oversight

Audit of WellPoint Southeast Mason, Ohio

Published by the Office of Personnel Management, Office of Inspector General on 2009-03-03.

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
Inspector General




                                        AUDIT REPORT



                              Federal Employees Health Benefits Program

                              Service Benefit Plan    Contract CS 1039

                                   BlueCross BlueShield Association

                                            Plan Code 10


                                         WeUpoint Southeast

                          Plan Codes 060/560 (Connecticut), 180/680 (Maine),

                           2701770 (New Hampshire), and 423/923 (Virginia)

                                            Mason, Ohio





                      REPORT NO. lA-10-63-08-044           DATE:March 3, 2009




                                                            Michael R. Esser
                                                            Assistant Inspector General
                                                              for Audits



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

                                               Washington, DC 20415



   Office of the
Inspector General




                                       EXECUTIVE SUMMARY



                                 Federal Employees Health Benefits Program

                                 Service Benefit Plan    Contract CS 1039

                                      BlueCross BlueShield Association

                                               Plan Code 10


                                            Wellpoint Southeast

                             Plan Codes 060/560 (Connecticut), 180/680 (Maine),

                              2701770 (New Hampshire), and 423/923 (Virginia)

                                               Mason, Ohio





                        REPORT NO. IA-1O-63-08-044             DATE:   March 3. 2009

      This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations at
      WellPoint Southeast (Plan) in Mason, Ohio, questions $693,795 in health benefit charges. The
      BlueCross BlueShield Association (Association) agreed (A) with $679,256 and disagreed (D)
      with $14,539 of the questioned charges.

      OUf 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.

      Questioned health benefit charges are summarized as follows:

      •     Amounts Paid Greater than Covered Charges (A)                                      $314,993

            During our review of claims where the amounts paid were greater than the covered charges,
            we determined that the Plan incorrectly paid 20 claims, resulting in net overcharges of
            $314,993 to the FEHBP. Specifically, the Plan overpaid 17 claims by $317,383 and
            underpaid-3 claims by $2,390.




          www.opm.goY                                                                       www.usalobs.goY
•   Assistant Surgeon Review fA)                                                         $170,820

    The Plan incorrectly paid 185 assistant surgeon claims.

•   System Review fA)                                                                    $117,354

    Based on our review of a judgmental sample of 290 claims, we determined that the Plan
    incorrectly paid five. claims, resulting in net overcharges of $117,354 to the FEHBP.
    Specifically, the Plan overpaid four claims by $118,617 and underpaid one claim by $1,263.

•   Omnibus Budget Reconciliation Act of 1990 Review                                     $90,628

    The Plan incorrectly paid 18 claims that were priced or potentially should have been priced
    under the Omnibus Budget Reconciliation Act of 1990 pricing guidelines. Specifically, the
    Plan overpaid 13 claims by $120,647 and underpaid 5 claims by $30,019, resulting in net
    overcharges 0[$90,628 to the FEHBP. The Association agreed with $76,089 (A) and
    disagreed with $14,53 9 (D) of the questioned charges.




                                                11
                                     CONTENTS

                                                                                   PAGE


       EXECUTIVE SUMMARY             ,                                                     i


 L     INTRODUCTION AND BACKGROUND                                                     1


II.    OBJECTIVES, SCOPE, AND METHODOLOGy	                                             3


III.   AUDIT FINDINGS AND RECOiv1MENDATIONS	                                           5


       A.   HEALTH BENEFIT CHARGES	                                                    5


            I. Amounts Paid Greater than Covered Charges	                              5


            2. Assistant Surgeon Review	                                               7


            3. System Review	                                                          8


            4. Omnibus Budget Reconciliation Act of 1990 Review                       10


IV,    MAJOR CONTRIBUTORS TO THIS REPORT.                                             13


 V.    SCHEDULE A - HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

       APPENDIX	 (BlueCross BlueShield Association reply, dated January 19, 2009, 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
WellPoint Southeast (Plan). The Plan includes the Connecticut, Maine, New Hampshire and
Virginia BlueCross and BlueShield plans. The Plan's central office is located in Mason, Ohio.

The audit was performed by the Office of Personnel Management's (OPM) Office of the Inspector
General (DIG), 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 carriers.

The BlueCross BlueShield Association (Association), on behalf of participating BlueCross and
BIueShield plans, has entered into a Government-wide Service Benefit Plan contract (CS 1039)
with OPM to provide a health benefit plan authorized by the FEHB Act. The Association
delegates authority to participating local BlueCross and BlueShield plans throughout the United
States to process the health benefit claims of its federal subscribers. The Plan is one of
approximately 63 local BlueCross and BlueShield plans participating in the FEHBP.

The Association has established a Federal Employee Program (FEl") 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.




I 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 audits of the Plan (Report No. lA-10-59-01-022 for Maine, dated
May 14,2001; Report No. lA-1O-27-02-022 for New Hampshire, dated February 14,2003; Report
No. lA-10-50-03-021 for Connecticut, dated June 24,2004; and Report No. lA-1O-62-04-003 for·
Virginia, dated January 4, 2005), covering various contract years during the period 1997 through
2002, have been satisfactorily resolved.

The results of our 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 November 18,2008. 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 eviderice 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 060/560 (Connecticut), 180/680 (Maine), 2701770 (New Hampshire), and
423/923 (Virginia). During this period, the Plan paid approximately $2.6 billion in health benefit
charges (See Schedule A). Specifically, we reviewed approximately $74 million in claim
payments made from 2005 through 2007 for proper adjudication.

In planning and conducting our audit, we obtained an understanding ofthe 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 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
provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by the
FEP Director's Office, the FEP Operations Center, the Plan, and the Centers for Medicare and
Medicaid Services. Due to time constraints, we did not verify the reliability of the data generated



                                                 3

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.

The audit was performed at our offices in Cranberry Township, Pennsylvania and Jacksonville,
Florida from August 5 through November 19, 2008.

METHODOLOGY

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

To test the Plan's compliance with the FEHBP health benefit provisions, we selected and
reviewed samples of 1,536 claims.' We used the FEHBP contract, the Service Benefit Plan
brochure, the Plan's provider agreements, and the Association's FEP administrative manual to
determine the allowability of benefit payments. The results of these samples were not projected
to the universe of claims.




2 See the audit findings for "Amounts Paid Greater than Covered Charges" (AI), "Assistant Surgeon Review" (A2),
"System Review" (A3), and "Omnibus Budget Reconciliation Act of 1990 Review" (A4).on pages 5 through 12 for
specific details of our sample selection methodologies.



                                                       4

            III. AUDIT FINDINGS AND RECOMMENDATIONS


A. HEALTH BENEFIT CHARGES


  1.	 Amounts Paid Greater than Covered Charges                                         $314,993

     The Plan incorrectly paid 20 claims, resulting in net overcharges of $314,993 to the
     FEHBP. Specifically, the Plan overpaid 17 claims by $317,383 and underpaid 3 claims
     by $2,390.

     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 aPM 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,
     other group health benefits coverages ... (b) The Carrier shall not pay benefits under this
     contract until it has determined whether it is the primary carrier ... ."

     For the period 2005 through 2007, we identified 13,886 claims where the amounts paid
     were greater than the covered charges by a total of$18,222,691. From this universe, we
     selected and reviewed a judgmental sample of 517 claims with a total variance of
     $7,327,591 ,and determined if the Plan adjudicated these claims properly. Our sample
     included all claims where the amounts paid exceeded covered charges by $2,500 or more
     for the Connecticut, Maine and New Hampshire plans, and $10,000 or more for the
     Virginia plan. Based on our review, we determined that 20 of these claims were paid
     incorrectly, resulting in net overcharges of$314,993 to the FEHBP. Specifically, the Plan
     overpaid 17 claims by $317,383 and underpaid 3 claims by $2,390.

     These claim payment errors resulted from the following reasons:

     •	 The Plan paid three claims using the incorrect pricing methodology, resulting in
        overcharges of $164,497 to the FEHBP.

     •	 The Plan priced one claim using the incorrect number of units, resulting in an

        overcharge of $36,491 to the FEHBP.


     •	 The Plan incorrectly paid four claims due to processor errors, resulting in net
        overcharges of$34,160 to the FEHBP. Specifically, the Plan overpaid three claims
        by $34,760 and underpaid one claim by $600. For example, the Plan inadvertently
        priced two separate claims (split bills) for a patient when only one claim should have
        been priced for the entire admission.




                                               5

  •	 The Plan did not correctly bundle claim line charges for two claims, resulting in

     overcharges of $30,331 to the FEHBP.


  •	 The Plan paid two claims using incorrect billed charges, resulting in overcharges of
     $16,389 to the FEHBP.

  •	 The Plan paid three claims using incorrect per diem allowances, resulting in net
     overcharges of$13,076 to the FEHBP. Specifically, the Plan overpaid two claims by
     $14,246 and underpaid one claim by $1,170.

  •	 The Plan did not properly coordinate one claim with Medicare, resulting in an

     overcharge of$10,805 to the FEHBP.


  •	 The Plan did not properly coordinate one claim with the patient's primary insurance
     carrier, resulting in an overcharge of $5,700 to the FEHBP.

  •	 The Plan paid one claim using an incorrect fee schedule amount, resulting in an

     overcharge of $3,440 to the FEHBP.


  •	 The Plan paid two claims using the incorrect types of services, resulting in net
     overcharges of $104 to the FEHBP. Specifically, the Plan overpaid one claim by
     $724 and underpaid one claim by $620.

  Association's Response:

  The Association agrees with this finding. The Association states that the Plan has initiated
  recoveries of the overpayments and has recovered $216,067 as of December 31, 2008.

- The Association also states, "The errors that occurred in this area appear to be mostly
  human error. To ensure these types of errors do not occur in the future, the Plan will
  review processing procedures and ensure training materials are up to date. This review
  should be concluded by February 28,2009. The FEP Director's Office System Wide
  Claims Review process includes Amounts Paid Greater than Covered Charges claims for
  Plan review and identification of overpayments. This review process should continue to.
  reduce these types of findings in the future."

  Recommendation 1

  We recommend that the contracting officer disallow $317,383 in claim overcharges, and
  verii)' 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 $2,390 if
  additional payments are made to the providers to correct the underpayment errors.


                                           6

2.	 Assistant Surgeon Review                                                         $170,820

   The Plan incorrectly paid 185 assistant surgeon claims, resulting in overcharges of

   $170,820 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. Also, the Plan must coordinate the payment
   of benefits with Medicare.

   For the period 2005 through 2007, we identified 2,350 assistant surgeon claim groups,
   totaling $826,013 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 406 assistant surgeon claim groups, totaling $609,129
   in potential overpayments, to determine if the Plan paid these claims properly. Our
   sample included all assistant surgeon claim groups with potential overpayments of $500
   or more. The majority ofthese claim groups contained one primary surgeon and one
   assistant surgeon claim. Based on our review, we determined that 185 claims were paid
   incorrectly, resulting in overcharges 0[$170,820 to the FEHBP.

   These claim payment errors resulted from the following:

   •	 The Plan incorrectly paid 172 assistant surgeon claims, resulting in overcharges of
      $158,564 to the FEHBP. These overcharges were due to errors in the calculation of
      the assistant surgeon fee, which should have been priced at 10, 16, 20, or 25 percent
      of the primary surgeon's allowed amount.

   •	 The Plan incorrectly paid 12 assistant surgeon claims, resulting in overcharges of
      $11,934 to the FEHBP. These overcharges were due to errors in the calculation of the
      assistant surgeon fee for claims that were subject to the Omnibus Budget
      Reconciliation Act of 1993 (OBRA 93), which should have been priced at 13.6 or 16
      percent of the primary surgeon's Medicare allowed amount,

   •	 The Plan did not properly coordinate one claim with Medicare, resulting in an overcharge
      of $322 to the FEHBP.

   Association's Response:

   The Association agrees with this finding. The Association states that the Plan has initiated
   recoveries of the overpayments and has recovered $169,796 as of December 31,2008.

   The Association also states, "The Plan reviewed the errors identified ... and determined
   that these errors could be identified as system errors. The Plan has created or strengthened
       . proce dures. . . ."
   t helf




                                            7

         In addition, the Association states, "For the Assistant Surgeon claim errors noted during
         the audit, the FEPDO implemented the following:

         •	 .Palmetto began correctly pricing AS modifier claims. A final comprehensive list that
             identifies all unadjusted Assistant Surgeon claims will be issued to all Plans by
             January 31, 2009 so that claims can be adjusted as necessary.
         •	 .Assistant Surgeon claims are included in the periodic System-Wide Claims Review
             process to ensure that any claim payment errors are identified and corrected in a timely
             manner."

         Recommendation 3

         We recommend that the contracting officer disallow $170,820 in claim overcharges, and
         verify that the Plan returns all amounts recovered to the FEHBP.

    3.	 System Review                                                                                  $117,354

         The Plan incorrectly paid five claims, resulting in net overcharges of $117,354 to the

         FEHBP. Specifically, the Plan overpaid four claims by $118,617 and underpaid one

         claim by $1,263.


         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 or other health insurance coverage.


         For health benefit claims reimbursed during the period January 1, 2007 through

         December 31, 2007, we identified 8,696,487 claim lines, totaling $858,826,237 in

        'payments, using a standard criteria based on our audit experience. From this universe, we

         selected and reviewed a judgmental sample of290 claims (representing 3,191 claim

         lines), totaling $13,349,211 in payments, to determine if the Plan adjudicated these claims

         properly. 3 Our review identified five claim payment errors, resulting in net overcharges

         0[$117,354 to the FEHBP. Specifically, the Plan overpaid four claims by $118,617 and

         underpaid one claim by $1,263.


         These claim payment errors resulted from the following:


        •	 The Plan made one duplicateclaim payment, resulting in an overcharge of $97,230 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 (paS), 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 pas stratum based on the stratum's total
claim dollars paid.



                                                        8
•	 The Plan did not properly coordinate one claim with the patient's primary insurance
   carrier, resulting in an overcharge of$10,335 to the FEHBP.

•	 The Plan paid one claim at total billed charges instead of applying the applicable
   contract rate, resulting in an overcharge of$5,543 to the FEHBP.

•	 The Plan paid one claim at percent of charges instead of applying the applicable fee
   schedule amount, resulting in an overcharge of $5,509 to the FEHBP.

•	 The Plan paid one claim using an incorrect percent of charges, resulting in an
   undercharge of $1,263 to the FEHBP.

Association's Response:

The Association agrees with this finding. The Association states that the Plan has initiated
recoveries of the overpayments and has recovered $108,282 as of December 31, 2008. The
Association also states that these payments were good faith erroneous benefit payments and
fall within the context of CS 1039, Part II, section 2.3(g). Any payments the Plan is unable
to recover are allowable charges to the FEHBP. As good faith erroneous payments, lost
investment income does not apply to the claim payment errors identified in this finding.

The Association states, "The Plan will review processing procedures and documentation
to ensure training materials are up to date as well as provide refresher training to claims
processors as necessary to reduce these types of payment errors in the future.

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."

Recommendation 4

We recommend that the contracting officer disallow $118,617 in claim overcharges, and
verify that the Plan returns all amounts recovered to the FEHBP.

Recommendation 5

We recommend that the contracting officer allow the Plan to charge the FEHBP $1,263 if
an additional payment is made to the provider to correct the underpayment error.




                                         9

4.	 Omnibus Budget Reconciliation Act of 1990 Review                                   $90,628

   The Plan incorrectly paid 18 claims that were priced or potentially should have been
   priced under the Omnibus Budget Reconciliation Act of 1990 (OBRA 90), resulting in
   net overcharges of $90,628 to the FEHBP. Specifically, the Plan overpaid 13 claims by
   $120,647 and underpaid 5 claims by $30,019.

   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.

   Contract CS 1039, Part III, Section 3.8 states, "the Carrier shall retain and make available
   all records applicable to a contract term that support the annual statement of operations
   and ... the rate submission for that contract term ...."

   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 amount for the claims in our sample
   that were subject to and/or processed as OHRA 90.

   The following summarizes the claim payment errors.

   OBRA 90 Claim Pricing Errors

  "For the period 2005 through 2007, we identified 4,083 claims, totaling $30,932,902 in
   payments, that were subject to OBRA 90 pricing guidelines. From this universe, we
   selected and reviewed a judgmental sample of 175 claims, totaling $5,936,959 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
   $20,000 or more. Based on our review, we determined that nine ofthese claims were paid
   incorrectly, resulting in net overcharges of $28,663 to the FEHBP. Specifically, the Plan
   overpaid six claims by $39,745 and underpaid three claims by $11,082.

   These claim payment errors resulted from the following:

   •	 The FEP Operations Center priced seven claims at incorrect Medicare diagnosis
      related grouping (DRG) allowances. Consequently, the Plan overpaid four claims by
      $25,621 and underpaid three claims by $11,082, resulting in net overcharges of
      $14,539 to the FEHBP.




                                            10

•	 The Plan priced one claim using an incorrect Medicare DRG code, resulting in an
   overcharge of $12,564 to the FEHBP.

•	 The Plan paid one claim using an incorrect percent of charges, resulting in an
   overcharge of $1,560 to the FEHBP.

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

For the period 2005 through 2007, we identified 1,756 claims, totaling $3,565,768 in
payments, that were potentially subject to OBRA 90 pricing guidelines but appeared to be
paid under the Plan's standard pricing procedures. From this universe, we selected and
reviewed ajudgmental sample of68 claims, totaling $1,699,353 in payments, to
determine if the Plan paid these claims properly. Our sample included all possible OBRA
90 claims with amounts paid of$lO,OOO or more. Based on our review, we determined
that nine of these claims were paid incorrectly, resulting in net overcharges of $61,965 to
the FEHBP. Specifically, the Plan overpaid seven claims by $80,902 and underpaid two
claims by $18,937.

These claim payment errors resulted from the following:

•	 The Plan did not provide supporting documentation for five claims, resulting in
   overcharges of$75,336 to the FEHBP.

•	 The Plan inadvertently did not price one claim under OBRA 90, resulting in an
   overcharge of$530 to the FEHBP.

•	 The FEP Operations Center priced three claims at incorrect Medicare DRG
   allowances. Consequently, the Plan overpaid one claim by $5,036 and underpaid two
   claims by $18,937, resulting in net undercharges of$13,901 to the FEHBP.

Association's Response:

The Association agrees with $76,089 and disagrees with $14,539 of the questioned
charges. The Association states that the Plan has recovered $8,577 of the uncontested
amount as of December 31,2008.

For the contested amount, the Association states, "The claims were contested because
when re-priced by the Operations Center OBRA '90 pricing software, it resulted in a
different price than the price calculated by the CMS PC pricer. The Operations Center
OBRA '90 pricing software is the official OPM 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 ofthe Operations Center OBRA '90 pricer was used to reprice the
claims, FEP continues to believe that the resulting price obtained by the Operations
Center OBRA '90 Mainframe pricer software is the most accurate."



                                        11
In addition, the Association states, "To reduce pricing errors in the future, the Plan has
implemented and updated its Policy & Procedure for OBRA 90 and an OBRA 90
Processing guide. Further, the FEP Director's Office includes ... OBRA '90 priced
claims on the periodic System-Wide Review process to facilitate early identification and
recovery ofOBRA '90 claim payment errors."

DIG Comments:

For the contested amount, the FEP Operations Center's OBRA 90 pricing amounts
differed from the eMS Pricer amounts. Based on our experience with auditing BJueCross
and BlueShield plans, we have found that these pricing differences occur because the .
mainframe pricing software used by the FEP Operations Center is not always up-to-date.
Therefore, we will continue to use the latest version of the eMS Pricer program, which
includes up-to-date pricing, to determine if claims paid under OBRA 90 were correctly
priced by the FEP Operations Center and paid by the Plan.

In addition, the Association did not provide documentation to support the amounts that
were repriced by the FEP Operations Center for the contested items.

Recommendation 6

We recommend that the contracting officer disallow $120,647 in 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 $30,019
if additional payments are made to the providers to correct the underpayment errors.




                                         12

              IV. MAJOR CONTRIBUTORS TO THIS REPORT


Experience-Rated Audits Group

               Auditor-In-Charge

_uditor


                   Chief

              Senior Team Leader




                                   13

                                                                V. SCHEDULE A

                                                    ,,       WELLPOINT SOUTHEAST
                                                                 MASON, OHIO

                                             HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED


HEALTH BENEFIT CHARGES                                           2005              2006                2007                TOTAL


      CONNECTICUT:
      PLAN CODE 060                                               $34,441,782        $38,461,343              43,880,063      $116,783,188
      MnSCELLANEOUSPAYMENTS                                          (483,252)           675,486                 369,772           562,006

      PLAN CODE 560                                                34,330,771             38,190,380          41,590,817        114,111,968
      MUSCELLANEOUSPAYMENTS                                                 0                      0                   0                  0

      MAINE:
      PLAN CODE 180                                                56,160,565             61,702,739          62,090,550        179,953,855
      MISCELLANEOUS PAYMENTS                                        1,146,882                189,301             218,624          1,554,806

      PLAN CODE 680                                                27,100,197             29,354,775          31,042,179         87,497,151
      MISCELLANEOUS PAYMENTS                                                0                      0                   0                  0

      NEW HAMPSHIRE:
      PLAN CODE 270                                                69,706,529             80,590,561          85,948,394        236,245,484
      MISCELLANEOUS PAYMENTS                                          227,229                631,075             487,931          1,346,235

      PLAN CODE 770                                                37,760,586             41,387,654          45,069,304        124,217,544
      MISCELLANEOUS PAYMENTS                                                0                      0                   0                  0

      VIRGINIA:
      PLAN CODE 423                                               273,684,651         295,986,960         334,081,611           903,753,222
      MISCELLANEOUS PAYMENTS                                        3,027,186           4,149,757           4,250,063            11,427,006

      PLAN CODE 923                                               245,080,499         273,307,410         307,334,758         . 825,722,667
      MISCELLANEOUS PAYMENTS                                                0                   0                   0                     0

              TOTAL HEALTH BENEFIT CHARGES               I       $782,183 626        $864627440          $956.364.066        $2 603 175,131 II



AMOUNTS QUESTIONED	                                              2005              2006                2007                TOTAL


1.   AMOUNTS PAID GREATER THAN COVERED CHARGES	                     $293,625                $16,104               $5,264           $314,993
2.   ASSISTANT SURGEON REVIEW	                                        50,763                 24,041               96,016            170,820
3.   SYSTEM REVIEW	                                                        0                      0              117,354            117,354
4.   OMNIBUS BUDGET RECONCILIATION ACT OF 1990 REVIEW	                28,661                  4,668               57,299             90,628

                TOTAL AMOUNTS QUESTIONED                 I          $373,049                $44,813            $275,933            $693,795 III
                                                                                                 APPENDIX



                                                                      . BlUt,'Cross BlueShicld
                                                                        Association
January 19, 2008                                                        All !>ssDcililioll of lndepen (jl~m
                                                                        £lIueCross and BIlleShield PI,lJIs

                     Group Chief
Experience-Rated Audits Group
                                                                        federal Employee Program
Office of the Inspector General                                         1310 G Street. N.W.
U.S. Office of Personnel Management                                     Washington, D.C. 20005
1900 E Street. Room 6400                                                202.942.1000
Washington, DC 20415-1100                                               Fax 202.942.1 125


Reference:	        OPM DRAFT AUDIT REPORT
                   Well Point Southeast
                   Audit Report Number 1A·10-63"()8-044
                   (Dated November 18 and received November 19, 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 Well Point Southeast. Our comments
concerning the findings in the report are as follows:

A. HEALTH BENEFIT CHARGES

1. Amounts Paid Greater than Covered Charges	                           $314,993

   We do not contest this audit finding. Recovery has been initiated to recover

   the overpayments. The errors that occurred in this area appear to be mostly

   human error. To ensure these types of errors do not occur in the future, the

   Plan will review processing procedures and ensure training materials are up

   to date. This review should be concluded by February 28. 2009. The FEP

   Director's Office System Wide Claims Review process includes Amounts Paid

   Greater than Covered Charges claims for Plan review and identification of

   overpayments. This review process should continue to reduce these types of

   findings in the future.


   As of December 31, 2008, the Plan has recovered $216,067.

2. Assistant Surgeon Review	                                            $170,820

   We do not contest this finding. Recovery has been initiated to recover the

   overpayments. The Plan reviewed the errors identified on the Assistant

   Surgeon claims list and determined that these errors could be rdentified as

   system errors. The Plan has created or strengthened their procedures to

   include the following:

                  Group Chief
OPM Draft Audit Response
January 19, 2009
Page 2

   •	 Virginia Corporate Provider Allowance Assistant Surgeon Pricing
      defect: When modifier 80, 81, or 83 was reported on claims for
      providers with specially negotiated contract rates, the corporate provider
      allowance file gave the same allowance for both type service 200 and
      2TO. Corrective action was implemented on August 19, 2008 to set up a
      separate allowance for type service 2TO which reflects the appropriate
      reduction for assistant surgeons (10% of type service 200) and then apply
      the appropriate negotiated rate.

   •	 Virginia Streamline Provider Allowance Assistant Surgeon Pricing
      defect: When modifier AS was reported on claims for providers with
      specially negotiated contract rates, the Streamline system incorrectly set a
      type of service 2TO which allows 10% of the base allowance. Corrective
      action was implemented on August 19, 2008 so that when a provider has
      a specially negotiated contract rate, the Streamline system uses type of
      service 200 and calculates the correct allowance using the base
      allowance for type of service 200 multiplied by the provider's negotiated
      rate.

   •	 NE (CT, ME, & NH) Assistant Surgeon Pricing defect:
      When multiple modifiers were reported on claims, a system limitation of
      the ACES pricer accepted only the modifier located in position # 1. The
      Streamline system was programmed to send only the modifier in position
      # 1 to ACES for pricing. Modifiers located in positions 2,3, and 4 were not
      considered. A system enhancement was implemented in production on
      February 17,2008 to correct the pricing problems in both systems.

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

   •	 .Palmetto began correctly pricing AS modifier claims. A final
        comprehensive list that identifies all unadjusted Assistant Surgeon claims
      . will be issued to all Plans by January 31, 2009 so that claims can be
        adjusted as necessary.
   •	 Assistant Surgeon claims are included in the periodic System-Wide
        Claims Review process to ensure that any claim payment errors are
        identified and corrected in a timely manner.

    As of December 31, 2008, the Plan has recovered $169,796.
                  Group Chief
OPM Draft Audit Response
January 19, 2009
Page 3


3. Omnibus Budget Reconciliation Act 1990 Review                   $90,628

  The Plan does not contest $76,089. However, the Plan does contest
  $14,539. The claims were contested because when they were re-priced by
  the Operations Center OBRA '90 pricer software, it resulted in a different
  price than the price calculated by the CMS PC pricer. The Operations Center
  OBRA '90 pricer software is the official OPM 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, FEP continues to believe
  that the resulting price obtained by the Operations Center OBRA '90
   Mainframe pricer software is the most accurate.

  To reduce pricing errors in the future, the Plan has implemented and
  updated its Policy & Procedure for OBRA 90 and an OBRA90 Processing
  guide. Further, the FEP Director's Office includes not OBRA '90 priced
  claims on the periodic System-Wide Review process to facilitate early
  identification and recovery of DBRA'90 claim payment errors.

   As of December 31,2008, the Plan has recovered $8,577.

4. System Review.                                                  $117,354

   We do not contest this audit finding. All claims have been adjusted to recover
   the overpayments. The Plan will review processing procedures and
   documentation to ensure training materials are up to date as well as provide
   refresher training to claims processors as necessary to reduce these types of
   payment errors in the future.

   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, Amount Paid Greater
   than Charges Claims, OBRA '90, and Termination 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. 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
                  Group Chief

OPM Draft Audit Response

January 19, 2009

Page 4


      payments, lost investment income does not apply to the payments identified
      in this finding.

      As of December 31,2008, the Plan has recovered $108,282.

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




Executive Director
Program Integrity



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