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B-164031(2) 1 (1974-05-01)

handle is hein.gao/gaobabkvi0001 and id is 1 raw text is: S WASHINGTON 0 C 24 470 B-164031(2) -7LtJ~~MAY 1 194 910t9 The Honorable Ernest F Hollings United States Senate SDear Senator Hollings This is in response to your recent request that we provide you with information concerning (1) the extert of the audits by the Department of Health, Education, and Welfare (HEW) of the giants and contracts awarded by HEW aimed at assisting the development of health maintenance organizations (HMOs), (2) the nature and scope of our review started in March 1973 of such grant and contract pro- jects, and (3) examples of our findings pertaining to grantee financial management including questionable grantee expenditures and deficiencies in accounting controls and financial reporting This request supplements your earlier request dated December 14, 1973, for an audit and report on the HEW grants awarded to the Health Maintenance Organization of South Carolina, Inc. and the Charleston Area Comprehensive Health Planning Agency. GENERAL BACKGROUND In his February 1971 and March 197? health messages to the Congress, the President endorsed the concept of HMOs and proposed setting tp a network of HMOs throughout the country as an alternative to the traditional fee-for-service health care delivery system To implement his proposal, HEW, in fiscal year 1971 began awarding grants and contracts to organizations to provide financial assistance in the planning and development of HMOs This grant and contract program for the development of HMOs was carried out under various sections of the Public Health Service Act and section 1110 of the Social Security Act rThe HEW grant and contract programhas been principally administered by the Health Maintenance Organization Service of the Health Services and Mental Health Administration Aftei an HEW reorganization in July 1973, the Service was placed in the Bureau of Community Health Services of the Health Services Administration located at Rockville, Maryland ()9

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