oversight

Audit of BlueCross and BlueShield of Alabama

Published by the Office of Personnel Management, Office of Inspector General on 2016-06-08.

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

                   Audit of Blue Cross and Blue Shield of Alabama
                                            Report Number 1A-10-09-15-043
                                                     June 8, 2016




                                                            -- CAUTION --
This audit report has been distributed to Federal officials who are responsible for the administration of the audit program. This audit report may
contain proprietary data which 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 (http://www.opm.gov/our-inspector-general), 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 

                             Audit of Blue Cross and Blue Shield of Alabama

Report No. 1A-10-09-15-043                                                                            June 8, 2016

 Why Did We Conduct the Audit?             What Did We Find?

 The objectives of our audit were to       Our audit identified several minor incidents of erroneous claim
 determine whether Blue Cross and Blue     payments, but we do not believe that the errors are indicative of
 Shield of Alabama (Plan) charged costs    major systemic control problems. Therefore, we conclude the
 to the Federal Employees Health           Plan’s processing of FEHBP claims appears to be in compliance
 Benefits Program (FEHBP) and
                                           with the terms of its contract with the U.S Office of Personnel
 provided services to FEHBP members
                                           Management and industry standards. The report questions $24,332
 in accordance with the terms of its
 contract with the U.S. Office of
                                           in health benefit charges. The questioned health benefit charges
 Personnel Management. Specifically,       are summarized as follows:
 our objective was to determine whether
 the Plan complied with contract           A. 	Multiple Procedures Discount Review
 provisions relative to claim payments.        	 The Plan incorrectly paid 41 claim lines that were billed
                                                  when multiple services were performed on the same day,
                                                  resulting in overcharges of $18,977 to the FEHBP.
 What Did We Audit?
                                           B. 	Bilateral Procedures Discount Review
 The Office of the Inspector General has
                                               	 The Plan incorrectly paid seven claim lines that contained
 completed a limited scope audit of the
                                                   identical services that were performed on both sides of the
 FEHBP operations of Blue Cross and
                                                   body during a single operative session, resulting in
 Blue Shield of Alabama. The audit
                                                   overcharges of $2,741 to the FEHBP.
 covered Blue Cross and Blue Shield of
 Alabama claim payments from               C. 	Non-Participating Provider Review
 January 1, 2012 through February 28,          	 The Plan incorrectly paid two claims to providers that are
 2015, as reported in the Blue Cross and          not part of the Plan’s provider network, resulting in
 Blue Shield Association’s Federal                overcharges of $2,614 to the FEHBP.
 Employee Program Government-wide
 Service Benefit Plan Annual
 Accounting Statements.




 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                        i
              ABBREVIATIONS


Association    Blue Cross Blue Shield Association
BCBS           Blue Cross Blue Shield
DO             Director’s Office
FEHB           Federal Employees Health Benefits
FEHBP          Federal Employees Health Benefits Program
FEP            Federal Employee Program
FEP OC         Federal Employee Program Operations Center
OBRA 93        Omnibus Budget Reconciliation Act of 1993
OIG            Office of the Inspector General
OPM            U.S. Office of Personnel Management
Plan           Blue Cross and Blue Shield of Alabama




                         ii
IV. MAJOR CONTRIBUTORS TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                        Page 

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


         ABBREVIATIONS ..................................................................................................... ii 


  I.     BACKGROUND ..........................................................................................................1 

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

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

         A. Multiple Procedures Discount Review.....................................................................5 

         B. Bilateral Procedures Discount Review .....................................................................6 

         C. Non-Participating Provider Review .........................................................................7 


  IV.    MAJOR CONTRIBUTORS TO THIS REPORT ....................................................9 


         APPENDIX: Blue Cross Blue Shield Association’s February 26, 2016 response
                   to the Draft Audit Report, issued January 15, 2016.

         REPORT FRAUD, WASTE, AND MISMANAGEMENT
            I. BACKGROUND
IV. MAJOR CONTRIBUTORS TO THIS REPORT

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
Blue Cross and Blue Shield of Alabama (Plan). The Plan is located in Birmingham, Alabama.
The audit was performed by the U.S. Office of Personnel Management’s (OPM) Office of the
Inspector General (OIG), as authorized by the Inspector General Act of 1978, as amended.

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. Health insurance coverage is made available through
contracts with various health insurance carriers.

The Blue Cross Blue Shield Association (Association), on behalf of participating Blue Cross and
Blue Shield (BCBS) 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 BCBS plans throughout the United States to
process the health benefit claims of its federal subscribers. There are 64 BCBS plans
participating in the FEHBP.

The Association has established a Federal Employee Program (FEP1) Director’s Office (DO) in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP DO
coordinates the administration of the contract with the Association, member BCBS plans, and
OPM.

The Association has also established an FEP Operations Center (OC). The activities of the FEP
OC 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.




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                                Report No. 1A-10-09-15-043
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.

The most recent audit report issued that covered claim payments for Blue Cross and Blue Shield
of Alabama was Report No. 1A-10-09-05-087, dated February 27, 2007. All findings from the
previous audit have been 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 audit report, dated January 15, 2016. 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                           Report No. 1A-10-09-15-043
II.
IV. OBJECTIVES, SCOPE, ANDTO
     MAJOR CONTRIBUTORS   METHODOLOGY
                             THIS REPORT
 Objectives
 The objectives of our audit were to determine whether the Plan charged costs to the FEHBP and
 provided services to FEHBP members in accordance with the terms of the contract. Specifically,
 our objective was to determine whether the Plan complied with contract provisions relative to
 health benefit payments.

 Scope and Methodology
 We conducted our limited scope performance audit in accordance with generally accepted
 government auditing standards. Those standards require that we plan and perform the audit to
 obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and
 conclusions based on our audit objectives. We believe that the evidence obtained provides a
 reasonable basis for our findings and conclusions based on our audit objectives.

 We reviewed the Blue Cross and Blue Shield Association’s Government-wide Service Benefit Plan
 FEP Annual Accounting Statements as they pertain to Plan code 010 and 510 (BCBS of Alabama)
 for contract years 2012 through 2014. During this period, the Plan paid approximately $1.3 billion
 in health benefit charges (See Figure 1). From this universe, we judgmentally selected various
 samples. We reviewed approximately 376 claims, totaling $1.6 million in payments, for the period
 January 1, 2012 through February 28, 2015 for proper adjudication. We used the FEHBP contract,
 the 2012 through 2015 Service Benefit Plan brochures, the Plan’s provider agreements, and the
 Association’s FEP Administrative Procedures Manual to determine the allowability of benefit
 payments. The results of these samples were not projected to the universe of claims.


                                     Blue Cross Blue Shield of Alabama
                                          Health Benefit Charges
                              $435

                                                                              Health Benefit
                 $ Millions




                              $430                                            Payments



                              $425
                                      2012          2013          2014


                                         Figure 1 – Health Benefit Charges




                                                           3                 Report No. 1A-10-09-15-043
In planning and conducting our audit, we obtained an understanding of the Plan’s internal control
structure to help determine the nature, timing, and extent of our auditing procedures. For those
areas selected, we primarily relied on substantive tests of transactions and not tests of controls.
Based on our testing, we did not identify any significant matters involving the Plan’s internal
control structure and its operations. However, since our audit would not necessarily disclose all
significant matters in the internal control structure, we do not express an opinion on the Plan’s
system of internal controls taken as a whole.

We also conducted tests to determine whether the Plan had complied with the contract and the
laws and regulations governing the FEHBP as they relate to claim payments. The results of our
tests indicate that, with respect to the items tested, the Plan did not fully comply with the
provisions of the contract relative to claim payments. Exceptions noted are explained in detail in
the “Audit Findings and Recommendations” section of this audit report. With respect to the
items not tested, nothing came to our attention that caused us to believe that the Plan had not
complied, in all material respects, with those provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP DO, the FEP OC, 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 OC, 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, nothing came to our attention to cause us to doubt its reliability. We believe that the
data was sufficient to achieve our audit objectives.

Audit fieldwork was performed at our offices in Washington, D.C.; Cranberry Township,
Pennsylvania; and Jacksonville, Florida through December 2015.




                                                4                           Report No. 1A-10-09-15-043
  IV. AUDIT
III.   MAJORFINDINGS
             CONTRIBUTORS  TO THIS REPORT
                     AND RECOMMENDATIONS
   The sections below summarize the results of several reviews we performed on claim payments
   made by BCBS Alabama. As mentioned in the “scope” section above, all of our samples were
   selected from claim payments for services provided between January 1, 2012 and
   February 28, 2015.

A. Multiple Procedures Discount Review	                                                                     $18,977

   We reviewed a sample of claims that contained multiple procedures. In general, the Plan
   discounts the provider’s reimbursement when multiple services are performed on the same
   patient on the same day. See Exhibit I for a summary of our multiple procedures discount
   review.

                     Exhibit I – Summary of Multiple Procedures Discount Review
       Universe of      Universe          Sampled          Sampled           Claim Lines           Total Claim
       Claim Lines     Dollar Total      Claim Lines      Dollar Total       Paid in Error       Payment Errors
                                                                                   41                 $18,977


   Sample Selection Criteria
   Our review included:
   	 All claim lines with amounts paid of $2,500 or more;
   	 A random selection of 50 claim lines with amounts paid between $500 and $2,500; and
   	 All claim lines subject to Omnibus Budget Reconciliation Act of 1993 (OBRA 93) pricing
      guidelines with amounts paid of $150 or more2.

   Cause of Errors
   	 For six claim lines, the Plan’s claims processors applied the incorrect allowance for an out-
      of-network provider, resulting in overcharges of $10,368.
   	 The FEP OC did not apply the Medicare multiple procedure discount to 33 OBRA 93 claim
      lines, resulting in overcharges of $6,862; and
   	 The Plan’s claims processors did not apply the Plan’s local multiple procedure discount to
      two claim lines, resulting in overcharges of $1,747.

   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.” Part II,

   2
    The OBRA 93 regulation limits the benefit payment for certain services to annuitants age 65 or older who are not
   covered under Medicare Part B and the FEHBP is required to limit the claim payment to the lesser of the Medicare
   Part B payment or billed charges.


                                                       5	                                   Report No. 1A-10-09-15-043
   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 . . . regardless of any time period limitations in the written agreement with
   the provider.”

   Plan Response:

   “The Plan adjusted each claim in order to initiate recovery. Any funds recovered will be
   returned to the FEP Program.”

   OIG Comment:

   As part of the audit resolution process, we recommend that the Plan submit evidence that these
   overpayments have been properly adjusted and returned to the FEHBP. This statement applies to
   all subsequent recommendations in this report where the Plan agrees to implement our
   recommendation.

   Recommendation 1

   We recommend that the contracting officer disallow $18,977 for claim overcharges and verify
   that the Plan returns all amounts recovered to the FEHBP.

B. Bilateral Procedures Discount Review	                                                     $2,741

   We reviewed a sample of claims that contained a bilateral procedure. In general, the Plan
   discounts the provider’s reimbursement when identical services are performed on both sides of
   the body during a single operative session. See Exhibit II for a summary of our bilateral
   procedures discount review.

                  Exhibit II– Summary of Bilateral Procedures Discount Review
    Universe of      Universe       Sampled       Sampled        Claim Lines        Total Claim
    Claim Lines     Dollar Total   Claim Lines   Dollar Total    Paid in Error    Payment Errors
                                                                        7              $2,741


   Sample Selection Criteria
   Our review included:
   	 All claim lines subject to OBRA 93 pricing guidelines with amounts paid of $200 or more;
      and
   	 A random selection of 50 claim lines with amounts paid of $500 or more.


                                                  6	                          Report No. 1A-10-09-15-043
   Cause of Errors
   	 The FEP OC did not apply the Medicare bilateral procedure discount to six OBRA 93 claim
      lines, resulting in overcharges of $2,637; and
   	 In one instance, the Plan’s claims processors overrode the system’s automated pricing,
      resulting in an overcharge of $104.

   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. Also, the recovery of any overpayment must be treated as an
   erroneous benefit payment, regardless of any time period limitations in the written provider
   agreement.

   Plan Response:

   “The Plan adjusted each claim in order to initiate recovery. Any funds recovered will be
   returned to the FEP Program.”

   Recommendation 2

   We recommend that the contracting officer disallow $2,741 for claim overcharges and verify that
   the Plan returns all amounts recovered to the FEHBP.

C. Non-Participating Provider Review	                                                              $2,614

   We reviewed a sample of claims paid to providers that are not part of the Plan’s provider
   network (i.e., non-participating or non-par providers) to ensure that these claims were correctly
   priced and paid according to the FEP Service Benefit Plan brochures. See Exhibit III for a
   summary of our non-participating providers review.

                   Exhibit III – Summary of Non-Participating Providers Review
   Universe of      Universe         Sampled         Sampled        Total Claims        Total Claim
    Claims         Dollar Total       Claims        Dollar Total    Paid in Error     Payment Errors
                                                                          2               $2,614


   Sample Selection Criteria
   Our review included:
   	 A random selection of 15 professional claims and 10 outpatient claims paid to non-par
      providers;




                                                     7	                             Report No. 1A-10-09-15-043
   A judgmental selection of 5 high dollar dental claims where the patient had basic option
    enrollment coverage; and
   A judgmental selection of 3 high dollar claims containing unlisted procedure codes.

Cause of Errors
The overpayments found in this review were due to a provider inadvertently billing two claims
with overlapping dates of service.

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. Also, the recovery of any overpayment must be treated as an
erroneous benefit payment, regardless of any time period limitations in the written provider
agreement.

The 2015 BCBS Service Benefit Brochure provides general guidance on the FEP’s policy for
pricing and paying non-participating provider claims.

Plan Response:

“The Plan adjusted each claim in order to initiate recovery. Any funds recovered will be
returned to the FEP Program.”

Recommendation 3

We recommend that the contracting officer disallow $2,614 for claim overcharges and verify that
the Plan returns all amounts recovered to the FEHBP.




                                                  8                            Report No. 1A-10-09-15-043
IV. MAJOR CONTRIBUTORS TO THIS REPORT
Information Systems Audits Group

             , Auditor-in-Charge

                         , Auditor

           , Auditor


           , Senior Team Leader

             , Group Chief




                                     9   Report No. 1A-10-09-15-043
                                                               Federal Employee Program
                                                               1310 G Street, N.W.
                                                               Washington, D.C. 20005
                                                               Phone # 202.942.1000
                                                               Fax 202.942.1125

                                  APPENDIX


February 26, 2016

                , Group Chief
Claims & IT 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 Alabama
                    Audit Report Number 1A-10-09-15-043
                    (Dated and Received January 15, 2016)

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

HEALTH BENEFIT CHARGES

A. DELETED BY THE	 OIG. THIS FINDING AND RECOMMENDATION WAS
   REMOVED FROM THE FINAL REPORT.

B. Multiple Procedure Review	                                                   $18,977

   Recommendation 3

   We recommend that the contracting officer disallow $18,977 for claim overcharges
   and verify that the Plan returns all amounts recovered to the FEHBP.




                                                                Report No. 1A-10-09-15-043
   Plan Response:

   The Plan adjusted each claim in order to initiate recovery. Any funds recovered will be
   returned to the FEP Program.

C. Bilateral Procedures Review	                                                  $2,741

   Recommendation 4

   We recommend that the contracting officer disallow $2,741 for claim overcharges and
   verify that the Plan returns all amounts recovered to the FEHBP.

   Plan Response

   The Plan adjusted each claim in order to initiate recovery. Any funds recovered will be
   returned to the FEP Program.

D. Non-Participating Providers Review	                                           $2,614

   Recommendation 5

   We recommend that the contracting officer disallow $2,614 for claim overcharges and
   verify that the Plan returns all amounts recovered to the FEHBP.

   Plan Response:

   The Plan adjusted each claim in order to initiate recovery. Any funds recovered will be
   returned to the FEP Program.

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 Audit Report. If you have any questions, please contact me at
or                   at               .

Sincerely, 



            , CISA
Managing Director, Program Assurance 
 
cc: 	              , BCBSAL
                      , FEP
                     , FEP




                                                              Report No. 1A-10-09-15-043
                                                                                                                         



                                       Report Fraud, Waste, and 

                                           Mismanagement 

                                                  Fraud, waste, and mismanagement in
                                               Government concerns everyone: Office of
                                                   the Inspector General staff, agency
                                                employees, and the general public. We
                                              actively solicit allegations of any inefficient
                                                    and wasteful practices, fraud, and
                                               mismanagement related to OPM programs
                                              and operations. You can report allegations
                                                          to us in several ways:


                        By Internet:               http://www.opm.gov/our-inspector-general/hotline-to-
                                                   report-fraud-waste-or-abuse


                         By Phone:                 Toll Free Number:                              (877) 499-7295
                                                   Washington Metro Area:                         (202) 606-2423


                           By Mail:                Office of the Inspector General
                                                   U.S. Office of Personnel Management
                                                   1900 E Street, NW
                                                   Room 6400
                                                   Washington, DC 20415-1100
                     
                                                                                                                         
                                                                                                                         




                                                             -- 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 which 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 (http://www.opm.gov/our-inspector-general), 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.