Guidance for Regulatory Reviews

1. Guidance for Regulatory Reviews HCCA Compliance Institute April 2005 Jean Boord, JD, CHC

2. Tina Prassas, Senior Consultant, Regulatory Affairs, Pacificare Michael Lohnberg, VP Regulatory and Government Compliance, Wellpoint Karen Carty, Senior Compliance Analyst, Anthem East Compliance Dept. Janet Degnan, Esq., Director of Ethics and Compliance, Anthem Bren Schwab, Compliance Administrator, Corporate Compliance and Ethics Dept., Premera Blue Cross Monica Zachary, MS, CHC, Director of Compliance,Health Alliance Medical Plans, Inc. Lucy Davis, Director, Health Plan Compliance, Cigna Suzanne Michelson, Sr. Planning Analyst/Project Coordinator, Noridian Mutual Insurance Company HCCA Payor/Managed Care Workgroup

3. Discussion Topics • Background • The Five Phases of Regulatory Reviews • Why Organize For and Manage a Regulatory Review? • Basic Elements of Managing the Five Phases of a Review • Post Review Management

4. Background • Regulatory Reviews are a Part of Doing Business in a State or with the Federal Government • Regulatory Agencies include: DOI, DOH, Office of Patient Protection, DOL, Dept of Veterans Affairs, CMS, State Medicaid Agencies, etc.

5. Background • Regulatory Agencies are often required by statute to examine company business practices every few years • Review may be a full scope review, examining all aspects of the business over which the Regulatory Agency has jurisdiction • Can also conduct a targeted review outside of statutory timeframes based on a complaint; legislative mandate; or a compliance review of a particular law, regulation, or bulletin, etc.

6. Background • Many states are combining the Finance and Market Conduct Reviews into one review • More state DOIs are following NAIC guidelines for examinations • NAIC/NCOIL raising awareness/interest in multi-state reviews • Examiners may be Regulatory Agency employees or Independent Contractors

7. The Five Phases • Typical Regulatory Reviews can be broken down into five phases • Pre-Exam or “Off-Site” Phase: includes all activities necessary to prepare for the review • On-Site Review Phase: Coordination of all on-site activities including staff interviews, responses to auditor questions and criticisms, and updating company on status of review • Note, if the auditor chooses to do a desk review, this phase would occur during the time span when the examiner is conducting the desk review of materials.

8. The Five Phases • Finding Reports and Corrective Action Phase: includes all activities necessary to respond to the review report • Legal Action Phase: (if applicable) includes coordinating fulfillment of any consent orders, hearings, etc. • Monitoring Phase: includes oversight and documentation of the company’s implementation of any Corrective Action Plans (CAPS)

9. Why Organize for and Manage the Review? • Disorganization leads to a more costly review: • Additional findings • States typically charge the company for at least partial cost of the review • Damages relationship with the regulatory entity • Increased fine • Effective management can lead to: • Reduction of re-work • Reduction of internal and auditor costs • Reduction of Financial Penalty

10. Basic Elements of Managing the Five Phases of Reviews

11. Centralized Coordination Point • Ensures consistent responses to similar questions from multiple auditors within the review and multiple states across reviews • Monitors / reviews information provided to auditors for accuracy and completeness • Monitors auditor contact with other company employees • Builds rapport with regulators and auditors

12. Centralized Coordination Point • Coordinator should have list of Company Operational Business Owners from all areas who will act as contacts • Use this list for each review to get consistent responses and documentation • Operational Business Owners provide data and documents to the Coordinator

13. Pre-Exam Phase: Create a Work Plan • Use the scope document, coordinator’s handbook, or other materials provided by regulatory agency • Consider NAIC standards if adopted by state • Each section and item should match the itemization and numbering in the scope document or coordinator’s handbook • Each requested item should have a company responsible party and a due date

14. Pre-Exam Phase: Create a Work Plan • Coordinator should conduct meetings with the company responsible parties to ensure they understand their responsibility and what is needed for the review • If responsible parties have questions on required documentation, Coordinator should consult with the auditors • It is strongly recommended that all correspondence with the auditors and regulatory agency be in writing

15. Pre-Exam Phase: Create a Work Plan • Information should be provided to the Coordinator several days before it is due • Coordinator should be in regular contact with responsible parties to evaluate progress

16. Pre-Exam and On-Site Phase: Review Documents Prior to Submission to Auditors • Operational Business Owner should ensure all documents are compliant with applicable law • Operational Business Owner should ensure data universes meet auditor specifications • Coordinator will do a final review • Keep responses short and factual

17. Pre-Exam and On-Site Phase: Review Documents Prior to Submission to Auditors • Documents should explain company acronyms • Coordinator should organize the documentation in a manner that facilitates review

18. Pre-Exam and On-Site Phase: Review Documents Prior to Submission to Auditors • Make a copy or otherwise track exactly what is provided • Track when all documentation and data is provided to the auditors • Meet deadlines if possible. If not, discuss with auditor and come to agreement on extension.

19. Pre-Exam Phase: Prepare Operational Business Owners • It is recommended that the Coordinator conduct mock interviews with those company employees that may be interviewed • Employees should not answer questions that do not pertain to their job function • Coordinator should be present during interviews as witness

20. On-Site Review Phase • Consider an opening conference with the auditors to explain a complicated company or the company changes since the last review • If the auditor demands on-line access to claims and other company systems, consider having a subject matter expert train and walk the auditor through the samples

21. On-Site Review Phase • Auditors should present questions, criticisms, requests for additional information to the Coordinator • Coordinator should track the following for each of the above: • When the Coordinator receives the request • Which auditor requested the information • Which responsible party is responsible for providing the information • When it is due • When the Coordinator provides the response to the auditor

22. On-Site Review Phase • It is strongly recommended that the Coordinator have weekly meetings with the auditors to provide updates on outstanding items • Operational Business Owners should have a checklist for the file samples of all required documentation • Coordinator should be in regular contact with Operational Business Owners and Senior Management to update on compliance issues or other issues with the documentation

23. On-Site Review Phase • Coordinator should track fees and expenses in addition to fine amounts. Senior Management will be able to use these for budgeting purposes. Alert Senior Management when fines are imminent. • The Coordinator should review the auditor invoices for accuracy in hours billed, fee per hour, etc.

24. Finding Reports and CAP Phase • Operational Business Owners should determine CAPS for their processes • It is recommended that your legal counsel review the examination report from the Regulatory Agency • Legal counsel should also review the company response • Legal counsel will assist in determining next steps if disagreement with the report (informal meeting with Regulatory Agency, hearing, etc)

25. Monitoring Phase • Coordinator should track all CAPS, responsible parties, due dates • Coordinator should work with Operational Business Owner to ensure that all CAPS are implemented • Monitoring is recommended for CAPS

26. Monitoring Phase • Two questions must be answered in the affirmative in this phase: • Is the CAP working? • Does the CAP address the issue raised in the review report?

27. Post-Review Management • Consider auditing program of high risk areas to find and correct compliance issues well before a regulatory review

28. A few tools