oversight

Audit On Global Claims Where Amounts Paid Exceeded Covered Charges For Bluecross And BlueShield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2011-01-11.

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

                                                               'u.s. OFFICB OF PERSO.        NEL MANAGE1fENT
                                                                             OFFICE, OF THEJN PECTOR GE ;El~L
                                                                                              OFF C __ OF ,AUDITS




              a A_'ll.. .. .,

Subje t:


          A D1  N GL AL C' AIMS W JERE
     1\'10 TS A EXCEE     COY     D eRA GES
           B'  CROSSA () L ES I ~LD',  NS




                                                          eport o.             'lA~99-'O ~10-030



                                                          ate~:       January'~        ], 2Q.11




                                                                               lJTION-~


Till .lIditri~rt tuu be Ill.11~lrlhult.d Ii) Fq;derlll uffic.i.ah ".,lL~;ln: t'f'~fljlUrJl!~~ for l~u~PljJlI~ali4l1l fI'f~ht lludiled jfrOgnlln, i'JU§. ~~tIil
'I"~l1urt JIlay oolltlll provriclll.ry dam ~'hlch III pr{jlllttl.'d Ill' hdtnll,lLW (Iii \.I,S.C.1911S)- Tbatfore, wllile 1I11$ ~udil f~IlDnju ' JhbJ~:
ulldff III fh~dhlll uflnfonll.l'ltioll Ac:tlll'ld Md" n'ail~hl~ to lbc 1JLlhkl-e. liD ~ 01 !t' J;Jn~, tallflcrll n~fll! (Clile t\ l!J'{igtdbtfort
.rl'1el.!iil•.l1.IIlHepor~ ~I,l tlte gt.llilf I pttldit a~ it mBr tolll ill propn;;h'r)'iDf<lTlnJl.t!OJllhatwiIIs ['fd ri1:tl from Ul~ Il'UlIlidy riisP'ibll«d CO,fa}':
                         U T     D, 'TA    S O"F CE OF PERSONN                                 MANi\GEMENT
                                                  "\V(.\~l -, tl "L(lll. D{~   204l­


    Office l}f tile:
b'l>pe'{' ot G~nc:r I




                                              AUDIT                        QRT


                                  Federal Anployccs Heal' Bene Its Program

                                  Servicr BeneD Plan      C ntracl ,.:' 1039

                                       Blu~Cros~       Blue 'hield ASSQciatilUl

                                                     ,- 'Ian: Code 10

                        010' al Claims, '¥ ' ere An O1t tsPaid .Ejl{ceeded Co,," ted Charges
                                         BlueCros_ and BIu Shield Plan:                  '




                        REPORT NO, ,lA-99-00-1O-030




                                                                               :zs?K'L:.-"-

                                                                                 Micliael R. Es,,~er
                                                                                 A!!isislant Jnspecto Gener,&L
                                                                                       for Amrts'




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                                             r   C         lYE U


                                     -'cderal Employees: Hen tb Benefits Program
                                     Ser\~i   Benefit Plan       ontract CS 103
                                            Blu ros BlueShield Association
                                                     Plan Code 10

                            G oba] Claims where Amounts Ptud Exct!'eded CaYljred Charges

                                          B u ·Crpss and BJueShield Plans





                            REPO    N. lA-99-00-HJ-030                     DATE: JanuaI' 11 2011


          This fina audit report, n the Federal Employees Hea th Benet1is "rogram (F HBP) op~r~ti ns
          SI   an
                BlueCrossand Blue "hieid (Be ) plans que 'om; P.216,234 in he'a]lh benefit c:harge.s.
          The BlueCro~s BlueShield Association and/or B BS plans agreed with $3 ~655~291 and '
         'disagreed "ritb. 560,943 0 the questioned charge.

          Our limited stope audit wa..q, conducted in aceordanc with Government Auditing Standard, The
          audit covered health benefit paYlD n [rom January 1~ 2QQS thro gh Janua1)' . ., I ~ 2010 as
          reported iIi tbe AnnuaJ Accounting Statemc11ts. pecifica] y~ we reviewed all facility claims tha
          we e reimbur ed during t:hi period where the a ounts paid ex(;eeded covered harge by S9,50n
          OT more. . sed on our levi ~w. w d tenllincd tha th BC B plan· :incorrectly paid 8 - Claims,
          resulting in net overcharge of$2,216,23 to the FEHBP.. ' peC'ifically the BellS plams overpald
          82 claim" b.. 2 234.710 and,    derpaid 3 claims by. 18476.
                                          CON ENTS

                                                                                                "JAG:
       'EXE UTJ\TE SUrvJMA..RY              ,   ~   ,    '.. ~       ,        ,                         J

       INTRODUCTION A       rn BACKGROlJND              ".""                                ,          ,.1
,IT.   DB ReT .TE: SCOPE AND MEn OUOLOGY.".. ,                       «,   ,             ,              ,.3

HI.    AIID"T PINDING ANDRECO 1l\1ENDATIONS ." "'.. ,..',                 ,;..•... "'~ ,              ;,. 5
          Claims Vy'here Am unts Paid Exceeded Cavt,'red Cbarges " .. ,                         ,.,     5
IV.    MAJOR CONTRlBUTO S TO THIS REPORT                         "                  ,                  l0

'V"SCI ED LES

       A. SUMMARY 0 .CLAIM S 'NlPLE SELECTION. BY PLA .

       B.QUEST10 fiD CHARGES BY PLAN
       APPENDiX      (BlueCross Bllle8hieid Association repJy.dated Jun~ 30: 2010,10 (e
                     draft audi report)
                                                            AND HAC GROUND    <




Tbis final audit report de1aiJ the findings, conclusions. and reGClmmendations l'esulting'fl'om our
l'rnited seop" audit of tIle Federa En:pJoye s Heal h BemefitsProgtam (F ~HBP) operations at all
BlueC' ss and BlueShield {BCH.') pJan',

. he audit was periOmled by the Office fPersolmel lianagement's (OPlvf) Office Qfthc lnspectQf
General (OIG 1 as established by the J.JJ..&.-pectot Genera Act of 1978. as amended.

BAr_~ROUND

Th FEHBP was- establl hed b. "the Federal Employee' Heat Benefits (}'EHB) . ct ('Publk Law
86-:382), enacted 011 eptember 28, 959. 'Ule FEHBP was Cl' at d to provide health insuranc,e
benefLts. for federal OOlployees~ annuitants. and dependents. OPM s Heal' care and nstlrance
Office ha.s overall [~sponsibility or administration of the F 'HBP. 'The pro\risions of l1e FEHB
At, reo ilnple11leme . by OPM thrlmgh r guintions, w ieb are. codified in Title 5. Chapter ~ Part
890 of the Cod ofFederaL Regulations (CI·R}. H '31th insurane t.:u.vemge is made availa Ie
   'ough contracts with various health ins.urance carriers.

The Bltl      'Oss Blue hjeld A. oiatio (Assodation), on behalf 0 participatjug BCBS plans. has
t: (ereu int.o a Govem.ment~vljde Service B~neflt Pian CPJltrac (es:] 039) ,,,ith OPM to P"J'ovlde a
health henefi plan authorized b)lthe FEHB Act. The Assodntion de egates authority to
participating local BeSS p aUf{ throughoUL the United States t pr'O~es h health benefit claims
 fiTs fedc.ra.l su scrib rs., There tU approximately 63 local BeBS plans participating in the
FEHDP.

The Asso iauon has established a Federal' Empl )'ee Program ,-<E I) Director _ O' ce in..
Wa.shington, D•.. to provide ceIltralized management for the ServL<;e Ben tit Plan. The FEP
Dil'eCtor's atTIc coordinate.s the adminisu'ation ofthe contrad "villi the Association, member
BeB plans, and Pro-·f.

Th A:SQctatiollha& also estabhshe 'a1:1 FEP Operations Center- Th~ a~tivities ofthe FEP
Operaliol1s Center ar perfon ed by CareFi 'StBlueCross Blue-S ield. ID.eated in ;\-'ashingtort,
D. . These ncth·itie.s in lude a,cting a 15cal intermediary bc1:\·veen the Associatlon ~d member
~ lans.~ v rifyillg subscriber eJigibilit},'; appro . g r: disapprovin_. the reimbur em nt £local pIa
paYt en'lS of FEHHP claims (us'ng cflmpuletized 78.tem edits). maintaining a history tl1e of' 1
FEHBP '.1fli s, and maintaining an acc-mmting Dfall program funrls,

  ompliance ,"vith laws and regulation appHcabl~ 10 th FEHEP i the'e pon~'ibility ofthe
Asso iation and ca h BeSS pIal's manag ment. Also, management ofeacl113CB, plan is
r~sponsjble for establisbing and 11 aintaini.ng a srstc.tn ofintemal CQrr ols..




1 Thro &,haut rhis report, when we >i:far to "FEP " w at ret'Nrill_ to he Servi~e B nefj[ Pla111ipe.s of b lS{n~~. at thi;1

Phm. When we refh to the. fEHEfJ" we ar~ referring lo the fogyam t.h 1 provides health bellefit~ W dtltHl

emphye~S',





                                                             1
Thi~ is our first global fl~djtot claim ',""here the amounts paid ~xceeded covered c arges fOI ili ,
BCBS plans. Our preli miD aty results fO!: t . s: audir were p "eS~ ted in detail in dtaft: report,
dated Apr' 15 .2010. Th ,A.'sociation·s co nmen1soffcred inespJnse to thedraftJ:'t:port were
considered,in reparin, out final t-eport and are included as the App~ndi;x tc I i ' report.. , Also.
add"tiona , documentation prQ .i ed b)' the .Nsociatfonand C.l3S plans on variQus dat s through
October27 2D J0 wa considered in prepaling our [mal rcpo ,
           j
           ,                   ,              ,
            VE

The objective of lhis. audit :vas to determine \",/,. eth.er the BCBS pam~ properly char ed the
FEHBP for cl ims where the ~1lloum paid exceeded covered charges.

SCOPE

'N con ucted our limit d scope perfonnance alldit In a.c~ord~mce whh enerallyaccepted
government auditing 'l.andards-.          ase standards r- quire that V'i'e plan and perform me udit to
obtain suft1cient and appropriate evidence to provide a reasonable ba. is for our findings and
Cf'lll Iwions based on our udil objce i ·C. We.· elieve hat the evidence obtained pro rides a
reasonable basi fot our findings and conclusions base.d on our . udit o~jective.

The audit covere~ health beJ;lefit paymen          fJ:o   January 1. 2008     r rough January 31      t   20 ~ 0 as
reported in the Annual Accounting Statements,. ~ p-ecificalJ:, e re ri~wed fac,Hity I,JlailllS that
were reimbursed during this period ';I,lhe e (he amount paid exceeded qovercd charges. Based on
our'claim 'ananc.e ep()I'~ \. c identi cd 96,998 facilit;y claim' for this period ~N} ere e amo nt.'l
paid exceeded cxwere c lBrges by a 'otal of 13 ,043,,267 (abo referred 10 as/Man 'cs or
potential overpayment '). ~ From this univcr 'e, \'Ire . e.lected ~.t1d reviewed all facility ~aims \.vllere
the amounts paid exec d' d ~overed charge' b-y $9 SOO or mor , Our sample included 2,599
facility claim totaling $5 ,410;745 in variances ot potentia overpaymeII S, for 49 of the 6_
BeBS plans (See Sched"lleA for the Sllmm;n' of the claim sample selections by pan).

We did n     consider each Be S plan            . t~ma1 antral structure itt planning an conductillO'              OUT'
aUditing procedu e . Our a ldit approac c·onsistc::d mainly of ub tantive-1e t otrransactiGl1
and not teBts 0. . controls. TherefQre~ we do not express an opinion O!1each BCBS planls sy Will
of internal contro s taken as a ,;"thole..

    also ondutl 'tests to dete:nnim: .hethcr the BeB plans had complied with the contra :t
    re
and the laws and regulation governing the FEHBP as they r late· c aim pa 'ments where the
amounts paid e. ceeded covered charge '., The results of our tes indicaL hat:l with respec to th
items tested: the BeBS plans did not fully campi)' witl the provisiollS 0 the con Tact rela ive t·
claiul paymen wbel the amounts paid exceeded co e-red cluU'ge _ Exceptions note' in t c
area reviewed are et forth in detail in the' o\udit Finding aDd eJ:Otnmend tion.,"' section of
dus audit report, \V' h respect to the items no testedl nD hing came to our a.ttention that caused
us to believe tbat the BesS plans bad no complied, in aU material respects, wi,th thos.e
provisions.

1n conducting our audit. we reJie<l to varying degrees un comput~r;.gc era-ted data provided by
 he ,EP Direc or"' Offic~, the FEP Operatiot'lS Center, ano the BCB plans. Due to time
cQwtraint5, w did l10t verify the reliability of the data generated bJ' the V'llious information
systems involve . However, "vh'it: utilizing the compute '-g nemted claw during Olll' avdiU

2Thi'l univers ~xcfudes facility claLrns wherol:oe ~inounts paid ~x~ooded cm(en~d charges for the B . BS phil! ~
years mat were previOlls it iillldited by the OIG,.



                                                          3

· te iug noth.ing came to Q.ur a 1e.lJtiQo to cause u . l doubt i s reliab11ity. We believe that the datil
  w·.~ i,lftlcient to achIeve our audit objecti'V'e"

 The 3uditwas performed at our Q - ICes in ~~asbingtol'l") D.C.; Cranbeqy To "Illship, PellflsylvaJ1ia­
 and Jack OlwiUe, Florida fl.-om Au~ust 2010 'lIQugh Nov'ember 20110 .

 .!\   THODOLOG       T




 Ta te$t each BCBS plan~s compliance with t1u~ EHBP healh benefit provi ions relate-d 10 claim
 pa):me:nts where t1 e ~o1U1ts paid e ceed d covered charges, we se1cc ecl . aJl fac-ilit)' clail
   rb re rhe ;ullQun s paid exceeded c.overed charg" by 9, -00 r mort{ hat '(}re Identified in a
 computer sea-rcl1. Spe meally v,'e seJec eel -for revicw&juQgm ntai sample of2599 faciHt)'
  lainlS.. totaling $51,410,74 in variances Of potcnti overpayments (out of 96,998 facility
 c1aims. totaling. $] 35,043::2:67 in varian,,: SOl" pptential Vt,Hl,a}1nCJJ{s).

 Th facility clail celec'cd forrevie\v were submhteJ to each applicak'B              'plail for their
 re,irl?,\vand resjmll .\Ve then c~m4ucled a limited Ie jew' offucpJans'- greed re~ponse. and an
 expande.d ,tevieV'l of lb· . lsa-gree resp·:O., s lq determine th appropriate q lcs"tic.}1)ed amount,
 \V . dld not project t sample result to th universe.

 TI1. ·dC1etmim.\ 'on ofthe questisne.d amo\.1nt isb~ed on the F HB t:ontr ct, th~ Service Benefit
 Pla.n b:rochure;, and e A,socia ion's FEr adtninistr?-tivemanual.
                   ill ADDI FI DING AND RECOMM



The BCB plans incorrectly paid 85 claims. resulting in ne' ver barg s of $2,216.23410 he
FEHBP" pecifica 1)', the neBS plans overpaid 82 claims by £2.234,710 and underpaid:: 'loims,
by $18,476.

Contract CS 1039, Part HI. ectioll 3.2 (b)( 1) states, ~"The Carrier may c~ge a c S 'i.O                          he
contract for a contract tenn if the coSt' a~itlal, allmvabJe? al1o~ab e, and rensona' e."                         Part 11,
section .3(g) states~, .1Ifthe Mrier ot OPM d termines that a Member s c aim has be                               n paid' n
~rror for an reason"", ih, Carrier shaH make a prompt and diligent effort to recover                              he
erroneou~' payment. " , .~:


Contract CS 1039~ Part II, seclion 2.6 states, ,; 'a) The Carrier :1 al coordu.1ate the payment of
  nefils under th"g contract with the payment c           ' ts under M die are , '" b) The Carrier sball
no[ pay benefits und r this contract untiJ 't ha detcrrnin d whefher it is the primar ' mItder ' ." .'"

Section 6(') ofth FEHB Act provides that rates should. rcasonabl and equitably reflect lru
costs' ofbenefiLS pro ided.

We performed a computer search on the BCB claims database, using our dat warehouse
function; to ident.ii){ faciHty claims r in1bm~ed during the peribd January 1. 2008 thtou h
. anuary 31, 2010 where the am01U1.t~ paid ext·ecded covered d4'trges. Ba.sed on our claim
  ariance report we identified 96,99 , c.laims for this period whe.re the amounts prod exceeded
covered ch" rges by a total QfS135 043,267,3 From this un'verse, \lve sele~te and reviewed at
facility claims ""vhere the amount paid exceeded covered chal'g 50 by $9.5000,1:" more, and
d termined if he BCBS l'lan 11aid these cl~~11S. correctly. Our ..ample inc,luded 2,599 facility
claims. totaling $57 A1O~74 ~ in Vat' anoes or pnltmtial oyerpaymel ts, for 4G 0 'th .63· CBS.
plans (See chedule A fur til ' sUltlrnary ofthe claim sample selections by. ian).

Based on our review"        \VC   determin dhat 85 o!ihcse claims w re paid incorrectly. re 'ulting in net
     ver harges of $2.2 I6,234 to e FEHB ',,~ 8p~l.i· "~caHy the Bea plan overpai5.i 82 daim by
$2,234~ 710 and underpa-id 3 claims by $18,476 (See Sc d lie B for a sumn ary "Iftl)e c aiw
payment eJTOrs by plan).




] This uruven::e ~ducles ['acllity claims fur the DCBS plans' years tllatV'/e.re previous!)' audited by the 010.
•iIn additton,heTI.: were 60 \;laim paymcmterrots, lotalirlg $J.049,~60 11"1 c,lverpa:ymenl' lhatwere i~lltit1ed hythe
  CBS plans b fort: the start 0 . the: audit (i. 0. April IS, 2(10) ilJLQ. l.litju~red or vojd~d by the A~oejation s respof1!1,c
da~e (1.11:0' Ju'J'Jc 30. 2010) to e drnft r~p()rt, Since ,,hese ovcrp;J.ytnenffi were identified by the BeaS pluf.ls b for~ Ihe
8mt of our ~udil1!lli!. adjusted or voided by the Association':; respon5t: date to the draft repa ~ we did no~ question
dlese OY rpaym t'lts in the final report.



                                                               5
, hese claim payment errors resulted from the following:

     Th BeBS plans paid 4 claim ll~ing the it)corred pricing al owallces or methodologics:
     resulting in net overcharges of $1 ~398,32 7 t.o the FBHBP. These errors '~'ere due to the pIa         g
     using the incorrect per diems, diagnosis related group' g rates: or pereent of charge when
     pricing the claims, or not appl. ing the lesser ofbiUed charge. Conseql.lently.., the BeSs.
     plans verpaid J cl ims y 1:416,803 and und rpajd 3 c aims by 18 476.

•'	 'Ine BeBS plans paid seven c aims. where . be procedure-line c arge. \v re incorrectly
     bundled, resulting in overcharges of$223:93' to the FEHBP.

•'	 The BeSS plans inadve 'en y paid l up icate charge for 19b 'lalms re               ~.1lting in
    o	 rcharg s of $ 72,,141 to th~ FEHBP.,

.'	 The BCBS ]ans did not properly coordina e eight claims with M dlc                 ,resulting in
    overc ' arges of $151.279 0 the FEHEr"

•	 Tlr BCB plans incorrectly priced four claul'1S due to provider billing eITOl's. resul "ng ill
     o rcrcharges of 129,623      0     the FEHBP.

•'	 In on iostanc , W l1Point BeBS 0 .' Georgia paid a claim Llsing the incorre t wnber of t1nys
     "hen pric.ing the claim, resu]tino:~ in an overcharge 01'$91 !634 to he E . f fiP .

•'	 In two instances. Wellpoin1 BCBS i)fColoradoand Mountain Stat BCBS inadvertently paid
      or ~ nallowable servic • resulting in overc arges of $31)72'0 to the FEHBP.,

•	    11   one ins anee" Well. oint BCBS of Indiana overpai.d a claim by $] 1) -77 du        0   an
     incorr ctly loaded hospital rate in   c ptan' , local prici .g sy~ten].

   'the $2,216,134 in questioned charges, 545,222 25 percent) were j'enilfied by the BeB '
plans before the start ofour audit (i.e., April 15, 2010). However, sinoe 1he BCB plans had not
completed the recovery process and/or adjusted or voide these claim pnym ,nt ~ITorS by the
Association'. response da e (i.e., June, 0.2010) to the draft repoTt l we are continuing qu tion
th ~e ovcrc argcs. "be remaining questioned charg S 01'$1 ,671 012 (75 pl,':rcenL) wet identifit:
as a Tesul' of our audit.



Tbe' As ocia:f~Ol agrees wi . $l,j06,946 of he que tioned over harges: and slate that tb BeBS
plans Mve ree vert: 605,889 ofdle O"llerp{lyments as o' .rune. 30, 2010.

Regard· g e contested amounl to the drs              l'epOIl fhe A~sodati n disagrees with these po entia1
overd1arges for the toll wing reason :

•	 The c1ailIl payment error       \i   ere adjusted or aided prior lo the start 0 the audit (April] 5..,
     2010)"




                                                         6
.'	 The £, aim payment rrn;rs wer" adjl".l~ted or foided and the lener of l:redit ae-count
    adju In nts 1,vere mad on or after April 15~ 2010. but by t c re:ponse date (JUne 30~
    2(10) to the draft rep!> .

    TlI cia-'m pa.'ments error \Yere idenilii~d and r ovencs 'er initiated 'prior to April!5;
    2010, but th~ recovW)" proce s had not bee completed as of June· 30,4.010.

•	 The claim were aid oorrec,tly accor lng !othe pJ ns' pricing methodolo ies.

Reg~rding        con'ective action the Assodation states, '·our analysis: identi· ed That the i1lidityand
C )mp~libi1ity Edit C92 (l-Jig. Dollar) in FEPExpress is being generated bast:d upon th C'ovete
Charges as op osed to the Plan aBowances. BecamJl;: the clai., ." f-or hi';l dit are b sed upon Ute
Plan' alLO\vance·s xceeding the Covered Charges ... th..cte \VeTe claims that should have stopped
     >


prtvr t . payment lOt erification ofth allowances that did not defer. Had these c aims deferred
for investitmtion
            .......                                                                 . could have bee·11
                       ufthe PlaIl AJIovvance field. there i' th likelihood that thev
corrected prj or to paymcm. A modiflcatio . to the FEPExptess dahil system 0 defer claims based
upon the Plan Allowanc ~ has bee{ll requesred fur . nplefnentation by lsi quarter 3011. ...

To reduce these type' of claim err r~ fro      ccurrillg ill the fun.lIe" Plans and the As 'ociatiQo
pexD rro th~ foUov.,inJ!:

•	 Use confirmed audit errors a::' train] g t"Qols to enhance the prof'icienc...·of claims examiners.
   The Plans pCl'todlca -y conduct re:fi:e·sher train' g on tht CO!TCl:t metbod:s for coding, pricing
   and 1 e submission requir meuls for Ii type of c,l~jm!> along vdth any xceptions noted
    sine   me previol.ls training session.
•      e various Plan meetings; on~line \Ncbin IS, audit alens, BuH tins;' Plan visits an . the EP
      dmini:'itralive Mant al as tools to educate Plan staff an 'arioLl. componems of lh ~ claims
    adjudicatiDn process..

    C0l1tinue to conduct the A..sS"ociatiou·Sc SysteD Wide Claim ReVie\v process to ide!'"uify claims
    on 11 pot-paymel t basis ,here the amoUllt paid is greater Ihan charge!> for Plan to revie\v
    an c rrec1. as nece sary.

\\lhile these measures are not absQlute- hey rovide rcasomlbl . ~SSlU"ances that SllCh 'terns vill be:
identifi d and cDrrect~d. Accormngly* to th .e"-1cnt that" erwrs did occur, the pa: me t at good
faith erronMus bene ts paym nts and fall ",Jthin the conte 't of e.S 1039, Sec 'on 2,3(g). : . ,

To further reduce the e type.s af cla' n e Ots in he futUf . the BeBS        wul implelnent    h~
follO'wing by ~·U~J.kt. 3 .20]0:

    Modify Pta '. re-payment q alitj, review pro' SSC5 t" review a percentage of laims p "or
    to ubmlssion to the FEP Operations ~entl:r;. 'i h emp a~is Oil the impact of coding accuracy
    in the paYD1~l1t pIoce:$s.                                                         .




                                                   7
·'	 Add claim' that cover wo benefit eriods to thu As ociati n )'!itcu1 'Vide CJaim Review
    pmcesI)•

•'	 Inc·rease the claims sample size to valid,ate hat Plal:ls have accurately ev uated claims
    provided during th System Wide Clai Revi~,w process.

BCBSA win a so-evaluate the feasibility ofimplernentlng , , " additional controls bJ.. the 41'1.
                                                                                 l
quarter of '010 and. implemcntatJol1, if determined to be feasib e. nu later t 2, ld quarter of
20   I,~:


DIG Comments:

After tf'vleW!ng the Assoeiation s respon. e and a.dditional documeutati'on provided by Ihe neBS
plans, ' ' 'C rev-ised the qu~stioned charges from our dmfLreport {() $2,2 5.234~ Based on the
AS~(ldatjon's response and tlie BC13S plans.' additional documentation, we detennined that th
As~(lcjation and/or   plan' agre  vith 5J ,655291 and isagree, with $560~-943 of the que tinned
c £ltg-esl. Altho: gh the' Assodatjon anl t agte.es with $1, 06,946 in its \-miten response. the
BeBS plans' ocun entation supports concl.II'T nee '"itb $1.655 29 ,.

Ba ed on      Associatior' 1 SpQnBC and/or !.he BCBS       pla1J~'   documentation.   me conte ted
am ount 0 f $560,943 repl'ese,n s the tan owing itt:ms;:

•	 $ 5.221ofth contested amount represenL,; ] I. claims where recQvery effort~ 'ere jn~tiated
   by-three BeB, plans (BeB 01 Ilorida, \VellPolnt ueCro' f ,al"fOmia.• and BeBS (jf
   D lavvare) b~fore he audit started. How ver,: tile- p ,gus had not reo overed t!le.se
   overpayments Md adjustl:ld or '''aide the claltns by th~ Association' ~ Ie pons.: date 10 1he
   draft report. Since these o"\o'er'pa~'menis had not bee    overed EUld returned to tb~ FEHBP
   by tb. Association'. cspon·ge date, ~ "are olltinuing to. question this anlOUll in the final
   report.

•	   S15 721 of the contested amount repl:esent~ on clab that 'as priced inC' rreet y by BeB
     of \Vyoming due to a provider billing error. As a r~sult of aut audit, lhe Plan voided lliis
     clah 011 May 18,   2m 0 to correct the oY'erpaym nt error.

ltecommendanUd 1

~"e recommend that the-contracting offiGer disallow $2 J 234; 710 for cJaim OVCle          ges and vcrH~y
that the BeSS plans retl1£ all amounts l' l:OV red 1Q the FEHBP.

R	 ommendation 2

We recolnmend that the cunt acting 1ftlcer allow the BeBS plans to charge the EHBP $] 8,476
if additional pay lenls are made to Lhe providers to c.orrect 1.h underpuyments.




                                                  g
,Although teA sudation has ' eveloped a correct"',..'e ac,tion pJat,l to reduce paymcl error,
 rdating to dal 1S where arno Is paid t:X 'eeded cov~red diarges, we recotnmend t t the
"can"'racnng officer lostruct tlre A sociation to ensure lhat th ' BCBS plans are f0110V'.1Ug the
.carre tiv ~ action lan. Also, 'rve n: o11111end that "he tontrading office·r writy the additional
 correct'on action in luded ill the ,A,.~sod non's respon e ilia have 01' w11l be implenie,ned -as a
 resul ofour . udi 'iindhlg, Th13 stah.ts ofthes' .~qrrc:ctive actions. will a so he evslua ed d~uing
 funn'(' audits scheduled by the DIG,
                          IV.· .AJORCO                 RIBUTORS TO THIS REPORT

EXJ?erjem~e-RatedAudits GroLlQ




      ~------                           ,-~.   -_ ..
                                    Chief

                      ,Senior Ieam Lender
                                r
,Infoffi.'ill,tio.D    y~t,t;rn.s   Audits Group

                           Cbici,

                         Selliorlillonnation'rechnolt;gy pecialis{

                                    Infonnation S.stems Audi
                                                          . or




                                                            o

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   ()1l7         p, B (If           \I~U                                                    LA            JOIIUtlr)' 1., 2m S - ljJl\l.iU)' II , 2 0 l f l !                         M.!J7                                              71A09
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                 DCBS (If IIfin :i                                                         It             j, UI1I' 1,,, 21]08 ~JIJ.:mtill')' ,1, 20W            {}                           n                                                  n
                 W Ui'Qlnl RCBS ofOhio                                                     Oti            Ja/lU .' I. 2008 -J.1Jlll.\ll'~ 31, WaJ              6J                  J.Gl,4·n                                        lml~"'>"10
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                 BeDS          -KmL~i.II.i City                                            MO             .l,l1luruy 1,2008 -l1Puary :!' 1,2(11 n                    n                          (l ,                     n                                 (I
                 R~S"           OS l}j'ldaho                                                10            ~ IUijll')' • ~OO -JilnRi.Il~ 31 T 2111 U                  U                            0                      {J
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                 B. ()fCllil1Qrofo                                                               A        J il.l1utJry I. 200S - hr1~ ~1, ;ll,l l U                  0                                                   o                                 o
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                                                                  Sl'.lMARY OF _ AD'] SA~U>U:· ~U:C110,.s BYPLA

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 0..l.8    Empkrt'BCBS                                              N\"                \)                      0                   0                0                     0              0              rI
 049       Hori:t,\~n BC:a     t N~ JCfilCJ'                          .r               ()                        ()                0                0                     ()             0              [}

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 062       ,WcllPnird ElCI3~ (!fVirgll'l.lil                             '1\           0               FJ ,21)             l ,623        179585                           ()   193.2{J1i                Il

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                                          'rural                                llS      S1,216,2~             S'708,(i83, $1.-123.456        S1l4,095        SJ,655,Z'l]        S560i)4.3
                                                                                             APPE..\DlX

                                                                       BluCCross BlueShteld
                                                                       Associanon
                                                                         . A9~r.tIlfil:lTI I>nl'ld~en~&I'
                                                                       IIlul; Croll &n~ 1l1~tj &lIlp.'d "wn




                                                                       Federal Empioye.~ l'rogmTi~
                                                                       15J 0 G Strtlet, N.W,
                                                                       "Vn SllirlgroUI D, f" 2I:mu5
June 3D, 201 (J                                                        'lQ2.9if;2. WOO
                                                                        f'll J::. 202.1)42-1 25
                        Group Chief
Expenence~Rat~d      Audits Group
Office of thl;l Inspector General
U_S. Office of Personnel Management
1900 E Streei Room 6400
Wa$hlngron" DC 204,15-1100
'Referencej :	       OPM DRAFT AUblT REPORT
                     Global Amount Paid Exceeded Covered Charges
                    Audlt Report #1A-99..o0.;10...o30
                    (Report ated and received 041 512010)



This is On response 0 the above referenced U.S. Office of PersonneJ
Management (OPM) Draij Audjt ReportCOI1Ci;HTling tile Global Amount
Paid Exceeded Covered Charges for clafms paid from January 1,2008
th rough January 31. 2010.• wlth potentiaI everp ayments ot~~i ng
$57 r410,745. Our comments concerning the findings in thlstepor1 are as
follows:                                .



The OPM 0 G auditors recommended that the Blue Cross Blue Shield
ASSQcil:ition (Association) and/or BCBS Plans review e sample of 2,599 fac.iUty·
claims, totaling $57.410,745 t determine whetherlhe claims were paid properly,
For all cfaim p~yment errors, ttle Bess plans should jnitiate recov~ry efforts
immediately as required flY the FEHBP contract. and return all amounts
recoveref,l to the FEHSP. After reviewing the listings of Amount Paid Exc~eded
Covered Charges potential overpayments totaling $57,410,745[, the Associa ·on.
.does not contesf that 122 claims totaling $1,306.946 in claim payment.s were
mad. As of June 30, 201 ,the Plans have recovered and returned $605)889 to
the Program f-er these overpaymen1s~ This represents .0013 percent of the
96,998 facilityc ai'ms review:ed and .0096 percent of he facility cl,afms wher~ the
amounts paidexoeeded oovered charges of $135043,267.. For the period of tile
audit, It represents O.<J0007perce,nt of total facility claims paid of     .
$1B,3Sa,037 1 660
We contest the remainjng 2,477 claims tQtaHng $56 1 103,'799 (support proviqed)
for ttte following reasons:'   '

•	 $ 2,018,192 in ctai,m payments were voided and/or adjusted prior to the start
   of the audit (April 1,5,2010)."                                 "                      ,   ,

   $152 l 833 in claim payments were ~djllSted or voided and LQCA adjus ed on
   or after April 15, 2010 but by June 30,2010,

•	 $421 ,354 ~n claim payments. error ere idenffied and recov.ery V'las loitfaled
   prior 0 the start of this audit (April 15, 2010) but the re<::ovety proce.s:s had not
   been completed as of June 30, 2010"

•	 The remaining $53,511,420 In questroned claim payments were paid correctly
   according to the Plan's pricmg methodology.

Recommendation 3 and ReliEonse,

The DIG Auditors recommended that the contracting ~fficer instruct the
Association to have the BeSS Plans: ldentify the root c8use(s) of the claim
payment e/TOrS and implement com;wtive aotfons/proc'edures to pre'fent these
types 0 errors in the, future, Based on our review of the Plan's confirmed
tlverpayments,o r analysis identified that the Validity and Compatibility Edit C92
(His Dollar) in FEPExpres fS being .Qeneraled. based lipan the Covered .
Charges as opposed to the Plan>~ allowances. Because the clLaims for this audit
are based upon the Plans' allowances exceeding the Covered. Charges
(Charged/Billed Amount)) there were claims that should have stopped prior to
payment for verification of the allowanoes that did not defer. Had these claim
deferreo for investigation of th~ P~an AIIDwan~ field, ther.e i$ tile likelihood th,at'
they could, have beenoorrected prior to paymen . A mod ificatton to the
FEPExpress claims system to defer claims based up-on the Plan Allowance as
been requested for lmpJamentatio by1 11t quarter 2.011.

Our an aIys fS of the pJan s' resu Its identlf1 ed he fo 11 oWj ng :

..	 64 clalms toteling $651,388 we~ paid incorrectly as a re~ult Ofprote5S0r
    error in pricrng, tl"Ie: claim using incorrect DRGs, Per Djems t allowa'r1ces or
    bundHng claIm lines for payment                           .               .

•	 55 claims totaling $601.955 were paid incorrectly as            e. fE!sult of prQc~ss_or
   error in incorrect data or provider billJng er ors.                 .         ..
To reduce these types o~ claim errors from occurring in the future, Plans and the
Assocfa ion perform the foHowing:'

.'   Use confirmed audJt errors as tra.iolng cols to enhance the proficienoy of
     claims eXBl11iner$. he Plans periodicaUy conduct foe-fresher training on the
     correct methods·for coding', pricing and the submIssion requirements fora I
     types of cJafms along with any exceptions noted since the previoll~ tr~inill9
     s~ssion.
   Use various ,Plan meeting&.' on-line webinaTS, a.ud;it ~Iert$, BlJlletlns, Plan
   vjslts al1~ the FEP AdnlinistfBifve Manual as tools to educate Plali staff on
   various compDnents of the claims adj:udlcatio process.
•' Continua to conduct the Association's System Wi e Clai Revi,ew process to
   Identify claims on a pos payment basis wllsre the amou t paid is greater
   than 'charges for Plans t9 rev'ew and correct as rlecess~ry,

While th esa measures are not absolute, ,they· provide reasonab le assura nces that
such items will be iden ified and corrected' According YJ 10 the extem that errors,
did occur, the payments are good faith erroneoUs benefits payments and faU
within the context of CS 1.039, Section 2.3(9)., Any benefit payments the Plan is
unable to recover are allowable charges to tt1e Program. In addlUon. as good
f-aith erroneous payments,' lost investmen in<?Ome does no appty to he
payments identified in this finding .

To further reduce hese types of claims errors in the fut re, SeBsAw111
implement the folloWing by August 31,. 2010;

..	 Modify Plans' pre~payn1ent quality review processes to. revIew a petc-antage
                    to
   of claims prior submission to the FEP Operations Center, with emphasis Or}
   the l'mpac of codlng aceuracy 'intne Payment process.
•	 Add c aims that cover tiNo betJsfit periods to the Association' System Wide
    Claim Revjew process.
•'	 ncreaS8 the c aims sample site to valf ate that Plans have accurately
    avaruated claIms provrded during the ~tem Wide Claim Review process.

seSSA will also e.vf:!fuate the feasibility of implementing the followingadditioneil
 oontTol:s by the4 h quarter of 2010 and implementa lon l If determi ea to be
'feasible, no later than 2nd quarter 6f 201 t

•	   Defer clain s: for verification of the Plan Al owance when the Allowance
     exceeds the Coyeri;ld Charges (aiJIed Charges) bY$25,OOO or More. ft
Amourrt 'aid 'reaterThan Charges Audit
June 30 2Q-10
Page 4 of4


    should be noted that he Amount Paid is not de emi,r1i::d untH the daim
    passes all edits and as a resLiJtciil"nnot be iTicluded in a pre-pa.yment edit
    process.
•	 Defer direct data entry claims, special pricing claims and Plan caictJlated
    claims over adoll'armaximum (S50~OOO) to elrow Plans" to perform a· quality'
  "reView prior to the· claim being released to FEP for processing,.
•	 Defer for ela,ims that cover more than one benefit period for management
    review before sLlb.rnitti n9 the claim for processi t g.,

We appreciate the opportu ity to provide oUr respanse to each ofthe
findings and request that our comments be included in their entirety as
part of the Final Audit Report . .         ....




Executive Director, F' rog ram Integrity
Federal Employee Program

Attachment

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