oversight

Audit of Blue Cross Blue Shield of Michigan

Published by the Office of Personnel Management, Office of Inspector General on 2018-04-24.

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 BLUE SHIELD OF
              MICHIGAN

         Report Number 1A-10-32-17-009
                 April 24, 2018
                EXECUTIVE SUMMARY
                                Audit of Blue Cross Blue Shield of Michigan

Report No. 1A-10-32-17-009                                                                          April 24, 2018



 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 Blue       payments, but we do not believe that the errors are indicative of major
 Shield of Michigan (Plan) charged       system control problems. Therefore, we conclude that the Plan’s
 costs to the Federal Employees          processing of FEHBP claims generally complies with the terms of its
 Health Benefits Program (FEHBP)         contract with the U.S. Office of Personnel Management and industry
 and provided services to FEHBP          standards. The report questions $27,745 in health benefit charges
 members in accordance with the          summarized as follows:
 terms of the Blue Cross Blue Shield
 Association’s (Association) contract    A. System Pricing Review
 with the U.S. Office of Personnel
                                              The Plan incorrectly paid five claims resulting in
 Management. Specifically, our
                                                 overcharges of $13,918.
 objective was to determine whether
 the Plan complied with contract
                                         B. Omnibus Budget Reconciliation Act of 1993 (OBRA 93)
 provisions relative to health benefit
                                            Review
 payments.
                                              The Federal Employee Program Operations Center did not
 What Did We Audit?                             properly price 30 claim lines in accordance with OBRA
                                                93 pricing guidelines, resulting in overcharges of $9,671.
 The Office of the Inspector General
 has completed a limited scope           C. Non-Participating Provider Review
 performance audit of the FEHBP               The Plan incorrectly paid 13 claims to providers that are
 operations of Blue Cross Blue                  not part of the plan’s provider network, resulting in
 Shield of Michigan. The audit                  overcharges of $4,156.
 covered claim payments from
 January 1, 2013, through
 September 30, 2016, as reported in
 the Association’s Government-wide
 Service Benefit Plan Annual
 Accounting  Statem
   ccounting Statements.




 Michael R. Esser
Assistant Inspector General
for A adits                                           i
              ABBREVIATIONS

The Act       Federal Employees Health Benefits Act
Association   Blue Cross Blue Shield Association
BCBS          Blue Cross and Blue Shield
FEHBP         Federal Employees Health Benefits Program
FEP           Federal Employee Program
Non-par       Non-Participating
OBRA 93       Omnibus Budget Reconciliation Act of 1993
OIG           Office of the Inspector General
OPM           U.S. Office of Personnel Management
Plan          Blue Cross Blue Shield of Michigan




                          ii
                         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. System Pricing Review ............................................................................................5

       B. Omnibus Budget Reconciliation Act of 1993 ..........................................................7

       C. Non-Participating Providers Review .......................................................................9

       APPENDIX: Blue Cross Blue Shield Association’s February 9, 2018, response
                 to the Draft Audit Report, issued December 13, 2017.

       REPORT FRAUD, WASTE AND MISMANAGEMENT
                                   I. BACKGROUND

This final 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 Blue Shield of Michigan (Plan). The Plan is located in Detroit, Michigan. 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 Act (the Act), 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 Act are implemented by
OPM through regulations, which are codified in Title 5, Chapter 1, Part 890 of the Code of
Federal Regulations (CFR). Health insurance coverage is made available through contracts with
various health insurance carriers.

The 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 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 36 BCBS companies participating in
the FEHBP. The 36 companies are comprised of 64 local BCBS plans.

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

The Association has also established an FEP Operations Center. The activities of the FEP
Operations Center are managed by CareFirst Blue Cross Blue Shield, located in Owings Mills,
Maryland. 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-10-32-17-009
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
Association and Plan management. Also, Plan management is responsible for establishing and
maintaining a system of internal controls.

The most recent audit report issued that covered claim payments for Blue Cross Blue Shield of
Michigan was Report No. 1A-10-32-05-034, dated March 24, 2006. All findings from the
previous audit have been resolved.

The results of this current audit were discussed with Plan and Association officials throughout
the audit and at an exit conference dated September 22, 2017. 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-10-32-17-009
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 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 Association’s Government-wide Service Benefit Plan Annual Accounting
 Statements as they pertain to Plan codes 210 and 710 (Blue Cross Blue Shield of Michigan) for
 contract years 2013 through 2016 (see Exhibit I) and determined the Plan paid approximately
 $1.2 billion in health benefit charges. From this universe, we judgmentally selected various
 samples for review. We reviewed approximately 429 claims, totaling $5.4 million in payments,
 for the period of January 1, 2013, through September 30, 2016, for proper adjudication. The
 determination of our audit findings is based on the FEHBP contract, the 2013 through 2016
 Service Benefit Plan brochures, the Plan’s provider agreements, and the Association’s FEP
 Administrative Procedures Manual. The results of these samples were not projected to the
 universe of claims.

                                      Exhibit I – Health Benefit Charges

                              BlueCross BlueShield of Michigan
                                   Health Benefit Charges
                       $300
                       $295
          $ Millions




                                                                               Health Benefit
                       $290                                                    Payments
                       $285
                       $280
                               2013        2014        2015   2016

                                                   3                       Report No. 1A-10-32-17-009
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. Our audit
approach consisted mainly of 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 is generally in compliance with the
provisions of the contract relative to claim payments. A summary of our reviews was noted and
explained in detail in the “Audit Reviews and Conclusion” 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, and the Plan. Through audits and a
reconciliation process, we have verified the reliability of the BCBS claims data in our data
warehouse, which was used to identify the universe of claims for each type of review. The
BCBS claims data is provided to us on a monthly basis by the FEP Operations Center, and after a
series of internal steps, uploaded into our data warehouse. However, due to time constraints, we
did not verify the reliability of the data generated by the Plan’s local claims system. While
utilizing the computer-generated data during our audit, 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 from May through September 2017.




                                              4                       Report No. 1A-10-32-17-009
III. AUDIT FINDINGS AND RECOMMENDATIONS

  Our audit identified several minor incidents of erroneous claim payments, but we do not believe
  that the errors are indicative of major system control problems. Therefore, we conclude that the
  Plan’s processing of those FEHBP claims generally complies with the terms of its contract with
  the U.S. Office of Personnel Management and industry standards.

  The sections below summarize the improper overpayment results identified in the reviews we
  performed on claim payments made by Blue Cross Blue Shield of Michigan. As mentioned in
  the “scope” section above, all of our samples were selected from claim payments for services
  reimbursed between January 1, 2013, and September 30, 2016.

A. System Pricing Review                                                                   $13,918

  We reviewed a sample of claims where the FEHBP paid as the primary insurer to determine
  whether the Plan’s local claims adjudication system properly processed and priced these claims
  in accordance with contract CS 1039. See Exhibit II for a summary of our System Pricing
  Review.

                         Exhibit II – Summary of System Pricing Review
             Population                     Sample                             Errors
        Claim        Amount           Claim     Amount               Claim
        Count         Paid            Count        Paid              Count         Overcharges
      8,478,209   $985,474,689         200     $3,686,363              5             $13,918

  Sample Selection Criteria

  We selected 200 claims that were stratified by place of service (such as provider’s office or
  inpatient hospital) and payment category (such as $50 to $99). Our sample size was
  judgmentally determined by the number of sample items from each place of service stratum
  based on the stratum’s total claim dollars paid.

  Review Summary

     The Plan’s local system incorrectly processed four claims for professional therapy services
      that were billed by a skilled nursing facility, resulting in overcharges of $13,495 to the
      FEHBP.

                                                  5                    Report No. 1A-10-32-17-009
   The Plan incorrectly paid one claim where the incorrect rate was loaded to the Plan’s local
    system, resulting in an overcharge of $423.

Criteria

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.”
Additionally, Part II, section 2.3(g) states, “If the Carrier [or OPM] determines that a Member’s
claim has been paid in error for any reason … the Carrier shall make a prompt and diligent effort
to recover the erroneous payment … .”

Recommendation 1

We recommend that the contracting officer disallow $13,918 for claim overcharges and verify
that the Plan returns all amounts recovered to the FEHBP.

Recommendation 2

We recommend that the contracting officer require the Plan to provide evidence that skilled
nursing facilities are properly educated on how to submit claims.

Plan’s Response:

The Plan agrees with this finding and states, $13,495 in overcharges has been returned to the
FEHBP and the remaining $423 will be returned by March 31, 2018.

Regarding the OIG’s recommendation related to skilled nursing facilities, the Plan “will
educate providers on how to properly submit these specific types of claims.”

OIG Comments:

The Plan’s response to the draft report and supporting documentation did not contain sufficient
documentation to show the Plan returned the overcharged funds to the FEHBP. Therefore, we
continue to recommend that the contracting officer disallow $13,918 in claim overcharges and
verify that the Plan returns all amounts recovered to the FEHBP.

As part of the audit resolution process, we recommend that the Plan provide OPM’s Healthcare
and Insurance Office with evidence that it has provided training to ensure that skilled nursing
facilities are properly educated on how to submit claims.

                                             6                      Report No. 1A-10-32-17-009
B. Omnibus Budget Reconciliation Act of 1993                                               $9,671

  The Omnibus Budget Reconciliation Act of 1993 (OBRA 93) limits the benefit payments for
  physician services provided to annuitants age 65 or older who are not covered under Medicare
  Part B. The FEHBP fee-for-service plans are required to limit the claim payment to the lesser of
  the amount billed by the provider or the amount equivalent to the Medicare Part B payment. The
  FEP Operations Center contracts with Palmetto (an OBRA 93 pricing vendor) to calculate the
  pricing amounts for FEHBP claims subject to OBRA 93 pricing regulations. See Exhibit III for
  a summary of our OBRA 93 Review.

                           Exhibit III – Summary of OBRA 93 Review
             Population                       Sample                           Errors
       Claim         Amount             Claim      Amount             Claim
       Count           Paid             Count        Paid             Lines        Overcharges
                                         92        $72,279             30            $9,671

  Sample Selection Criteria

  We reviewed a sample of claim lines subject to OBRA 93 pricing with amounts paid of $400 or
  more that also contained procedure code modifiers 50, 51, 62, 66, 80, 81, or AS. Based on our
  audit experience, we consider these claim lines to be at high risk for claim payment error since
  the Association’s nationwide claims adjudication system (FEP Express) was not configured to
  apply the Medicare modifier discount percentages.

  Review Summary

  Our review determined the Plan incorrectly paid 30 claim lines, totaling $9,671 in overcharges to
  the FEHBP. These claim overcharges were the result of the FEP Express system not deferring
  claims with modifier 59 for medical review. Based on the American Medical Association
  guidelines, modifier 59 indicates that a procedure separate and distinct from the primary
  procedure was performed, and additional documentation is required for the provider to receive a
  full payment of the distinct service. For these 30 claim lines, the Plan was unable to provide
  documentation to indicate that the separate and distinct procedure was medically necessary.
  Therefore, these multiple procedures should have paid at a discounted rate instead of the full
  Medicare allowance.




                                               7                      Report No. 1A-10-32-17-009
Criteria

As previously cited from contract CS1039, 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 limitations in written provider
agreements.

Recommendation 3

We recommend that the contracting officer disallow $9,671 for claim overcharges and verify that
the Plan returns all amounts recovered to the FEHBP.

Recommendation 4

We recommend that the contracting officer require the Association to enhance the FEP Express
system to defer all claims with modifier 59 for medical review before allowing the BCBS Plans to
process the claims for payment.

Plan’s Response:

The Plan agrees with this finding and states $6,173 has been returned to the FEHBP and the
remaining $3,498 in overcharges will be returned by March 31, 2018.

Association’s Response:

“BCBSA [Association] will evaluate the feasibility of implementing the recommendation by
March 31, 2018.”

OIG Comments:

The Plan’s response to the draft report and supporting documentation did not contain sufficient
documentation to show the Plan returned the overcharged funds to the FEHBP. Therefore, we
continue to recommend that the contracting officer disallow $9,671 for claim overcharges and
verify that the Plan returns all amounts recovered to the FEHBP.




                                             8                      Report No. 1A-10-32-17-009
C. Non-Participating Providers Review                                                          $4,156

  Non-Participating (non-par) providers are those that do not have a contract with the Plan and
  have not agreed to accept the Plan’s standard rates as payment in full. See Exhibit IV for a
  summary of our non-par providers review.

                            Exhibit IV – Summary of Non-Par Provider Review
           Population                         Sample                              Errors
      Claim        Amount               Claim      Amount              Claim
      Count          Paid               Count        Paid              Count          Overcharges
      14,816      $1,946,611             146       $56,041              13              $4,156

  Sample Selection Criteria

  We judgmentally selected claims from the 21 non-par providers that received the highest
  payments from the FEHBP, and where the amount paid on the claim was greater than or equal to
  the amount billed.

  Review Summary

     We determined the Plan did not coordinate claims for one patient in our sample review with
      the member’s primary insurer. As a result, the Plan incorrectly paid 10 claims, totaling
      $2,221 in overcharges to the FEHBP.

     The Plan incorrectly paid two claims due to a processor applying the incorrect pricing
      methodology while calculating the claims, resulting in overcharges of $926 to the FEHBP.

     The Plan incorrectly paid one claim to a provider who was not medically licensed during the
      patient’s dates of service, resulting in an overcharge of $1,009 to the FEHBP.

  Criteria

  As previously cited from CS1039, 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 limitations in written provider agreements.



                                                 9                       Report No. 1A-10-32-17-009
Recommendation 5

We recommend that the contracting officer disallow $4,156 for claim overcharges and verify that
the Plan returns all amounts recovered to the FEHBP.

Plan’s Response:

The Plan agrees with this finding and states $2,221 has been returned to the FEHBP and the
remaining $1,935 in overcharges will be returned by March 31, 2018.

OIG Comments:

The Plan’s response to the draft report and supporting documentation did not contain sufficient
documentation to show the Plan returned the overcharged funds to the FEHBP. Therefore, we
continue to recommend that the contracting officer disallow $4,156 for claim overcharges and
verify that the Plan returns all amounts recovered to the FEHBP.




                                            10                      Report No. 1A-10-32-17-009
                                    APPENDIX




                                                                      Federal Employee Program
                                                                      1310 G Street, N.W.
                                                                      Washington, D.C. 20005
February 9, 2018
                                                                      202.626.4800




Senior Team Leader
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 Blue Shield of Michigan
                   Audit Report Number 1A-10-32-17-009
                   (Dated and Received December 13, 2017)

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

A. System pricing Review                                                         $13,918

   Recommendation 1

   We recommend that the contracting office disallow $13,918 for claim overcharges
   and verify that the Plan returns all amounts recovered to the FEHBP.

   Plan Response

   The Plan agrees with this error. $13,495 was returned to the Program through claim
   adjustments. The remaining balance of $423 will be return by March 31, 2018.
   Documentation to support the Letter Of Credit Account (LOCA) adjustment will also
   be submitted by March 31, 2018.

   Recommendation 2

   We recommend that the contracting office require the Plan to modify the local
   system to recognize when multiple professional therapy services are billed on the
                                         11                 Report No. 1A-10-32-17-009
  same day by skilled nursing facilities. The local system should process the
  professional therapy claims according to the date of service for each service
  provided, as applicable to the providers’ contracts and/or payment policy.

  Plan Response

  To prevent future occurrences of this issue, the Plan will educate providers on how
  to properly submit these specific types of claims.

  [Redacted by OIG – not relevant to final report]

  Recommendation 3

  We recommend that the contracting office require the Plan to correct the rate loading
  error identified in our review.

  Plan Response

  The Plan agrees this was a manual error and that the system has been corrected.
  See attachment 1 showing the correct rate.

B. Omnibus Budget Reconciliation Act of 1993 (OBRA 93)                            $9,671

  Recommendation 4

  We recommend that the contracting office disallow $9,671 for claim overcharges and
  verify that the Plan returns all amounts recovered to the FEHBP.

  Plan Response

  The Plan agreed with this recommendation. Nine claims totaling $6,173 have been
  adjusted to pay correctly. The remaining $3,498 will be credited to FEP by March 31,
  2018. Documentation to support the LOCA adjustment will also be submitted by
  March 31, 2018.

  Recommendation 5

  We recommend that the contracting office require the Association to
  enhance the FEP Express system to defer all claims containing
                                                          Report No. 1A-10-32-17-009
      modifier 59 for medical review before allowing the BCBS Plans to
      process the claims for payment.

      BCBSA Response

      BCBSA will evaluate the feasibility of implementing the recommendation by
      March 31, 2018.

C. Non-Participating Providers Review                                             $5,267

      Recommendation 6

      We recommend that the contracting office disallow $5,267 for claim overcharges
      and verify that the Plan returns all amounts recovered to the FEHBP.

      Plan Response

      The Plan agrees to overpayments totaling $4,156 and contests questioned
      claims totaling $1,111. The questioned amount represents the difference
      between questioned subrogation claims totaling $3,332 and the amount agreed
      to as a settlement with the other insurance carrier totaling $2,221.

      See attachment 2 verifying the $2,221 check copies returning funds to the
      Program. The balance of $1,935 will be returned to the Program and
      documentation to support the LOCA adjustment will be submitted by March 31,
      2018.

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                  at
              .

Sincerely,

Executive Director, FEP Program Integrity

cc:                , BCBSM



                                                               Report No. 1A-10-32-17-009
                                                                                  



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