oversight

Audit on Global Omnibus Budget Reconciliation Act Of 1990 Claims For Bluecross and Blueshield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2010-07-19.

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 ON GLOBAL 

      OMNIBUS BUDGET RECONCILIATION ACT 

                OF 1990 CLAIMS 

      FOR BLUECROSS AND BLUESHIELD PLANS 





                                             Report No. lA-99-00-09-046


                                             Date:         July 19, 2010




                                                          --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.
                       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 


                        Global Omnibus Budget Reconciliation Act of 1990 Claims 

                                    BlueCross and BlueShield Plans 





                      REPORT NO, lA-99-00-09-046            DATE:                2010




                                                             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

                        Global Omnibus Budget Reconciliation Act of 1990 Claims
                                    BlueCross and BlueShie1d Plans




                      REPORT NO. lA-99-00-09-046              DATE: July 19, 2010


      This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations
      at all BlueCross and BlueShield (BCBS) plans questions $4,237,986 in health benefit charges.
      "The BlueCross BlueShield Association (Association) and/or BCBS plans agreed with $4,094,956
      and disagreed with $143,030 of the questioned charges.

      Our limited scope audit was conducted in accordance with Government Auditing Standards. The
      audit covered health benefit payments from 2006 through May 31, 2009 as reported in the
      Annual Accounting Statements. Specifically, we reviewed claims paid from January 1,2007
      through May 31, 2009 that were subject to the Omnibus Budget Reconciliation Act of 1990
      (OBRA 90) pricing guidelines. Also, we reviewed claims paid from January I, 2006 through
      May 31, 2009 that were potentially subject to the OBRA 90 pricing guidelines but appeared to be
      paid under the BCBS plans' standard pricing procedures.

      We determined that BCBS plans incorrectly paid 262 claims that were priced or potentially
      should have been priced under the OBRA 90 pricing guidelines, resulting in net overcharges of
      $4,001,506 to the FEHBP. Specifically, the BCBS plans overpaid 214 of these claims by
      $4,515,977 and underpaid 48 of these claims by $514,471. In addition, we identified 76 claims
      requiring retroactive overpayment adjustments of$738,112 and 106 claims requiring retroactive
      underpayment adjustments of$501,632 due to OBRA 90 pricing updates that occurred after these
      claims were processed, resulting in net overpayments of $236,480. In total, we determined that
      290 claims were overpaid by $5,254,089 and 154 claims were underpaid by $1,016,103, resulting
      in net overcharges of $4,237,986 to the FEHBP for these 444 claims.


                                          - - - - - - - - -

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                                                    CONTENTS 

                                                                                                                    PAGE

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


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


II.      OBJECTIVE, SCOPE, AND METHODOLOGY ............................................................ 3 


III. 	   AUDIT FINDING AND RECOMMENDATIONS ......................................................... 6 


             Omnibus Budget Reconciliation Act of 1990 Review ............................................... 6 


IV.      MAJOR CONTRIBUTORS TO THIS REPORT .......................................................... 13 


V.       SCHEDULES

         A. SUMMARY OF CLAIM SAMPLE SELECTIONS BY PLAN
         B. QUESTIONED CHARGES BY PLAN

         APPENDIX 	 (BlueCross BlueShield Association reply, dated April 5,201 0, 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 all
BlueCross and BlueShield (BCBS) plans.

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

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

The Association has also established an FEP Operations Center. The activities of the FEP
Operations Center are 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 oflocal plan
payments ofFEHBP claims (using computerized system edits), maintaining a history file of all
FEHBP claims, and maintaining an accounting of all program funds.

Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
Association and each BCBS plan's management. Also, management of each BCBS plan is
responsible for establishing and maintaining a system of internal controls.



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

This is our first global audit of Omnibus Budget Reconciliation Act of 1990 COBRA 90) claims
for the BCBS plans. The results of this audit were discussed with the Association throughout the
audit and presented in detail in a draft report, dated December 30,2009. The Association's
comments offered in response to the draft report were considered in preparing our final report
and are included as the Appendix to this report. Also, additional documentation provided by the
Association and BCBS plans on various dates through June 16,2010 was considered in
preparing our final report.




                                               2

                  II. OBJECTIVE, SCOPE, AND METHODOLOGY 


OBJECTIVE 


The objective of this audit was to determine whether the BCBS plans complied with contract
provisions relative to claims that were priced or potentially should have been priced under the
OBRA 90 pricing guidelines.

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 objective. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objective.

The audit covered health benefit payments from 2006 through May 31, 2009 as reported in the
Annual Accounting Statements. Specifically, we reviewed claims paid from January 1,2007
through May 31, 2009 that were subject to the OBRA 90 pricing guidelines. Also, we reviewed
claims paid from January 1,2006 through May 31,2009 that were potentially subject to the
OBRA 90 pricing guidelines but appeared to be paid under the BCBS plans' standard pricing
procedures.

Using our SAS data warehouse function, we performed a computer search on the BCBS claims
database to identify claims paid that were subject to the OBRA 90 pricing guidelines. For the
period January 1,2007 through May 31, 2009, we identified 37,195 claims, totaling
$342,311,386 in payments, that met this search criteria. 2 From this universe, we selected and
reviewed a judgmental sample of 1,150 claims, totaling $47,239,527 in payments, for the
purpose of determining if these claims were correctly priced by the FEP Operations Center and
paid by the BCBS plans. Our sample included various selections of OBRA 90 claims with
amounts paid of $5,000 or more and consisted of claims for 56 of the 63 BCBS plans (see
Schedule A for the sample summary of OBRA 90 claims by plan).

We also performed a computer search to identify claims paid that were potentially subject to the
OBRA 90 pricing guidelines but appeared to be paid under the BCBS plans' standard pricing
procedures (also referred to as possible OBRA 90 claims). For the period January 1,2006
through May 31, 2009, we identified 4,631 claims, totaling $46,912,430 in payments, for 3,607
patients that met this search criteria. 3 From this universe of 3,607 patients, we selected and
reviewed a judgmental sample of 861 patients (1,490 claims, totaling $30,877,728 in payments)
for the purpose of determining if the BCBS plans paid these patients' claims properly. Our
sample included all patients with cumulative possible OBRA 90 claim payments of$15,000 or
more and consisted of claims for 50 of the 63 plans (see Schedule A for the sample summary of
possible OBRA 90 claims by plan).

2 This universe excludes the OBRA 90 claims for the BeBS plans' years that were previously audited by the OIG.
3 This universe excludes the possible OBRA 90 claims for the BeBS plans' years that were previously audited by
the OIG.




                                                       3

We did not consider each BCBS plan's internal control structure in planning and conducting our
auditing procedures. Our audit approach consisted mainly of substantive tests of transactions
and not tests of controls. Therefore, we do not express an opinion on each BCBS plan's system
of internal controls taken as a whole.

We also conducted tests to determine whether the BCBS plans had complied with the contract and
the laws and regulations governing the FEHBP as they relate to OBRA 90 claim payments. The
results of our tests indicate that, with respect to the items tested, the BCBS plans did not fully
comply with the provisions of the contract relative to OBRA 90 claim payments. Exceptions noted
in the areas reviewed are set forth in detail in the "Audit Finding 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 BCBS plans 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 BCBS plans, and the Centers for
Medicare and Medicaid Services (CMS). 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
objective.

The audit was performed at our offices in Washington, D.C.; Cranberry Township, Pennsylvania;
and Jacksonville, Florida from October 8, 2009 through December 30, 2009.

METHODOLOGY

To test each BCBS plan's compliance with the FEHBP health benefit provisions, we selected
judgmental samples of claims that were priced or potentially should have been priced under the
OBRA 90 pricing guidelines. For the period January 1,2007 through May 31,2009, we selected
forreview 1,150 claims, totaling $47,239,527 in payments (from a universe of 37,195 claims,
totaling $342,311,386 in payments), that were subject to the OBRA 90 pricing guidelines. This
sample included various selections ofOBRA 90 claims with amounts paid of $5,000 ormore. 4 For
the period January 1, 2006 through May 31,2009, we also selected for review 1,490 claims,
totaling $30,877,728 in payments, for 861 patients (from a universe of 4,631 claims, totaling
$46,912,430 in payments, for 3,607 patients) that were potentially subject to the OBRA 90 pricing
guidelines but appeared to be paid under the BCBS plans' standard pricing procedures. This
sample included the possible OBRA 90 claims for all patients with cumulative possible OBRA
claim payments of$15,000 or more.                  .



4 Using our SAS OBRA 90 application, we randomly selected 250 claims from the stratum of claims with amounts
paid of $5,000 to $9,999.99, which included 15,644 claims totaling $109,420,037 in payments; 250 claims from the
stratum of claims with amounts paid of$10,000 to $24,999.99, which included 7,635 claims totaling $109,144,835
in payments; and 261 claims from the stratum of claims with amounts paid of$25,000 to $49,999.99, which
included 1,379 claims totaling $45,997,998 in payments. We also selected all 302 claims, totaling $19,921,103 in
payments, from the stratum of claims with amounts paid of $50,000 to $99,999.99; and all 87 claims, totaling
$13,200,014 in payments, from the stratum of claims with amounts paid ofSl 00,000 or more.




                                                       4

The samples selected for review were submitted to each applicable BCBS plan for their review
and response. We then conducted a review of the plans' responses to verify if the claims were
correctly paid and/or determine the appropriate questioned amounts. We did not project the
sample results to the universes of OBRA 90 and possible OBRA 90 claims.

The determination of the questioned amounts is based on the FEHBP contract, the Service
Benefit Plan brochure, the Association's FEP administrative manual, the FEP Operation Center's
OBRA 90 pricing calculations, and/or the CMS pricing program.




                                               5

               III. AUDIT FINDING AND RECOMMENDATIONS 


Omnibus Budget Reconciliation Act of 1990 Review                                         $4,237,986

The BCBS plans incorrectly paid 262 claims that were priced or potentially should have been
priced under the OBRA 90 pricing guidelines, resulting in net overcharges of $4,00 1,506 to the
FEHBP. Specifically, the BCBS plans overpaid 214 of these claims by $4,515,977 and
underpaid 48 of these claims by $514,471. In addition to these claim payment errors, we
identified 76 claims requiring retroactive overpayment adjustments of$738,112 and 106 claims
requiring retroactive underpayment adjustments of$501,632 due to OBRA 90 pricing updates
that occurred after these claims were processed, resulting in net overpayments of $236,480. In
total, we determined that 290 claims were overpaid by $5,254,089 and 154 claims were
underpaid by $1,016,103, resulting in net overcharges of$4,237,986 to the FEHBP for these 444
claims.

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." 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 ...."

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 primary carrier ...."

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 CMS 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. We also
reviewed the BCBS plans' responses and the FEP Operation Center's OBRA 90 pricing
calculations for the claims in our samples.

The following summarizes the results.

Sample of OBRA 90 Claims

For the period January 1,2007 through May 31, 2009, we identified 37,195 claims, totaling
$342,311,386 in payments, that were subject to the OBRA 90 pricing guidelines. From this
universe, we selected and reviewed a judgmental sample of 1,150 claims, totaling $47,239,527 in
payments, to determine if these claims were correctly priced by the FEP Operations Center and
paid by the BCBS plans. Our sample included various selections of OBRA 90 claims with
amounts paid of $5,000 or more and consisted of claims for 56 of the 63 BCBS plans (see
Schedule A for the sample summary of OBRA 90 claims by plan).




                                                 6

Based on our review, we determined that 69 claims were paid incorrectly, resulting in net
overcharges of$1,787,535 to the FEHBP. Specifically, the BCBS plans overpaid 62 claims by
$1,971,683 and underpaid 7 claims by $184,148.

These claim payment errors resulted from the following:

• 	 The BCBS plans inadvertently did not price 15 claims under OBRA 90, resulting in
    overcharges of$744,160 to the FEHBP.

• 	 The FEP Operations Center priced 16 claims using the incorrect Medicare diagnosis related
    grouping (DRG) codes and/or allowances. Consequently, the BCBS plans overpaid 12
    claims by $417,490 and underpaid 4 claims by $144,479, resulting in net overcharges of
    $273,011 to the FEHBP.

• 	 The BCBS plans paid seven claims using the incorrect local pricing amounts, discounts or
    methods, resulting in overcharges of $228,278 to the FEHBP. (These claims were not
    subject to OBRA 90 pricing but were included in our universe and sample of OBRA 90
    claims.)

• 	 The BCBS plans did not properly coordinate 14 claims with Medicare, resulting in
    overcharges of $203,709 to the FEHBP.

• 	 The FEP Operations Center priced 10 claims using the incorrect Medicare provider numbers.
    Consequently, the BCBS plans overpaid nine claims by $180,637 and underpaid one claim
    by $2,700, resulting in net overcharges of$177,937 to the FEHBP.

• 	 The FEP Operations Center priced two claims without applying the Medicare present on
    admission indicators, resulting in overcharges of $140,054 to the FEHBP.

• 	 In one instance, the FEP Operations Center priced a claim using the incorrect billed charges,
    resulting in an overcharge of $28,222 to the FEHBP.

• 	 In one instance, the FEP Operations Center incorrectly priced a claim due to a provider
    billing error, resulting in an overcharge of $8,910 to the FEHBP.

• 	 The FEP Operations Center incorrectly priced two claims due to manual processing errors.
    Consequently, the BCBS plans overpaid one claim by $20,223 and underpaid one claim by
    $11,544, resulting in net overcharges of $8,679 to the FEHBP.

• 	 In one instance, the FEP Operations Center used the incorrect discharge date when pricing
    the claim, resulting in an undercharge of $25,425 to the FEHBP.

In addition to these claim payment errors, we identified 143 claims requiring retroactive payment
adjustments due to CMS OBRA 90 pricing updates that occurred after these claims were
processed. After the FEP Operations Center repriced these claims using the applicable CMS
pricing updates, we determined that 63 of these claims required overpayment adjustments of



                                                7

$493,272 and 80 of these claims required underpayment adjustments of $312,055, resulting in
net overpayment adjustments of $181 ,217 to the FEHBP. Based on an agreement between OPM
and the Association, the BCBS plans are required to pursue due diligence and initiate
overpayment recoveries for these retroactive payment adjustments.

In total, we determined that 125 claims were overpaid by $2,464,955 and 87 claims were
underpaid by $496,203, resulting in net overcharges of$1 ,968,752 to the FEHBP for these 212
claims (see Schedule B for a summary of questioned charges by plan for the OBRA 90 sample).5

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

For the period January 1, 2006 through May 31, 2009, we identified 4,631 claims, totaling
$46,912,430 in payments, for 3,607 patients that were potentially subject to the OBRA 90
pricing guidelines but appeared to be paid under the BCBS plans' standard pricing procedures.
From this universe of 3,607 patients, we selected and reviewed a judgmental sample of 861
patients (1,490 claims, totaling $30,877,728 in payments) to determine if the BCBS plans paid
these patients' claims properly. Our sample included all patients with cumulative possible
OBRA 90 claim payments of $15,000 or more and consisted of claims for 50 of the 63 plans (see
Schedule A for the sample summary of possible OBRA 90 claims by plan).

Based on our review, we determined that 193 of these claims were paid incorrectly, resulting in
net overcharges of$2,213,971 to the FEHBP. Specifically, the BCBS plans overpaid 152 claims
by $2,544,294 and underpaid 41 claims by $330,323.

These claim payment errors resulted from the following:

• 	 The FEP Operations Center priced 86 claims using the incorrect Medicare provider numbers.
    Consequently, the BCBS plans overpaid 70 claims by $1,175,222 and underpaid 16 claims
    by $123,180, reSUlting in net overcharges of $1,052,042 to the FEHBP. The Association
    and/or plans agree with $986,445 and disagree with $65,597 of these questioned charges.

• 	 The FEP Operations Center did not price 34 claims under OBRA 90 due to an "X-52" error
    code (incorrect or incomplete information) generated by the FEP claims system OBRA 90
    pricing software. Consequently, the BCBS plans overpaid 25 claims by $360,972 and
    underpaid 9 claims by $44,975, resulting in net overcharges of$315,997 to the FEHBP. This
    error code is generated when the system software can not calculate an OBRA 90 price based
    on the claim data submitted. In order to pay the claims when this occurs, the FEP Director's
    Office has instructed the BCBS plans to price these claims using the provider contracts.

• 	 The BCBS plans paid 35 claims using the incorrect local pricing information or methods,
    resulting in net overcharges of$309,193 to the FEHBP. Specifically, the BCBS plans

5 In addition, there were 13 OBRA 90 claims, totaling $492,805 in net overcharges, that were identified by the
BCBS plans before the start ofthe audit (Le., July 10,2009) and adjusted by the Association's response due date to
the draft report (i.e., March 31, 2010). Since these overpayments were identified by the BCBS plans before the start
of our audit and adjusted by the Association's response due date to the draft report, we did not question these
overpayments in the final report.



                                                         8

    overpaid 24 claims by $449,612 and underpaid 11 claims by $140,419. (These claims were
    not subject to OBRA 90 pricing, but were included in our universe and sample of possible
    OBRA 90 claims.)

• 	 The FEP Operations Center incorrectly priced 10 claims due to manual processing errors.
    Consequently, the BCBS plans overpaid eight claims by $135,353 and underpaid two claims
    by $8,628, resulting in net overcharges of $126,725 to the FEHBP.

• 	 The FEP Operations Center inadvertently did not price six claims under OBRA 90 due to
    BCBS plans improperly using process code "IE" (timely filing), which caused these claims
    to by-pass the FEP claims system OBRA 90 pricing software. As a result, the BCBS plans
    overpaid these claims by $123,215. The Association and/or plans agree with $45,782 and
    disagree with $77,433 of these questioned charges.

• 	 The BCBS plans inadvertently did not price seven claims under OBRA 90 since the patients'
    information fields in the FEP Direct System were not current at the time of service, resulting
    in overcharges of $118,929 to the FEHBP.

• 	 The FEP Operations Center inadvertently did not price five claims under OBRA 90 due to
    BCBS plans improperly using process code "11" (Plan approved), which caused these claims
    to by-pass the FEP claims system OBRA 90 pricing software. As a result, the BCBS plans
    overpaid these claims by $87,489.

• 	 The BCBS plans did not properly coordinate 10 claims with Medicare, resulting in net
    overcharges of$80,381 to the FEHBP. Specifically, the BCBS plans overpaid seven claims
    by $93,502 and underpaid three claims by $13,121.

In addition to these claim payment errors, we identified 39 claims requiring retroactive payment
adjustments due to CMS OBRA 90 pricing updates that occurred after the claims were
processed. After the FEP Operations Center repriced these claims using the applicable CMS
updates, we determined that 13 of these claims required overpayment adjustments of $244,840
and 26 of these claims required underpayment adjustments of$189,577, resulting in net
overpayment adjustments of$55,263 to the FEHBP. (These claims were OBRA 90 priced, but
were included in our universe and sample of possible OBRA 90 claims.) Based on an agreement
between OPM and the Association, the BCBS plans are required to pursue due diligence and
initiate overpayment recoveries for these retroactive payment adjustments.

In total, we determined that 165 claims were overpaid by $2,789,134 and 67 claims were underpaid
by $519,900, resulting in net overcharges of $2,269,234 to the FEHBP for these 232 claims (see
Schedule B for a summary of questioned charges by plan for the possible OBRA 90 sample).6


6 In addition, there were 16 possible OBRA 90 claims, totaling $243,598 in net overcharges, that were identified by
the BCBS plans before the start of the audit (Le., July 10, 2009) and adjusted by the Association's response due date
to the draft report (Le., March 31,2010). Since these overpayments were identified by the BCBS plans before the
start of our audit and adjusted by the Association's response due date to the draft report, we did not question these
overpayments in the final report.




                                                          9

Association I S Response:

The Association agrees with $4,094,955 ($1,968,752 + $2,126,203) of the questioned charges.
The Association states that the BCBS plans have been instructed to initiate recoveries on all
uncontested overpayments where possible. To date, the BCBS plans have recovered and
returned $3,265,467 of the overpayments to the FEHBP. For the underpayments, the
Association states that the BCBS plans have been instructed to adjust these claims to make
additional payments if feasible.

Regarding the sample of OBRA 90 claims, the Association states, "We contest seven claims ...
for the following reasons:

• 	 Pricing differences between the FEP Claim System OBRA '90 mainframe pricing software
    (supplied by CMS) and the CMS PC Pricer.

• 	 Recovery of the overpayments was initiated or the claims were voided prior to July 10, 2009,
    the start date of the audit.

• 	 Subscribers' liabilities were included in the overpayment amounts."

Regarding the sample of possible OBRA 90 claims, the Association states, "We contest 21
claims ... for the following reasons:

• 	 Pricing differences between the FEP Claim System pricing and OPM's PC Pricer ...

• 	 Provider refunded the money voluntarily because they felt it was an overpayment before the
    OPM global audit started.

• 	 Claims were identified in a previous OPM audit and priced according to that audit response."

The Association also states, "In order to promote the accuracy ofFEP OBRA '90 claims and
ensure that Plans are complying with the OBRA '90 action Plan, BCBSA periodically contacts
the Plans, sends Possible OBRA '90 claims listing[s] to Plans for review and makes site visits as
appropriate to ensure that the Action Plan implemented to reduce OBRA '90 payment errors is
producing the desired results. FEP evaluates ways to improve the detection and identification of
potentialOBRA '90 claim payment errors. In order to continue to reduce the number of
confirmed OBRA 90 payment differences in future audits, BCBSA will or has implemented ...
process improvements ...

While these measures are not absolute, they provide reasonable assurances that payment errors
will be identified timely and promote the recoveries of confirmed overpayments. Plan staff
continues to periodically examine existing procedures and add additional controls where
necessary.

To the extent that there were potential errors, the payments were good faith erroneous benefit
payments and fall within the context of CS 1039, Section 2.3 (g). The Plans will continue to




                                                10 

pursue the remaining amounts as required by CS 1039 ... Any benefit payments the Plans are
unable to recover and where due diligence was demonstrated are allowable charges to the
Program. In addition, as good faith erroneous payments, lost investment income does not apply
to the payments identified in the finding."

DIG Comments:

After reviewing the Association's response and additional documentation provided by the BCBS
plans, we revised the questioned charges from our draft report to $4,237,986. Based on the
Association's response and the BCBS plans' additional documentation, we determined that the
Association and/or plans agree with $4,094,956 and disagree with $143,030 of the questioned
charges.

Based on the Association's response and/or the BCBS plans' documentation, the contested
amount of$143,030 represents the following items from the possible OBRA 90 sample:

• 	 $77,433 ofthe contested amount represents four claims that by-passed the FEP claims system
    OBRA 90 pricing software due to BCBS of Alabama improperly using process code "IE"
    (timely filing). As a result, these claims were locally priced by BCBS of Alabama. The
    questioned overpayments represent the differences between our OBRA 90 pricing
    calculations and the plan's local pricing amounts.

• 	 $65,597 of the contested amount represents four claims that were priced by the FEP
    Operations Center using the incorrect Medicare provider numbers. The Association and/or
    BCBS plans (Arizona, New Mexico, Oklahoma, and Texas plans) did not provide
    documentation to support the OBRA 90 pricing with the correct Medicare provider numbers.

Recommendation 1

We recommend that the contracting officer disallow $4,515,977 ($1,971,683 from OBRA 90
sample + $2,544,294 from possible OBRA 90 sample) for claim overcharges and verify that the
BCBS plans return all amounts recovered to the FEHBP.

Recommendation 2

We recommend that the contracting officer allow the BCBS plans to charge the FEHBP
$514,471 ($184,148 from OBRA 90 sample + $330,323 from possible OBRA 90 sample) if
additional payments are made to the providers to correct the underpayments.

Recommendation 3

For the claims requiring retroactive overpayment adjustments due to eMS OBRA 90 pricing
updates, we recommend that the contracting officer require the BCBS plans to initiate recoveries
of$738,112 ($493,272 from OBRA 90 sample + $244,840 from possible OBRA 90 sample) for
these overpayments and verify that the BCBS plans return all amounts recovered to the FEHBP.




                                               11 

Recommendation 4

For the claims requiring retroactive underpayment adjustments due to CMS OBRA 90 pricing
updates, we recommend that the contracting officer allow the BCBS plans to charge the FEHBP
$501,632 ($312,055 from OBRA 90 sample + $189,577 from possible OBRA 90 sample) if
additional payments are made to the providers to correct these underpayments.

Recommendation 5

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 BeBS plans are
following the corrective action plan. Also, we recommend that the contracting officer verify that
the additional process improvements included in the Association's response are implemented.




                                               12 

              IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

             Auditor-In-Charge

                  Auditor


                    Chief

Information Systems Audits Group

               Chief

              Senior Information Technology Specialist

                 IntorIJnatlOn Systems Auditor




                                             13 

                                                                                               SCHEDULE A
                                                                                                  Page 1 of3
                                               v. SCHEDULES
                         GLOBAL OMNIBUS BUDGET RECONCILIATION ACT OF 1990 CLAIMS
                                    BLUECROSS AND BLUESHIELD PLANS

                                SUMMARY OF CLAIM SAMPLE SELECTIONS BY PLAN

                                                          OBRA 90 Sample         Possible OBRA 90 Sample
Plan Site                                             Number of Claim Payment    Number of Claim Payment
Number                   Plan Name            State    Claims       Amounts       Claims        Amounts
  003       BCBS of New Mexico                 NM         9      $     333,484      40       $      862,937
  005       WellPoint BCBS - Georgia           GA        35      $   1,313,470      47       $      988,692
  007       BCBS of Louisiana                  LA        14      $     498,854       6       $       95,824
  009       BCBS of Alabama                    AL        38      $     955,342      10       $      416,637
  010       BC ofIdaho Health Service          ID         5      $     101,787       0       $           -
  011       BCBS of Massachusetts              MA        34      $   1,109,223      15       $      360,234
  012       BCBS of Western New York           NY         1      $       9,805       3       $       37,106
  013       Highmark BCBS                      PA         7      $     432,749      12       $      291,764
  015       BCBS of Tennessee                  TN        21      $     633,656       7       $      216,699
  016       BCBS of Wyoming                    WY         1      $      68,592      15       $      184,328
  017       BCBS of Illinois                   IL        41      $   2,049,819     108       $    1,311,233
  021       WellPoint BCBS - Ohio              OH        80      $   3,868,697      30       $      842,818
  024       BCBS of South Carolina             SC        19      $     631,008      18       $      420,188
  027       WellPoint BCBS - New Hampshire     NH         2      $      37,260       5       $      158,617
  028       BCBS of Vermont                    VT         1      $      26,206       2       $       19,334
  029       BCBS of Texas                      TX       115      $   4,578,417     250       $    4,508,882
  030       WellPoint BCBS - Colorado          CO        18      $     497,581      26       $      381,383
  031       Wellmark BCBS of Iowa              IA         5      $     118,924      48       $      612,554
  032       BCBS of Michigan                   MI        17      $     665,079       4       $      113,184
  033       BCBS of North Carolina             NC        30      $   2,503,777      29       $      761,768
                                                                                                  SCHEDULE A
                                                                                                     Page 2 of3
                                                 V. SCHEDULES

                         GLOBAL OMNIBUS BUDGET RECONCILIATION ACT OF 1990 CLAIMS
                                    BLUECROSS AND BLUESHIELD PLANS

                                 SUMMARY OF CLAIM SAMPLE SELECTIONS BY PLAN

                                                             OBRA 90 Sample         Possible OBRA 90 Sample
Plan Site                                                Number of Claim Payment    Number of Claim Payment
Number                     Plan Name             State    Claims       Amounts       Claims       Amounts
  034       BCBS of North Dakota                  ND         3      $      28,538        1      $       16,407
  036       Capital Blue Cross                    PA        19      $     890,656        3      $       66,091
  037       BCBS of Montana                       MT         4      $      97,383        1      $       15,539
  039       WellPoint BCBS - Indiana              IN        14      $     633,165        7      $      265,465
  040       BCBS of Mississippi                   MS        13      $     554,179      21       $      534,916
  041       BCBS of Florida                       FL        76      $   3,289,826      163      $    3,756,169
  042       BCBS of Kansas City                  MO          7      $     147,715       17      $      328,804
  044       Arkansas BCBS                         AR         3      $      70,251       11      $      292,952
  045       Well Point BCBS - Kentucky            KY        17      $     646,867      51       $      676,296
  047       WellPoint BCBS United of Wisconsin    WI         3      $     218,063      26       $      454,287
  048       Empire BCBS (WellPoint)              NY         47      $   2,451,004      56       $    2,956,251
  049       Horizon BCBS of New Jersey            NJ         6      $     197,111       0       $           -
  050       WellPoint BCBS - Connecticut          CT         5      $     228,081       8       $      116,900
  052       WellPoint BC - California             CA       155      $   7,202,738      61       $    1,615,352
  053       BCBS of Nebraska                      NE         6      $     333,320      36       $      462,037
  054       Mountain State BCBS                  WV          5      $     264,307       4       $       42,372
  055       Independence BC                       PA        32      $     964,581       6       $      110,905
  056       BCBS of Arizona                       AZ        23      $     848,010      71       $    1,313,009
  058       Regence BCBS of Oregon                OR        15      $     467,724      22       $      300,857
  059       WellPoint BCBS - Maine               ME         4       $      70,442       8       $      169,796
                                                                                                     SCHEDULE A
                                                                                                        Page 3 of3
                                                  V. SCHEDULES

                          GLOBAL OMNIBUS BUDGET RECONCILIATION ACT OF 1990 CLAIMS
                                     BLUECROSS AND BLUESHIELD PLANS

                                  SUMMARY OF CLAIM SAMPLE SELECTIONS BY PLAN

                                                               OBRA 90 Sample         Possible OBRA 90 Sample
Plan Site                                                 Number of Claim Payment     Number of Claim Payment
Number                     Plan Name              State    Claims        Amounts       Claims       Amounts
  060       BCBS of Rhode Island                   RI          6      $     435,890        0      $           -
  061       WellPoint BCBS - Nevada                NV          9      $     471,373        4      $       57,410
  062       WellPoint BCBS - Virginia              VA         39      $   1,389,242        6      $      106,350
  064       Excellus BCBS of the Rochester Area   NY           2      $      18,273        0      $           -
  066       Regence BCBS of Utah                   UT         16      $     381,218        5      $      158,218
  070       BCBS of Alaska                         AK         4       $     261,657        1      $      124,045
  075       Premera BC (Washington)               WA          32      $   1,076,419        7      $       83,936
  076       WellPoint BCBS - Missouri             MO          19      $     559,518       25      $      660,359
  078       BCBS of Minnesota                     MN          10      $     344,553        8      $      265,377
  079       Excellus BCBS of Central New York      NY          2      $      19,446        0      $           -
  082       BCBS of Kansas                         KS          8      $     193,916       20      $      280,310
  083       BCBS of Oklahoma                      OK         20       $     586,790       17      $      440,559
  084       Excellus BeBS of Utica-Watertown      NY           1      $       5,941        0      $           -
  085       CareFirst BCBS (DC Service Area)       DC        26      $    1,305,093      133      $    2,294,489
  088       BC of Northeastern Pennsylvania        PA         3       $      67,476        6      $      109,400
  089       BCBS of Delaware                       DE         3      $       85,030       10      $      218,689
                              Total                         1,150     $ 47,239,527      1,490     $ 30,877,728
                                                                                                                                                                                                                                             SCHEDULEB
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                                                                                     GLOBAL OMNIBUS BUDGET RECONCIUATlON ACT OF 1990 CLAIMS
                                                                                                BLUECROSS AND BLUESHIELD PLANS

                                                                                                         QUESTIONED CHARGES BY PI,AN

                                                              c~~~~~     OBRA 90 S.m~le          Possible OBRA 90 Samole         TotalOuestioned              -------­
                                                                                                                                                                             ~~~mount.   Questioned by Year                       Plans' Responses
Plan Site                                                                        Questioned                    Questioned                    Total
Number                   Plan Name              State                  Claim.     Chan,es         Claims        Char2e5        Claim.       Ch.r2e5             2006              l007           lOO!!            2009        ARrees              Disaj!rees
  003     BCBS of New Mexico                    NM                      2       $      7,615        8        $      154,986      10      $    162,601     $      44,962       $     15,580   $     15,066     $     86,993   $ 159,856        $         2,745
  005     WellPoint BCBS • Georgia               GA                     4       $     17,598        14       $      165,303      18      $    182,901     $       13,857      $     22,426   $     80,774     $     65,844  $  182,901        $
  007     BCBS of Louisiana                      LA                      I      $     30,031        0        $          -         I      $     30,031     $          ·        $     30,031   $                $             $   30,031        $
  009     BCBS of Alabama                        AL                      I      $     12,511        4        $       77,433      5       $     89,944     $       72,019      $          -   $      5,414     $     12,511 $    12,511        $       77,433
  010     BC of Idaho Health Service            ID
                                                                         °3     $         -         0        $                   0       $                $          ·        $          -   $                $             $      ·          $
  011     BCBS of Massachusetts                 MA                              $      (6,805)      12       $       65,877      15      $     59,073     $      (l5,752) $        31,734    $     44,278     $     (1,186) $   59,073        $
  012     BCBS of Western New York              NY                       0      $         -         0        $                   0       $         -      $                   $       ·      $       ·        $              $        ·       $
  013     Highmark BCBS                         PA                       2      $       (116)        1       $       (3,572)     3       $      (3,6S8)   $                   $       ·      $       651      $     (4,339) $     (3,688) $
  015     BCBS oftennessee                      TN                      3       $    151,781        2        $       41,024      5       $    192,805     $                   $       ·      $    41,024      $    151,781 $     192,805 $               ·
  016     BCBS of Wyoming                       WY                      0       $        ·          0        $          ·        0       $         ·      $              ·    $              $                $        ·    $             $
  017     BCBS of Illinois                      IL                       2      $     66,137        8        $       81,571      10      $    147,708     $              ·    $     2,226 $      107,151      $     38,331 $     147,708 $
  021     WellPoint BCBS • Ohio                 OH                      24      $    237,307        8        $      167,879     32       $    405,186     $       21,185      $   (17,344) $     223,102      $    178,243 $     405,186 $
  024     BCBS of South Carolina                SC                       3      $     (2,167)       7        $      127,030      10      $    124,863     $              ·    $    37,605 $       21,326      $     65,932 $     124,863 $
  027     WellPoint BCBS • New Hampshire        NH                       0      $         ·          I       $       24,030       I      $     24,030     $              ·    $            $         ·        $     24,030 $      24,030 $               -
  028     BCBS of Vermont                        VT                      0      $                   0        $                   0       $         ·      $                   $       · $                     $
                                                                                                                                                                                                              $
                                                                                                                                                                                                                        · $           ·       $          ·
  029     BCBS of Texas                         TX                      22      $    648,540       34        $      170,760     56       $    819,300     $                   $   266,917 $      370,928           181,455 $      801,683     $       17,617
  030     WellPoint BCBS . Colorado             CO                      3       $     92,612         I       $       13,327      4       $    105,939     $              ·    $    93,994 $       11,945      $        · $        105,939     $          ·
  031     Wellmark BCBS of Iowa                 IA                      0       $         ·         2        $       16,315      2       $      16,315    $       16,315      $       -    $                  $        · $         16,315     $
  032     BCBS of Michigan                      MI                       8      $     64,630        0        $          ·         8      $     64,630     $              ·    $     9,071 $        55,559     $        ·    $      64,630     $
  033     BCBS of North Carolina                NC                      20      $     36,830        8        $       37,099      28      $     73,929     $       32,288      $   (l3,647) $        5,193     $     50,095 $       73,929     $
  034     BCBS of North Dakota                  ND                       0      $         ·          1       $       16,407       I      $      16,407    $              ·    $    16,407 $          ·        $        ·    $      16,407     $
  036     Capital Blue Cross                    PA                       4      $     35,923        0        $          ·        4       $     35,913     $                   $            $       28,222     $      7,701 $       35,923     $
  037     BCBS of Montana                       MT                       I      $       (566)       0        $          ·         I      $        (566)   $              -    $      (566) $         ·        $             $        (566)    $          ·
  039     WellPoint BCBS -Indiana                IN                     2       $     (5,161)
                                                                                                    °        $          -        2       $      (5,161)   $              ·    $          - $                  $     (5,161) $      (5,161)    $          ·
  040     BCBS of Mississippi                   MS                      3       $     10,986        6        $      114,303      9       $    125,289     $
                                                                                                                                                          $
                                                                                                                                                                         ·    $   117,441 $        7,848      $             $     125,289     $          ·
  041     BCBS of Florida                       FL                      16      $    215,525       43        $      132,810     59       $    348,335             26,108      $   (43,341) $     282,711      $     82,857 $      348,335     $
  042     BeBS of Kansas City                   MO                      2       $      3,969        0        $          ·        2       $       3,969    $              ·    $       ·    $       5,351   $        (1,3&2) $       3,969     $
  044     Arkansas BeBS                         AR                       I      $      2,078         I       $      104,215      2       $    106,293     $              ·    $       · $        104,215   $         2,078 $      106,293     $
  045     WellPoint BCBS • Kentucky             KY                      0       $         -         II       $       82,067      II      $     82,067     $       34,826      $    (9,931) $      10,403   $        46,769 $       82,067     $
  047
  048
          Well Point BCBS United of Wisconsin
          Empire BCBS (WeIlPoint)
                                                WI
                                                NY
                                                                        0
                                                                        12
                                                                                $
                                                                                $
                                                                                          -
                                                                                     (156,623)
                                                                                                    II
                                                                                                    2
                                                                                                             $
                                                                                                             $
                                                                                                                    166,118
                                                                                                                     18,000
                                                                                                                                 II
                                                                                                                                 14
                                                                                                                                         $
                                                                                                                                         $
                                                                                                                                              166,118
                                                                                                                                             (138,623)
                                                                                                                                                          $
                                                                                                                                                          $
                                                                                                                                                                         ·
                                                                                                                                                                         -
                                                                                                                                                                              $
                                                                                                                                                                              $
                                                                                                                                                                                   50,409 $
                                                                                                                                                                                   (8,747) $
                                                                                                                                                                                                  69,171
                                                                                                                                                                                                 (13,332)
                                                                                                                                                                                                           $
                                                                                                                                                                                                           $
                                                                                                                                                                                                                    46,538 $
                                                                                                                                                                                                                  (116,544) $
                                                                                                                                                                                                                                  166,118
                                                                                                                                                                                                                                 (138,623)
                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                         ·
                                                                                                                                                                                                                                                         ·
  049     Horizon BeBS of New Jersey            NJ                       I      $      (2,196)      0        $          ·         I      $      (2,196)   $                   $          -   $        · $           (2,196) $      (2,196)    $          ·
  050     WellPoint BCBS Connecticut            CT                       2      $      26,184       0        $                    2      $     26,184     $                   $          ·   $     12,323 $         13,861 $       26,184     $          ·
  052     WellPoint BC • California             CA                      31      $     (34,812)     to        $      214,545     41       $    179,733     $       43,997      $   110,955    $      5,640 $         19,140 $      179,733     $
  053     BeBS of Nebraska                      NE                       I      $      19,072       0        $          ·         I      $      19,072    $              ·    $          ·   $     19,072 $            ·    $      19,072     $
  054     Mountain State BCBS                   WV                       2      $       2,256       0        $          ·        2       $       2,256    $              ·$          1,081   $      1,174 $                 $       2,256     $
  055     Independence BC                        PA                      0      $         ·
                                                                                                    °7       $                   0       $         -      $
                                                                                                                                                                         ·$              ·   $       ·     $                 $        ·       $
  056     BeBS of Arizona                        AZ                      0      $         -                  $       71,706      7       $     71,706     $          · $            7,458    $     60,178 $          4,070  $     42,373      $       29,333
  058     Regence BCBS of Oregon                OR                       8      $     92,247        3        $      (66,848)     II      $     25,398     $      (82,525) $         2,785    $     60,235 $         44,904  $     25,398      $
  059     WeliPoint BCBS - Maine                ME                      0       $         ·         I        $        3,019       I      $       3,019    $               $                  $      3,019 $            ·    $      3,019      $          ·
  ()6()   BCBS of Rhode IsWtd                   RI                       I      $        911        0        $          ·         I      $         911    $               $              ·   $        911 $            ·    $        911      $          ·
  061     WeIlPoint BCBS • Nevada               NV                       1      $      1,083        0        $                    1      $       1,083    $              ·    $     1,083    $             $           ·    $      1,083      $
  062     WellPoint BCBS • Virginia             VA                       5      $     20,700        I        $       16,247      6       $     36,947     $              -    $          ·   $     37,878 $           (932) $     36,947      $
  064     Excellus BCBS of the Rochester Area   NY                       0      $         ·         0        $          -        0       $         ·      $              -    $          ·   $             $                $         ·       $
  066     Regence BCBS ofUtah                   UT                       2      $     (2,079)       2        $       12,076      4       $       9,997    $              ·    $    16,195    $     (4.119) $        (2,079) $      9,997      $          ·
  070     BCBS of Alaska                        AK                       2      $    186,836        0        $          ·         2      $    186,836     $              ·    $              $    186,836 $            ·     $   186,836      $
  075     Premera BC (Washington)               WA                       2      $     82,141        0        $          ·         2      $     82,141     $              ·    $              $     82,141 $            -     $    82,141      $
  076     WellPoint BCBS . Missouri             MO    ~   ~
                                                                         2      $     20898        to        $      179237       12      $    200~135     $                   $              $                $    200 135   $   200 135      $          ·
                                                                                                                                                                                                                                SCHEDULEB
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                                                                     GLOBAL OMNIBUS BUDGET RECONCILIATION ACT OF 1990 CLAIMS
                                                                                BLUECROSS AND BLUESHIELD PLANS

                                                                                          QUESTIONED CHARGES BY PLAN

                                                          ORRA 90 Sample           Possible OBRA 90 Sample        Total Questioned                                Amounts Questioned by Year                           Plans' Responses
Plan Site                                                         Questioned                     Questioned                    Total
Number                    Plan Name            State    Claims     Cha~        ---­
                                                                                    Claims        Charges       Claims       Charges           2006       ----­
                                                                                                                                                                      2007           2008            2009            Agrees          Disagrees
  078       BeBS of Minnesota                  MN         0     S        ·           0        31                  0       S                $          ·           S          ·   $
                                                                                                                                                                                            ··   $          ·    $        .      $          ·
  079       Excello. BCBS of Central New Yon   NY         0     S        ·           0        $                   0       S                $          ·           $          ·   $               S          ·    $               $          ·
  082       BeBS of Kansas                     KS         0     $                    4        S        6,186      4        $      6,186    $   (10,129) S               9,876    $     6,439     S          ·    $      6,186    S
  083       BeBS of Oklahoma                   OK         2     S     29,077         1        S       15,903       3       S     44,980    S            S                    ·   $    44,980     $               S     29,077    $       15,903
                                                                                                                                                                                                            ·            .
  084       Excellu. BeBS ofUtica.Watertown    NY         0     S        ·           0        $                   0       $                $          ·           $          ·   S          ·    $               S               $          ·
  085       Carefirst BCBS (DC Service Area)   DC         9     $     10,990         2        $       (9,260)     11      $        1,730   S          ·           $          ·   S               $      1,730    S     1,730     $          ·
  088       BC of Northeastern Pennsylvania    PA         I     S      3,527         1        $        6,617      2       S      10,144    $                      S              $               S     10,145    S    10,145     S
  089       BCBS "LDelaware                     DE._~     1     S     49,280   ~5             $       46825       6        $     96105     S          ·           $    49,280    $    46825      $               $    96,105     $
                            Total                        21Z    $   1968 752        232       $    2,269,234     444      $ 4,237986       $   197,151            $   798979     $ 2,040,533     $   1,201,323   $ 4,094956      $      143 030
                                                                    ..,                 APPENDIX

                                                                     BlueCross BlueSbJeld
                                                                     Association
                                                                     An Aaaociation of Independent
                                                                     Blue Cross and Blue Shield Plans




                                                                     Federal Employee Program
April 5, 2010                                                        1510 G Street, N.W.
                                                                     Washington, D.C. 20005
                                                                     202.942.1000
 roup                                                                Fax 202.942.1125
Experience-Rated Audits Group
Office of the Inspector General
U.S. Office of Personnel Management
1900 E Street, N.W., Room 6400
Washington, D.C. 20415


Reference: 	       OPM DRAFT AUDIT REPORT
                   Global OBRA '90 & Possible OBRA '90
                   Audit Report 1A-99-00-09-046

Dear

This is in response to the above referenced U.S. Office of Personnel
Management (OPM) Draft Audit Report concerning the Global OBRA '90
and Possible OBRA '90 Claim Payments Audit of the FEP Blue Cross Blue
Shield Plans. Our comments concerning the findings in the report are as
follows:

Global OBRA '90 & Possible OBRA '90 	                        $4,476.488

OBRA '90 Claims Sample

OPM determined that 219 of the claims sample were paid incorrectly that resulted
in a net overcharges of $2,093,552 to the FEHBP. Specifically, 131 claims were
overpaid by $2,593,516 and 88 claims were underpaid by $499,964.

We do not contest that $1,968,752 in OBRA '90 claim payments may have been
overpaid. These overpayments represent approximately .006 percent of total
medical claims subject to OBRA '90 processing paid during the audit scope (from
January 1, 2007 through May 31, 2009). For this time frame, the Federal
Employee Program paid $342,311,386 in medical claims that were subject to
OBRA '90 pricing guidelines. As of March 31, 2010, the Plans have recovered
$1,453,240, as noted in Attachment A which also identifies total confinned
OBRA '90 claims and the amount recovered by each Plan location.
Page 2 



Further analysis of the Plan responses identified the following: 


• 	 15 claims resulting in a net overcharge of $744,160 were overpaid because
    these transactions were not priced according to OBRA guidelines.

• 	 26 claims resulting in a net overcharge of $449,948 due to the usage of an
    incorrect Medicare provider number or incorrect DRG.

• 	 Seven claims resulting in a net overcharge of $228,278 because of the
    incorrect local pricing allowance. (These claims were not subject to OBRA '90
    pricing, but were included in our universe of OBRA '90 claims.)

• 	 14 claims resulting in a net overcharge of $203,709 because the claim was not
    coordinated with Medicare Part B.

• 	 Two claims resulting in a net overcharge of $140,054 because the Medicare
    present on admission (POA) indicator was not used in pricing the claim.

• 	 Six claims resulting in a net overcharge of $22,087 because of processors'
    error, incorrect billed amount used in pricing the claim and other miscellaneous
    reasons.

• 	 144 claims resulting in a net overcharge of $179,517 because when the claims
    were initially priced by the FEP Claims System OBRA '90 software, a different
    price was obtained then when the plans resubmitted the claims for re-pricing
    during the audit process through the Association's Mainframe.

We contest seven claims totaling $124,801 in OBRA '90 payments for the following
reasons:

• 	 Pricing differences between the FEP Claim System OBRA '90 mainframe
    pricing software (supplied by CMS) and the CMS PC Pricer.

• 	 Recovery of the overpayments was initiated or the claims were voided prior to
    July 10, 2009, the start date of the audit.

• 	 Subscribers' liabilities were included in the overpayment amounts.
••       ••
Page 3


Sample of Claims Meeting OeRA '90 Criteria but Not OeRA '90 Priced
(Possible OeRA 90 Claims)

Based on OPM's review, 247 claims were overpaid by $2,382,936. Specifically,
the BCBS plans overpaid 172 claims by $2,992,713 and underpaid 75 claims by
$617,683.

We agree that $2,126,203 claims were paid in error and disagree with $256,734.
As of March 30, 2010, the Plans have recovered $1,812,225, as noted in
Attachment A which also identifies total confirmed Possible OBRA '90 claims and
the amount recovered by each Plan location.

These claim payment overpayments resulted from the following:

• 	 83 claims were priced using the incorrect Medicare provider numbers, resulting
    in net overcharges of $986,445 to the FEHBP.

• 	 40 claims were paid incorrectly because there was a pricing difference between
    the Associations' Mainframe Pricer and the PC pricer the OPM auditors used to
    reprice the claims, resulting in a net overcharge of $55,263.

• 	 35 claims (not subject to OBRA '90 pricing) were priced using the incorrect
    local pricing methods or rates, resulting in net overcharges of $309,193 to the
    FEHBP.

• 	 Seven claims totaling $118,929 were not priced under OBRA '90 because the
    patient's information fields in the FEP Direct System were not current at the
    time of service.

• 	 10 claims were not properly coordinated with Medicare, resulting in net
    overcharges of $80,381 to the FEHBP.

• 	 Seven claims were processed as Plan Approved or timely filing claims, causing
    the claims to by-pass the FEP Claims System OBRA '90 Pricer resulting in a
    net overcharge of $133,269.

• 	 10 claims were incorrectly priced because of miscellaneous processor's errors,
    resulting in net overcharges of $126,725 to the FEHBP.
Page 4


• 	 34 claims received an X-52 error code and could not be OBRA '90 priced by
    the FEP Claims System OBRA '90 software. When the claims were
    resubmitted for the audit the FEP Claims System OBRA '90 pricer was able to
    obtain a price due to updates to the claims OBRA '90 Pricer since the original
    submission. In the majority of these instances, the claims had been submitted
    once based upon an internal BCBSA audit and could not be priced; however,
    with the third attempt as a result of the OIG audit, the claims were priced by the
    FEP Claims System OBRA '90 software. The subsequent re-pricing of these
    claims resulted in a net "overcharge savings" to the Program of $315,997.

We contest 21 claims totaling $256,734 in Possible OBRA '90 payments for the
following reasons:

• 	 Pricing differences between the FEP Claim System pricing and OPM's PC
    Pricer, where the repriced amount between the OBRA '90 Pricer.

• 	 Provider refunded the money voluntarily because they felt it was an
    overpayment before the OPM global audit started.

• 	 Claims were identified in a previous OPM audit and priced according to that
    audit response.

Recommendation 1-4

The Plans have been instructed to initiate recovery on all "overpayments/savings"
where possible. To date, a total of $3,265,467 has been recovered and returned to
the Program.

For the underpayments, the Plans have been instructed to adjust the claims to pay
an additional $1,016,102, as feasible.

Recommendation 5

In order to promote the accuracy of FEP OBRA '90 claims and ensure that Plans
are complying with the OBRA '90 action Plan, BCBSA periodically contacts the
Plans, sends Possible OBRA '90 claims listing to Plans for review and makes site
visits as appropriate to ensure that the Action Plan implemented to reduce
OBRA '90 payment errors is producing the desired results. FEP evaluates ways to
improve the detection and identification of potential OBRA '90 claim payment
errors. In order to continue to reduce the number of confirmed OBRA '90 payment
differences in future audits, BCBSA will or has implemented the following process
improvements:
PageS


a. 	 Automation of OBRA '90 Processing Target Date: Completed 2009
     In 2009, there were two changes made to the OBRA '90 claims adjudication
     process. First, the system was modified to allow batch processing of OBRA '90
     claims. Prior to 2009, all OBRA '90 claims had to be manually entered into the
     FEP Claims System. Now, most OBRA '90 claims are processed via the batch
     mode and require less human intervention. This change will improve the
     accuracy of the data submitted for OBRA '90 pricing. The second change in
     OBRA '90 claims processing is that OBRA '90 claims can be processed in Real
     Time. Real Time processing promotes timeliness of payment and the return of
     the claim to the provider for additional information if the claim could not be
     OBRA '90 priced.

b. 	 System Pricing Time Frame -Implementation Date Second Quarter 2010
     During 2010, the FEP Claims System will be modified to expand the timeframe
     that claims are processed through the OBRA '90 Pricer from three years after
     the incurred date to all years that the data is retained which is in line with the
     OPM allowed processing period for original claim payments. Currently, OBRA
     '90 pricing history is only maintained for three years and all claims with incurred
     dates passed the three year timeframe require manual OBRA '90 pricing.

c. 	 Additional FEPSystem Edit Enhancement - Target Date: Third Quarter
     2010: Implement an edit that would prevent claims from by-passing the OBRA
     '90 Pricer regardless of the Process Code used to adjudicate the claims.

d. 	 Additional FEPSystem OBRA '90 Requirement: Target Date: Fourth
     Quarter 2010: If a claim goes through the OBRA '90 Pricer and the FEP
     Claims System OBRA '90 Pricer software cannot generate a Medicare pricing
     allowance (X - 52 edit reply to the Plan), due to incorrect or incomplete
     information, these claims will not be priced according to the local Plan's
     allowance but returned to the provider with a request for the correct information.
     The message code will be the same code that the Provider would get if the
     claim were submitted to a Medicare Part A Intermediary for pricing.

e. 	 Training - Conduct Plan training on the correct process for submitting these
     claims for FEP Claims System OBRA '90 pricing at the Micro Regional
     Meetings (training sessions conducted by the FEP Operations Center with
     small groups of Plans in three different locations through the country), the FEP
     Annual Operations Meeting and at the FEP System Meeting.

While these measures are not absolute, they provide reasonable assurances that
payment errors will be identified timely and promote the recoveries of confirmed
overpayments. Plan staff continues to periodically examine existing procedures
and add additional controls where necessary.
April 5, 2010
Page 6


To the extent that there were potential errors, the payments were good faith
erroneous benefit payments and fall within the context of CS 1039, Section 2.3 (g).
The Plans will continue to pursue the remaining amounts as required by CS 1039,
Section 2.3 (g)(I). Any benefit payments the Plans are unable to recover and
where due diligence was demonstrated are allowable charges to the Program. In
addition, as good faith erroneous payments, lost investment income does not apply
to the payments identified in the finding.

We appreciate the opportunity to provide our response to the finding 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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