oversight

Audit of the BlueCross BlueShield of Louisiana Baton Rouge, Louisiana

Published by the Office of Personnel Management, Office of Inspector General on 2013-12-19.

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

                                                     U.S. OFFICE OF PERSONNEL MANAGEMENT
                                                           OFFICE OF THE INSPECTOR GENERAL
                                                                            OFFICE OF AUDITS




Final Audit Report
Subject:


                    AUDIT OF
        BLUECROSS BLUESHIELD OF LOUISIANA
             BATON ROUGE, LOUISIANA



                                             Report No. 1A-10-07-13-005


                                             Date:         December 19, 2013




                                                            --CAUTION--

This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data that is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
                                                     AUDIT REPORT


                                        Federal Employees Health Benefits Program
                                         Service Benefit Plan Contract CS 1039
                                            BlueCross BlueShield Association
                                                      Plan Code 10


                                               BlueCross BlueShield of Louisiana
                                                     Plan Codes 170/670
                                                    Baton Rouge, Louisiana




                    REPORT NO. 1A-10-07-13-005                                                   12/19/13
                                                                                      DATE: ______________




                                                                               Michael R. Esser
                                                                               Assistant Inspector General
                                                                                 for Audits




                                                            --CAUTION--

This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data that is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
                               EXECUTIVE SUMMARY


                            Federal Employees Health Benefits Program
                             Service Benefit Plan Contract CS 1039
                                BlueCross BlueShield Association
                                          Plan Code 10


                                 BlueCross BlueShield of Louisiana
                                       Plan Codes 170/670
                                      Baton Rouge, Louisiana




                                                                     12/19/13
              REPORT NO. 1A-10-07-13-005                    DATE: ______________



This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations
at BlueCross BlueShield of Louisiana (Plan), in Baton Rouge, Louisiana, questions $454,085 in
health benefit charges. The BlueCross BlueShield Association agreed (A) with these questioned
charges.

Our limited scope audit was conducted in accordance with Government Auditing Standards. The
audit covers claim payments from January 1, 2010 through November 30, 2012 as reported in the
Annual Accounting Statements.

The questioned health benefit charges are summarized as follows:

•   Non-Participating Provider Claims (A)                                              $208,745

    During our review of claims submitted by non-participating providers, we determined that
    the Plan incorrectly paid 25 claims, resulting in overcharges of $208,745 to the FEHBP.
    Specifically, the Plan overpaid 10 professional claims by $116,258, 13 basic coverage claims
    by $77,226, and 2 inpatient claims by $15,261.




                                                i
•   System and Discount Review (A)                                                       $166,667

    Based on our review of a judgmental sample of 150 claims, we determined that the Plan
    incorrectly paid 7 claims, resulting in net overcharges of $166,667 to the FEHBP.
    Specifically, the Plan overpaid six claims by $167,167 and underpaid one claim by $500.

•   Durable Medical Equipment Claims (A)                                                  $51,782

    Based on our review of a judgmental sample of 50 durable medical equipment claims, we
    determined that the Plan incorrectly paid 3 claims, resulting in net overcharges of $51,782 to
    the FEHBP. Specifically, the Plan overpaid two claims by $53,305 and underpaid one claim
    by $1,523.

•   Duplicate Payments – Professional/Facility Claims (A)                                 $26,891

    The Plan incorrectly paid 35 professional claims, resulting in overcharges of $26,891 to the
    FEHBP. These claims were included in payment groups that contained one facility claim
    and one or more possible duplicate professional claims.




                                                ii
                                                  CONTENTS
                                                                                                                  PAGE

       EXECUTIVE SUMMARY .............................................................................................. i

 I.    INTRODUCTION AND BACKGROUND .....................................................................1

II.    OBJECTIVES, SCOPE, AND METHODOLOGY .........................................................3

III.   AUDIT FINDINGS AND RECOMMENDATIONS .......................................................5

              HEALTH BENEFIT CHARGES ............................................................................5

              1. Non-Participating Provider Claims ....................................................................5

              2. System and Discount Review ............................................................................7

              3. Durable Medical Equipment Claims..................................................................9

              4. Duplicate Payments – Professional/Facility Claims ........................................10

IV.    MAJOR CONTRIBUTORS TO THIS REPORT ..........................................................12

 V.    SCHEDULE A – HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

       APPENDIX (BlueCross BlueShield Association response, dated September 6, 2013,
                to the draft audit report)
                         I. INTRODUCTION AND BACKGROUND
INTRODUCTION

This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
BlueCross BlueShield of Louisiana (Plan). The Plan is located in Baton Rouge, Louisiana.

The audit was performed by the Office of Personnel Management’s (OPM) Office of the
Inspector General (OIG), as established by the Inspector General Act of 1978, as amended.

BACKGROUND

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law
86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance
benefits for federal employees, annuitants, and dependents. OPM’s Healthcare and Insurance
Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB
Act are implemented by OPM through regulations, which are codified in Title 5, Chapter 1, Part
890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available
through contracts with various health insurance carriers.

The BlueCross BlueShield Association (Association), on behalf of participating BlueCross and
BlueShield plans, has entered into a Government-wide Service Benefit Plan contract (CS 1039)
with OPM to provide a health benefit plan authorized by the FEHB Act. The Association
delegates authority to participating local BlueCross and BlueShield plans throughout the United
States to process the health benefit claims of its federal subscribers. The Plan is one of
approximately 64 local BlueCross and BlueShield plans participating in the FEHBP.

The Association has established a Federal Employee Program (FEP 1) Director’s Office in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP
Director’s Office coordinates the administration of the contract with the Association, member
BlueCross and BlueShield plans, and OPM.

The Association has also established an FEP Operations Center. The activities of the FEP
Operations Center are performed by CareFirst BlueCross BlueShield, located in Washington,
D.C. These activities include acting as fiscal intermediary between the Association and member
plans, verifying subscriber eligibility, approving or disapproving the reimbursement of local plan
payments of FEHBP claims (using computerized system edits), maintaining a history file of all
FEHBP claims, and maintaining an accounting of all program funds.

Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
Association and Plan management. Also, management of the Plan is responsible for establishing
and maintaining a system of internal controls.

1
  Throughout this report, when we refer to "FEP", we are referring to the Service Benefit Plan lines of business at
the Plan. When we refer to the "FEHBP", we are referring to the program that provides health benefits to federal
employees.


                                                          1
All findings from our prior audit of the Plan (Report No. 1A-10-07-07-016, dated January 18,
2008), which included claim payments from 2003 through September 30, 2006, have been
satisfactorily resolved.

The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan and/or Association officials throughout the audit and at an exit conference; and were
presented in detail in a draft report, dated June 21, 2013. The Association’s comments offered in
response to the draft report were considered in preparing our final report and are included as an
Appendix to this report.




                                                 2
                II. OBJECTIVES, SCOPE, AND METHODOLOGY 


OBJECTIVES 


The objectives of om audit were to detem line wheth er the Plan char ged costs to th e FE HBP and
provided se1vices to FEHBP m embers in accordan ce with the te1m s of th e contract. Specifically,
om objectives were to dete1mine whether th e Plan complied with contract provisions relative to
health benefit payments.

SCOPE

We conducted om limited scope perf01m ance audit in accordance with generally accepted
govemment auditing standards. Those standards require that we plan an d perf01m the audit to
obtain sufficient and appropriate evidence to provide a reasonable basis for om fmdings and
conclusions based on om audit objectives. We believe th at th e evidence obtained provides a
reasonable basis for om findings and conclusions based on om audit objectives.

We reviewed the BlueCross and BlueSllleld                     BlueC1·oss BlueSbield of Louisiana 

                                                                   Health Benefit Charges 

FEHBP Ammal Accounting Statem ents as
th ey pe1iain to Plan codes 170 and 670 for           $300 .,......- - - - - - - - - - - - - - ,




                                                   ~:: : m ~ ~
contract years 2010 through 2012. Dming
tllls period, the Plan paid approximately
$703 million in health benefit charges (See
Figure 1 and Schedule A) . In total, we
reviewed approximately $9.5 million in                          2010         2011             2012
                                                                          Contract Years
claim payments made fr om J anuruy 1, 201 0
                                                                  a Health Benefit Payments
through November 30, 2012 for proper
adjudication.                                          Figure 1 - Health Benefit Charges

In planning an d conducting om audit, we obtained an understanding of the Plan's intem al control
stmctm e to help dete1mine th e natm e, timing, and extent of om auditing procedm es. Tllls was
detennined to be the m ost effective approach to select ru·eas of audit. For those areas selected,
we primarily relied on substantive tests of transactions and not tests of controls. Based on om
testing, we did not identify any significant matters involving the Plan 's intem al control stm cture
and its operations. However, since om audit would not necessru·ily disclose all significant
matters in the intem al control stmcture, we do not express an opinion on the Plan's system of
intem al controls taken as a whole .

We also conducted tests to dete1mine whether the Plan had complied with the contract an d the
applicable laws and regulations goveming the FEHBP as they relate to claim payments. The
results of om tests indicate that, with respect to the items tested, the Plan did not fully comply
with the provisions of th e contract relative to claim payments . Exceptions noted in the ru·eas
reviewed are set f01ih in detail in the "Audit Findings and Recommendations" section of tllls
audit rep01i. With respect to the items not tested, nothing cam e to om attention that caused us to
believe that the Plan had not complied, in all material respects, with those provisions .




                                                 3

In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP Director’s Office, the FEP Operations Center, and the Plan. Through audits and a
reconciliation process, we have verified the reliability of the BCBS claims data in our data
warehouse, which was used to identify the universe of claims for each type of review. The
BCBS claims data is provided to us on a monthly basis by the FEP Operations Center, and after a
series of internal steps, uploaded into our data warehouse. However, due to time constraints, we
did not verify the reliability of the data generated by the Plan’s local claims system. While
utilizing the computer-generated data during our audit testing, nothing came to our attention to
cause us to doubt its reliability. We believe that the data was sufficient to achieve our audit
objectives.

The audit was performed at the Plan’s office in Baton Rouge, Louisiana from April 16, 2013
through April 24, 2013. Audit fieldwork was also performed at our offices in Washington, D.C.
and Cranberry Township, Pennsylvania through June 5, 2013.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan’s claims processing system
by inquiry of Plan officials.

To test the Plan’s compliance with the FEHBP health benefit provisions, we selected and
reviewed samples of 501 claims. 2 We used the FEHBP contract, the 2010 through 2012 Service
Benefit Plan brochures, the Plan’s provider agreements, and the Association’s FEP
administrative manual to determine the allowability of benefit payments. The results of these
samples were not projected to the universe of claims.




2
  See the audit findings for “Non-Participating Provider Claims” (1), “System and Discount Review” (2), “Durable
Medical Equipment Claims” (3), and “Duplicate Payments – Professional/Facility Claims” (4) on pages 5 through 11
for specific details of our sample selection methodologies.


                                                       4
                   III. AUDIT FINDINGS AND RECOMMENDATIONS
HEALTH BENEFIT CHARGES

1. Non-Participating Provider Claims                                                                      $208,745

      During our review of claims submitted by non-participating (non-par) providers, we
      determined that the Plan incorrectly paid 25 claims, resulting in overcharges of $208,745 to
      the FEHBP.

      Contract CS 1039, Part III, section 3.2 (b)(1) states, “The Carrier may charge a cost to the
      contract for a contract term if the cost is actual, allowable, allocable, and reasonable.” In
      addition, Part II, section 2.3 (g) states, “If the Carrier or OPM determines that a Member’s
      claim has been paid in error for any reason . . . the Carrier shall make a prompt and diligent
      effort to recover the erroneous payment . . . .”

      The 2012 BlueCross and BlueShield Service Benefit Plan brochure, page 132, states, “Non-
      participating providers – We have no agreements with these providers to limit what they can
      bill you for their services. This means that using Non-participating providers could result in
      your having to pay significantly greater amounts for the services you receive.”

      For the period January 1, 2010 through November 30, 2012, we performed a computer search
      to identify inpatient, outpatient, and professional claims that were submitted by non-par
      providers. In total, we identified 140,754 non-par provider claims (representing 463,358
      claim lines), totaling $15,265,823 in payments that met this search criteria. From this
      universe, we selected and reviewed a judgmental sample of 150 claims (representing 1,608
      claim lines), totaling $3,367,899 in payments, to determine if these claims were correctly
      priced by the FEP Operations Center and/or paid by the Plan. 3

      Our sample selections are summarized as follows:

      •    From a population of 173 non-par inpatient claims (representing 2,094 claim lines,
           totaling $1,540,405 in payments), we selected and reviewed a judgmental sample of 75
           claims (representing 1,236 claim lines), totaling $1,187,581 in payments. The sample
           selections included the 75 highest paid claims in this population.

      •    From a population of 324 non-par outpatient claims (representing 371 claim lines,
           totaling $626,664 in payments), we did not select a sample of claims since the total
           payment amounts were considered immaterial.

      •    From a population of 140,257 non-par professional claims (representing 460,893 claim
           lines, totaling $13,098,754 in payments), we selected and reviewed a judgmental sample
           of 75 claims (representing 372 claim lines), totaling $2,180,318 in payments. The sample
           selections included the 75 highest paid claims in this population.

3
    The non-par provider claims are generally priced by the FEP Operations Center and then paid by the Plan.


                                                           5
After reviewing our initial sample of 150 non-par provider claims, we expanded our testing
to also include all non-par provider claims with amounts paid of $2,500 or more that were
processed for members with basic coverage only. This expanded sample included an
additional 63 claims, totaling $485,259 in payments, from the universe.

In total, we determined that 25 of the non-par claims in our initial and expanded samples
were paid incorrectly, resulting in overcharges of $208,745 to the FEHBP. Specifically, the
Plan overpaid 10 professional claims by $116,258, 13 basic coverage claims by $77,226, and
2 inpatient claims by $15,261. These claim payment errors resulted from the following:

•   The Plan applied the non-par “balance relief” incorrectly when pricing nine professional
    claims, resulting in overcharges of $114,003 to the FEHBP.

•   The Plan inadvertently included non-covered services when pricing four claims, resulting
    in overcharges of $62,284 to the FEHBP. Specifically, the Plan overpaid three basic
    coverage claims by $53,084 and one inpatient facility claim by $9,200. In each instance,
    the Plan did not have proper authorization for the medical necessity of the claim, which
    made the claim charges unallowable (non-covered services).

•   The Plan priced six basic coverage claims using incorrect allowed amounts, resulting in
    overcharges of $20,831 to the FEHBP.

•   The FEP Operations Center did not properly coordinate two claims with the members’
    additional insurance when pricing the claims. Consequently, the Plan overpaid one
    inpatient facility claim by $6,061 and one professional claim by $2,255, resulting in
    overcharges of $8,316 to the FEHBP.

•   In one instance, a member’s enrollment data records, which identified the patient’s
    eligibility status in the FEP Direct System, were incorrect when the Plan paid a basic
    coverage claim. However, after receiving the patients’ updated enrollment data records,
    the Plan did not review and/or adjust this basic coverage claim. As a result, the Plan
    inappropriately charged the FEHBP $3,011 for this claim that was incurred after the
    patient’s termination date of coverage.

•   The FEP Operations Center did not properly calculate the copayment amounts for three
    basic coverage claims. As a result, the Plan overpaid these claims by $300.

Association’s Response:

The Association states, “The Plan agrees that 19 claim payments totaling $206,490 were paid
incorrectly . . . The Plan has initiated overpayment recovery efforts for the confirmed
overpayments. As of August 21, 2013, the Plan has recovered and returned $59,660 to the
FEP Program. In addition, the Plan has established $66,211 in offsets of future member
payable claims on FEP Direct because the refund letters did not result in the recovery of
these overpayments. The remaining $80,619 balance is still in recovery. The Plan continues
to show due diligence in its recovery efforts.”


                                            6
   To the extent that errors did occur, the Association also states that these payments were good
   faith erroneous benefit payments and fall within the context of CS 1039, Part II, section
   2.3(g). Any payments the Plan is unable to recover are allowable charges to the FEHBP as
   long as the Plan demonstrates due diligence in the collection of these overpayments. As
   good faith erroneous payments, lost investment income does not apply to the claim payment
   errors identified in this finding.

   In addition, the Association states that the Plan has implemented corrective actions to
   minimize these types of claim payment errors in the future.

   OIG Comments:

   Based on our review of the Association’s response and additional documentation, we revised
   the amount questioned from the draft report to $208,745 for this finding. Although the
   Association only agrees with $206,490 in its written response, the Association’s additional
   documentation supports concurrence with the revised questioned charges of $208,745.

   Recommendation 1

   We recommend that the contracting officer disallow $208,745 for claim overcharges and
   verify that the Plan returns all amounts recovered to the FEHBP.

   Recommendation 2

   We recommend that the contracting officer require the Association to provide evidence or
   documentation supporting that the Plan’s corrective actions to minimize these types of claim
   payment errors in the future are being implemented. These corrective actions are included in
   the Association’s response to the draft report.

2. System and Discount Review                                                           $166,667

   The Plan incorrectly paid seven claims, resulting in net overcharges of $166,667 to the
   FEHBP. Specifically, the Plan overpaid six claims by $167,167 and underpaid one claim by
   $500.

   As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
   allocable, and reasonable. If errors are identified, the Plan is required to make a diligent
   effort to recover the overpayments.

   For health benefit claims incurred and reimbursed from July 1, 2011 through November 30,
   2012 (excluding Omnibus Budget Reconciliation Act of 1990, Omnibus Budget
   Reconciliation Act of 1993, and case management claims), we identified 2,629,320 claim
   lines, totaling $289,826,071 in payments, where the FEHBP paid as the primary insurer.
   From this universe, we selected and reviewed a judgmental sample of 150 claims
   (representing 1,699 claim lines), totaling $5,387,293 in payments, for the purpose of
   determining if the Plan adjudicated these claims properly and/or priced them according to the



                                                7
    provider contract rates. 4 As part of our review, we also selected 30 participating and
    preferred providers, which were associated with the highest reimbursed claims in our sample,
    for the purpose of verifying if these providers’ contract rates were accurately and timely
    updated in the Plan’s local network pricing system.

    Our review identified seven claim payment errors, resulting in net overcharges of $166,667
    to the FEHBP. Specifically, the Plan overpaid six claims by $167,167 and underpaid one
    claim by $500. These claim payment errors resulted from the following:

    •    The Plan paid five claims using the incorrect pricing allowances, resulting in overcharges
         of $115,388 to the FEHBP.

    •    In one instance, the Plan inadvertently included a non-covered service when pricing the
         claim, resulting in an overcharge of $51,779 to the FEHBP.

    •    In one instance, the Plan inadvertently applied a pre-certification penalty when pricing
         the claim, resulting in an undercharge of $500 to the FEHBP.

    Association’s Response:

    The Association agrees with this finding. The Association states that the Plan has initiated
    recoveries of the overpayments. As of August 21, 2013, the Plan had recovered and returned
    $100,196 of the overpayments to the FEHBP. In the FEP Direct System, the Plan has also
    set-up $66,471 in offsets of future member payable claims because the refund letters did not
    result in recoveries of these overpayments. To the extent that errors did occur, the
    Association also states that these payments were good faith erroneous benefit payments and
    fall within the context of CS 1039, Part II, section 2.3(g). Any payments the Plan is unable
    to recover are allowable charges to the FEHBP as long as the Plan demonstrates due
    diligence in the collection of these overpayments. As good faith erroneous payments, lost
    investment income does not apply to the claim payment errors identified in this finding.

    In addition, the Association states that the Plan has implemented corrective actions to
    minimize these types of claim payment errors in the future.

    Recommendation 3

    We recommend that the contracting officer disallow $167,167 for claim overcharges and verify
    that the Plan returns all amounts recovered to the FEHBP.

    Recommendation 4

    We recommend that the contracting officer allow the Plan to charge the FEHBP $500 if an
    additional payment is made to the provider to correct the underpayment error.

4
  We selected our sample from an OIG-generated “Place of Service Report” (SAS application) that stratified the claims by place
of service (POS), such as provider’s office and payment category, such as $50 to $99.99. We judgmentally determined the
number of sample items to select from each POS stratum based on the stratum’s total claim dollars paid.



                                                               8
3. Durable Medical Equipment Claims                                                       $51,782

   During our review of durable medical equipment (DME) claims, we determined that the Plan
   incorrectly paid three claims, resulting in net overcharges of $51,782 to the FEHBP.
   Specifically, the Plan overpaid two DME claims by $53,305 and underpaid one DME claim
   by $1,523.

   As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
   allocable, and reasonable. If errors are identified, the Plan is required to make a diligent
   effort to recover the overpayments.

   Contract CS 1039, Part II, section 2.6 states, “(a) The Carrier shall coordinate the payment of
   benefits under this contract with the payment of benefits under Medicare . . . (b) The Carrier
   shall not pay benefits under this contract until it has determined whether it is the primary
   carrier . . . .”

   For the period January 1, 2011 through November 30, 2012, we identified 174,666 DME
   claim lines, totaling $11,748,429 in payments. From this universe, we selected and reviewed
   a judgmental sample of 50 claims (representing 362 claim lines), totaling $534,682 in
   payments, to determine if these claims were correctly priced and paid by the Plan. Our
   sample included all claims with amounts paid of $500 or more.

   Based on our review, we determined that three of the DME claims in our sample were paid
   incorrectly, resulting in net overcharges of $51,782 to the FEHBP. Specifically, the Plan
   overpaid two claims by $53,305 and underpaid one claim by $1,523. These claim payment
   errors resulted from the following:

   •   In one instance, the Plan paid a claim using the incorrect provider identification number
       and fee schedule pricing allowance, resulting in an overcharge of $41,487 to the FEHBP.

   •   In one instance, the Plan incorrectly priced each claim line separately for a claim, when
       the claim lines should have been grouped and paid under the first claim line. As a result,
       the Plan overpaid the claim by $11,818.

   •   In one instance, the Plan did not properly coordinate a claim with Medicare, resulting in
       an undercharge of $1,523 to the FEHBP.

   Association’s Response:

   The Association agrees with this finding. The Association states that the Plan has recovered
   and returned the overpayments of $53,305 to the FEHBP, as well as issued a payment of
   $1,523 to the applicable provider to correct the underpayment error.




                                                9
   Recommendation 5

   We recommend that the contracting officer disallow $53,305 for claim overcharges and verify
   that the Plan has returned these overcharges to the FEHBP.

   Recommendation 6

   We recommend that the contracting officer allow the Plan to charge the FEHBP $1,523 for
   the underpayment error.

4. Duplicate Payments – Professional/Facility Claims                                       $26,891

   The Plan incorrectly paid 35 professional claims, resulting in overcharges of $26,891 to the
   FEHBP. These claims were included in payment groups that contained one facility claim
   and one or more possible duplicate professional claims.

   As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
   allocable, and reasonable. Also, the Plan must coordinate the payment of benefits under this
   contract with the payment of benefits under Medicare. If errors are identified, the Plan is
   required to make a diligent effort to recover the overpayments.

   Section 6(h) of the FEHB Act provides that rates should reasonably and equitably reflect the
   costs of benefits provided.

   We performed computer searches on the BCBS claims database, using our SAS data
   warehouse function, to identify potential duplicate professional claims that were paid by the
   Plan from January 1, 2010 through November 30, 2012.

   •   Using our “duplicate professional and inpatient match” search criteria, we identified 592
       potential duplicate payment groups containing two or more claims, where one claim was
       the original inpatient facility claim and the other(s) were possible duplicate professional
       claims. These potential duplicate groups included 1,571 claim lines, totaling $59,705 in
       payments. Due to the immaterial payment amounts, we did not select a sample of these
       groups to review.

   •   Using our “duplicate professional and outpatient match” search criteria, we identified
       26,791 potential duplicate payment groups containing two or more claims, where one
       claim was the original outpatient facility claim and the other(s) were possible duplicate
       professional claims. These potential duplicate groups included 57,631 claim lines,
       totaling $2,205,631 in payments. From this universe, we selected and reviewed a
       judgmental sample of 151 groups (representing 454 claim lines), totaling $223,992 in
       payments. Our sample included all groups with potential duplicate payments of $100 or
       more.




                                                10
Based on our review, we identified 35 professional claim payment errors, resulting in
overcharges of $26,891 to the FEHBP. These claim payment errors occurred due to the
following reasons:

•   Due to various provider billing errors, the Plan inadvertently paid 31 duplicate claims,
    resulting in overcharges of $23,788 to the FEHBP.

•   In two instances, the Plan incorrectly used override codes when processing the claims,
    resulting in duplicate charges of $1,902 to the FEHBP.

•   In one instance, the Plan did not properly coordinate a claim with Medicare, resulting in
    an overcharge of $1,131 to the FEHBP (a non-duplicate claim payment error).

•   In one instance, although the provider submitted a revised claim with a modifier on the
    duplicate procedure code, the Plan did not correctly adjust the claim in the local claims
    system, resulting in an overcharge of $70 to the FEHBP.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan has initiated
recoveries of the overpayments. As of August 21, 2013, the Plan has recovered and returned
$15,305 of the overpayments to the FEHBP. To the extent that errors did occur, the
Association also states that these payments were good faith erroneous benefit payments and
fall within the context of CS 1039, Part II, section 2.3(g). Any payments the Plan is unable
to recover are allowable charges to the FEHBP as long as the Plan demonstrates due
diligence in the collection of these overpayments. As good faith erroneous payments, lost
investment income does not apply to the claim payment errors identified in this finding.

The Association states that the Plan has implemented corrective actions to reduce these types
of claim payment errors in the future. In addition, the Association states that the FEP
Director’s Office will be adding monthly duplicate listings to the FEP Direct System’s
“Claims Audit Monitoring Tool” later this year.

Recommendation 7

We recommend that the contracting officer disallow $26,891 for claim overcharges and verify
that the Plan returns all amounts recovered to the FEHBP.




                                            11
                 IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

                 , Auditor-In-Charge

              , Auditor


                  , Chief

Information Systems Audits Group

                  , Senior Information Technology Specialist

            , Senior Information Technology Specialist




                                            12
                                                                 V. SCHEDULE A

                                                  BLUECROSS BLUESHIELD OF LOUISIANA
                                                       BATON ROUGE, LOUISIANA

                                         HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED


HEALTH BENEFIT CHARGES                                                           2010         2011            2012          TOTAL

HEALTH BENEFIT CHARGES

     PLAN CODE 170:
       CLAIM PAYMENTS                                                       $121,018,071    $147,103,311    $148,570,896    $416,692,278
       MISCELLANEOUS PAYMENTS AND CREDITS*                                        73,125         (44,364)       (547,081)       (518,320)

     PLAN CODE 670:
       CLAIM PAYMENTS                                                         90,654,953      98,496,314      97,964,089     287,115,356
       MISCELLANEOUS PAYMENTS AND CREDITS*                                             0               0               0               0

     TOTAL                                                                  $211,746,149    $245,555,261    $245,987,904    $703,289,314


AMOUNTS QUESTIONED                                                               2010         2011            2012          TOTAL

1.   NON-PARTICIPATING PROVIDER CLAIMS                                             $8,428        $98,495       $101,822        $208,745
2.   SYSTEM AND DISCOUNT REVIEW                                                         0         42,069        124,598         166,667
3.   DURABLE MEDICAL EQUIPMENT CLAIMS                                                   0         (1,523)        53,305          51,782
4.   DUPLICATE PAYMENTS - PROFESSIONAL/FACILITY CLAIMS                              3,708          8,359         14,824          26,891

     TOTAL QUESTIONED CHARGES                                                     $12,136      $147,400        $294,549        $454,085

* We did not review the miscellaneous payments and credits on this audit.
                                                                BlueCross BlueShield
                                                                Association
                                                                An Association of Independent
                                                                Blue Cross and Blue Shield Plans
                                                               Federal Employee Program
                                                               131 0 G Street, N.W.
                                                               Washington, D.C. 20005
September 6, 2013                                              Phone # 202 .942. 1000
                                                               Fax 202.942.1125
                     Group Chief,
Experience-Rated Audits Group,
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, D.C. 20415-1100

Reference: 	        OPM DRAFT AUDIT REPORT
                    Blue Cross and Blue Shield of Louisiana
                    Audit Report Number 1A-10-07-13-005
                    (Dated June 21, 2013 and Received June 24, 2013)

Dear

This is our response to the above referenced U.S. Office of Personnel Management
(OPM) Draft Audit Report covering the Federal Employees' Health Benefits Program
(FEHBP) for Blue Cross and Blue Shield of Louisiana. Our comments concerning the
findings in this report are as follows:

HEALTH BENEFIT CHARGES

1. Non-Participating Provider Claims 	                                              $239,616

The Plan agrees that 19 claim payments totaling $206,490 were paid incorrectly. These
errors resulted in nine facility and ten professional claims overpayments. The Plan has
initiated overpayment recovery efforts for the confirmed overpayments. As of August 21,
2013, the Plan has recovered and returned $59,660 to the FEP Program. In addition ,
the F?lan has established $66,211 in offsets of future member payable claims on FEP
Direct because the refund letters sent did not result in the recovery of these
overpayments. The remaining $80,619 balance is still in recovery. The Plan continues
to show due diligence in its recovery efforts.

The Plan contests that $33,126 for samples # 62 & 63 were overpaid. These claims
were determined to be paid correctly.

These overpayments were caused by the manual submission of the Plan
Allowance/FEP Non-Par Per Diem used by the Operations Center to calculation the
Non-Par Allowances and determine the FEP Payable Amounts.
September 6, 2013
Louisiana BCBS Draft Report
Page 2 of 4

The Plan has taken the following actions to minimize these types of errors in the future:

 o 	 Conduct period coding training for the claims processors.

 o 	 Include any errors identified during the quality review process, internal and external
     audits and confinned errors from quarterly performance reporting in the periodic
     coding training sessions.

 o 	 The confirmed errors in this report were also used as training tools during recent re­
     fresher training sessions for the claims staff held on August 19 and August 20, 2013.
     In addition, the Plan will use its quality process to continue to monitor the accuracy
     of these types of claims. Attached is support documenting the re-fresher training that
     was conducted .

Accordingly, to the extent that errors did occur, the payments are good faith erroneous
benefit payments and fall within the context of CS 1039, section 2.3(g). Any benefit
payments the Plan is unable to recover are allowable charges to the Program as long
as the Plan is able to demonstrate due diligence in collection of the overpayment. In
addition, as good faith erroneous benefit payments the Plan continues to initiate
recovery in a timely manner for confirmed overpayments. Because these are good faith
erroneous payments, they are not subject to lost investment income.

2. 	 System and Discount Review                                                   $166,667

The Plan agrees that seven claims totaling $166,667 may have been paid incorrectly.
These payment errors consist of six overpayments totaling $167,167 and one
underpayment for $500. Refund recovery efforts have been initiated for these
confirmed overpayments. As of August 21, 2013, the Plan has collected and returned
$100,196 to the FEP Program. In addition , the Plan has established $66,471 in offsets
of future member payable claims on FEP Direct because the refund letters sent did not
result in the recovery of these overpayments. The Plan continues to show due d iligence
in its recovery efforts.

These overpayments were caused by manual pricing errors. Th e Plan has taken the
following actions to minimize these types of errors in the future:

o 	 These confirmed errors were used as training tools during recent re-fresher training
    sessions for the clai ms staff on August 19 and August 20, 2013. In addition, the
    Plan will use its quality process to continue to monitor the accuracy of these types of
    claims payments.
September 6, 2013
Louisiana BCBS Draft Report
Page 3 of 4


o 	 Plan staff also conducts random system reviews to promote the efficiency of the
    functionality of the system in an effort to reduce the amount of human intervention
    required for pricing.


Accordingly, to the extent that errors did occur, the payments are goo d faith erroneous
benefit payments and fall within the context of CS 1039, section 2.3(g). Any benefit
payments the Plan is unable to recover are allowable charges to the Program as long
as the Plan is able to demonstrate due diligence in collection of the overpayment. In
addition, as good faith erroneous benefit payments; the Plan continues to initiate
recovery in a timely manner for confirmed overpayments. Because these are good faith
erroneous payments, they are not subject to lost investment income.

 2.    Durable Medical Equipment Claims 	                                         $51,782

The Plan agrees that three claims with a net total of $51,782 may have been paid
incorrectly. These payment errors resulted in two overpayments totaling $53,305 and
one underpayment totaling $1,523. The Plan has taken actions to initiate recovery on
these two overpayments and has issued the identified underpayment amount to the
provider. As of August 21 , 2013, the Plan has co llected and returned$53,305 to the
FEP Program.

The two overpayments were the result of manual pricing errors. The Plan has
implemented additional procedures that would require peer review of any manual priced
claims prior to the submission to the FEP Operations Center.


3.     Duplicate Payments- Professional/Facility Claims 	                         $26,891

The Plan agrees that 35 claims from a population of 592 professional claims groupings
with a net total of $26,891 may have been paid incorrectly. These payment errors were
the result of providers submitting multiple billings and examiners overriding the duplicate
edits generated by the FEP Operations Center. As of August 21 , 2013, th e Plan has
collected and returned $15,305 to the FEP Program. The Plan continues to show due
diligence in its recovery efforts for the remaining $11,586 .

The Plan believes that these overpayments occurred because a few select providers
submitted multiple billings and processors incorrectly overrode the duplicate edits
generated by the FEP Claims System. T o reduce future payments of this nature in the
future, the Plan has taken the following actions:
Louisiana BCBS Draft Report
Page 4 of 4

      • 	 Sent out educational materials to their providers to encourage them not to re­
          submit billings but to use the Plan 's on-line claim status process to determine the
          adjudication stage of claims prior to the re-submission of previously submitted
          claims.

      • 	 Plan re-fresher training sessions that were conducted that included these error
          types. The sessions included the actions to be taken to resolve the duplicates
          which include pulling a copy of the other claims that caused the generation of the
          duplicate edit and performing a manual comparison review to determine whether
          the transactions should be paid or rejected.

In add ition , the FEP Director's Office will be adding monthly Duplicate Listings to the
FEP Claims System on-line Claims Audit Monitoring Tool later this year. We believe
that these actions should further reduce the potential for duplicate payments and
promote the timely identification and recovery of any overpayment.

Accordingly, to the extent that errors did occur, the payments are good fa ith erroneous
benefit payments and fall within the context of CS 1039, sect ion 2 .3(g). Any benefit
payments the Plan is unable to recover are allowable charges to the Program as long
as the Plan is able to demonstrate due diligence in collection of the overpayment. In
addition, as good faith erroneous benefit payments; the Plan continues to initiate
recovery in a t imely manner for co nfirmed overpayments. Because these are good faith
erroneous payments, they are not subject to lost investment income.

We appreciate the opportunity to provide our response to each of the findings in this
report and request that our comments be included in their entirety and are made a part
of the Final Auditlliiiilil~~-stions, please contact me at


Sincerely,




Attachment ( 1)

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