oversight

Audit of WellPoint Inc. in Mason, Ohio

Published by the Office of Personnel Management, Office of Inspector General on 2011-03-17.

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

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




Final Audit Report

Subject:



                              AUDIT OF WELLPOINT, INC.

                                    MASON,OHIO



                                            Report No. lA-99-00-10-013



                                            Date:        March       17.      2011




                                                          --CAUTION-­
This audit report has been distributed to Federal officials who are responsible for the administration ofthe audited program. This audit
report may contain proprietary data which is protected b)' Federal Jaw (18 V.S.c. 1905). Therefore, while this audit report is available
under the Freedom oflnformation Act and made available to the public on the DIG web page, caution needs to be exercised before
releasing the report to the general public as it may contain propriet): 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



                                                 WellPoint, Inc,

                        Plan Codes 041, 050/550, 060/560, 100, 130/630, 160/660, 180/680,

                      2411741,2651765,2701770,303/803/808,332/339,423/923, and 4501950

                                                  Mason, Ohio





                         REPORT NO, IA-99-00-10-013            DATE: 3/17/2011





                                                                -7//:
                                                                    C
                                                               /t'-J/~~~
                                                                                "/
                                                                Michael R. Esser
                                                                Assistant Inspector General
                                                                  for Audits



        www.opm.goY                                                                           www.usajobs.goY
                          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, Inc,

                      Plan Codes 041, 050/550, 060/560,100,130/630,160/660,180/680,

                    241/741,265/765,270/770,303/803/808,332/339,423/923, and 450/950

                                                Mason, Ohio





                       REPORT NO, IA-99-00-10-013           DATE:    3/17/2011


      This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations at
      WellPoint, Inc, (Plan), which specifically included 14 BlueCross and/or BlueShield plans in
      California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New
      Hampshire, New York, Ohio, Virginia, and Wisconsin, questions $2,644,595 in health benefit
      charges, The BlueCross BlueShield Association (Association) andlor Plan agreed (A) with
      $1,539,400 and disagreed (D) with $1,105,195 of the questioned charges,

      Our limited scope audit was conducted in accordance with Government Auditing Standards, The
      audit covered claim payments from January I, 2008 through December 31, 2009 as reported in
      the Annual Accounting Statements, In addition, we expanded our audit scope to include
      inpatient facility claims with duplicate or overlapping dates of service from 2006 through
      September 30,2009,

      Questioned health benefit charges are summarized as follows:




        www.opm.gov                                                                      www.usajobs.gov
•   Inpatient Facility Claims - Duplicate or Overlapping Dates of Service               $1,761,013

    During our review of inpatient facility claims with duplicate or overlapping dates of service,
    we determined that the Plan incorrectly paid 181 claims, resulting in overcharges of
    $1,761,013 to the FEHBP. The Association agreed with $786,251 (A) and disagreed with
    $974,762 (D) of the questioned charges.

•   System Review                                                                         $484,037

    Based on our review of a judgmental sample of 1,195 claims, we determined that the Plan
    incorrectly paid 30 claims, resulting in net overcharges of$484,037 to the FEHBP.
    Specifically, the Plan overpaid 27 claims by $485,771 and underpaid 3 claims by $1,734. The
    Association agreed with $353,604 (A) and disagreed with $130,433 (D) of the questioned
    charges.

•   Continuous Stay Claims (A)                                                            $318,279

    During our review of continuous stay claims, we determined that the Plan incorrectly paid 18
    claims, resulting in net overcharges of$318,279 to the FEHBP. Specifically, the Plan
    overpaid 10 claims by $329,029 and underpaid 8 claims by $10,750.

•   Omnibus Budget Reconciliation Act of 1993 Review         (A)                           $51,695

    The Plan incorrectly paid 154 claim lines that were priced under the Omnibus Budget
    Reconciliation Act of 1993 pricing guidelines, resulting in net overcharges of $51 ,695 to the
    FEHBP. Specifically, the Plan overpaid 132 claim lines by $56,421 and underpaid 22 claim
    lines by $4,726.

•   Non-Participating Providers    (A)                                                     $29,571

    During our review of claims submitted by non-participating providers, we determined that the
    Plan incorrectly paid four claims, resulting in net overcharges of$29,571 to the FEHBP.
    Specifically, the Plan overpaid three claims by $30,888 and underpaid one claim by $1,317.




                                                 11
                                       CONTENTS

                                                                                        PAGE

        EXECUTIVE SUMMARY	                                                                 i


 1.     INTRODUCTION AND BACKGROUND	                                                       I


II.     OBJECTIVES, SCOPE, AND METHODOLOGy	                                                3


III.	   AUDIT FINDINGS AND RECOMMENDATIONS                                                 5


            HEALTH BENEFIT CHARGES                                                         5


             I. Inpatient Facility Claims - Duplicate or Overlapping Dates of Service      5


            2. System Review	                                                              8


             3. Continuous Stay Claims	                                                   11


            4. Omnibus Budget Reconciliation Act of 1993 Review	                          13


             5. Non-Participating Providers	                                              15


IV.     MAJOR CONTRIBUTORS TO THIS REPORT	                                                18


 V.     SCHEDULE A - HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

        APPENDIX	 (BlueCross BlueShield Association response, dated December 15, 2010,
                  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 ofthe Federal Employees Health Benefits Program (FEHBP) operations at
WellPoint, Inc. (Plan), which specifically included 14 BlueCross and/or BlueShield plans in
California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New
Hampshire, New York, Ohio, Virginia, and Wisconsin. The Plan's headquarters are located in
Indianapolis, Indiana; however, most of the audit support functions are located in Mason, Ohio.
Also, the Plan's claims processing operations are located in Albany, New York; Cincinnati,
Ohio; Columbus, GA; Indianapolis, Indiana; Roanoke, Virginia; and Reno, Nevada.

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

BACKGROUND

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

The BlueCross BlueShield Association (Association), on behalf of participating BlueCross and
BlueShield (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. The Plan includes 14 of the 63 local BCBS plans
participating in the FEHBP.

The Association has established a Federal Employee Program (FEP') 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 ofthe 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


I Throughout this report, when we refer to "PEP" 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.




                                                          I

payments of FEHBP 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 Plan management. Also, management of the Plan is responsible for establishing
and maintaining a system of internal controls.

The following were the most recent audit reports issued for the WellPoint, Inc. plans:

•   Report No.   1A-IO-63-08-044, WellPoint Southeast, dated March 03, 2009
•   Report No.   1A-IO-OI-07-058, Empire BCBS, dated June 25, 2008
•   Report No.   IA-1 0-18-06-052, Anthem Midwest BCBS, dated February 20, 2008
•   Report No.   IA-10-05-07-045, WellPoint BCBS of Georgia, dated November 20,2007
•   Report No.   IA-10-05-06-008, WellPoint BCBS of Georgia, dated November 16,2007
•   Report No.   1A-10-30-05-069, WellPoint BCBS of Colorado, dated April 25, 2007
•   Report No.   IA-10-52-05-021, BC of California, dated February 22,2006
•   Report No.   IA-1 0-47-05-009, BCBS United of Wisconsin, dated June 5, 2006
•   Report No.   IA-10-61-04-009, Anthem BCBS of Nevada, dated August 2, 2004
•   Report No.   1A-IO-76-03-015, BCBS of Missouri, dated April 7, 2003

All findings from our previous audits of the WellPoint, Inc. plans, covering various contract
years from 1999 through 2007, were satisfactorily resolved, except for a few claim payment
findings that are in the process of being resolved.

The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan and/or Association officials throughout the audit and at an exit conference; and were
presented in detail in a draft report, dated October 15,2010. 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. Also, additional documentation provided by the
Association and Plan on various dates through February 4,2011 was considered in preparing our
final 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
govermnent auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.

We reviewed the BlueCross and BlueShield FEHBP Annual Accounting Statements as they pertain
to Plan codes 041 (California), 050/550 (Colorado), 060/560 (Connecticut), 100 (Georgia),
1301630 (Indiana), 160/660 (Kentucky), 180/680 (Maine), 332/339 (Ohio), 241/741 (Missouri),
265/765 (Nevada), 270/770 (New Hampshire), 303/803/808 (Empire BCBS), 423/923 (Virginia),
and 4501950 (Wisconsin) for contract years 2008 and 2009. In addition, we expanded our audit
scope to include inpatient facility claims with duplicate or overlapping dates of service from 2006
through September 30, 2009. During the period 2006 through 2009, the Plan paid approximately
$15.2 billion in health benefit charges (See Schedule A). Specifically, we reviewed approximately
$146 million in claim payments from January 1,2008 through December 31, 2009 for proper
adjudication, and from 2006 through September 30, 2009 for our review of inpatient facility claims
with duplicate or overlapping dates of service.

In planning and conducting our audit, we obtained an understanding of the Plan's internal control
structure to help determine the nature, timing, and extent of our auditing procedures. This was
determined to be the most effective approach to select areas of audit. For those areas selected,
we primarily relied on substantive tests of transactions and not tests of controls. Based on our
testing, we did not identify any significant matters involving the Plan's internal control structure
and its 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 (FAR) and Federal
Employees Health Benefits Acquisition Regulations (FEHBAR), 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




                                                 3

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

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 the Plan's office in Mason, Ohio from April 19,2010 through

April 30, 2010. While on-site, we also made site visits to the Plan's offices in Cincinnati, Ohio;

Indianapolis, Indiana; and Louisville, Kentucky. Audit fieldwork was also performed at our

offices in Cranberry Township, Pennsylvania and Jacksonville, Florida.


METHODOLOGY

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

To test the Plan's compliance with the FEHBP health benefit provisions, we selected and
reviewed samples 00,612 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.




2See the audit findings for "Inpatient Facility Claims ~ Duplicate or Overlapping Dates of Service" (AI), "System
Review" (A2), "Continuous Stay Claims" (A3), "Omnibus Budget Reconciliation Act of 1993 Review" (A4), and
"Non-Participating Providers" (A5) on pages 5 through 17 for specific details of our sample selection
methodologies.




                                                         4
          III. AUDIT FINDINGS AND RECOMMENDATIONS

HEALTH BENEFIT CHARGES

1.	 Inpatient Facility Claims - Duplicate or Overlapping Dates of Service           $1,761,013

   During our review of inpatient facility claims with duplicate or overlapping dates of
   service, we determined that the Plan incorrectly paid 181 claims, resulting in overcharges
   of$I,761,013 to the FEHBP.

   Contract CS 1039, Part III, section 3.2 (b)(l) 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 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,
   other group health benefits coverage's, and the payment of medical and hospital costs
   under no-fault or other automobile insurance that pays benefits without regard to fault.
   (b) The Carrier shall not pay benefits under this contract until it has determined whether it
   is the primary carrier ...."

   We performed a computer search for potential duplicate payments on inpatient facility
   claims paid during the period January 1,2006 through September 30, 2009. We
   identified 765 groups of claims with duplicate or overlapping dates of service. These 765
   groups included 1,582 claims with total amounts paid of$15,818,849. Based on our
   review, we determined that 181 of these claims were paid incorrectly, resulting in
   overcharges of $1,761,013 to the FEHBP.

   We determined that 178 of these claim payment errors were duplicates, resulting in
   overcharges of $1,721,510 to the FEHBP. These duplicate claim payments occurred due
   to the following reasons:

   •	 The Plan overpaid a provider when making a series of claim adjustments and/or
      additional payments to correct an initial claim that was not properly coordinated with
      Medicare. The last claim that was paid in this series resulted in an overcharge of
      $974,762 to the FEHBP.

   •	 The Plan paid 149 claims that were deferred as potential duplicates on the claims
      system but were overridden by the processors, resulting in overcharges of$718,610 to
      the FEHBP.




                                             5

•	   Providers submitted 10 claims with incorrect information causing the claims system
     not to defer these claims as potential duplicates, resulting in overcharges of $13,134
     to the FEHBP.

•	 The Plan's processors made data entry errors when adjudicating 13 claims causing the
   claims system not to defer these claims as potential duplicates, resulting in
   overcharges of$8,348 to the FEHBP.

•	 For reasons unknown, the claims system did not defer four duplicate claims, resulting
   in overcharges of$5,632 to the FEHBP.

•	 In one instance, Medicare submitted a cross-over claim with an incorrect provider
   identification number and then later submitted a corrected claim. The Plan paid both
   claims, resulting in an overcharge of$I,024 to the FEHBP.

During our review of potential duplicate payments on inpatient facility claims, we also
found three claims that were not duplicate claim payments but contained other Plan
payment errors, resulting in overcharges of$39,503 to the FEHBP. These claim payment
errors occurred due to the following reasons:

•	 In one instance, the Plan paid a claim using an incorrect pricing method, resulting in
   an overcharge of $31 ,396 to the FEHBP.

•	 In one instance, the Plan reprocessed a claim with revised charges and provider
   information but did not adjust or void the previous claim payment, resulting in an
   overcharge of$7,859 to the FEHBP.

•	 In one instance, the Plan processed a claim using an incorrect provider identification
   number, resulting in an overcharge of $248 to the FEHBP.

Association's Response:

In response to the amount questioned in the draft report, the Association agrees with
$797,488. The Association states that the Plan has recovered and returned $652,632 to the
FEHBP as of November 15,2010. 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.




                                          6

In addition, the Association states, "For the remaining overpayment of $974,762, the Plan
requests that OPM acknowledge the due diligence performed in trying to recover the
overpayment. The Plan identified the overpayment and sent ten recovery letters to the
provider in an attempt to recover the overpayment. Also, this activity was performed
before the OPM OIG audit began. This activity demonstrates the Plans' due diligence to
obtain overpayment from the provider. The Plans will continue with their recovery
efforts."

The Association also states, "Currently, FEP Express has an edit that is designed to defer
inpatient claims with overlapping dates of services. However, a review of this control
indicates that this edit only generates a deferral if the claims are from the same provider.
A request to enhance this editing process to defer inpatient claims when the dates of
services overlaps and the services were provided by different providers has been
submitted. Due to the large number of2011 benefit changes, this edit modification will
not be implemented until 20 II.

In addition, the FEP Director's Office has expanded its System-wide Claims Review
Process to include inpatient admissions with overlapping dates of services. This listing
was implemented into the review process as of the 2nd Quarter 20 I 0."

OIG Comments:

Based on our review of the Association's response and additional documentation
provided by the Plan, we revised the amount questioned from the draft report to
$1,761,013. Subsequent to receiving the Association's response, the Association and
Plan provided additional documentation supporting agreement with $786,251 and
disagreement with $974,762 of the revised questioned amount.

Regarding the contested amount, we are continuing to question this overpayment because
the Plan has not recovered and returned the funds to the FEHBP. The FEHBP should
not be expected to cover this material claim overpayment because ofprovider
refund issues. The following is our understanding of this claim overpayment.

•	 Claim Number 2006213382488 - The Plan paid the provider a stop-loss amount of
   $402,687 on September 26, 2006. Subsequently, the Plan found out that this claim
   should have been coordinated with Medicare and that the Plan should have only paid
   the coinsurance amount. The Plan recouped $402,687 and then paid the provider
   $1,028,237 on October 5, 2006. The Plan subsequently voided this claim payment
   and performed an automatic recoupment for $1,028,237 on March 21, 2007. The
   Plan recouped this amount without consent from the provider, and therefore, was in
   breach of contract and had to repay the provider for this claim.

•	 Claim Number 2007173GC3896 - The Plan paid the provider $35,700 on July 19,
   2007. This was the correct payment for the Medicare coinsurance amount.




                                          7
         •	 Claim Number 062133824880XA - The Plan paid the provider $974,762 on
            December 19, 2007. This was an unnecessary payment. However, we believe that
            the Plan paid this claim due to breach of contract for making the aforementioned
            recoupment without the provider's consent.

         •	 Starting on February 20,2008 and ending on April 4, 2009, the Plan sent 10 refund
            request letters to the provider to recover $1,028,237 for claim number
            2006213382488. To date, the Plan has not recovered these funds.

         •	 We are not sure why the Plan sent letters to recover $1,028,237 for claim number
            2006213382488 and not $974,762 for claim number 062133824880XA. As noted
            above, the Plan discontinued recovery efforts on April 4, 2009 and did not recover the
            funds from the provider. However, we do acknowledge the Association's comments
            that the Plan has resumed recovery efforts for this claim overpayment. According to
            the Association, the Plan included this claim overpayment in its new collection
            agency process.

         Recommendation 1

         We recommend that the contracting officer disallow $1,761,013 for claim overcharges
         and verifY that the Plan returns all amounts recovered to the FEHBP.

    2.	 System Review                                                                                      $484,037

         The Plan incorrectly paid 30 claims, resulting in net overcharges of $484,037 to the
         FEHBP. Specifically, the Plan overpaid 27 claims by $485,771 and underpaid 3 claims
         $1,734.

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

         For health benefit claims reimbursed during the period January 1,2008 through
         September 30, 2009, we identified 51,091,033 claim lines, totaling $6,117,841,218 in
         payments, using a standard criteria based on our audit experience. From this universe, we
         selected and reviewed a judgmental sample of 1,195 claims (representing 15,331 claim
         lines), totaling $62,775,626 in payments, to determine if the Plan adjudicated these claims
         properly.J


3 For each WeliPoint, Inc. FEP plan, we selected our sample from an DIG-generated "Place of Service Report" (SAS
application) that stratified the claims by place of service (POS), such as provider's office and payment category, such
as $50 to $99.99. Wejudgmentally determined the number of sample items to select from each POS stratum based
on the stralum's total claim dollars paid.




                                                          8
Our review identified 30 claim payment errors, resulting in net overcharges of $484,037
to the FEHBP. Specifically, 27 claims were overpaid by $485,771 and 3 claims were
underpaid by $1,734.

The claim payment errors resulted from the following:

•	 Due to various manual processing errors, the Plan priced eight claims without
   applying the appropriate procedure allowances, resulting in overcharges of $148,316
   to the FEHBP. For example, in one instance, the Plan did not apply a multiple
   procedure discount of 50 percent when pricing the claim.

•	 The Plan inadvertently priced four claims using the billed charges instead of the
   Plan's procedure allowances, resulting in overcharges of $126,298 to the FEHBP.

•	 The Plan paid three claims using incorrect pricing methods, resulting in overcharges
   of $60,742 to the FEHBP.

•	 In one instance, the Plan did not correctly price a claim by using the lesser of billed
   charges or the non-member inpatient surgery per diem allowance, resulting in an
   overcharge of $56,853 to the FEHBP.

•	 In one instance, the Plan did not properly coordinate a claim with Medicare, resulting
   in an overcharge of$35,700 to the FEHBP.

•	 In one instance, the Plan did not apply the co-surgeon reimbursement rate of 62.5
   percent when pricing the claim, resulting in an overcharge of $29,063 to the FEHBP.

•	 In one instance, the Plan paid a no-fault insurance claim at 100 percent of billed
   charges instead of using the professional fee schedule amounts, resulting in an
   overcharge of$14,232 to the FEHBP.

•	 The Plan priced two claims using incorrect provider numbers, resulting in
   overcharges of $6, 174 to the FEHBP.

•	 The claims processors overrode system edits and entered incorrect pricing information
   for six claims, resulting in net overcharges of $3,920 to the FEHBP. Specifically, the
   Plan overpaid three claims by $5,654 and underpaid three claims by $1,734

•	 In one instance, the Plan paid a claim at the incorrect pricing rate, resulting in an
   overcharge of$2,389 to the FEHBP. This claim was paid incorrectly because the Plan's
   claims system was not updated with 2009 and 20 I0 contract rates for Porter Hospital.




                                          9

   Since more claims may have been affected, we requested the Plan to identify and
   review all FEP claims affected by this pricing error and determine if there were
   additional overpayments. On February 4,2011, the Association informed us that the
   Plan is in the process of identifying the universe of all FEP claims affected by this
   pricing error and will initiate recoveries on the additional identified overpayments.

•	 The claims processors did not calculate the appropriate co-insurance for two claims,
   resulting in overcharges of$350 to the FEHBP.

Association's Response:

In response to the amount questioned in the draft report, the Association agrees with
$347,471 and disagrees with $239,629 of the questioned charges. The Association states
that the Plan has issued all underpayments to the providers and/or members, and initiated
recoveries for the confirmed overpayments. As of November 15,2010, the Plan had
recovered and returned $120,294 to the FEHBP. 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.

For the contested amounts that are being questioned in the final report, the Association
states that the Plan disagrees with overpayments of $130,433 because these claim
payment errors were identified in previous OPM audits.

In addition, the Association states that the Plan has taken corrective action to minimize
these types of errors in the future.

OIG Comments:

Based on our review of the Association's response and additional documentation
provided by the Plan, we revised the amount questioned from the draft report to
$484,037. Subsequent to receiving the Association's response, the Plan provided
additional documentation supporting agreement with $353,604 and disagreement with
$130,433 of the revised questioned amount. For the contested amount, the Plan provided
documentation supporting that proper claim adjustments were made. However, these
claim adjustments were made after our audit request due date of February 1, 2010.
Therefore, we will continue to question these claim overpayments. Also, we verified that
the contested overpayments were not questioned in previous OPM audits.

Recommendation 2

We recommend that the contracting officer disallow $485,771 for claim overcharges and
verify that the Plan returns all amounts recovered to the FEHBP.




                                         10

        Recommendation 3

        We recommend that the contracting officer allow the Plan to charge the FEHBP $1,734 if
        additional payments are made to the providers to correct the underpayment errors.
        However, before making any additional payment(s) to a provider, the contracting officer
        should require the Plan to first recover any questioned overpayment(s) for that provider.

        Recommendation 4

        We recommend that the contracting officer ensure that the Plan completes the expanded
        review of the Porter Hospital claims. Also, the contracting officer should ensure that the
        Plan makes the appropriate adjustments to correct all claim payment errors identified
        from this review.

    3. Continuous Stay Claims                                                                        $318,279

        During our review of continuous stay claims, we determined that the Plan incorrectly paid
        18 claims, resulting in net overcharges of$318,279 to the FEHBP. Specifically, the Plan
        overpaid 10 claims by $329,029 and underpaid 8 claims by $10,750.

        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.

        Our review included continuous stay claims for the California, Georgia, New York, Ohio,
        and Virginia plans. During the period January 1,2008 through December 3 1,2009, we
        identified 4,350 continuous stay claim groups (representing 7,027 claims), totaling
        $146,052,843 in payments for these plans. From this universe, we selected and reviewed
        a judgmental sample of 170 continuous stay claim groups (representing 429 claims),
        totaling $58,338,902 in payments, to determine if these claims were correctly priced and
        paid by the Plan. Our sample included the top 10, 20, 40, or 80 high dollar claim
        payment groups from various dollar stratums within each service area. 4 The majority of
        these claim groups contained one admission claim, one or more continuous stay claims,
        and one discharge claim.

        Our review identified 18 claim payment errors, resulting in net overcharges of $318,279
        to the FEHBP. Specifically, 10 claims were overpaid by $329,029 and 8 claims were
        underpaid by $10,750.




4For cumulative amounts paid less than $15,000,000, we selected the top 10 groups. For cumulative amounts paid
of$15,000,000 or more but less than $30,000,000, we selected the top 20 groups. For cumulative amounts paid of
$30,000,000 or more but less than $45,000,000, we selected the top 40 groups. For cumulative amounts paid of
$45,000,000 or more, we selected the top 80 groups.




                                                      11

These claim payment errors resulted from the following:

•	 The Plan incorrectly applied the outlier threshold discount when pricing two claims,
   resulting in overcharges of $160,173 to the FEHBP.

•	 The Plan incorrectly applied the stop-loss rate when pricing nine claims, resulting in
   net overcharges of$147,592 to the FEHBP. Specifically, the Plan overpaid six claims
   by $157,442 and underpaid three claims by $9,850.

•	 In one instance, the Plan did not properly coordinate a claim with Medicare, resulting
   in an overcharge of$5,717 to the FEHBP.

•	 In one instance, the Plan incorrectly applied the billed charges on a claim, resulting in
   an overcharge of$5,697 to the FEHBP.

•	 The Plan did not apply the coinsurance and/or deductible when pricing five claims,
   resulting in undercharges of $900 to the FEHBP.

Association's Response:

The Association agrees with this finding. The Association states that the Plan has issued
all underpayments to the providers and initiated recoveries for the overpayments where
applicable. As of November 15, 2010, the Plan had recovered and returned $165,890 to
the FEHBP. The Association also states that these payments were good faith erroneous
benefit payments and fall within the context ofCS 1039, Part II, section 2.3(g). Any
payments the Plan is unable to recover are allowable charges to the FEHBP. As good
faith erroneous payments, lost investment income does not apply to the claim payment
errors identified in this finding.

The Association states that these claim payment errors were caused by manual coding
errors. In addition, the Association states that the Plan has taken corrective action to
minimize these types of errors in the future.

Recommendation 5

We recommend that the contracting officer disallow $329,029 for claim overcharges and
verify that the Plan returns all amounts recovered to the FEHBP.

Recommendation 6

We recommend that the contracting officer allow the Plan to charge the FEHBP $10,750
if additional payments are made to the providers to correct the underpayment errors.
However, before making any additional payment(s) to a provider, the contracting officer
should require the Plan to first recover any questioned overpayment(s) for that provider.




                                         12

4.	 Omnibus Budget Reconciliation Act of 1993 Review                                   $51,695

   The Plan incorrectly paid 154 claim lines that were priced under the Omnibus Budget

   Reconciliation Act of 1993 (OBRA 93) pricing guidelines, resulting in net overcharges of

   $51,695 to the FEHBP. Specifically, the Plan overpaid 132 claim lines by $56,421 and

   underpaid 22 claim lines by $4,726.


   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.


   OBRA 93 limits the benefit payments for certain physician services provided to annuitants

   age 65 or older who are not covered under Medicare Part B. The FEHBP fee-for-service

   plans are required to limit the claim payment to the lesser of the amount equivalent to the

   Medicare Part B payment or billed charges.


   Using a program developed by the Centers for Medicare and Medicaid Services to price

   OBRA 93 claims, we recalculated the claim payment amounts for the claims in our

   samples that were subject to and/or processed as OBRA 93.


   Wejudgmentally selected for review the service areas with universe totals of $400,000 or

   more for OBRA 93 claims. Our review included OBRA 93 claims for the Georgia, New

   York, Ohio, and Virginia plans. During the period January I, 2008 through December 31,

   2009, we identified 36,116 claims (73,938 claim lines), totaling $4,682,164 in payments,

   that were subject to OBRA 93 pricing guidelines for these plans. From this universe, we

   selected and reviewed a judgmental sample of200 claims (1,152 claim lines), totaling

   $490,642 in payments, to determine if these claims were correctly priced by the FEP

   Operations Center and paid by the Plan. Our sample included the 50 highest dollar claims

   from each service area.


   Based on our review, we determined that 154 claim lines were paid incorrectly, resulting

   in net overcharges of$51,695 to the FEHBP. Specifically, 132 claim lines were overpaid

   by $56,421 and 22 claim lines were underpaid by $4,726. These claim payment errors

   resulted from the following:


   •	 The FEP Operations Center did not price 112 claim lines according to OBRA 93
      pricing guidelines, resulting in net overcharges of $42,662 to the FEHBP.
      Specifically, the Plan overpaid 99 claim lines by $47,060 and underpaid 13 claim
      lines by $4,398. These errors resulted from the FEP national claims system, by
      design, automatically generating an "OFMA" override code when the system did not
      receive a timely response (i.e., with 15 days) from Palmetto (an OBRA 93 pricing
      vendor). Consequently, the FEP Operations Center used the allowable charge
      (covered charge minus preferred provider allowance/participating savings amount)
      instead of the Medicare allowance to calculate the claim line payments.




                                            13
•	 The Plan incorrectly paid 21 claim lines due to Palmetto not recognizing the second
   and third procedure code modifiers and erroneously calculating the payments,
   resulting in overcharges of $5,851 to the FEHBP.

•	 The FEP Operation's Center applied incorrect OBRA 93 Medicare allowances to 18
   claim lines, resulting in net overcharges of $3,272 to the FEHBP. Specifically, the
   Plan overpaid 12 claim lines by $3,510 and underpaid 6 claim lines by $238.

•	 The Plan inadvertently did not price three claim lines under OBRA 93, resulting in
   undercharges of $90 to the FEHBP.

Association's Response:

The Association agrees with this finding. The Association states that these claims have
been repriced by Palmetto and where appropriate, refunds have been initiated. The Plan
had recovered and returned $15,360 to the FEHBP as of November 15, 2010. The
Association also states that these payments were good faith erroneous benefit payments
and fall within the context ofCS 1039, Part II, section 2.3(g). Any payments the Plan is
unable to recover are allowable charges to the FEHBP. As good faith erroneous
payments, lost investment income does not apply to the claim payment errors identified in
this finding.

In addition, the Association states, "To enhance the accuracy ofOBRA '93 claims
pricing, the FEP Director's Office has taken the following actions:

•	 The FEP Director's Office is currently working with Palmetto to enhance pricing
   procedures to ensure that all applicable FEP claims are priced in accordance with
   Medicare pricing requirements.

•	 Established a chain of communication between the FEP Operations Center and
   Palmetto in an effort to improve the pricing process.

•	 Will include claims that were not OBRA '93 priced (Claims with the information
   Code OFMA) in the quarterly System-Wide Claims Review process. These claims
   will be included starting with the 4th Quarter 2010 reports.

•	 Conduct Plan trainings on how OBRA '93 claims should be to coded and submitted
   to the Operations Center. The first training was held at the FEP 2010 System
   Information Meeting in October 2010. Future trainings will be held via Webinars,
   and Plan meetings, visits and correspondence.

•	 We are currently evaluating our OBRA '93 system edits to determine whether there
   are changes that can be made to further promote the accuracy of the claims select and
   sent to Palmetto for pricing."




                                       14

   Recommendation 7

   We recommend that the contracting officer disallow $56,421 for claim overcharges and
   verifY that the Plan returns all amounts recovered to the FEHBP.

   Recommendation 8

   We recommend that the contracting officer allow the Plan to charge the FEHBP $4,726 if
   additional payments are made to the providers to correct the underpayment errors.
   However, before making any additional payment(s) to a provider, the contracting officer
   should require the Plan to first recover any questioned overpayment(s) for that provider.

5.	 Non-Participating Providers                                                         $29,571

   During our review of claims submitted by non-participating providers, we determined
   that the Plan incorrectly paid four claims to non-participating facility providers, resulting
   in net overcharges of$29,571 to the FEHBP. Specifically, the Plan overpaid three claims
   by $30,888 and underpaid one claim by $1,317.

   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.

   We reviewed claims submitted by non-participating professional providers for the
   Georgia, New York, Ohio and Virginia plans. During the period January 1, 2008 through
   December 31, 2009, we identified 1,676,506 claim lines, totaling $51,705,091, that were
   paid to non-participating professional providers by these plans. From this universe, we
   selected and reviewed a judgmental sample of 317 claim lines (representing 75 claims),
   totaling $1,305,739 in payments, to determine if these claims were correctly priced by the
   FEP Operations Center and paid by the Plan. Our sample included the 25 highest dollar
   claims within each service area. Based on our review, we determined that all of these
   claims were paid correctly.

   In addition to non-participating professional providers, we reviewed a sample of non­
   participating facility providers. Our review of non-participating facility providers
   covered the period January 1, 2008 through December 31, 2009 for the following plans:

   •	 For the California, Georgia, New York, Ohio, and Virginia plans, we identified
      102,149 inpatient surgery, mental health and substance abuse, rehabilitation, and
      medical non-participating facility claim lines, totaling $23,443,900 in payments.
      From this universe, we selected and reviewed a judgmental sample of 85 inpatient
      claims (representing 1,068 claim lines), totaling $4,877,095 in payments, to determine
      if these claims were correctly priced by the FEP Operations Center and paid by the




                                            15

   Plan. Our inpatient sample included the five highest dollar claims per inpatient
   admission type for each service area.

•	 For the California, Georgia, and New York plans, we identified 25 outpatient surgery
   non-participating facility claims, totaling $220,283 in payments, that may not have
   been paid in accordance with the non-participating provider allowance. From this
   universe, we selected and reviewed 21 outpatient claims, totaling $201,290 in
   payments, to determine if these claims were correctly priced by the FEP Operations
   Center and paid by the Plan. We only selected our outpatient sample from the
   California plan because the Georgia and New York plans' universes were immaterial.
   Our outpatient sample included all claims in the universe for the California plan.

Based on our review, we determined that four of the inpatient and outpatient claims were
paid incorrectly, resulting in net overcharges of$29,571 to the FEHBP. Specifically,
three claims were overpaid by $30,888 and one claim was underpaid by $1,317.

The claim payment errors resulted from the following:

•	 In one instance, the Plan did not correctly pay a claim by using the lesser of billed
   charges or the non-member inpatient rehabilitation per diem allowance, resulting in
   an overcharge of$17,550 to the FEHBP.

•	 In one instance, the Plan did not properly coordinate a claim with Medicare, resulting
   in an overcharge of $11,793 to the FEHBP.

•	 The Plan inadvertently priced two claims using the billed charges instead of the
   authorized case management per diem rates, resulting in net overcharges of $228 to
   the FEHBP. Specifically, the Plan overpaid one claim by $1,545 and underpaid one
   claim by $1,317.

Association's Response:

In response to the amount questioned in the draft report, the Association agrees with
$17,778 and disagrees with $11,793 of the questioned charges. The Association states that
refund recovery efforts have been initiated. The Association also states that these payments
were good faith erroneous benefit payments and fall within the context ofCS 1039, Part 11,
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.

OIG Comments:

Subsequent to receiving the Association's response, the Plan provided additional
documentation supporting concurrence with the questioned amount of $29,571.




                                        16
Recommendation 9

We recommend that the contracting officer disallow $30,888 for claim overcharges and
verifY that the Plan has returned all amounts recovered to the FEHBP.

Recommendation 10

We recommend that the contracting officer allow the Plan to charge the FEHBP $1,317 if
an additional payment is made to the provider to correct the underpayment error.
However, before making any additional payment(s) to a provider, the contracting officer
should require the Plan to first recover any questioned overpayment(s) for that provider.




                                        17

                  IV. MAJOR CONTRIBUTORS TO THIS REPORT


Experience-Rated Audits Group

            Auditor-In-Charge

             Auditor

             Auditor

              Auditor


                   Chief

              Senior Team Leader




                                   18

                                                                                                V. SCHEDULE A

                                                                                               WELLPOINT, INC.
                                                                                                MASON, OHIO

                                                                         HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED

HEALTH BENEFIT CHARGES'                                                                                      2006                  2007                  2008                   2009              TOTAL


  CLAIM PAYMENTS                                                                                           $3,194,817,112        $3,577,054,506        $4,017,858,892        $4,285,045,147      $15,074,775,657
  MISCELLANEOUS PAYMENTS                                                                                       13,679,582            15,270,948            30,895,069            34,724,617           94,570,215


  TOTAL HEALTH BENEFIT CHARGES                                                                      I      $3 208 496 694        $3 592 325 454        $4048753961           $4319769 764        $15169345872



AMOUNTS QIIESTIONED                                                                                          2006                  2007                  2008                   2009             TOTAL


  I. INPATIENT FACILITY CLAIMS - DUPLICATE OR OVERLAPPING DATES OF SERVICE                                          $68,385          $1,093,357              $282,406              $316,865           $1,761,013
  2. SYSTEM REVIEW                                                                                                       0                    0                    (200)               484,237          484.037
  3. CONTINUOUS STAV CLAIMS                                                                                              0                    0                 311,119                  7,160          318,279
  4. OMNIBUS BUDGET RECONCILIATION ACT OF 1993 REVlEW                                                                     0                   0                  26,475                 25,220           51,695
  5. NON-PARTICIPATING PROVIDERS                                                                                         0                    0                  13,338                 16,233           29,571


  TOTAL QUESTIONED CHARGES                                                                          I               $68,385          $1,093,357              $633,138              $849,715           $2,644,595



'" Includes all amounts reported in the Annual Accounting Statements under Plan codes 041 (California), 050/550 (Colorado), 060/560 (Connecticut), 100 (Georgia), 1301630 (Indiana),
   160/660 (Kentucky), 180/680 (Maine), 241/741 (Missouri), 265/765 (Nevada), 270n70 (New Hampshire), 303/803/808 (New York), 332/839 (Ohio), 423/923 (Virginia), and 450/950 (Wisconsin).
                                                                                            APPENDIX





December 15, 2010                                              BlueCross BlueShield
                                                               Association
                          Group Chief                          An Association of Independent
Experience-Rated Audits Group                                  Blue Cross and Blue Shield Plans
Office of the Inspector General                                 Federal Employee Program
U.S. Office of Personnel Management	                            1310 G Street, N.W.
1900 E Street, Room 6400                                        Washington, D.C. 20005
                                                                202.942.1000
Washington,	 DC 20415-1100                                      Fax 202.942.1125



Reference:	 OPM DRAFT AUDIT REPORT
            Anthem BlueCross BlueShield Plans (WeIlPoint)
            Audit Report Number 1A-99-00-10-013
            (Dated October 15, 2010 and Received October 15, 2010)



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) concerning the WeliPoint, Inc. BlueCross BlueShield Plans (14 Plans in total).
Our comments concerning the findings in the report are as follows:
A. HEALTH BENEFIT CHARGES

   1. Inpatient Facility Claims-Duplicate Dates of Service                    $1,782,325

      The Plans agree that $797,488 of the questioned claims may have been overpaid.
      As November 15, 2010, the Plans have recovered and returned to the Program a
      total of $652,632. For the remaining overpayment of $974,762, the Plan requests
      that OPM acknowledge the due diligence performed in trying to recover the
      overpayment. The Plan identified the overpayment and sent ten recovery letters to
      the provider in an attempt to recover the overpayment. Also, this activity was
      performed before the OPM OIG audit began. This activity demonstrates the Plans'
      due diligence to obtain overpayment from the provider. The Plans will continue
      with their recovery efforts. The Plan also contests $10,075 in claim overpayments
      as the auditors sited the entire amount of the claim payment; however, there are
      FEP liabilities to pay for those days that are non-overlapping days. Documentation
      to support the Plans' position was provided to the auditors.

      Currently, FEPExpress has an edit that is designed to defer inpatient claims with
      overlapping dates of services. However, a review of this control indicates that this
      edit only generates a deferral if the claims are from the same provider. A request to
      enhance this editing process to defer inpatient claims when the dates of services
      overlaps and the services were provided by different providers has been submitted.
      Due to the large number of 2011 benefit changes, this edit modification will not be
      implemented until 2011.
December 15, 2010
Page 2 of5



       In addition, the FEP Director's Office has expanded its System-wide Claims Review
       Process to include inpatient admissions with overlapping dates of services. This
       listing was implemented into the review process as of the 2 nd Quarter 2010.

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


  2.   System Review	                                                       $587,279

       The Plan agrees that $347,471 of the questioned claims may have been overpaid.
       These claims payments were caused by manual errors. All underpayments have
       been issued to the providers and/or members. Recoveries have been initiated on
       the confirmed overpayments. As of November 15, 2010, the Plans have recovered
       and returned $120,294 to the Program. The Plans will continue in its recovery
       efforts.

       The Plan disagrees that $239,629 was paid incorrectly. Documentation to support
       the Plan's position has been provided to the auditors. The Plans disagree for the
       following reasons:

       •	 Payments were made based on Non-Par Pricing for claims totaling $12,522.
       •	 A facility payment corrected in the Hospital Settlement Process for claims
          totaling $2,389.
       o	 Claims totaling $130,433 were identified in previous OPM Audits. These claims
          are still in the recovery process for the Uncoordinated Medicare Tier 8 audit and
          the Amount Paid Greater than Charges audit. To include these again would be
          double counting the overpayment.
       o	 Claims totaling $93,039 were adjusted prior to the OPM Information Request
          Date.
       o	 For one claim totaling $1,216, the provider file is correct based on the rate
          loading form for the date of service of August 27,2009. It was determined at a
          later date that the rate was changed to 96.48% on July 1, 2009.
       •	 The OIG Auditors miscalculated the value of this finding by $178. They stated
          the total questioned amount was $587,279 when it should be $587,101.

       The Plan will take the following actions to minimize these types of errors in the
       future:
December 15, 2010
Page 3 of 5


     •	 Conducted re-fresher training in those areas impacted by the manual payment
        errors such as the requirements for the following:

          :r   the proper research required for deferral resolution prior to submitting the
               override codes;
          :r   the proper procedures for correctly coding claims so that FEPExpress
               applies the appropriate member cost share; and
          :r   the correct procedures for manually pricing claims.

     •	 In addition, Plan management re-enforced the requirements for manual pricing
        of claims to include the proper usage of the non-par relief provision in the FEP
        Contract.

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

     3.        Continuous Stay Claims	                                        $318.279

     The Plan agrees that $329,029 may have been over paid and $10,750 were
     underpaid. These claims payments were caused by manual coding errors. All
     underpayments have been issued to the providers. Recoveries have been initiated
     on the overpayments, where applicable. As of November 15, 2010, the Plans have
     recovered and returned $165,890 to the Program. The Plans will continue to show
     due diligence in its recovery efforts.


     The Plan will take the following actions to minimize these types of errors in the
     future:

     •	 Conducted re-fresher training in those areas where these manual payment
        errors occurred. Special emphasis was placed on the correct pricing
        procedures for interim facility billings and the impact on the pricing requirements
        for the entire admission.
     •	 Reviewed the process to ensure that the proper research for deferral resolution
        was conducted prior to submitting the override codes; and
     •	 Updated the correct procedures for the manual pricing of claims.

     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
 ecember 15, 2010
Page 4 of 5


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

    4. Omnibus Budget Reconciliation Act of 1993 Review                  $52,826

     The Plan agrees that $51,695 in professional claim payments were not subject to
     OBRA '93 pricing requirements. FEP OBRA '93 claims are priced by an outside
     vendor, Palmetto, GBA. The claims subject to OBRA '93 pricing are selected by
     the FEP Claims System based upon Medicare requirements and sent to the vendor
     for the appropriate Medicare allowance. These confirmed overpayments were sent
     to Palmetto for pricing but after 15 days with no pricing response from the vendor,
     the FEP Claims System applied the local Plan's allowance to these. These claims
     have been re-priced with the FEP OBRA '93 Pricing Vendor and where appropriate,
     refunds have been initiated. As of November 15, 2010, the Plans have recovered
     and returned $15,360 to the Program for these overpayments.

     The Plans disagrees that $1 ,130 was paid incorrectly for one claim. The member
     was under age at the time of the services; therefore the claim was not eligible for
     OBRA '93 pricing.

     To enhance the accuracy of OBRA '93 claims pricing, the FEP Director's Office has
     taken the following actions:
     •	 The FEP Director's Office is currently working with Palmetto to enhance pricing
        procedures to ensure that all applicable FEP claims are priced in accordance
        with Medicare pricing requirements.
     •	 Established a chain of communication between the FEP Operations Center and
        Palmetto in an effort to improve the pricing process.
     •	 Will include claims that were not OBRA '93 priced (Claims with the information
        Code OFMA in the quarterly System-Wide Claims Review process. These
        claims will be included starting with the 4th Quarter 2010 reports.
     •	 Conduct Plan trainings on how OBRA '93 claims should be to coded and
        submitted to the Operations Center. The first training was held at the FEP 2010
        System Information Meeting in October 2010. Future trainings will be held via
        Webinars, and Plan meetings, visits and correspondence.
     •	 We are currently evaluating our OBRA '93 system edits to determine whether
        there are changes that can be made to further promote the accuracy of the
        claims select and sent to Palmetto for pricing.

     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).
December 15, 2010
Page 5 of 5


     Any benefit payments the Plan is unable to recover are allowable charges to the
     Program. In addition, as good faith payments, the Plan continues to initiate
     recovery in a timely manner for confirmed overpayments. Because these are good
     faith erroneous payments, they are not subject to lost investment income.

     5.       Non-Participating Provider Claims                            $29,571

     The Plan does not contest that $17,778 in claim payments resulted in
     overpayments and $1,317 in underpayments. Refund recovery efforts have been
     initiated. The Plan disagrees that $11,793 in claim payments were paid
     incorrectly. For these claims total billed charges were paid in full because Medicare
     was primary at the time of service, which required the Plan to pay the Medicare
     coinsurance in full leaving, the patient responsible for nothing. As a result, the Plan
     paid in full.

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

     We appreciate the opportunity to provide our response to this Draft Audit Report
     and request that our comments be included in their entirety as n amendment to the
     Final Audit Report.




     Executive Director
     Program Integrity

     Rcm/jb

     cc:              Well Point BCBS Plans
                             FEP
                            FEP
                            , FEP