for prospective service.

46

VIII. HCR Program Evaluation

The HCR Program continues to utilize its consumer satisfaction survey with all accepted cases in

order to obtain feedback from consumers regarding the external review experience. A consumer

satisfaction survey is mailed to the consumer or authorized representative at the completion of

each accepted case. Since the Program began on July 1, 2002, 391 surveys were sent and 219

( 56%) consumers or authorized representatives responded.

In addition to questions regarding the service the HCR Program staff provided and the IRO

decision, the survey asks for consumer comments and “ Would you tell a friend about external

review?” Overall, responders are generally pleased with the customer service they receive while

contacting the Healthcare Review Program. Most responders report satisfaction with the HCR

Program staff and information about the external review process. Comments from consumers

regarding suggestions that they should be able to see the information being sent by the insurer to

the IRO led to a change in legislation to allow for consumers to receive this information in 2005.

Despite the number of respondents whose decision was upheld, a large percentage of consumers

responded that they “ would tell a friend” about external review. Of the responders whose

decision was overturned, 97.5 percent stated they would tell a friend about external review.

While this number is to be expected, what is relevant is that 74.7 percent of the responders,

whose decision was upheld, would also tell a friend about external review. As shown in Table

14, 88.1 percent of individuals who went through the external review process stated they would

tell a friend about external review, suggesting that external review is viewed to be a valued and

important consumer protection.

Table 14: Consumer Satisfaction Survey Analysis

Outcome of

External

Review

Number of

Surveys

Sent

Number of

Surveys

Received

Percentage

of

Respondents

Number of

Respondents

“ would tell a

friend”

Percentage of

Respondents

“ would tell a

friend”

Overturned 156 121 77.6 118 97.5

Upheld 226 91 40.3 68 74.7

Reversed 9 7 77.8 7 100.0

Total: 391 219 56.0 193 88.1

IX. Conclusion

External review is the independent medical review of an insurer denial when the insurer’s

decision to deny reimbursement was based on a medical necessity determination. North

Carolina’s External Review law provides consumers with another option for resolving coverage

disputes with their insurer using this efficient, cost- effective process. In North Carolina, there is

no cost to the consumer for requesting an external review. To date, the cumulative total of

47

services provided to consumers as a result of external review since the Program commenced is

$ 2,247,010.09.

This HCR Program Semiannual Report presents external review and consumer counseling

activity data which documents the growth of the Program over the past four calendar years, as

well as reporting activity and outcomes for calendar year 2006. Information is provided with

respect to the insurers whose decisions were the subject of requests for external review and about

the independent review organizations that reviewed accepted cases. While the quantity of data is

still relatively small, and general conclusions cannot be made, some overall observations can be

reported based upon the data we have available.

Over the last four years, the volume of external review requests has shown growth and stability.

For the period of January 1, 2003 – December 31, 2006, the number of requests received per

calendar year by the HCR Program ranged from a low of 201 in 2004 to 291 in 2005, with a

mean of 242 cases for this four- year reporting period. The percentage of requests that have been

determined to be eligible has remained constant over the four- year reporting period. For

standard requests, the percentage eligible ranged from a low of 40.1 percent in 2004 to a high of

48.7 percent in 2006, with a mean of 43.2 percent of standard requests being eligible. For

expedited requests, only 2.2 percent of the requests were eligible in 2006 with 6 percent of the

requests eligible in 2004, and a mean of 4.8 percent eligible in the four- year reporting period.

The HCR Program became effective July 1, 2002. During the four years and six months of

operation, 408 cases were accepted for review, resulting in coverage for 43.1 percent of the

consumers who requested external review, due either to the insurer reversing its own denial or

the IRO overturning the insurer’s noncertification.

Insurers subject to North Carolina’s External Review law are required to provide notice of

external review rights to covered persons in their noncertification decisions and notices of appeal

decision on appeals and grievances. When the HCR Program receives a request for external

review, the insurer is required to provide certain information within statutory time frames, so that

eligibility determinations can be made. During this reporting period, the HCR Program worked

with 26 different insurance companies, the State Health Plan’s Indemnity and PPO plans, CHIP

and two Multiple Employer Welfare Arrangements ( MEWAs). All complied with the time

frame requirements, and were responsive and cooperative to the HCR Program’s questions or

requests for additional information.

There continues to be interest from consumers to receive assistance with issues involving their

insurer’s utilization review or internal appeals and grievance process. During this four- year

reporting period, HCR Program staff provided counseling to 1,674 consumers who contacted our

office. In addition to explaining the state law that governs the appeal and grievance process,

staff will suggest general resources where the consumer may find supporting information

regarding their case, suggest collaboration with their physician to identify the most current

scientific clinical evidence to support the treatment, and explain how to use the supporting

information and law during the appeal process. Furthermore, this arrangement will provide for

continuity for those cases that ultimately progress to external review.

48

The HCR Program continues to seek out new and different opportunities to promote consumer

and provider awareness of external review services through a comprehensive community

outreach and education program. Activities during this four- year reporting period have included

participation in health fairs, speaking engagements, publications, and radio interviews. During

this reporting period, the Commissioner of Insurance sent letters to nearly 16,000 actively

practicing physicians in North Carolina, hospital business managers and physician practice

administrators explaining the importance of external review services. Through the different

mailings, the recipients have received external review posters for display in their patient lobby

areas, Program brochures and telephone contact cards. An electronic notice about external

review services was sent to state agencies, private sector businesses and allied health providers.

The response to this initiative was very positive with the HCR Program receiving the largest

number of external review requests in one ( 1) month.

North Carolina’s external review service continues to be an effective vehicle for consumers to

resolve coverage disputes with their insurer in a fair, efficient, and cost- effective manner. In this

state, consumers can easily request an external review as there are no monetary claims threshold

requirements, and no cost to the consumer to request an external review. Over the last four

years, improvements to the external review process have been made based on program

experience by the staff and suggestions from consumers. In the end, the Healthcare Review

Program operates effectively to provide external review services to the citizens of North

Carolina.