oversight

Audit of BlueCross BlueShield of Florida Jacksonville, Florida

Published by the Office of Personnel Management, Office of Inspector General on 2012-10-17.

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

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




Final Audit Report
Subject:


                         AUDIT OF
              BLUECROSS BLUESHIELD OF FLORIDA
                   JACKSONVILLE, FLORIDA



                                             Report No. 1A-10-41-12-019


                                             Date: October 17, 2012




                                                            --CAUTION--

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


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


                                                 BlueCross BlueShield of Florida
                                                       Plan Codes 90/590
                                                      Jacksonville, Florida




                       REPORT NO. 1A-10-41-12-019                                      October 17, 2012
                                                                                DATE: ______________




                                                                               Michael R. Esser
                                                                               Assistant Inspector General
                                                                                 for Audits




                                                            --CAUTION--

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


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


                                  BlueCross BlueShield of Florida
                                        Plan Codes 90/590
                                       Jacksonville, Florida




              REPORT NO. 1A-10-41-12-019                           October 17, 2012
                                                            DATE: ______________



This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations
at BlueCross BlueShield of Florida (Plan), doing business as Florida Blue, in Jacksonville,
Florida, questions $448,133 in health benefit charges. The BlueCross BlueShield Association
agreed (A) with these questioned charges.

Our limited scope audit was conducted in accordance with Government Auditing Standards. The
audit covers claim payments from January 1, 2010 through December 31, 2011 as reported in the
Annual Accounting Statements.

The questioned health benefit charges are summarized as follows:

•   Continuous Stay Claims (A)                                                         $352,639

    During our review of continuous stay claims, we determined that the Plan incorrectly paid 30
    groups of continuous stay claims, resulting in net overcharges of $352,639 to the FEHBP.
    Specifically, the Plan overpaid 19 claim groups by $421,779 and underpaid 11 claim groups
    by $69,140.




                                                i
•   Duplicate Payments – Professional/Facility Claims (A)                             $90,354

    The Plan paid 94 duplicate professional claims, resulting in overcharges of $90,354 to the
    FEHBP. These claims were included in duplicate payment groups that contained one facility
    claim and one or more duplicate professional claims.

•   System and Discount Review (A)                                                      $5,140

    The Plan incorrectly paid 459 claims, resulting in net overcharges of $5,140 to the FEHBP.
    Specifically, the Plan overpaid 120 claims by $53,505 and underpaid 339 claims by $48,365.




                                              ii
                                                   CONTENTS
                                                                                                                       PAGE

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

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

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

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

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

              1. Continuous Stay Claims .....................................................................................5

              2. Duplicate Payments – Professional/Facility Claims ..........................................7

              3. System and Discount Review ............................................................................9

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

 V.    SCHEDULE A – HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

       APPENDIX (BlueCross BlueShield Association response, dated August 9, 2012, to the
                draft audit report)
                         I. INTRODUCTION AND BACKGROUND
INTRODUCTION

This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
BlueCross BlueShield of Florida (Plan), doing business as Florida Blue. The Plan is located in
Jacksonville, Florida.

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

BACKGROUND

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

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

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

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




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
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.

All findings from our previous audit of the Plan (Report No. 1A-10-41-10-012, dated
May 12, 2011), which included claim payments from 2006 through September 30, 2009, have
been satisfactorily resolved.

The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan and/or Association officials throughout the audit and at an exit conference; and were
presented in detail in a draft report, dated June 15, 2012. 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 to determine whether the Plan complied with contract provisions relative to
health benefit payments.

SCOPE

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 BlueCross and BlueShield FEHBP Annual Accounting Statements as they
pertain to Plan codes 90 and 590 for contract years 2010 and 2011. During this period, the Plan
paid approximately $2.5 billion in health benefit charges (See Schedule A). Specifically, we
reviewed approximately $31 million in claim payments from January 1, 2010 through
December 31, 2011 for proper adjudication.

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. This was
determined to be the most effective approach to select areas of audit. For those areas selected,
we primarily relied on substantive tests of transactions and not tests of controls. Based on our
testing, we did not identify any significant matters involving the Plan’s internal control structure
and its operations. However, since our audit would not necessarily disclose all significant
matters in the internal control structure, we do not express an opinion on the Plan’s system of
internal controls taken as a whole.

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

In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP Director’s Office, the FEP Operations Center, and the Plan. Due to time constraints, we
did not verify the reliability of the data generated by the various information 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.



                                                 3
The audit was performed at the Plan’s office in Jacksonville, Florida on various dates from
March 19, 2012 through May 8, 2012. Audit fieldwork was also performed at our offices in
Washington, D.C.; Cranberry Township, Pennsylvania; and Jacksonville, Florida.

METHODOLOGY

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

To test the Plan’s compliance with the FEHBP health benefit provisions, we selected and
reviewed samples of 1,194 claims. 2 We used the FEHBP contract, the 2010 and 2011 Service
Benefit Plan brochures, the Plan’s provider agreements, and the Association’s FEP
administrative manual to determine the allowability of benefit payments. The results of these
samples were not projected to the universe of claims.




2
 See the audit findings for “Continuous Stay Claims” (1), “Duplicate Payments – Professional/Facility Claims” (2),
and “System and Discount Review” (3) on pages 5 through 10 for specific details of our sample selection
methodologies.


                                                        4
              III. AUDIT FINDINGS AND RECOMMENDATIONS
HEALTH BENEFIT CHARGES

1. Continuous Stay Claims                                                                $352,639

   During our review of continuous stay claims, we determined that the Plan incorrectly paid 30
   groups of continuous stay claims, resulting in net overcharges of $352,639 to the FEHBP.
   Specifically, the Plan overpaid 19 claim groups by $421,779 and underpaid 11 claim groups
   by $69,140. Continuous stay claims are two or more inpatient hospital claims with
   consecutive dates of service that were billed by a provider for a patient with one length of
   stay.

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

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

   For the period January 1, 2010 through September 30, 2011, we identified 2,079 continuous
   stay claim groups (representing 5,317 claims), totaling $31,629,226 in payments. From this
   universe, we selected and reviewed a judgmental sample of 176 continuous stay claim groups
   (representing 436 claims), totaling $18,437,024 in payments, to determine if these claims
   were correctly priced and paid by the Plan. Our sample included groups with cumulative
   claim payment amounts of $30,000 or more. The majority of these groups contained claims
   with consecutive dates of service. This sample contained a 12 percent error rate (claims in
   21 of the 176 continuous stay groups were paid incorrectly).

   Since our sample contained a high error rate, we expanded our testing to include all groups
   with cumulative claim payment amounts of $23,000 or more but less than $30,000. This
   expanded sample included an additional 65 continuous stay claim groups (representing 147
   claims), totaling $1,703,249 in payments. Our expanded sample contained a 14 percent error
   rate (claims in 9 of the 65 continuous stay groups were paid incorrectly).

   In total, our review identified 30 groups of continuous stay claims with payment errors
   (representing 47 claim payment errors), resulting in net overcharges of $352,639 to the
   FEHBP. Of these, the Plan overpaid 19 claim groups by $421,779 and underpaid 11 claim
   groups by $69,140. These claim payment errors resulted from the following:

   •   Due to provider billing errors, the Plan incorrectly paid 28 claims in 14 of the groups,
       resulting in net overcharges of $236,087 to the FEHBP. Specifically, the Plan overpaid
       11 groups by $301,887 and underpaid 3 groups by $65,800. In each instance, the



                                                5
    provider billed the Plan two or more separate claims for the patient when only one claim
    should have been billed for the entire stay (admission).

•   In two of the groups, the Plan did not properly coordinate four claims with Medicare,
    resulting in overcharges of $91,594 to the FEHBP.

•   In eight of the groups, the Plan paid eight claims using incorrect allowed amounts,
    resulting in net overcharges of $20,905 to the FEHBP. Specifically, the Plan overpaid
    five groups by $21,855 and underpaid three groups by $950.

•   In one of the groups, the Plan did not calculate the appropriate co-insurance amounts for
    two claims, resulting in overcharges of $6,443 to the FEHBP.

•   In five of the groups, the Plan inadvertently applied pre-certification penalties when
    pricing five claims, resulting in undercharges of $2,390 to the FEHBP.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan has initiated
recoveries of the overpayments. As of July 13, 2012, the Plan has recovered and returned
$287,690 of the overpayments to the FEHBP. To the extent that errors did occur, the
Association also states that these payments were good faith erroneous benefit payments and
fall within the context of CS 1039, Part II, section 2.3(g). Any payments the Plan is unable
to recover are allowable charges to the FEHBP as long as the Plan demonstrates due
diligence in the collection of these overpayments. As good faith erroneous payments, lost
investment income does not apply to the claim payment errors identified in this finding.
Regarding the underpayments, the Association states that the Plan has already issued
additional payments to the providers to correct these errors.

The Association also states that “the Plan completed causal analysis of the errors and
determined that the errors were the result of manual coding errors and provider billing errors.
The following processes have been implemented to reduce these types of claim payment
errors in the future:

    •   Coaching and feedback was provided to the appropriate individuals and support areas
        within the Plan.
    •   Internal systems and guidelines were reviewed to verify the appropriate controls are
        in place, and based on the review new controls have been implemented to ensure
        similar errors will not occur in the future.
    •   The Plan will continue to randomly audit processors monthly to ensure compliance
        with the processing guidelines.”




                                             6
   Recommendation 1

   We recommend that the contracting officer disallow $421,779 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 $69,140 if
   additional payments are made to the providers and/or members to correct the underpayment
   errors. However, before making any additional payment(s) to a provider, the contracting
   officer should require the Plan to first recover any questioned overpayment(s) for that
   provider.

   Recommendation 3

   We recommend that the contracting officer have the Association verify that the Plan’s
   corrective actions to minimize these types of claim payment errors in the future are being
   implemented. These corrective actions are included in the Association’s response to the draft
   report.
2. Duplicate Payments – Professional/Facility Claims                                      $90,354

   The Plan paid 94 duplicate professional claims, resulting in overcharges of $90,354 to the
   FEHBP. These claims were included in duplicate payment groups that contained one facility
   claim and one or more duplicate professional claims.

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

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

   We performed computer searches on the BCBS claims database, using our data warehouse
   function, to identify potential duplicate professional claims that were paid by the Plan from
   January 1, 2010 through December 31, 2011.

   •   Using our “duplicate professional and inpatient match” search criteria, we identified 925
       potential duplicate payment groups containing two or more claims, where one claim was
       the original inpatient facility claim and the other(s) were possible duplicate professional
       claims. These potential duplicate groups included 3,150 claim lines, totaling $2,600,413
       in payments. Of these payments, $178,178 were considered potential duplicates. From
       this universe, we selected and reviewed a judgmental sample of 75 groups (representing
       355 claim lines), totaling $363,126 in payments. Of these payments in our sample,
       $97,983 were considered potential duplicates. Our sample included all groups with
       potential duplicate payments of $500 or more.



                                                7
•   Using our “duplicate professional and outpatient match” search criteria, we identified
    18,657 potential duplicate payment groups containing two or more claims, where one
    claim was the original outpatient facility claim and the other(s) were possible duplicate
    professional claims. These potential duplicate groups included 47,787 claim lines,
    totaling $5,152,013 in payments. Of these payments, $1,911,037 were considered
    potential duplicates. From this universe, we selected and reviewed a judgmental sample
    of 442 groups (representing 1,820 claim lines), totaling $896,114 in payments. Of these
    payments in our sample, $629,611 were considered potential duplicates. Our sample
    included all groups with potential duplicate payments of $750 or more.

Based on our review, we determined that 94 of the professional claim payments in our
samples were duplicates, resulting in overcharges of $90,354 to the FEHBP. These duplicate
claim payments occurred due to the following reasons:

•   Due to various provider billing errors, the Plan inadvertently paid 65 duplicate claims,
    resulting in overcharges of $57,713 to the FEHBP.

•   The Plan paid 29 claims that were deferred as potential duplicates on the claims system
    but were overridden by the processors, resulting in overcharges of $32,641 to the
    FEHBP.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan has initiated
recoveries of the confirmed duplicate payments. As of July 13, 2012, the Plan has recovered
and returned $24,817 of the duplicate payments to the FEHBP. To the extent that errors did
occur, the Association also states that these payments were good faith erroneous benefit
payments and fall within the context of CS 1039, Part II, section 2.3(g). Any payments the
Plan is unable to recover are allowable charges to the FEHBP as long as the Plan
demonstrates due diligence in the collection of these overpayments. As good faith erroneous
payments, lost investment income does not apply to the claim payment errors identified in
this finding.

The Association also states that the Plan completed a causal analysis of the errors and
determined that these errors were caused by manual overrides by processors and billing
errors by providers. The Plan has implemented processes to reduce these types of errors
from occurring in the future.

Recommendation 4

We recommend that the contracting officer disallow $90,354 for duplicate claim payments
charged to the FEHBP, and verify that the Plan returns all amounts recovered to the FEHBP.




                                             8
    Recommendation 5

    We recommend that the contracting officer have the Association verify that the Plan’s
    corrective actions to minimize these types of duplicate claim payments in the future are being
    implemented. These corrective actions are included in the Association’s response to the draft
    report.

3. System and Discount Review                                                                                        $5,140

    The Plan incorrectly paid 459 claims, resulting in net overcharges of $5,140 to the FEHBP.
    Specifically, the Plan overpaid 120 claims by $53,505 and underpaid 339 claims by $48,365.

    As previously cited from CS 1039, costs charged to the FEHBP must be actual, allowable,
    allocable, and reasonable. If errors are identified, the Plan is required to make a diligent
    effort to recover the overpayments. Also, the Plan must coordinate the payment of benefits
    with Medicare and the payment of medical and hospital costs under no-fault or other
    automobile insurance that pays benefits without regard to fault.

    For health benefit claims reimbursed from January 1, 2010 through September 30, 2011
    (excluding Omnibus Budget Reconciliation Act of 1990, Omnibus Budget Reconciliation
    Act of 1993, and case management claims), we identified 8,963,100 claim lines, totaling
    $1,138,964,008 in payments, where the FEHBP paid as the primary insurer. From this
    universe, we selected and reviewed a judgmental sample 200 claims (representing 2,149
    claim lines), totaling $9,639,298 in payments, for the purpose of determining if the Plan
    adjudicated these claims properly and/or priced them according to the provider contract
    rates. 3 As part of our review, we also selected 50 participating and preferred providers,
    which were associated with the highest reimbursed claims in our sample, for the purpose of
    verifying if these providers’ contract rates were accurately and timely updated in the Plan’s
    local network pricing system.

    Our review identified eight claim payment errors, resulting in net undercharges of $1,597 to
    the FEHBP. These claim payment errors resulted from the following:

    •    In one instance, the Plan did not properly coordinate the claim with Medicare, resulting in
         an overcharge of $6,245 to the FEHBP.

    •    In one instance, the Plan incorrectly applied the allowed pricing amount when processing
         the claim, resulting in an overcharge of $4,368 to the FEHBP.

    •    In one instance, the Plan incorrectly applied the co-payment amount when processing the
         claim, resulting in an undercharge of $20 to the FEHBP.



3
 We selected our sample from an OIG-generated “Place of Service Report” (SAS application) that stratified the claims by place
of service (POS), such as provider’s office and payment category, such as $50 to $99.99. We judgmentally determined the
number of sample items to select from each POS stratum based on the stratum’s total claim dollars paid.



                                                              9
•   In one instance, the Plan paid a claim using the incorrect pricing rate, resulting in an
    undercharge of $72 to the FEHBP. This claim was paid incorrectly because the Plan’s
    local claims system was not updated with the 2011 contract rates in the Physician Group
    Medical Services Agreement (see below for our expanded review of the issue).

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

•   In one instance, the Plan paid a claim using the incorrect pricing information, resulting in
    an undercharge of $2,877 to the FEHBP.

•   In two instances, the Plan entered an incorrect deferral code when processing the claims,
    resulting in net undercharges of $8,743 to the FEHBP. Specifically, the Plan underpaid
    one claim by $34,488 and overpaid one claim by $25,745.

After researching the claim that was paid using an incorrect pricing rate (see above), we
requested the Plan to identify all claims paid from August 1, 2011 (effective date of the
updated rates) through September 30, 2011 (when claims system was updated) that were
potentially processed with this type of error, and determine if these claims were paid
correctly. The error was due to the Plan’s local claims system not being updated with the
2011 contract rates in the Physician Group Medical Services Agreement. The Plan identified
483 claims, totaling $427,193 in payments, that were potentially processed with this type of
error. We reviewed these claims and determined that 451 additional claims were paid
incorrectly, resulting in net overcharges of $6,737 to the FEHBP. Of these additional claim
payment errors, 116 were overpaid by $17,217 and 335 were underpaid by $10,480.

Association’s Response:

The Association agrees with this finding. The Association states that the Plan has initiated
recoveries of the confirmed overpayments. As of July 13, 2012, the Plan has recovered and
returned $31,990 of the overpayments to the FEHBP. To the extent that errors did occur, the
Association also states that these payments were good faith erroneous benefit payments and
fall within the context of CS 1039, Part II, section 2.3(g). Any payments the Plan is unable
to recover are allowable charges to the FEHBP as long as the Plan demonstrates due
diligence in the collection of these overpayments. As good faith erroneous payments, lost
investment income does not apply to the claim payment errors identified in this finding.
Regarding the underpayments, the Association states that the Plan has already issued
additional payments to the providers to correct these errors.

The Association also states that “the Plan completed causal analysis of the errors and
determined that the errors occurred due to lack of coordination between internal business
partners.

    •   Internal systems and guidelines were reviewed as well to verify the appropriate
        controls are in place. Based on this review, internal guidelines have been updated.




                                             10
   •   Procedures have been enhanced to include the necessary detail required to process
       claims accurately.
   •   Controls have been developed and implemented to minimize errors and identify
       outliers.”

Recommendation 6

We recommend that the contracting officer disallow $53,505 for claim overcharges and verify
that the Plan returns all amounts recovered to the FEHBP.

Recommendation 7

We recommend that the contracting officer allow the Plan to charge the FEHBP $48,365 if
additional payments are made to the providers and/or members to correct the underpayment
errors. However, before making any additional payment(s) to a provider, the contracting
officer should require the Plan to first recover any questioned overpayment(s) for that
provider.

Recommendation 8

We recommend that the contracting officer have the Association verify that the Plan’s
corrective actions to minimize these types of claim payment errors in the future are being
implemented. These corrective actions are included in the Association’s response to the draft
report.




                                           11
              IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

             Lead Auditor

              Auditor

              , Auditor


                  , Chief (

Information Systems Audits Group

                   , Senior Information Technology Specialist

            , Senior Information Technology Specialist




                                            12
                                                               V. SCHEDULE A

                                                  BLUECROSS BLUESHIELD OF FLORIDA
                                                       JACKSONVILLE, FLORIDA

                                       HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

HEALTH BENEFIT CHARGES                                                           2010             2011           TOTAL

HEALTH BENEFIT CHARGES

     PLAN CODE 90:
       CLAIM PAYMENTS                                                           $637,742,834     $682,942,668    $1,320,685,502
       MISCELLANEOUS PAYMENTS AND CREDITS*                                           501,088       (2,004,401)       (1,503,313)

     PLAN CODE 590:
       CLAIM PAYMENTS                                                            564,237,987      578,302,946     1,142,540,933
       MISCELLANEOUS PAYMENTS AND CREDITS*                                                 0                0                 0

     TOTAL                                                                     $1,202,481,909   $1,259,241,213   $2,461,723,122


AMOUNTS QUESTIONED                                                               2010             2011           TOTAL

1.   CONTINUOUS STAY CLAIMS                                                         $237,746         $114,893         $352,639
2.   DUPLICATE PAYMENTS - PROFESSIONAL/FACILITY CLAIMS                                18,241           72,113           90,354
3.   SYSTEM AND DISCOUNT REVIEW                                                            0            5,140            5,140

     TOTAL QUESTIONED CHARGES                                                       $255,987         $192,146         $448,133

* We did not review the miscellaneous payments and credits on this audit.
August 9, 2012
                          Group Chief
Experience-Rated Audits Group
Office of the Inspector General                                   Federal Employee Program
U.S. Office of Personnel Management 	                             1310 G Street, N.W.
                                                                  Washington, D.C. 20005
1900 E Street, Room 6400                                          202.942.1000
Washington, DC 20415-1100                                         Fax 202.942.1125



Reference:	                 OPM DRAFT AUDIT REPORT
                            BlueCross BlueShield of Florida
                            Audit Report Number 1A-10-41-12-019
                            (Dated June 15, 2012 and Received June 15, 2012)

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 Florida Blue. Our comments concerning the findings in the report are as
follows:

A. HEALTH BENEFIT CHARGES

1. 	Continuous Stay Claims                                                          $352,639

The Plan agrees that $421,779 in continuous stay claims were over paid and $69,140
were underpaid. Recovery has been initiated on the overpayments, where applicable.
This represented 1.1% of the $31,629,000 in claim payments reviewed during the audit.
As of July 13, 2012, the Plan has recovered and returned $287,690 to the Program and
will continue to show due diligence in its recovery efforts. All claims are adjusted to the
correct payment amount during the initial review of the claims for the audit; therefore all
underpayments have been issued to the providers.

As requested in the recommendation, the Plan completed causal analysis of the errors
and determined that the errors were the result of manual coding errors and provider
billing errors. The following processes have been implemented to reduce these types of
claim payment errors in the future:

   	 Coaching and feedback was provided to the appropriate individuals and support
      areas within the Plan.
August 9, 2012
Page 2 of 4

      Internal systems and guidelines were reviewed to verify the appropriate controls
       are in place, and based on the review new controls have been implemented to
       ensure similar errors will not occur in the future.
      The Plan will continue to randomly audit processors monthly to ensure
       compliance with the processing guidelines.

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

2. Duplicate Payments – Professional/Facility Claims                             $90,354

The Plan agrees that 94 duplicate claim lines may have resulted in overcharges of
$90,354 to the FEHBP. These claim errors represented 1.3% of the $6,752,426 in
potential duplicate claim payments identified during the audit. Recovery has been
initiated on the confirmed overpayments. As of July 13, 2012, the Plan has recovered
and returned $24,817 to the program and will continue to show due diligence in its
recovery efforts.

As requested in the recommendation, the Plan completed causal analysis of the errors
and determined that the errors were caused by manual overrides by processors and
provider billing errors. The following processes have been implemented to reduce
these types of errors from occurring in the future:

      Coaching and feedback was provided to the individual examiners as appropriate,
       and refresher training provided for all examiners in the claims processing area.
       Internal systems and guidelines were reviewed as well to verify the appropriate
       controls are in place. In addition, the Plan will continue to randomly audit
       processors monthly to ensure compliance with the processing guidelines.

Accordingly, to the extent that errors did occur, the payments are good faith erroneous
benefits payments and fall within the context of CS 1039, Section 2.3(g). Any benefit
payments the Plan is unable to recover are allowable charges to the Program as long
as the Plan is able to demonstrate due diligence in collection of the overpayment. In
addition, as good faith erroneous benefit. In addition, as good faith payments, the Plan
August 9, 2012
Page 3 of 4

continues to initiate recovery in a timely manner for confirmed overpayments. Because
these are good faith erroneous payments, they are not subject to lost investment
income.

3. System and Discount Review                                                    $5,140

The Plan agrees that $53,505 of the questioned claims may have been over paid and
that $48,365 of the questioned claims may have been underpaid. These claims
payments errors represented .005% of the $9,639,298 in claim payments reviewed.
Recovery has been initiated on the confirmed overpayments. As of July 13, 2012, the
Plan has returned $31,990 to the Program and will continue to show due diligence in its
recovery efforts. All claims are adjusted to the correct payment amount during the
initial review of the claims for the audit; therefore all underpayments have been issued
to the providers.

As requested in the recommendation, the Plan completed causal analysis of the errors
and determined that the errors occurred due to lack of coordination between internal
business partners.

      Internal systems and guidelines were reviewed as well to verify the appropriate
       controls are in place. Based on this review, internal guidelines have been
       updated.
      Procedures have been enhanced to include the necessary detail required to
       process claims accurately.
      Controls have been developed and implemented to minimize errors and identify
       outliers.

Accordingly, to the extent that errors did occur, the payments are good faith erroneous
benefits payments and fall within the context of CS 1039, Section 2.3(g) as long as the
Plan is able to demonstrate due diligence in collection of the overpayment. In addition,
as good faith erroneous benefit.. Any benefit payments the Plan is unable to recover
are allowable charges to the Program. In addition, as good faith payments, the Plan
continues to initiate recovery in a timely manner for confirmed overpayments. Because
these are good faith erroneous payments, they are not subject to lost investment
income.
August 9,2012
Page 4 014


We appreciate the opportunity to provide our response to this Draft Aud it Report and
reque st that our comments be included in their entirety in the Final Audit Report. If you
have any questions, feel free to call _          at                 or me at

Sincerely,




Director, Program Integrity

cc:	               , OPM
                  , Florida Blue
                       • Florida Blue
               , FEP

                     , FEP