Early Problems in Implementing the Philadelphia HealthPASS Program Gao ID: HRD-88-37 December 22, 1987

In response to a congressional request, GAO reviewed Pennsylvania's progress and problems in implementing the Philadelphia Accessible Services System (HealthPASS), a contractor-operated program that manages and coordinates delivery of prepaid health care services to Medicaid recipients.

GAO found that the contractor: (1) obtained a 2-year waiver of Medicaid regulations to administer HealthPASS as a health insuring organization; (2) used the case management method, which pays a manager on a capitated basis, to reduce program costs while maintaining quality of care; (3) attributed its first-year financial losses to an initial capitation rate that was too low and an underestimation of the hospital utilization rate among its recipients; (4) only partially implemented its required quality assurance program; and (5) did not use the required sampling methods and review criteria or focus on the quality of care in its reviews. GAO also found that: (1) despite initial implementation problems, the contractor achieved substantial success in establishing operations; (2) the program's long-term financial viability depends upon the contractor's resolution of the accuracy and adequacy of its capitation rates and the causes and magnitude of its losses; and (3) HealthPASS will require renewal of the Medicaid waiver to continue operating in its present form, at which time the Department of Health and Human Services will consider issues concerning the reasonableness of its payment rates and the effectiveness of its controls and quality assurance safeguards.

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