oversight

Audit of the BlueCross BlueShield Of Nebraska

Published by the Office of Personnel Management, Office of Inspector General on 2009-01-07.

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

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                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                            Washington, DC 20415


   Office of the
Inspeclor General




                                          AUDIT REPORT



                                Federal Employees Health Benefits Program

                                Service Benefit Plan     Contract CS 1039

                                     BlueCross BlueShield Association

                                               Plan Code 10



                                    BlueCross BlueShield of Nebraska

                                        Plan Codes 260 and 760

                                            Omaha, Nebraska





                    REPORT NO. lA-10-53-08-045                      DATE: .Tanuary 7,2009




                                                             Michael R. Esser
                                                             Assistant Inspector General
                                                               for Audits



        www.opm.gov                                                                        www.usajDbs.gov
                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                                Washington, DC 20415


  Office of the
InspeclOr General




                                        EXECUTIVE SUMMARY




                                  Federal Employees Health Benefits Program

                                  Service Benefit Plan     Contract CS 1039

                                       BlueCross BlueShield Association

                                                 Plan Code 10



                                       BlueCross BlueShield of Nebraska

                                           Plan Codes 260 and 760

                                              Omaha, Nebraska





                    REPORT NO. lA-10-53-08-045                          DATE:   January 7, 2009

      This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations at
      BlueCross BlueShield of Nebraska (Plan) in Omaha, Nebraska questions $440,327 in health
      benefit charges. The BlueCross BlueShield Association agreed (A) with all questioned charges.

      Our limited scope audit was conducted in accordance with Government Auditing Standards. The
      audit covered claim payments from 2005 through 2007 as reported in the Annual Accounting
      Statements.

      The questioned health benefit charges are summarized as follows:

       •    Omnibus Budget Reconciliation Act of 1990 Review fA)                                $413,408

            The Plan incorrectly paid 47 claims that were priced or potentially should have been priced
            under the Omnibus Budget Reconciliation Act of 1990 pricing guidelines. Specifically, the
            Plan overpaid 40 claims by $441,688 and underpaid 7 claims by $28,280, resulting in net
            overcharges of $413,408 to the FEHBP.




        www.opm.gov                                                                           www.usajobs.gov
•   Claim Payment Errors (A)                                                            526,919

    The Plan incorrectly paid 76 claims, resulting in overcharges of $26,919 to the FEHBP.




                                               11

                                          CONTENTS

                                                                                 PAGE


       EXECUTIVE SUMMARy                                                                i


 1.    INTRODUCTION AND BACKGROUND	                                                     1


II.    OBJECTIVES, SCOPE, AND METHODOLOGy	                                              3


III.   AUDIT FINDINGS AND RECOMMENDAnONS	                                               5


       A.   HEALTH BENEFIT CHARGES	                                                     5


            1.   Omnibus Budget Reconciliation Act of 1990 Review	                      5


            2.   Claim Paytnent Errors	                                                 8


IV.    MAJOR CONTRIBUTORS TO THIS REPORT	                                              11


 V.    SCHEDULE A - HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

       APPENDIX	 (BlueCross BlueShie1d Association reply, dated December 4, 2008, 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 Nebraska (Plan). The Plan is located in Omaha, Nebraska.

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 1, Part 890 of the Code of Federal Regulations (CFR). Health insurance coverage is
made available through contracts with various health insurance c.arriers.

The BlueCross BlueShield Association (Association), on behalf of participating BlueCross and
BlueShield plans, has entered into a Govenunent-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 B1ueShield plans participating in the FEHBP.

The Association has established a Federal Employee Program (FEp l ) 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 ofFEHBP claims (using computerized system edits), maintaining a history file of all
FEHBP claims, and maintaining an accounting of all program funds.




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

Phm. When we referto 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.

The findings from our previous audit of the Plan (Report No. lA-1O-53-0l-01O, dated January 19,
2001) for contract years 1997 through 1999 have been satisfactorily resolved.

The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan andlor Association officials throughout the audit and at an exit conference; and were
presented in detail in a draft report, dated September 17, 2008. 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 260 and 760 for contract years 2005 through 2007. During this period, the Plan paid
approximately $337 million in health benefit charges. Specifically, we reviewed $7.8 million in
claim payments made from 2005 through 2007 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 aild not tests of controls. Based on our
testing, we did not identify any significant matters involving the Plan's internal control structure
and its operation. 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, the
applicable procurement regulations (i.e., Federal Acquisition Regulations and Federal Employees
Health Benefits Acquisition Regulations, 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 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
provlslOns.

In conducting our audit, we relied to varying degrees on computer~generateddata 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 ofthe data generated
by the various information systems involved. However, while utilizing the computer-generated




                                                 3

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 our office in Jacksonville) Florida from June 13) 2008 through
July 31) 2008.

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 553 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
detennine the allowability of benefit payments. The results of these samples were not projected
to the universe of claims.




2 See the audit findings for "Omnibus Budget Reconciliation Act of 1990 Review" (AI) and "Claim Payment
Errors" (A2) on pages 5 through 10 for specific details of our sample selection methodologies.




                                                      4

            III. AUDIT FINDINGS AND RECOMMENDATIONS


A. HEALTH BENEFIT CHARGES


  1. Omnibus Budget Reconciliation Act of 1990 Review                                    $413,408

     The Plan incorrectly paid 47 claims that were priced or potentially should have been
     priced under the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) pricing
     guidelines. Specifically, the Plan overpaid 40 claims by $441,688 and underpaid 7 claims
     by $28,280, resulting in net overcharges of $413,408 to the FEHBP.

     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, "If the Carrier or OPM determines that a Member's claim
     has been paid in error for any reason, the Carrier shall make a diligent effort to recover an
     overpayment ...."

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

     OBRA 90 limits the benefit payments for certain inpatient hospital services provided to
     annuitants 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 claim payment errors.

     .oHRA 90 Claim Pricing Errors

     For the period 2005 through 2007, we identified 300 claims, totaling $3,724,457 in
     payments, that were subject to OBRA 90 pricing guidelines. From this universe, we
     selected and reviewed a judgmental sample of 114 claims, totaling $2,556,600 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$10,000 or more.

     Based on our review, we determined that 34 claims were paid incorrectly, resulting in net
     overcharges of $424,788 to the FEHBP. Specifically, the Plan overpaid 31 claims by
     $433,370 and underpaid 3 claims by $8,582.




                                               5

The claim payment errors resulted from the following:

•	 The Plan inadvertently did not price 27 claims under OBRA 90, resulting in net

   overcharges of $382,264 to the FEHBP. Specifically, the Plan overpaid 26 claims by

   $387,263 and underpaid I claim by $4,999.


•	 The Plan did not properly coordinate two claims with Medicate Part B, resulting in

   overcharges of $22,481 to the FEHBP.


•	 The FEP Operations Center priced one claim using the incorrect billed charges,

   resulting in an overcharge of$17,473 to the FEHBP.


•	 The FEP Operations Center priced one claim using an incorrect Medicare Diagnostic

   Related Group (DRG) code, resulting in an overcharge of $5,239 to the FEHBP.


•	 In one instance, the Plan paid a split claim incorrectly, resulting in an overcharge of

   $914 to the FEHBP.


•	 The Plan paid two claims using incorrect reimbursement rates, resulting in undercharges
   of$3,583 to the FEHBP.

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

For the period 2005 through 2007, we identified 96 claims, totaling $508,682 in payments,
that were potentially subject to OBRA 90 pricing guidelines but appeared to be priced
under the Plan's standard pricing procedures. We selected all 96 claims and determined if
the Plan paid these claims properly.

.Based on our review, we determined that 13 claims were paid incorrectly, resulting in net
 undercharges of $1] ,380 to the FEHBP. Specifically, the Plan overpaid nine claims by
 $8,318 and underpaid four claims by $19,698.

The claim payment errors resulted from the following:

•	 The Plan incorrectly paid six split claims, resulting in overcharges of $4,823 to the

   FEHBP.


•	 The Plan paid one claim using an incorrect local pricing amount, resulting in an

   undercharge of $476 to the FEHBP.


•	 The Plan priced one claim using an incorrect reimbursement rate, resulting in an
   undercharge of $1,263 to the FEHBP.




                                         6

•	 The Plan inadvertently did not price five claims under OBRA 90, resulting in net
   wldercharges of$14,464 to the FEHBP. Specifically, the Plan overpaid three claims
   by $3,495 and underpaid two claims by $17,959.

Association's Response:

The Association agrees with this finding. The Association states that the Plan has initiated
recoveries on the overpayments and has already returned $393,640 ($386,831 + $6,809) to
the FEHBP. The Association also states that these payments were good faith erroneous
benefit payments and fall within the context ofCS 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 does not apply to the claim payment errors
identified in this finding.

The Association states, "As a result of the audit, the Plan noted several discrepancies in
the assigning of Medicare provider numbers in the local Plan database. The Plan
immediately reviewed aU local files containing Medicare provider numbers against a
list retrieved from the local Medicare Part A contractor to ensure that the database used
to accurately price OBRA 90 claims was correct. ... Efforts will be made to
periodicaUy examine existing procedures and add additional controls where necessary."

·OIG Comments:

After reviewing the Association's response and documentation provided by the Plan, we
revised the amount questioned from the draft report to net overcharges of $413,408.
Using the FEP Direct System, we could only verify that the Plan has returned $347,127 of
the questioned overcharges to the FEHBP.

Recommendation 1

We verified that the Plan has returned $347,127 of the questioned overcharges to the
FEHBP. Therefore, no further action is required for these overpayments.

Recommendation 2

We recommend that the contracting officer disallow $94,561 ($441,688 overcharges­
$347,127 amount already returned) in claim overcharges, and verify that the Plan returns
all amounts recovered to the FEHBP.

Recommendation 3

We recommend that the contracting officer allow the Plan to charge the FEHBP $28,280
if additional payments are made to the providers to correct the underpayment errors.




                                         7

   Recommendation 4

   Although the Association has developed a corrective action plan to reduce OBRA 90
   findings, we recommend that the contracting officer instruct the Association to ensure
   that the Plan is following the corrective action plan.

2.	 Claim Payment Errors                                                               $26,919

   The Plan incorrectly paid 76 claims, resulting in overcharges of$26,919 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 diligent effort to recover the overpayments.

   The following summarizes the claim payment errors.

   Assistant Surgeon Review

   For the period of2005 through 2007, we identified 428 assistant surgeon claim groups,
   totaling $64,207 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 172 assistant surgeon claim groups, totaling $49,888 in
   potential overpayments, to detennine if the Plan paid these claims properly. Our sample
   included all assistant surgeon claim groups with potential overpayments of $100 or more.
   Based on our review, we detennined that 70 claims were paid incorrectly, resulting in
   overcharges of $23,827 to the FEHBP.

   The claim payment errors resulted from the following:

   •	 The Plan inadvertently priced 39 claims incorrectly, resulting in overcharges of
      $14,278 to the FEHBP. In each instance, the Plan paid the claim based on the assistant
      surgeon pricing even though the claim did not require assistant surgeon pricing.

   •	 The Plan incorrectly paid 18 assistant surgeon claims that were subject to Omnibus
      Budget Reconciliation Act of 1993 (OBRA 93) pricing guidelines, resulting in
      overcharges of $3,745 to the FEHBP. These errors were due to Palmetto (OBRA 93
      pricing vendor) not recognizing the assistant surgeon pricing modifier and
      erroneously calculating the assistant surgeon fee.

   •	 The Plan paid three claims using the incorrect assistant surgeon pricing percentage,
      resulting in overcharges of $2,657 to the FEHBP.

   •	 The Plan paid six claims at incorrect allowed amounts, resulting in overcharges of
      $2,569 to the FEHBP.




                                             8

         •	 The Plan paid four claims without applying the multiple surgery reduction, resulting
            in overcharges of$578 to the FEHBP.

         Amounts Paid Greater than Covered Charges

        For the period 2005 through 2007, we identified 71 claims where the amounts paid were
        greater than the covered charges by a total of$115,573. We selected all 71 claims and
        determined if the Plan adjudicated these claims properly. Based on our review, we
        identified six claim payment errors, resulting in overcharges of $3,092 to the FEHBP.

        The claim payment errors resulted from the following:

         •	 The Plan paid two claims using incorrect local pricing methods, resulting in
            overcharges of $2,235 to the FEHBP.

         •	 The Plan paid four claims using incorrect aJIowances, resulting in overcharges of
            $857 to the FEHBP.

         System Review

        For health benefit claims reimbursed from January 1,2007 through December 31, 2007,
        we identified 782,310 claim lines, totaling $99,613,703 in payments, using a standard
        criteria based on our audit experience. From this universe, we selected and reviewed a
        judgmental sample of 100 claims (representing 874 claim lines), totaling $4,545,554 in
        payments, to determine ifthe Plan adjudicated these claims properly.3 We identified two
        immaterial claim payment errors, which are not being questioned in the report.

         Association's Response:

        The Association agrees with this finding. The Association states that the Plan has
        initiated recoveries on the overpayments and has already returned $23,069 to the FEHBP.
        The Association also states that these payments were good faith erroneous benefit
        payments and fall within the context ofCS 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 does not apply to the claim payment errors
        identified in this finding.

        The Association states, "The Plan has retrained several claims auditors regarding when
        and how to pay Assistant Surgeon claims. This training is ongoing and as a follow up,
        additional quality is performed to ensure the training was successful.



3 We selected our sample from an DIG-generated "Place ofService 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 judgmentaJly
determined the number of sample items to select from each POS stratum based on the stratum's total claim dollars paid.




                                                          9

       For the Assistant Surgeon claim errors noted during the audit, the FEPDO implemented
       the following:

       •	 The OBRA '93 vendor, Palmetto, corrected pricing of the Assistant Surgeon modifier
          during May 2008; this should result in more accurate pricing in the future.

       •	 A final comprehensive list that identifies all unadjusted Assistant Surgeon claims will
          soon be issued so that claims can be adjusted as necessary."

       In addition, the Association states, "the Plan has several methods in place to identify
       overpayments. These methods include, but are not limited to the System Wide Claims
       Reports (which includes a listing of Assistant Surgeon Claims), COB claims reports and
       Duplicate claims reports provided by the FEP Director's Office and routine claims quality
       assurance audits performed by the Plan's Internal Auditors. 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."

       OIG Comments:

       Using the FEP Direct System, we could only verify that the Plan has returned $16,046 of
       the questioned charges to the FEHBP.

       Recommendation 5

       We verified that the Plan has returned $16,046 of the questioned charges to the FEHBP.
       No further action is required for these overpayments.

-~~c   'Recommendation 6

       We recommend that the contracting officer disallow $10,873 ($26,919 questioned­
       $16,046 amount already returned) in claim overcharges, and veritY that the Plan returns all
       amounts recovered to the FEHBP.




                                               10

               IV. MAJOR CONTRIBUTORS TO THIS REPORT


EX..Qerienced-Rated Audits Group

                 , Auditor-In-Charge




                 Senior Team Leader




                                       11

                                            , ,'
                                              "




                                                      V. SCHEDULE A

                                         BLUECROSS BLUESHIELD OF NEBRASKA
                                                   OMAHA, NEBRASKA

                                  HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED


HEALTH BENEFIT CHARGES	                                                        2005                                             2006                      2007                                        TOTAL


HEALTH BENEFIT CHARGES

  PLAN CODE 260                                                                 $61,672,846                                      $67,992,512               $72,166,774                                 $201,832,132
  MISCELLANEOUS PAYMENTS AND CREDITS                                                (14,481)                                         871,083                   807,315                                    1,663,917

  PLAN CODE 760                                                                  39,211,999                                       44,901,878                  49,056,344                                133,170,221
  MISCELLANEOUS PAYMENTS AND CREDITS                                                      0                                                0                                           0                           0

            TOTAL HEALTH BENEFIT CHARGES              I1                   .,  $100,870,364
                                                                                        ",,,,,,,,,mm'' ,,,,,,,,'' ' ' ' ' ' '
                                                                                                                                $113,765,473
                                                                                                                                                 "
                                                                                                                                                        $122,030,433
                                                                                                                                                     ,'' ' ' ' ' ' ',,_,,,,,.'' ,,,,,.,,'' ',,   .,
                                                                                                                                                                                                       $336,666,270 ~
                                                                                                                                                                                                                      I   ~



AMOUNTS QUESTIONED                                                             2005                                             2006                      2007                                        TOTAL


I. OMNIBUS BUDGET RECONCILIATION ACT OF 1990 REVIEW                               $205,165                                             $99,760                     $108,483                               $413,408
2.	 CLAIM PAYMENT ERRORS                                                              9,568                                              8,008                              9,343                             26,919

              TOTAL QUESTIONED CHARGES                I                           $214,733
                                                                                             ,                                     $107,768                        $117,826                               $440,327 ~
                                                          '''"'''.'''''0,1,	                                            I
                                                                                              APPENDIX



                                                                        .v

                                                                        BlueCross B]ueShicld
                                                                        Association
                                 (Revised 12/4/08)	                     An Assoda 0011 of lndependent
                                                                        BIlle Cross and Blue Shield PI/lDS

November 14, 2008
                                                                        Federal Employee .Prop·am
                     Group Chief
                                                                        1510 G Slreel, 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 202.9·12.1125
1900 E Street, Room 6400
Washington. DC 20415-1100

Reference:	         OPM DRAFT AUDIT REPORT
                    BlueCross BlueShleld of Nebraska
                    Audit Report Number 1A-10-53-08-045
                    (Dated and received September 17, 2008)

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 alueCross BlueShield of Nebraska.
Our comments concerning the findings in the report are as follows:

B. HEALTH BENEFIT CHARGES

1. Omnibus Budget Reconciliation Act of 1990             $435.720

   Specifically, the Plan overpaid 42 claims by $464,000 and underpaid seven

   claims by $28,280 for a net of $435,720. The breakdown is as follows:


   •   OBRA '90 Claim Pricing Errors

   There were $436,618 in overpayments and $8,582 in underpayments for a

   net total of $428,036. The Plan contests four claims totaling $3,248 but does

   not contest that a net $424,788 in claim payments may have been paid in

   error.


   The Plan has returned $386,831 to the Program through

   November 11, 2008 and has initiated refund recovery on all remaining

   identified overpayments.


   As a result of the audit, the Plan noted several discrepancies in the assigning

   of Medicare provider numbers in the local Plan database. The Plan

   immediately reviewed al110cal files containing Medicare provider numbers

   against a list retrieved from the local Medicare Part A contractor to ensure





                                                                    .
                  Group Chief
OPM Draft Audit Response
November 14,2008
Page 2

   that the database used to accurately price OBRA 90 claims was correct.
   In addition, the Plan has several methods in place to identify overpayments.
   These methods include, but are not limited to the System Wide Claims
   Reports. COB claims reports and Duplicate claims reports provided by the
   FEP Director's Office and routine claims quality assurance audits performed
   by the Plan's Internal Auditors. 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.

   •   Claims Not Priced Under OBRA t90 (Possible OBRA t90)

    We do not contest an overpayment of $8,318 and an underpayment of
    $19,698 for a net underpayment of $11 ,380. We do contest one clatm
    (Claim Sample #26), for $10,274 because this refund was recovered and
    adjusted prior to the audit. Additionally there were three claims totaling
    $8,790 (Claim Sample #27,39 and 78) that when re-priced by the
    Operations Center OBRA '90 pricer software resulted in a different price
    than the price calculated by the CMS PC pricer. The Operations Center
    OBRA '90 pricer software is the official O?M approved source for FEP
    OBRA '90 pricing and must be used to determine payment. The claims
    were repriced with the most up-to·date version of the Operations Center
    OBRA '90 pricer software. Because the final updated version of the·
    Operations Center OBRA '90 pricer was used to reprice the claims, FE?
    continues to believe that the pricing differences obtained by the Operations
    Center OBRA '90 Mainframe pricer software is the most accurate. Also,
   .since 2005, the Operations Center updates the OBRA '90 pricing software
. - on a quarterly basis. This has minimized pricing differences.

   The Plan returned $6,809 to the Program through November 11,2008 and
   has init1ated refund recovery on the remaining identified overpayments.

   As stated above, the Plan has several methods in place to identify
   overpayments. These methods inclUde, but are not limited to the System
   Wide Claims Reports, COB claims reports and Duplicate claims reports
   provided by the FEP Director's Office and routine claims quality assurance
   audits performed by the Plan's Internal Auditors. 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 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. 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
November 14, 2008
Page 3




2. Claim Payment Errors	                                    $26,919

   We do not contest this finding. The Plan reviewed the errors identified on the
   Assistant Surgeon claim list and realized that these errors could be identified
   as auditor errors. The Plan has retrained several claims auditors regarding
   when and how to pay Assistant Surgeon claims. This training is ongoing and
   as a follow up, additional quality is performed to ensure the training was
   successful.

   For the Assistant Surgeon claim errors noted dUring the audit, the FEPDO
   implemented the following:

   •	 The OBRA '93 vendor, Palmetto, corrected pricing" of the Assistant
      Surgeon modifier during May 2008. This should result in more accurate
      pricing in the future.

   •	 A final comprehensive list that identifies aU unadjusted Assistant Surgeon
      claims will soon be issued so that claims can be adjusted as necessary.

   As stated above, the Plan has several methods in place to identify
   overpayments. These methods include. but are not limited to the System
   Wide Claims Reports (which includes a listing of Assistant Surgeon Claims),
   COB claims reports and Duplicate claims reports provided by the FE?
   Director's Office and routine claims quality assurance audits performed by the
   Plan's Internal Auditors. 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 benefits payments and faU 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. In addition, as good faith erroneous
   payments, lost investment income does not apply to the payments identified
   in this finding.

   The Plan returned $23,069 to the Program through November 11, 2008 and
   has initiated refund recovery on the remaining identified overpayments.
_ G r o u p Chief
~sponse
November 14.2008
Page 4

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