oversight

Test of the BCBS Association's Federal Employee Program Portability System

Published by the Office of Personnel Management, Office of Inspector General on 2012-02-02.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                        UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                               Washington, DC 20415 



  Office of the
                                            February 2, 2012
Inspector General



       MEMORANDUM FOR JOHN BERRY 

                      Director 


       FROM: 	                  PATRICK E, McFARLAND 

                                Inspector General 


       SUBJECT: 	               Test of the BlueCross BlueShield Association's Federal Employee
                                Program Portability System (Report No, lA-lO-OO-12-022)


       The purpose of this memorandum is to communicate to you the conclusions resulting from our
       test of the BlueCross BlueShield Association's (BCBSA) Federal Employee Program (FEP)
       Portability system,

       The BCBSA currently contracts with CareFirst BlueCross BlueShield (CareFirst) to host and
       operate FEP Express and other supporting information systems used to adjudicate claims for the
       nationwide BlueCross BlueShield FEP program, FEP "Portability" is the methodology in which
       BlueCross BlueShield of South Carolina (BCBSSC) replicates and takes over support of these
       information systems in the event that CareFirst is no longer able to fulfill its contract.

       The BCBSA has performed several Portability tests and has hired outside vendors to certify the
       successful results of these tests, At the request of the Assistant Director for Federal Employee
       Insurance Operations, we reviewed the infrastructure supporting the Portability system and
       participated in a recent Portability test to perform an independent evaluation of the system's
       functionality,

       Executive Summary

       We toured the BCBSSC data center hosting the Portability system and determined that adequate
       physical and environmental controls were in place and that the technical infrastructure
       supporting Portability is physically and logically separate from BCBSSC's own business
       operations,

       To test the system's functionality, we submitted an identical set of test claims into both the
       CareFirst environment and the BCBSSC Portability environment. We compared the results of
       these tests to evaluate whether the two systems have the same processing capabilities. Our
       review determined that the FEP system hosted by BCBSSC appeared to adjudicate claims in an
       identical manner to the system hosted by CareFirst. However, it came to our attention that prior
       BCBSA Portability tests did not include the following elements that would be critical to a




        www.opm.gov 	                                                                         www.usajobs.gov
John Berry                                                                                        2

real-life switchover of the FEP systems from CareFirst to BCBSSC:
•   Sending a response file from the FEP system back to the local BCBS plans for final claim
    adjudication; and,
•   Enabling the modules of the system that are used by local Plans to resolve claims that are
    suspended within FEP Express.

We recommend that the BCBSA include these elements in future Portability tests.

Background

The BCBSA is responsible for adjudicating all FEP claims from BCBS Plans nationwide. The
BCBSA has executed a contract with CareFirst through December 2014 to host and maintain the
FEP Express application and other supporting information systems used to process these claims.

The Portability project was initiated to create an alternative processing site for FEP claims
should CareFirst be unable to fulfill its contract due to the company losing its BCBS license or
going out of business altogether (referred to as a “triggering event”). There were also concerns
that FEP Express was so tightly interconnected to CareFirst’s local claims processing system that
the BCBSA would be unable to extract FEP Express functionality if necessary.

The BCBSA awarded BCBSSC a contract, also through December 2014, to provide an
alternative processing site for the FEP systems should a triggering event occur. BCBSSC built a
technical infrastructure independent from its local systems to support the FEP systems, and
worked with CareFirst to extract the applications’ functionality. We performed an independent
evaluation of both the infrastructure and system functionality.

Scope and Methodology

In March 2011, we toured the BCBSSC data center hosting the technical infrastructure
supporting the Portability system and evaluated the physical and environmental controls of this
site.

To test the functionality of the Portability system, we created a set of 50 test claims (32
professional and 18 hospital/institutional) to be processed by both the CareFirst and BCBSSC
FEP systems. BCBS of Delaware (BCBSDE) assisted us with the test by processing the claims
in their local adjudication system and allowing their system to route the claims to the FEP
systems.

In August 2011, BCBSDE entered the 50 claims into their local system and then routed the
claims to the FEP system housed by CareFirst. In September 2011, we visited BCBSDE and
observed claims adjudicators as they entered the same 50 claims into the FEP system housed by
BCBSSC. We then compared the results of the two sets of test claims to determine whether the
same results were produced by both FEP environments.

Our review was not conducted in accordance with Generally Accepted Government Auditing
Standards (GAGAS). The nature and scope of the work performed was consistent with that
John Berry                                                                                         3

expected of a GAGAS audit; however, because we consider this to be a review, the
documentation, reporting, and quality control standards are not as stringent.

Test Results

Based on our tests, we concluded that BCBSSC has adequate physical and environmental
controls at the data center supporting the Portability system. BCBSSC’s technical infrastructure
supporting Portability is physically and logically separate from the Plan’s own business
operations; this includes dedicated software, servers, mainframe, and data transmission lines. In
a previous audit of BCBSSC, we recommended that the Plan reevaluate its practice of storing
data backup tapes at a location only several miles from its primary data centers (see Report No.
1A-10-24-11-014). If BCBSSC were to become the primary host of FEP Express, the urgency of
implementing this recommendation would greatly increase, as the Plan would be processing
claims for FEP members nationwide instead of just those in South Carolina.

The results of the functionality test revealed no instances in which a claim was processed or
priced differently between the CareFirst and BCBSSC systems. There were also no instances in
which a claim was suspended or deferred in one system but not the other. Nothing came to our
attention to indicate that the FEP system hosted by BCBSSC does not adjudicate claims in an
identical manner to the system hosted by CareFirst. However, our testing exercise revealed two
opportunities for improvement regarding BCBSA’s methodology for testing the functionality of
the Portability process.

a)   Resolving Deferred Claims

     Several hospital claims were unexpectedly deferred due to problems with the membership
     data in the FEP systems’ test environments. We asked that BCBSDE resolve or bypass
     these deferrals so that the claim could continue adjudicating, and this was done successfully
     for the test batch processed through CareFirst. However, when these claims hit the same
     deferral in the BCBSSC system, BCBSDE was unable to override the deferral. It was
     determined that the modules of the FEP system required to work deferrals were not enabled
     for this testing exercise, and had not been enabled for any prior Portability tests.

     Each local BCBS plan is responsible for resolving claims from that plan that are deferred by
     the nationwide FEP system. If this capability were not functional in a production FEP
     system, the only claims that could be processed and paid are those that adjudicate without
     encountering any deferrals or suspensions.

     Recommendation 1:
     We recommend that future Portability exercises include local plans testing their ability to
     resolve deferred claims.

b)   Response Files

     Each local BCBS plan prepares batches of claims to be further processed by the nationwide
     FEP system. After the claims are processed, local plans are automatically sent a “response
John Berry                                                                                             4

      file” that contains the results of the FEP system adjudication. Local plans use the response
      file to finalize the claims status in their local systems, which then generate payments to
      providers.

      In previous Portability exercises, several local plans sent batch files to the FEP system, but
      there has never been a test that included local plans receiving a response file. For our test,
      BCBSDE personnel manually retrieved the response file and loaded it to their local system.
      However, this process would not be feasible to perform manually in a production
      environment due to the frequency of batch transfers required.

      If response files were not sent to the local plans in a production environment, the plans
      would not be able to finalize claims in their systems and no payments to providers would be
      generated.

      Recommendation 2:
      We recommend that future Portability exercises include the testing of response file transfers.


cc:     Elizabeth A. Montoya
        Chief of Staff

        Richard B. Lowe
        Director, Executive Secretariat and Ombudsman

        John O’Brien
        Director, Healthcare and Insurance

        Shirley Patterson
        Assistant Director for Federal Employee Insurance Operations

        Mark W. Lambert
        Director
        Internal Oversight & Compliance

        Janet Barnes
        Deputy Director
        Internal Oversight & Compliance


        Chief, Policy and Internal Control