oversight

Audit of Highmark Bluecross Blueshield Camp Hill, Pennsylvania

Published by the Office of Personnel Management, Office of Inspector General on 2009-06-15.

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 HIGHMARKBLUECROSS BLUESHIELD
 .. . .. . '(=Al\1PIIILL,~PENNSYLVANIA· .. .



                                             ReportNo. lA-10-,13-09-,OOl.

                                             Date:           June. 15, 2009




                                                             --CAUTION--

Tbis audit report h~s beefi distributed to Federal offici~l~ who are re,ponsible for the administration oflh~ audited program. This audit report
may contain proprietary data 1:\'hicb is protected by FujeraHaw (IS U.S.c. 1905); therefore, while this audit report is available unde.r the
Freedom of Information Act, caution needs. to   be  exercised before releasing the report to the general public.
                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                             Washington, DC 20415 


     Office of the
. Inspector General




                                          AUDIT REPORT 



                                Federal Employees Health Benefits Program 

                                Service Benefit Plan     Contract CS 1039 

                                     BlueCross BlueShield Association 

                                               Plan Code 10 



                                     Highmark BlueCross BlueShield 

                                        Plan Codes 363 and 865 

                                        Camp Hill, Pennsylvania 





                        REPORT NO. IA-1O-13-09-001           DATE:      June 15, 2009




                                                              Michael R. Esser
                                                              Assistant Inspector General
                                                                for Audits




          WWW_Dpm.gov                                                                       www.lIsajobs.gov
                        UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                             Washington, DC 20415 


   Office of the
Inspector General




                                     EXECUTIVE SUMMARY 



                                Federal Employees Health Benefits Program 

                                Service Benefit Plan     Contract CS 1039 

                                     BlueCross BlueShie1d Association 

                                               Plan Code 10 



                                      Highmark BlueCross BlueShield 

                                         Plan Codes 363 and 865 

                                         Camp Hi1l, PelU1sylvania 





                      REPORT NO. IA-1O-13-09-001             DATE: June 15, 2009


       This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations at
       Highmark BlueCross BlueShield (Plan) in Camp Hill, Pennsylvania questions $872,886 in health
       benefit charges. The BlueCross BlueShield Association agreed (AJ with all questioned charges.

       Our audit was conducted in accordance with Government Auditing Standards. The audit covered
       claim payments from 2005 through 2007, as well as miscellaneous payments and credits and
       administrative expenses from 2003 through 2007 as reported in the AlU1ual Accounting
       Statements. In addition, we reviewed the Plan's cash management practices related to FEHBP
       funds for contract years 2003 through 2007.

       Questioned items are summarized as follows:




        www.opm.gov                                                                       www.usajobs.gov
                              HEALTH BENEFIT CHARGES 


Claim Payments

•   System Review fA)                                                                      $437,154

    Based on our review of a judgmental sample of 125 claims, we determined that the Plan
    incorrectly paid 5 claims, resulting in net overcharges of $437,154 to the FEHBP.
    Specifically, the Plan overpaid four claims by $441,272 and underpaid one claim by $4,118.

•   Omnibus Budget Reconciliation Act of 1990 Review (A)                                   $196,264

    The Plan incorrectly paid 24 claims that were priced or potentially should have been priced
    under the Omnibus Budget Reconciliation Act of 1990 pricing guidelines, resulting in net
    overcharges of $196,264 to the FEHBP. Specifically, the Plan overpaid 20 claims by
    $212,087 and underpaid 4 claims by $15,823.

•   Amounts Paid Greater than Covered Charges fA)                                          $177,193

    During our review of claims where the amounts paid were greater than the covered charges,
    we detennined that the Plan incorrectly paid eight claims, resulting in overcharges of
    $177,193 to the FEHBP.

•   Assistant Surgeon Review (A)                                                            $13,903

      The Plan incorrectly paid 12 assistant surgeon claims, resulting in net overcharges of $13,903
      to the FEHBP. SpecificaIJy, the Plan overpaid 10 claims by $14,541 and underpaid 2 claims
    . b'y$638.

MisceJlaneous Payments and Credits

•   Review of Refund Aging Report (A)                                                       $26,571

    As of the start date of our review, the Plan had not returned a provider audit recovery of
    $25,483 to the FEHBP. The Plan subsequently returned $26,571 to the FEHBP, consisting of
    $25,483 for the provider audit recovery and $1,088 for lost investment income on this
    recovery.

•   Provider Audit Recoveries (A)                                                          $21,801

    The Plan did not recover and return two provider overpayments to the FEHBP. As a result,
    the FEHBP is due $21,801 for these provider audit recoveries.




                                                  11
                        ADMINISTRATIVE EXPENSES 


The audit disclosed no findings pertaining to administrative expenses. Overall, we concluded
that the administrative expenses charged to the FEHBP were actual, allowable, necessary, and
reasonable expenses incurred in accordance with the terms of the contract and applicable laws
and regulations.

                             CASH MANAGEMENT

Overall, we concluded that the Plan handled FEHBP funds in accordance with Contract CS
1039 and applicable laws and regulations, ex~ept for the findings pertaining to cash
management noted in the "Miscellaneous Payments and Credits" section.




                                            111
                                                      CONTENTS 


                                                                                                                            PAGE
       'EXECUTIVE SUMMARy ............................................................................................... .i 


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


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


III.   AUDIT FINDINGS AND RECOMMENDATIONS ........................................................ 6 


       A.      HEALTH BENEFIT CHARGES ............................................................................ 6 


               1. Claim Payments ...... ,.......................................................................................... 6 

                  a. System Review ................... ~ ........................................................................ 6 

                  b. Omnibus Budget Reconciliation Act of 1990 Review ................................ 7 

                  c. Amounts Paid Greater than Covered Charges ........................................... 10 

                  d. Assistant Surgeon Review ......................................................................... 11 


               2. Miscellaneous Payments and Credits .............................................................. 14 

                  a. Review of Refund Aging Report ............................................................... 14 

                  b. Provider Audit Recoveries ......................................................................... 15 


       B.      ADMINISTRATIVE EXPENSES ......................................................................... 16 


       C.      CASH MANAGEMENT ....................................................................................... 16 


IV.    MAJOR CONTRIBUTORS TO THIS REPORT ........................................................... 17 


 V.    SCHEDULES

       A.      CONTRACT CHARGES AND AMOUNTS QUESTIONED
       B.      QUESTIONED CHARGES

       APPENDIX 	 (BlueCross BlueShield Association reply, dated April 10, 2009, to the
                  draft audit report)
                         I. INTRODUCTION AND BACKGROUND 


INTRODUCTION 


This final audit report details the findings, conclusions, and recommendations resulting from our
audit of the Federal Employees Health Benefits Program (FEHBP) operations at Higlunark
BlueCross BlueShield (Plan). The Plan is located in Camp Hill, Pennsylvania.

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 Center for Retirement and
Insurance Services 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 I, 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 63 local BlueCross and Blue Shield plans participating in the FEHBP.

The Association has established a Federal Employee Program (FEp!) Director's Office in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP
Director's Office coordinates the administration ofthe 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 intennediary 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.




I Throughout this report, when we refer to "FEP" we are referring to the Service Benefit Plan Jines of business at the 

Plan. When we refer to the "FEHBP" we are referring to the program that provides health benefits to federal employees. 

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 findings from our previous audit of the Plan (Report No. 1A-I 0-13-03-025, dated
February 2,2004) for contract years 1999 through 2001 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 February 5,2009. 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 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 objectives were as follows:

       Health Benefit Charges

       • 	 To determine whether the Plan complied with contract provisions relative to benefit
           payments.

       • 	 To determine whether miscellaneous payments charged to the FEHBP were in
           compliance with the terms of the contract.

       • 	 To determine whether credits and miscellaneous income relating to FEHBP benefit
           payments were returned promptly to the FEHBP.

       Administrative Expenses

       • 	 To determine whether administrative expenses charged to the contract were actual,
           allowable, necessary and reasonable expenses incurred in accordance with the terms
           of the contract and applicable regulations.

       Cash Management

       • 	 To determine whether the Plan handled FEHBP funds in accordance with applicable
           laws and regulations concerning cash management in the FEHBP.

SCOPE

We conducted our 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 BlueCross and BlueShield FEHBP Annual Accounting Statements as they
pertain to Plan codes 363 and 865 for contract years 2003 through 2007. During this period, the
Plan paid approximately $1 billion in health benefit charges and $95 million in administrative
expenses (See Figure 1 and Schedule A).




                                               3

Specifically, we reviewed approximately $13 million in claim payments made from 2005 through
2007 for proper adjudication. In addition, we reviewed miscellaneous payments and credits, such
as refunds and subrogation recoveries, administrative expenses, and cash management for 2003
through 2007.

In planning and conducting our audit, we
                                                                        Highmark BlueCross BlueShield
obtained an understanding of the Plan's internal                      . -____c_o_n_tr_a~_C_h_ar~g_es_ ___________~
control structure to help detennine the nature,              $300

timing, and extent of our auditing procedures.               $250
This was determined to be the most effective           11/
                                                       c $200
approach to select areas of audit. For those           .Q

areas selected, we primarily relied on                 i     $150
                                                       w
substantive tests of transactions and not tests of           $100 

controls. Based on our testing, we did not
identify any significant matters involving the                $50 

Plan's internal control structure and its                      $0 

operation. However, since our audit would not                            2003    2004       2005    2006      2007
necessarily disclose all significant matters in the                                   Contract Years

internal control structure, we do not express an              121 Health Benefit Payments   _ Administrative Expenses
opinion on the Plan's system of internal controls
taken as a whole.                                                      Figure I - Contract Charges

We also conducted tests to detennine whether the Plan had complied with the contract, the
applicable procurement regulations (i.e., Federal Acquisition Regulations (FAR) and Federal
Employees Health Benefits Acquisition Regulations (FEHBAR), as appropriate), and the laws
and regulations governing the FEHBP. The results of our tests indicate that, with respect to the
items tested, the Plan did not comply with all provisions of the contract and federal procurement
regulations. Exceptions noted in the areas reviewed are set forth in detail in the "Audit Findings
and)tecommendations" 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 Director's Office, the FEP Operations Center, the Plan, and the Centers for Medicare and
Medicaid Services. Due to time constraints, we did not verify the reliability of the data generated
by the various infonnation systems involved. However, 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 offices in Camp Hill, Pennsylvania from October 27
through November 21,2008 and December 8 through December 19,2008. Audit fieldwork was.
also performed at our offices in Washington, D.C. and Cranberry Township, Pennsylvania.




                                                  4

METHODOLOGY

We obtained an understanding of the internal controls over the Plan's claims processing,
financial, and cost accounting systems by inquiry of Plan officials.

To test the Plan's compliance with the FEHBP health benefit provisions, we selected and
reviewed samples of 412 claims. 2 We used the FEHBP contract, the Service Benefit Plan
brochure, 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.

We interviewed Plan personnel and reviewed the Plan's policies, procedures, and accounting
records during our audit of miscellaneous payments and credits. We also judgmentally selected
and reviewed 178 health benefit refunds, totaling $1,928,743 (from a universe of 39,181 refunds,
totaling $7,627,190); 47 provider audit recoveries, totaling $657,157 (from a universe of394
provider audit recoveries, totaling $932,776); 30 Special Plan Invoices, totaling $1,886,081 in
net payments (from a universe of 369 Special Plan Invoices, totaling $4,375,055 in net
payments); 10 subrogation recoveries, totaling $122,994 (from a universe of228 subrogation
recoveries, totaling $324,850); 6 hospital settlements, totaling $1,127,147 in payments (from a
universe of 183 hospital settlements, totaling $2,007,589 in net payments); and 5 fraud
recoveries, totaling $11,423 (from a universe of 24 fraud recoveries, totaling $13,357), to
determine if refunds and recoveries were promptly returned to the FEHBP and if miscellaneous
payments were properly charged to the FEHBP. In addition, we judgmentally selected and
reviewed 6 health benefit refunds and recoveries, totaling $1,281,590 (from a universe of 105
refunds and recoveries, totaling $ 1,703,949) from the Plan's December 2007 refund aging report.
The results of these samples were not projected to the universe of miscellaneous payments and
credits:

We judgmentally reviewed administrative expenses charged to the FEHBP for contract years
2003 through 2007. Specifically, we reviewed administrative expenses relating to cost centers,
natural accounts, out-of-system adjustments, prior period adjustments, pension, post-retirement,
employee health benefits, executive compensation, Association dues, inter-company profits,
nonrecurring projects, return on investment, subcontracts, and Health Insurance Portability and
Accountability Act of 1996 compliance. We used the FEHBP contract, the FAR, and the
FEHBAR to determine the allowability, allocability, and reasonableness of charges.

We also reviewed the Plan's cash management to determine whether the Plan handled FEHBP
funds in accordance with Contract CS 1039 and applicable laws and regulations.




2 See the audit findings for "System Review" (Al.a), "Omnibus Budget Reconciliation Act of 1990 Review" (Al.b),
"Amount Paid Greater than Covered Charges" (Al.c), and "Assistant Surgeon Review" (A l.d) on pages 6 through 13
for specific details of our sample selection methodologies.




                                                      5

                   III. AUDIT FINDINGS AND RECOMMENDATIONS 


A. 	 HEALTH BENEFIT CHARGES

     1. 	 Claim Payments

          a. 	 System Review                                                                             $437,154

              The Plan incorrectly paid five claims, resulting in net overcharges of$437,154 to the
              FEHBP. Specifically, the Plan overpaid four claims by $441,272 and underpaid one
              claim by $4,118.

              Contract CS 1039, Part III, section 3.2 (b)(I) 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, section 2.3(g) states, "lfthe 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 ...."

              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,
              other group health benefits coverages, and the payment of medical and hospital costs
              under no-fault or other automobile insurance that pays benefits without regard to
              fault. (b) The Carrier shall not pay benefits under this contract until it has determined
              whether it is the primary carrier ...."

              For health benefit claims reimbursed during the period January 1,2007 through
              December 31, 2007, we identified 3,205,763 claim lines, totaling $213,211,574 in
            . payments, using a standard criteria based on our audit experience. From this
              universe, we selected and reviewed a judgmental sample of 125 claims (representing
              827 claim lines), totaling $5,725,164 in payments, to determine ifthe Plan
              adjudicated these claims properly.3 Our review identified five claim payment errors,
              resulting in net overcharges of$437,154 to the FEHBP. Specifically, the Plan
              overpaid four claims by $441,272 and underpaid one claim by $4,118.

              The claim payment errors resulted from the following:

              • 	 The Plan did not properly coordinate one claim with Medicare,resulting in an
                  overcharge of $432, I 73 to the FEHBP.




--------------
3 We selected our sample from an OIG-generated "Place of Service Report" (SAS application) that stratified the
c/aims by place of service (POS), such as provider's office and payment category, such as $50 to $99.99. We
judglilClltaJ\y determined the number ofsampJe Items to select from each-POS stratum based on the stratum's total
claim dollars paid. ­




                                                         6

   • 	 The Plan did not properly coordinate two claims with the patient's primary 

       insurance carrier, resulting in overcharges of $8,937 to the FEHBP. 


   • 	 The Plan paid two claims at total billed charges instead of applying the applicable
       contract rates, resulting in net undercharges of $3,956 to the FEHBP.
       Specifically, the Plan overpaid one claim by $162 and underpaid one claim by
       $4,118.

   Association's Response:

   The Association agrees with this finding. The Association states that the Plan has
   recovered and returned $440,055 to the FEHBP a.s of February 20,2009. Also, the
   Plan has made an adjustment to the claim that was underpaid and charged the FEHBP
   accordingly for the additional payment made to the provider.

   The Plan is in the process of developing a training program specifically designed to
   address these errors. The Plan will conduct this training program in April or May
   2009 depending on the availability of training resources.

   Recommendation 1

   We recommend that the contracting officer disallow $441,272 for claim overcharges,
   and verifY that the Plan returns all amounts recovered to the FEHBP.

   Recommendation 2

   We recommend that the contracting officer allow the Plan to charge the FEHBP $4,118
   for the claim undercharge, and verify that that the Plan made an additional payment to
   the provider.

b. 	 Omnibus Budget Reconciliation Act of 1990 Review                             $196,264

   The Plan incorrectly paid 24 claims that were priced or potentially should have been
   priced under the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) pricing
   guidelines, resulting in net overcharges of $196,264 to the FEHBP. Specifically, the
   Plan overpaid 20 claims by $212,087 and underpaid 4 claims by $15,823.

   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 prompt and diligent effort to recover the overpayments. Also, the Plan must
   coordinate the payment of benefits with Medicare.




                                         7

OBRA 90 limits the benefit payments for certain inpatient hospital services provided
to arulUitants age 65 or older who are not covered under Medicare Part A. The .
FEHBP fee-for-service plans are required to limit the claim payment to the amount
equivalent to the Medicare Part A payment.

Using a program developed by the Centers for Medicare and Medicaid Services to price
OBRA 90 claims, we recalculated the claim payment amounts for the claims in our
samples that were subject to and/or processed as OBRA 90.

The following summarizes the c1aim payment errors.

OBRA 90 Claim Pricing Errors

For the period 2005 through 2007, we identified 861 claims, totaling $6,928,947 in
payments, that were subject to OBRA 90 pricing guidelines. From this universe, we
selected and reviewed a judgmental sample of 101 claims, totaling $3,037,198 in
payments, to determine if these claims were correctly priced by the FEP Operations
Center and paid by the Plan. Our sample included all OBRA 90 claims with amounts
paid of $12,500 or more.

Based on our review, we determined that 12 of these claims were paid incorrectly,
resulting in net overcharges of$I71,460 to the FEHBP. Specifically, the Plan
overpaid 11 claims by $176,451 and underpaid ] claim by $4,991.

These claim payment errors resulted from the following:

• 	 The Plan incorrectly bundled claim lines for six claims, resulting in overcharges
    of$157,319 to the FEHBP.

• 	 The FEP Operations Center priced three claims using incorrect Medicare provider
    numbers, resulting in overcharges of$17,260 to the FEHBP.

• 	 The Plan priced one claim using a per diem rate of $963 instead of a per diem rate
    of $900, resulting in an overcharge of $1,116 to the FEHBP.

• 	 The Plan did not properly coordinate one claim with Medicare, resulting in an
    overcharge of $756 to the FEHBP.

• 	 In one instance, the Plan inadvertently did not use the per diem pricing method to
    price the claim, resulting in an undercharge of $4,991 to the FEHBP.




                                     8

Claims Not Priced Under OBRA 90 (Possible OBRA 90 Claims)

For the period 2005 through 2007, we identified 589 claims, totaling $952,974 in
payments, that were potentially subject to OBRA 90 pricing guidelines but appeared
to be paid under the Plan's standard pricing procedures. From this universe, we
selected and reviewed a judgmental sample of 54 claims, totaling $741,717 in
payments, to determine if the Plan paid these claims properly. Our sample included
all possible OBRA 90 claims with amounts paid of $2,500 or more.

Based on our review, we determined that 12 of these claims were paid incorrectly,
resulting in net overcharges of $24,804 to the FEHBP. Specifically, the Plan overpaid
nine claims by $35,636 and underpaid three claims by $10,832.

These claim payment errors resulted from the following:

• 	 The Plan did not properly coordinate five claims with Medicare, resulting in
    overcharges of$23,028 to the FEHBP.

• 	 The Plan paid five claims using incorrect pricing rates, resulting in net
    overcharges of $7,540 to the FEHBP. Specifically, the Plan overpaid four claims
    by $12,608 and underpaid one claim by $5,068.

• 	 The Plan inadvertently did not price two claims under OBRA 90, resulting in
    undercharges of $5,764 the FEHBP.

Association's Response:

The Association agrees with this finding. The Association states that the Plan has
recovered and returned $192,692 to the FEHBP as of February 20,2009. Also, the
Plan has made adjustments to the claims that were underpaid and charged the FEHBP
accordingly for the additional payments made to the providers.

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 good
faith erroneous payments, lost investment income (LII) does not apply to the claim
payment errors identified in this finding.

The Association states, "The Plan identified the root cause as stemming from manual
processing errors and incorrect data on its provider file. The provider file was
corrected in July 2008.

In addition to these controls, the Plan has other methods in place to identify
overpayments. These methods include, but are not limited to, System-Wide Claims
Reports, COB Claims Reports and Duplicate Claims Reports provided by the FEP




                                     9

   Director's Office and worked by the Plan, as wel1 as routine claims quality assurance
   audits perfonned by the Plan's Perfonnance Measurement and Reporting Department.
   While these measures are not absolute, they provide reasonable assurances that such
   items will be identified. Efforts will be made to periodically examine existing
   procedures and add additional controls where necessary ....

   Further, the FEP Director's Office has implemented the following action steps to
   reduce OBRA '90 questioried items:

   • 	 Identify all claims that were not OBRA '90 priced and provide to Plans for
       correction as part of the new FEP System-wide Claims Review process; and

   • 	 Modified FEP claims system to defer claims whenever the Plan indicates the
       provider is not an approved facility. This will force the Plan to ensure that the
       proper information has been submitted."

   Recommendation 3

   We recommend that the contracting officer disallow $212,087 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
   $15,823 for the claim undercharges, and verify that that the Plan made additional
   payments to the providers.

c. 	 Amounts Paid Greater than Covered Charges                                     $177,193

   The Plan incorrectly paid eight claims, resulting in overcharges of $177,193 to the
   FEHBP.

   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 prompt and diligent effort to recover the overpayments.

   For the period 2005 through 2007, we identified 584 claims where the amounts paid
   were greater than the covered charges by a total of $2,624,294. From this universe,
   we selected and reviewed a judgmenta1 sample of 93 claims with a tota] variance of
   $2,473,215, and determined ifthe Plan adjudicated these claims proper1y. Our
   samp]e included all claims where the amounts paid exceeded covered charges by
   $2,500 or more. Based on our review, we determined that eight claims were paid
   incorrectly, resulting in overcharges of $177,193 to the FEHBP.




                                         10 

   The claim payment errors resulted from the following reasons:

   • 	 In two instances, providers submitted inaccurate claims, resulting in overcharges
       of$113,701 to the FEHBP. Subsequently, the providers identified this oversight
       and submitted revised claims for processing and payment on February 23, 2008
       and June 13,2008. The Plan voided the inaccurate claims on June 13,2008 and
       July 10, 2008. However, since these errors were corrected by the Plan after
       receiving our audit sample on May 6, 2008, we are continuing to question these
       claim payment errors in the final report.

   • 	 The Plan incorrectly paid six claims, resulting in overcharges of $63,492 to the
       FEHBP. These overcharges were due to the Plan's processors erroneously
       adjusting four claims that were correctly priced and paid, entering an incorrect per
       diem rate for one claim, and using an incorrect pricing method for one claim.

   Association's Response:

   The Association agrees with this finding. The Association states that the Plan has
   recovered the overpayments and returned $177,193 to the FEHBP.

   The Association also states that the Plan identified the root cause as stemming from
   manual processing errors and inaccurate provider claims submission. The Plan is in
   the process of developing a training program specifically designed to address these
   errors. The Plan will conduct this training program in April or May 2009 depending
   on the availability of training resources.

   Recommendation 5

   We recommend that the contracting officer disallow $177,193 for claim overcharges,
   and verifY that the Plan has returned all amounts recovered to the FEHBP.

d. 	 Assistant Surgeon Review                                                       $13,903

   The Plan incorrectly paid 12 claims, resulting in net overcharges of $13,903 to the
   FEHBP. Specifically, the Plan overpaid 10 claims by $14,541 and underpaid 2 claims
   by $638.

   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 prompt and diligent effort to recover the overpayments.

   For the period 2005 through 2007, we identified 3,169 assistant surgeon c1aim groups,
   totaling $242,382 in potential overpayments, that may not have been paid in
   accordance with the Plan's assistant surgeon pricing procedures. From this universe,
   we selected and reviewed a judgmental sample of 28 assistant surgeon claim groups,




                                         II 

totaling $41,702 in potential overpayments, to detennine if the Plan paid these claims
properly. Our sample included all assistant surgeon claim groups with potential
overpayments of$500 or more. The majority of these claim groups contained one
primary surgeon and one assistant surgeon claim.

Based on our review, we determined that 12 claims were paid incorrectly, resulting in
net overcharges of$13,903 to the FEHBP. Specifically, the Plan overpaid 10 claims
by $14,541 and underpaid 2 claims by $638.

The claim payment errors resulted from the fo11owing:

• 	 The Plan incorrectly paid six assistant surgeon claims, resulting in overcharges of
    $12,812 to the FEHBP. These overcharges were due to processor elTors in the
    calculation of the assistant surgeon or physician assistant fees, which should have
    been priced at 20 percent of the primary surgeon allowed amount.

• 	 The Plan incorrectly paid four claims that were subject to the Omnibus Budget
    Reconciliation Act of 1993 COBRA 93) pricing guidelines, resulting in
    overcharges of $1,729 to the FEHBP.

    );.> 	   Two of the claims were paid in error due to a Palmetto COBRA 93 pricing
             vendor) claims processing system error that caused an incorrect calculation of
             the assistant surgeon fee for claims containing assistant surgeon pricing modifier
             "82". These assistant surgeon claims should have been priced according to the
             Medicare fee schedule (16 percent ofthe primary surgeon fee). Consequently,
             the Plan overpaid these claims by $1,623.

             We noted that the FEP Director's Office issued a memorandum instructing
             BeBS plans of the steps to take to identifY and correct claims affected by this
             system error. Also, the system error has been corrected as of February 12,2005.
             Therefore, we did not review this issue any further.

    );.> 	   Two of the claims were paid in error due to Palmetto not recognizing the
             physician assistant pricing modifier "AS" and erroneously calculating the
             physician assistant fee. These physician assistant claims should have been
             priced according to the Medicare fee schedule (13.6 percent of the primary
             surgeon fee). Consequently, the P1an overpaid these claims by $106.

• 	 In one instance, the Plan used an incorrect fee schedule amount, resulting in an
    undercharge of $272 to the FEHBP.

• 	 In one instance, the Plan paid the primary surgeon claim lines but did not pay the
    assistant surgeon claim lines, resulting in an undercharge of $366 to the FEHBP.




                                          12 

Association's Response:

The Association agrees with this finding. The Association states that the Plan has
recovered and returned all the overpayments to the FEHBP.

The Association states, "The Plan identified the root cause of these errors as
stemming from manual processing errors and a Palmetto (the OBRA '93 pricing
vendor used by the Program) claims processing system error.

The FEP Director's Office has implemented the following controls to minimize future
payment errors related'to Assistant Surgeon claims:

• 	 Modified its contract with Palmetto to include the pricing of AS modifier claims;
    and

• 	 A final comprehensive listing that identifies all unadjusted OBRA '93 Assistant
    ,Surgeon claims with the AS Modifier was issued to al1 Plans on the January 2009
     System-wide Claims Review listing so that claims could be adjusted as necessary.

In addition to these controls, the Plan has other methods in place to identify
overpayments. These methods include, but are not limited to: System-Wide Claims
Reports ... provided by the FEP Director's Office and worked by the Plan as well as
routine claims quality assurance audits performed by the Plan's Performance
Measurement and Reporting Department. While these measures are not absolute, they
provide reasonable assurances that such items will be identified. Efforts will be made
to periodically examine existing procedures and add additional controls where
necessary. "

Recommendation 6

We recommend that the contracting officer disallow $14,541 for claim overcharges, and
verify that the Plan has returned all amounts recovered to the FEHBP.

Recommendation 7

We recommend that the contracting officer allow the Plan to charge the FEHBP $638 if
additional payments are made to the providers to correct the underpayment errors.




                                    13 

    2. Miscellaneous Payments and Credits

         a. Review of Refund Aging Report                                                                $26,571

             The Plan had not returned a provider audit recovery amount of $25,483 to the FEHBP
             as of November 19,2008. 4 Subsequent to this date, the Plan returned $26,571 to the
             FEHBP, consisting of $25,483 for the provider audit recovery and $1,088 for LII on
             this recovery.

             48 CFR 31.201-5 states, "The applicable portion of any income, rebate, allowance, or
             other credit relating to any allowable cost and received by or accruing to the
             contractor shall be credited to the Government either as a cost reduction or by cash
             refund."

             Based on an agreement between OPM and the Association, dated March 26, 1999,
             BlueCross and BlueShield plans have 30 days to return refunds to the FEHBP if
             received after March 31, 1999.

             48 CFR 52.232-17(a) states, "all amounts that become payable by the Contractor ...
             shall bear simple interest from the date due ... The interest rate shall be the interest
             rate established by the Secretary of the Treasury as provided in Section 611 of the
             Contract Disputes Act of 1978 (Public Law 95-563), which is applicable to the period
             in which the amount becomes due, as provided in paragraph (e) ofthis clause, and
             then at the rate applicable for each six-month period as fixed by the Secretary until the
             amount is paid."

             We reviewed the Plan's "Not Fully Allocated Aging Report" for the year ending
             2007. This report included 105 recoveries, totaling $1,703,949, which were
             researched to determine if the recoveries belonged to FEP or another line of business.
             From this universe, we judgmentally selected a sample of six recoveries, totaling
             $1,281,590, for the purpose of determining if the recoveries belonged to the FEP.
             Our sample included the six highest dollar recovery amounts.

             Based on our review, we determined that the Plan had not returned one recovery to
             the FEHBP. The Plan received a provider audit recovery of $690,206 on
             December 19,2007. As of the date of our audit sample (November 19,2008), the
             Plan had not returned FEP's portion of this recovery to the FEHBP. Subsequently,
             the Plan returned $25,483 to the FEHBP for this provider audit recovery on
             November 24,2008 (1] months after receiving the recovery). On this date, the Plan
             also transferred $1,088 into the dedicated FEP bank account for LII on this recovery.
             Based on our review of the Plan's LII calculation, we agree with the amount
             detennined by the Plan and will not assess additional LII.


4 We submilted our audit sample to the Plan on November 19,2008. As of this date, the Plan had not returned this
recovery to the FEHBP.




                                                        14 

   Association's Response:

   The Association agrees with this finding. The Association states that the Plan
   deposited the principal amount of $25,483 into the dedicated FEP bank account on
   November 24, 2008 and returned the funds to the FEHBP with a reduction to the
   letter of credit account (LOCA) drawdown on November 24,2008.

   The Association also states that the Plan transferred the corresponding LII of $1 ,088
   into the dedicated FEP bank account on November 24,2008. In addition, the Plan
   submitted a Special Plan Invoice for the LIl on December 22, 2008 and wire
   transferred the LIl to the Association on January 6, 2009.

   Recommendation 8

   We verified that the Plan returned $25,483 to the FEHBP on November 24, 2008 for
   this provider audit recovery. Therefore, no further action is required for this
   questioned amount.

   Recommendation 9

   Since we only verified that the Plan transferred the LII into the dedicated FEP bank
   account on November 24,2008, we recommend that the contracting officer verify that
  ,the Plan returned the questioned LII of$1,088 to the LOCA.

b. Provider Audit Recoveries                                                       $21.801

   The Plan did not recover and return two provider overpayments to the FEHBP. As a
   result, the FEHBP is due $21,801 for these provider overpayments.

   As previously cited from FAR, the Plan is required to return any income, rebate,
   allowance, or other credit relating to any allowable cost and received by or accruing to
   the Plan.

   Contract CS 1039, Part I, section 1.9 (f)(3) states that the Plan has an average of 30
   working days to commence overpayment collection action against a provider
   foJIowing identification of an overpayment.

   For the period 2003 through 2007, there were 394 provider audit recoveries totaling
   $932,776. From this universe, we selected a judgmental sample of 47 provider audit
   recoveries, totaling $657,157, for the purpose of detennining if the Plan returned
   these recoveries to the FEHBP in a timely manner. Our sample included all provider
   audit recoveries of $5,000 or more.




                                        15 

         For two of the provider audit recoveries in our sample, the Plan could not provide
         documentation to support the recovery and return of these funds to the FEHBP. .
         After further research, we found that the Plan made adjustments to the applicable
         claims to initiate the provider offset process, but the adjustments were performed
         incorrectly. Due to the manual processing errors on these claim adjustments, the
         offsets were not initiated and the providers were not notified to repay the debt. When
         the erroneous adjustments were made, information was given to the provider audit
         vendor showing that the recoupment process was underway. As a result, the vendor
         updated its system to note that the funds had been recovered, when in fact the funds
         had not been recovered.

         Consequently, these two provider overpayments, totaling $2] ,801, were not recovered
         and returned to the FEHBP. Since these exceptions were isolated cases and the Plan
         did not have possession of the funds, we did not assess LII on this questioned amount.

         Association's Response:

         The Association agrees with this finding. The Association states, "Both erroneous
         adjustments were made in 2004. Due to the age of the adjustments on the claims in
         question, a decision was made not to pursue repayments from the facilities, but
         instead credit the FEHBP for these Provider Audit Recoveries with Highmark funds.
         No lost investment income was assessed because the Plan never received these
         refunds from the providers."

         The Plan returned these funds to the FEHBP on March 10,2009.

         Recommendation 10

         We recommend that the contracting officer verifY that the Plan credited the FEHBP
         $21,801 for provider overpayments.

B. ADMINISTRATIVE EXPENSES

  The audit disclosed no findings pertaining to administrative expenses. Overall, we concluded
  that the administrative expenses charged to the FEHBP were actual, allowable, necessary,
  and reasonable expenses incurred in accordance with the tenus of the contract and applicable
  laws and regulations.

C. CASH MANAGEMENT

  OveraJI, we concluded that the Plan handled FEHBP funds in accordance with Contract CS
  1039 and applicable laws and regulations, except for the findings pertaining to cash
  management noted in the "Miscellaneous Payments and Credits" section.




                                             16
                IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

               Lead Auditor

               Auditor

              Auditor

              Auditor


                     hie~            


              Senior Team Leader




                                   17 

                                                                                                                                                    SCHEDULE A
                                                                             V. SCHEDULES

                                                                 fiGHMARK BLUECROSS BLUESHIELD
                                                                     CAMP fiLL, PENNSYLVANIA

                                                          CONTRACT CHARGES AND AMOUNTS QUESTIONED


CONTRACT CHARGES*                                                           2003         2004           2005           2006           2007            TOTAL


A. HEALTH BENEFIT CHARGES

       PLAN CODE 363                                                      $35,070,988   $42,945,199    $44,627,275    $45,591,795    $52,620,478     $220,855;735
       MISCELLANEOUS PAYMENTS                                                 148,310       513,138        501,646        468,553        394,221        2,025,868

       PLAN CODE 865                                                      118,231,737   135,920,441    157,896,030    181,801,946    207,994,644      801,844,798
       MISCELLANEOUS PAYMENTS                                               1,195,177       358,363       (312,172)       202,987        736,520        2,180,875

       TOTAL

       ADMINISTRA TIVE EXPENSES

       PLAN CODE 865                                                      $17,561,498   $17,163,115    $17,984,668    $20,227,752    $22,339,246      $95,276,279
       PRIOR PERIOD ADJUSTMENTS                                                     o             o        (18,981)       (34,559)      (246,597)        (300,137)
       BUDGET SETTLEMENT REDUCTION                                                          (17,161)             o              o              o          (17,161)
                                                                                    °
       TOTAL

TOTAL CONTRACT CHARGES



                                                                            2003          2004           2005           2006           2007           TOTAL


A. HEALTH BENEFIT CHARGES                                                          so       $21,801      $101,650        $10,191       $739,244         $872,886
B. ADMINISTRATIVE EXPENSES                                                         o                             o              o              o                o
C. CASH MANAGEMENT                                                                 o              °o             o              o              o                o
      TOTAL QUESTIONED CHARGES


i<   We did not review claim payments for contract years 2003 and 2004.
                                                                                                                                                                                          SCHEDULEB
                                                                         HIGHMARK BLUECROSS BLUE SHIELD
                                                                             CAMP HILL, PENNSYLVANIA

                                                                                         QUESTIONED CHARGES


AUDIT FINDINGS                                                                                     2003                      2004             2005               2006         2007          TOTAL

A. HEALTH BENEFIT CHARGES

    I. Claim Payments
        a.   System Review                                                                                     $0                   $0                  $0              $0    $437,154        $437,154
        b.   Omnibus Budget Reconciliation Act of 1990 Review                                                        0               0              99,141          (3,720)    100,843         196,264
        c.   Amounts Paid Greater than Covered Charges                                                               0               0                   0           6,800     170,393         177,193
        d.   Assistant Surgeon Review                                                                                0               0               2,509           7,111       4,283          13,903

        Total Claim Payments                                                   I                               SO                   SO        $101,650            $10,191     $712,673        $824,514

    2. Miscellaneous Payments and Credits
       a. Review of Refund Aging Report*                                                                       $0                  $0                  $0               $0     $26,571         $26,571
       b. Provider Audit Recoveries                                                                            $0             $21,801                  $0               $0          $0         $21,801

        Total Miscellaneous Payments and Credits                               I                               $0             $21,801                , $0
                                                                                                                                                                        $0     $26,571         $48,372
                                                                                   lIIIIImm~mlllmm                                             'm                                                        I
    TOTAL HEALTH BENEFIT CHARGES                                               I                               $0             $21,801
                                                                                                                                         I'
                                                                                                                                              $101,650            $10,191     $739,244        $872,886

B. ADMINISTRATIVE EXPENSES                                                     I                               $0
                                                                                                                         ,
                                                                                                                                    $0                 $0               $0           $0             $0
                                                                                                               ffi                                           ~


C. CASH MANAGEMENT                                                             I                               $0                   $0                 $0               $0
                                                                                                                                                                                ,
                                                                                                                                                                                     $0             $0 '
                                                                                   Iillllliillllirurulliwmmm

TOTAL QUESTIONED CHARGES                                                       I   ~wrumm~mliilmIDmIW.imliWi
                                                                                                               $0             $21,801         $101,650            $10191      $739,244        $872,886   ~
                                                                                                                                          "




* This finding includes lost investment income of $1,088 calculated in 2008.
                                                                             ••
                                                                                               APPENDIX


                                                                              BlueCross BlucShieId
                                                                              Association
                                                                              in AS$odfltifoll of hllkpendelll
                                                                              Blue Cross 1111d nluc Shield PlmlS
April 10, 2009


                                                                              f·'ed.eral Employee Program
                           up Chief 

                                                                              1310 G S1I'ec.t, N,W.
Experience-Rated Audits Group 
                                               Washington, D.C. 20005
Office of the Inspector General 
                                             202.942.1000
U.S. Office of Personnel Management                                           Fax 202.942.1125
1900 E Street, N.W., Room 6400
Washington, D.C. 20415-1100


Reference:              OPM DRAFT AUDIT REPORT
                  ...   Highmarklnc·~··................................ .
                        Audit Report Number 1A-10-13-09-001
                        (Dated and received February 5, 2009)

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)operations for Highmark. Our comments concerning the findings in the
report are as follows:

A. HEALTH BENEFIT CHARGES

    1. Claim Payments

       a. System Review                                                     $437,154

          The Plan does not contest that a net of $437,154 in claim payments were
          paid in error. As of February 20,2009, $440,055 of overpayments have
          been recovered and returned to the Program through normal business
          processes. Adjustments to claims that were underpaid have been
          processed and the additional payments have been charged appropriately.
          It should be noted that one error accounted for $432,173 of the
          overpayment error. This error occurred because Highmark was not
          informed that Medicare was the primary payer until nearly a year after the
          claim was processed. Highmark processes claims based on information on
          hand at the time the claim is processed. The balance of the errors occurred
          because of manual processing errors. The Plan is in the process of
          developing a training Program specifically designed to address these errors
          as welt as any other remedial opportunities that are identified between now
          and the training delivery date. The Program wilt be conducted between late
          April, 2009 and early May, 2009, depending on the availability of training
          resources.
_	                  Group Chief
~~sponse
April 10, 2009
Page 2


       b. Omnibus Budget Reconciliation Act of 1990 Review               $196,264

          The Plan does not contest that $196,264 in claim payments were paid in
          error. As of February 20,2009, $192,692 of overpayments have been
          recovered and returned to the Program via normal business processes.
          Adjustments to claims that were underpaid have been processed
          appropriately. The Plan identified the root cause as stemming from manual
          processing errors and. incorrect data on its provider file. The provider file
          was corrected in July 2008.

           In addition to these controls, the Plan has other methods in place to identify
         ··overpaymerifs·:··ihese·"inethqds·iridlide;"bu{arenoflimlted·lei,· System:'Wide·
           Claims Reports, COB Claims Reports and Duplicate Claims Reports
           provided by the FEP Director's Office and worked by the Plan, as well as
           routine claims quality assurance audits performed by the Plan's
           Performance Measurement and Reporting Department. While these
           measures are not absolute, they provide reasonable assurances that such
           items will be identified. Efforts will be made to periodically examine existing
           procedures and add additional controls where necessary. 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(9).
           Any benefit payments the Plan is unable to recover are allowable charges
           to the Program. In addition, as good faith erroneous payments, lost
           investment income does not apply to the payments identified in this finding.

          Further, the FEP Director's Office has implemented the following action
          steps to reduce OBRA '90 questioned items:

          • 	 Identify all claims that were not OBRA '90 priced and provide to Plans.
              for correction as part of the new FEP System-wide Claims Review
              process; and

          • 	 Modtfied FEP claims system to defer claims whenever the Plan
              Indicates the provider is not an approved facility. This will force the Plan
              to ensure that the proper information has been submitted;
                            Group Chief 

          aPM Draft Audit Response 

          April 10, 2009 

          Page 3 



                    c. 	 Amounts Paid Greater than Covered Charges

                         The Plan does not contest that $177,193 in claim payments were paid in
                         error. The Plan reported that the entire $177,193 has been recovered and
                         returned to the Program via normal business processes. The Plan
                         identified the root cause as stemming from manual processing errors and
                         inaccurate provider claims submission. The Plan is in the process of
                         developing a training Program specifically designed to address these errors
                         as well as any other remedial opportunities that are identified between now
                         and the training delivery date. The Program will be between late April, 2009
                                                        .
......................................arl~e,arly..~.~y, .. ?99~ ~AE!pen<firl~. o~ ~~El.a.".c:til.a~iHtx ()f .t.ri3illill~ ..r~s()ur~s~ 


                    d. Assistant Surgeon Review 	                                                                  $13.903

                         The Plan does not contest that $13,903 in claim payments were paid in
                         error. The Plan reported that all overpayments have been recovered and
                         returned to the Program via normal business processes. The Plan
                         identified the root cause of these errors as stemming from manual
                         processing errors and a Palmetto (the OBRA '93 pricing vendor used by the
                         Program) claims processing system error.

                         The FEP Director's Office has implemented the following controls to
                         minimize future payment errors related to Assistant Surgeon claims:

                          • 	 Modified its contract with Palmetto to include the pricing of AS modifier
                              claims; and

                         • 	 A final comprehensive listing that identifies all unadjusted OBRA '93
                         • 	 Assistant Surgeon claims with the AS Modifier was issued to all Plans
                             on the January 2009 $ystem·wide Claims Review listing so that claims
                             could be adjusted as necessary.

                         In addition to these controls, the Plan has other methods in place to identify
                         overpayments. These methods include, but are not limited to: System·Wide
                         Claims Reports, COB Claims Reports and Duplicate Claims Reports
                         provided by the FEP Director's Office and worked by the Plan as well as
                         routine claims quality assurance audits performed by the Plan's
                         Performance Measurement and Reporting Department. While these
                         measures are not absolute, they provide reasonable assurances that such
                         items will be identified. Efforts will be made to periodically examine existing
                         procedures and add additional controls where necessary. 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(9).
                         Any benefit payments the Plan is unable to recover are allowabte charges
                         to the Program. In addition, as good faith erroneous payments, lost
                         investment income does not apply to the payments identified in this finding.
                              Group Chief
            OPM Draft Audit Response
            April 10, 2009 

            Page 4 



                   2. Miscellaneous Payments and Credits

                         a. Review of Refund Aging Report                                $ 26.571

                               The Plan does not contest this finding. On November 24,2008, the Plan
                               deposited the principal amount of $25,483 into its dedicated FEP bank
                               account. On November 24, 2008, the Plan returned the funds to the
                               FEHBP with a reduction in the Letter of Credit Account (LOCA) drawdown.

                                In addition, the Plan transferred the corresponding lost investment income
                                (L1I) of $1,088 into its dedicatedFEP bank acc()unt on November24,200S .
... .. ....... ...... ....   ····thePiaii-ai·so·s·libmlhed·a.. SpediifPfan invoice for the LII on-December-22,
                                2008 and wired the 1I1 to the Blue Cross Blue Shield Association on
                                January 6, 2009. The Association received those funds on the same day.

                         b. Provider Audit Recoveries                                      $ 21,801

                               The Plan does not contest this finding. Both erroneous adjustments were
                               made in 2004. Due to the age of the adjustments on the claims in question,
                               a decision was made not to pursue repayments from the facilities, but
                               instead credit the FEHBP for these Provider Audit Recoveries with
                               Highmark funds. No lost investment income was assessed because the
                               Plan never received these refunds from the providers.

                               The Plan returned these funds to the Program via an adjustment to its
                               LOCA on March 10, 2009.

             We appreciate the opportunity to provide our response to each of the findings and
             request that our comments be included in their entirety as part of the Final Audit




             Executive Director 

             Program Integrity 




            -cc: