oversight

Audit of Global Coordination of Benefits for BlueCross and BlueShield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2015-07-29.

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
                  AUDIT OF
     GLOBAL COORDINATION OF BENEFITS FOR
       BLUECROSS AND BLUESHIELD PLANS
                                     Report Number 1A-99-00-14-046
                                              July 29, 2015




                                                        -- CAUTION –
This audit report has been distributed to Federal officials who are responsible for the administration of the audit program. This audit
report may contain proprietary data which is protected by Federal law (18 U.S.C 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general),
caution needs to be exercised before releasing the report to the general public as it may contain proprietary information that was
redacted from the publicly distributed copy.
             EXECUTIVE SUMMARY 

                                  Audit of Global Coordination of Benefits

Report No. 1A-99-00-14-046                                                                       July 29, 2015

Why Did We Conduct the Audit?          What Did We Find?

The objectives of our audit were to    Our limited scope audit was conducted in accordance with
determine whether the BlueCross and    Government Auditing Standards. The audit covered BCBS claim
BlueShield (BCBS) plans charged        payments from September 1, 2013 through May 31, 2014 as
costs to the Federal Employee Health   reported in the Annual Accounting Statements. The report
Benefit Program (FEHBP) and            questions $7,434,591 in health benefit charges. Specifically, these
provided services to the FEHBP         questioned charges are a result of the following:
members in accordance with the
terms of the contract with the U.S.    A. Survey Review
Office of Personnel Management.           	 Our survey review determined that the FEHBP was
Specifically, our objective was to           overcharged $2,947,816 in health benefit charges for
determine whether the BCBS plans             claims not properly coordinated with Medicare.
complied with contract provisions
relative to coordination of benefits   B. Statistical Review of Category F
with Medicare.                            	 Our review of a statistical sample of Category F claims for
                                              patients with cumulative claim line payments less than
What Did We Audit?                            $2,500 projected that the FEHBP was overcharged
                                              $4,486,775 in health benefit charges for claims not properly
The Office of the Inspector General           coordinated with Medicare. Category F claims include
has completed a limited scope audit           outpatient facility and professional claims where Medicare
of the FEHBP operations at all BCBS           Part B should have been the primary payer.
plans. The audit covered claims
incurred on or after August 15, 2013
that were reimbursed from
September 1, 2013 through
May 31, 2014 and potentially were
not coordinated with Medicare.




 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                    i
              ABBREVIATIONS
AAS           Annual Accounting Statements
Association   BlueCross BlueShield Association
BCBS          BlueCross and BlueShield
CARC          Claim Adjustment Reason Codes
CFR           Code of Federal Regulations
COB           Coordination of Benefits
DO            Director’s Office
FAM           Federal Employee Program Administrative Manual
FEHB          Federal Employee Health Benefits
FEHBP         Federal Employee Health Benefit Program
FEP           Federal Employee Program
FOIA          Freedom of Information Act
IG            Inspector General
OC            Operations Center
OIG           Office of the Inspector General
OPM           U.S. Office of Personnel Management
Plan(s)       BlueCross and BlueShield Plan(s)
RARC          Remittance Advice Remark Codes




                           ii
IV. MAJOR CONTRIBUTORS TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                              Page 

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


          ABBREVIATIONS ..................................................................................................... ii 


  I.	     BACKGROUND ..........................................................................................................1 


  II.	    OBJECTIVES, SCOPE, AND METHODOLOGY ..................................................3 


  III.	   AUDIT FINDINGS AND RECOMMENDATIONS.................................................7


          Global Coordination of Benefits Review.......................................................................7 

          A. Survey Review ..........................................................................................................7 

          B. Statistical Review of Category F Claims ................................................................13 


  IV.	    MAJOR CONTRIBUTORS TO THIS REPORT ..................................................17 


          APPENDIX A: BlueCross BlueShield Association’s October 31, 2014 response to
          the Draft Audit Report, issued August 1, 2014.

          APPENDIX B: BlueCross BlueShield Association’s February 25, 2015 response to
          the Statistical Review Audit Inquiry, issued February 11, 2015.

          REPORT FRAUD, WASTE, AND MISMANAGEMENT
IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT

This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at all
BlueCross and BlueShield (BCBS) plans. The audit was performed by the Office of Personnel
Management’s (OPM) Office of the Inspector General (OIG), as authorized by the Inspector
General Act of 1978, as amended.

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

The BlueCross BlueShield Association (Association), on behalf of participating BCBS plans, has
entered into a Government-wide Service Benefit plan contract (CS 1039) with OPM to provide a
health benefit plan authorized by the FEHB Act. The Association delegates authority to
participating local BCBS plans throughout the United States to process the health benefit claims
of its federal subscribers. There are 64 local BCBS plans participating in the FEHBP.

The Association has established a Federal Employee Program (FEP1) Director’s Office (DO) in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP DO
coordinates the administration of the contract with the Association, member BCBS plans, and
OPM.

The Association has also established an FEP Operations Center (OC). The activities of the
FEP OC are performed by CareFirst BlueCross BlueShield, located in Washington, D.C. These
activities include acting as fiscal intermediary between the Association and member plans,
verifying subscriber eligibility, approving or disapproving the reimbursement of local plan
payments of FEHBP claims (using computerized system edits), maintaining a history file of all
FEHBP claims, and maintaining an accounting of all program funds.




1
  Throughout this report, when we refer to "FEP", we are referring to the Service Benefit Plan lines of business at
the Plan(s). When we refer to the "FEHBP", we are referring to the program that provides health benefits to federal
employees.

                                                         1                                Report No. 1A-99-00-14-046
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
Association and plan management. Also, management of each BCBS plan is responsible for
establishing and maintaining a system of internal controls.

Findings from our previous global coordination of benefits (COB) audit of all BCBS plans
(Report No. 1A-99-00-13-032, dated November 22, 2013) for claims reimbursed from
April 1, 2012 through January 31, 2013 are currently in the process of being resolved.

Our sample selections, instructions, and preliminary audit results of the potential coordination of
benefit errors were presented to the Association in a draft report, dated August 1, 2014. 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 BCBS plans on various dates through February 25, 2015 was
considered in preparing our final report.




                                                 2                           Report No. 1A-99-00-14-046
IV. OBJECTIVES,
II.  MAJOR CONTRIBUTORS
                SCOPE, ANDTO THIS REPORT
                          METHODOLOGY

 Objectives
 The objectives of our audit were to determine whether the BCBS plans charged costs to the
 FEHBP and provided services to the FEHBP members in accordance with the terms of the
 contract. Specifically, our objective was to determine whether the plans complied with contract
 provisions relative to coordination of benefits with Medicare.

 Scope
 The audit covered health benefit payments from September 1, 2013 through May 31, 2014 as
 reported in the Annual Accounting Statements. We performed a computer search on our claims
 data warehouse to identify all BCBS claims incurred on or after August 15, 2013 that were
 reimbursed from September 1, 2013 through May 31, 2014 and potentially not coordinated with
 Medicare. This search identified 404,775 claim lines, totaling $49,239,602 in payments that were
 potentially not coordinated with Medicare (See Exhibit I for the summary of our universe by
 Category).

 Generally, Medicare Part A pays all covered costs (except for deductibles and coinsurance) for
 inpatient care in hospitals, skilled nursing facilities and hospice care. For each Medicare Benefit
 Period, there is a one-time deductible, followed by a daily copayment beginning with the 61st
 day. Beginning with the 91st day of the Medicare Benefit Period, Medicare Part A benefits may
 be exhausted, depending on whether the patient elects to use their Lifetime Reserve Days. For
 the uncoordinated Medicare Part A claims, we estimate that the FEHBP was overcharged for the
 total claim payment amounts. When applicable, we will reduce the questioned amount by the
 Medicare deductible and/or Medicare copayment.

 Medicare Part B pays 80 percent of most outpatient charges and professional claims after the
 calendar year deductible has been met. Also, Medicare Part B covers a portion of inpatient
 facility charges for ancillary services such as medical supplies, diagnostic tests, and clinical
 laboratory services. Based on our experience, ancillary items account for approximately 30
 percent of the total inpatient claim payment. Therefore, we estimate that the FEHBP was
 overcharged 25 percent for these inpatient claim lines (0.30 x 0.80 = 0.24 ~ 25 percent).

 We separated the uncoordinated claims into six categories based on the clinical setting and
 whether Medicare Part A or Part B should have been the primary payer.




                                                  3                            Report No. 1A-99-00-15-008
                  Exhibit I – Universe of Potentially Uncoordinated Claim Lines
                         Category                             Patients   Claim Lines   Amount Paid
Category A: Medicare Part A Primary for I/P Facility            199         232           $3,394,293
Category B: Medicare Part A Primary for Skilled                 958         8,864         $1,756,315
Nursing/HHC/Hospice Care
Category C: Medicare Part B Primary for Certain Inpatient       38           79           $2,177,720
Facility Charges
Category D: Medicare Part B Primary for Skilled                 46           62             $264,286
Nursing/HHC/Hospice Care
Category E: Medicare Part B Primary for Outpatient Facility    2,523       26,046         $6,534,223
and Professional
Category F: Medicare Part B Primary for Outpatient Facility   134,540      369,492       $35,112,765
and Professional (with processor manual override using code
‘F’)
Total                                                         138,304      404,775       $49,239,602


	 Categories A and B consist of inpatient claims that should have been coordinated with
   Medicare Part A. If the BCBS plans indicated that Medicare Part A benefits were exhausted,
   we reviewed the claims to determine whether there were any inpatient services that were
   payable by Medicare Part B. For these claim lines, we only questioned the services covered
   by Medicare Part B.

	 Categories C and D include inpatient claims with ancillary items that should have been
   coordinated with Medicare Part B. If we could not reasonably determine the actual
   overcharges for the ancillary items, we questioned 25 percent of the amount paid for these
   inpatient claim lines. If the BCBS plans indicated that members had Medicare Part B only
   and priced the claims according to the Omnibus Budget Reconciliation Act of 1990 pricing
   guidelines, we reviewed the claims to determine whether there were any inpatient services
   that were payable by Medicare Part B.

	 Categories E and F include outpatient facility and professional claims where Medicare Part B
   should have been the primary payer. If we could not reasonably determine the actual
   overcharge for a claim line, we questioned 80 percent of the amount paid for the claim line.

To test each BCBS plan’s compliance with the FEHBP health benefit provisions related to
coordination of benefits with Medicare, we selected the following for review:




                                                       4	                    Report No. 1A-99-00-14-046
    67,542 claim lines, totaling $23,772,591 in payments for survey review (See Exhibit II for the
     summary of our survey review claim selections). We did not project the results of our survey
     review to the universe of claims paid for potentially uncoordinated claim lines.

    A statistical review of Category F claims for patients with cumulative claim payments less
     than $2,500. From a universe of 333,904 claim lines, totaling $25,276,811 in payments, we
     selected to review 5,648 claim lines, totaling $1,577,291 in payments. The results of our
     sample review were projected to the universe.

When we notified the Association of these potential errors on August 1, 2014, these claims were
within the Medicare timely filing requirement and could be filed with Medicare for coordination
of benefits.2

Methodology
The claims selected for review were submitted to each BCBS plan for their review and response.
We then conducted a limited review of the plans’ “paid correctly” responses and an expanded
review of the plans’ “paid incorrectly” responses. Specifically, we verified supporting
documentation, the accuracy and completeness of the plans’ responses, determined if the claims
were paid correctly, and/or calculated the appropriate questioned amounts for the claim payment
errors. Additionally, we verified on a limited test basis if the BCBS plans had initiated recovery
efforts, adjusted or voided the claims, and/or completed the recovery process by the audit request
due date (i.e., October 31, 2014) for the claim payment errors in our sample.

The determination of the questioned amount is based on the FEHBP contract, the 2013 and 2014
Service Benefit Plan brochures, and the Association’s FEP Administrative Manual (FAM) and
various manuals and other documents available from the Center for Medicare and Medicaid
Services that explain Medicare benefits.

We conducted our limited scope performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.

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

2
  Claims received by Medicare more than one calendar year after the dates of service could be denied by Medicare as being past the timely filing
requirement.
                                                                       5                                        Report No. 1A-99-00-14-046
We also conducted tests to determine whether the BCBS plans had complied with the contract
and the laws and regulations governing the FEHBP as they relate to coordination of benefits.
The results of our tests indicate that, with respect to the items tested, the BCBS plans did not
fully comply with the provisions of the contract relative to coordination of benefits with
Medicare. Exceptions noted are explained in detail in the “Audit Findings and
Recommendations” section of this audit report. With respect to the items not tested, nothing
came to our attention that caused us to believe that the BCBS plans had not complied, in all
material respects, with those provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP DO, the FEP OC, and the BCBS plans. Through audits and a reconciliation process, we
have verified the reliability of the BCBS claims data in our data warehouse, which was used to
identify the universe of potential COB errors. The BCBS claims data is provided to us on a
monthly basis by the FEP OC, and after a series of internal steps, uploaded into our data
warehouse. However, due to time constraints, we did not verify the reliability of the data
generated by the BCBS plans’ local claims systems. While utilizing the computer-generated data
during our audit testing, nothing came to our attention to cause us to doubt its reliability. We
believe that the data was sufficient to achieve our audit objective.

Audit fieldwork was performed at our offices in Washington, D.C., Cranberry Township,
Pennsylvania and Jacksonville, Florida through March 2015.




                                                 6                           Report No. 1A-99-00-14-046
  IV. AUDIT
III.   MAJORFINDINGS
             CONTRIBUTORS  TO THIS REPORT
                     AND RECOMMENDATIONS

 Global Coordination of Benefits Review

 The sections below detail the results of our 2014 global coordination of benefits (COB) audit.
 Many recommendations were issued in prior COB audits and are rolled forward from the COB
 audit (Report No. 1A-99-00-12-029, issued March 20, 2013).

 A. Survey Review                                                                       $2,947,816

 From claims with dates of service on or after August 15, 2014 that were reimbursed from
 September 1, 2013 through May 31, 2014, we performed a computer search that identified
 404,775 claim lines, totaling $49,239,602, that potentially were not coordinated with Medicare.
 From this universe, we performed a survey review of 67,542 claim lines, totaling $23,772,591 in
 payments, to determine whether the BCBS plans complied with contract provisions relative to
 COB with Medicare. The following table outlines our sample selection methodology by
 Category.

                                 Exhibit II – Claim Lines Reviewed
                                                              Claim    Amounts        Potential
     Category           Sample Selection Methodology          Lines     Paid         Overcharges
    Category A      All patients selected (199 patients)       232      $3,394,293      $3,394,293
    Category B      All patients selected (958 patients)      8,864     $1,756,315      $1,756,315
    Category C      All patients selected   (38 patients)      79       $2,177,720        $544,430
    Category D      All patients selected   (46 patients)      62        $264,286          $66,072
    Category E      Patients with cumulative claim lines of   22,717    $6,344,023      $5,075,218
                    $500 or more (1,468 patients)
     Category F     Patients with cumulative claim lines of   35,588    $9,835,954      $7,878,763
                    $2,500 or more (1,660 patients)
  Total                                                       67,542   $23,772,591     $18,715,091


 At the time we submitted our sample of potential COB errors to the Association on August 1,
 2014, the claims were within the Medicare timely filing requirement and could be filed with
 Medicare for coordination of benefits. Since the BCBS plans are required to initiate recovery
 efforts immediately for the actual COB errors, our expectation is for the plans to recover and
 return all of the actual COB errors to the FEHBP.
                                                   7                          Report No. 1A-99-00-14-046
Our survey review determined that the BCBS plans incorrectly paid           BCBS Plans overpaid
9,028 claim lines, totaling $3,639,226 in payments. We estimate that        $2.9 million due to
the FEHBP was overcharged $2,947,816 for these claim line                   errors related to
payments. The following table details the six categories of questioned      coordinating benefits
claim lines:                                                                with Medicare.

                            Exhibit III – Claim Lines Questioned
                                         Claim        Amount        Amount
                       Category          Lines         Paid        Questioned
                   Category A             27           $509,633          $509,633
                   Category B            2,926         $374,981          $374,981

                   Category C             13           $244,903           $61,226

                   Category D              9            $35,739            $8,935

                   Category E            1,268         $719,157          $578,927
                   Category F            4,785        $1,754,813     $1,414,114
                   Total                 9,028        $3,639,226     $2,947,816



These 9,028 claim line payment errors are comprised of the following:

	 For 3,274 (36 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
   claims due to systematic processing errors. Specifically, the claims were not deferred on the
   FEP Express Claims System for Medicare COB review by the processors. As a result, the
   FEHBP was overcharged $602,490 for these COB errors.

	 For 2,613 (29 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
   claims due to manual processing errors. In most cases, there was special information present
   in the FEP Express Claims System to identify Medicare as the primary payer when these
   claims were paid. However, an incorrect Medicare Payment Disposition Code was used to
   override the FEP Express Claims System’s deferral of these claims. The Medicare Payment
   Disposition Code identifies Medicare’s responsibility for payment on each charge line of a
   claim. According to the FAM, the completion of this field is required on all claims for
   patients who are age 65 or older. As a result, we estimate that the FEHBP was overcharged
   $1,043,360 for these COB errors.




                                                 8	                           Report No. 1A-99-00-14-046
	 For 1,219 (14 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
   claims due to provider billing errors. As a result, we estimate that the FEHBP was
   overcharged $352,138 for these COB errors.

	 For 1,028 (11 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
   claims due to retroactive adjustments. Specifically, there was no special information present
   in the FEP Express Claims System to identify Medicare as the primary payer when the
   claims were paid. However, when the Medicare information was subsequently added to the
   FEP Express Claims System, the BCBS plans did not review and/or adjust the patient’s prior
   claim(s) back to the Medicare effective dates. As a result, we estimate that the FEHBP was
   overcharged $581,281 for these COB errors.

	 For 894 (10 percent) of the claim lines questioned, the overpayments were not COB errors,
   but were processed and paid incorrectly by the Plans. As a result, we estimate that the
   FEHBP was overcharged $368,547.

Of the $2,947,816 in total questioned charges, $843,493 (29 percent) was identified by the BCBS
plans before receiving our audit notification letter (i.e., June 26, 2014). However, since the
BCBS plans had not completed the recovery process and/or adjusted these claims by draft report
due date (i.e., October 31, 2014), we continue to question these charges. The remaining
questioned charges of $2,104,323 (71 percent) were identified as a result of our audit.

Contract CS 1039, Part II, section 2.6 states, “(a) The Carrier shall coordinate the payment of
benefits under this contract with the payment of benefits under Medicare . . . (b) The Carrier
shall not pay benefits under this contract until it has determined whether it is the primary
carrier . . . .” Also, Part III, section 3.2 (b)(1) states, “The Carrier may charge a cost to the
contract for a contract term if the cost is actual, allowable, allocable, and reasonable . . . [and]
on request, document and make available accounting support for the cost to justify that the cost
is actual, reasonable and necessary. . . .”

Contract CS 1039, Part II, section 2.3(g) states, “If the Carrier [or OPM] determines that a
Member’s claim has been paid in error for any reason . . . the Carrier shall make a prompt and
diligent effort to recover the erroneous payment . . . until the debt is paid in full or determined to
be uncollectible by the Carrier because it is no longer cost effective to pursue further collection
efforts or it would be against equity and good conscience to continue collection efforts . . . .”

Contract CS 1039, Part III, section 3.16(b) states, “Claim payment findings (i.e., claim
overpayments) in the scope of an OIG audit are reportable as questioned charges unless the
Carrier provides documentation supporting that these findings were already identified (i.e.,
documentation that the plan initiated recovery efforts) prior to audit notification and corrected
                                                  9	                           Report No. 1A-99-00-14-046
(i.e., claims were adjusted and/or voided and overpayments were recovered and returned to the
FEHBP) by the original due date of the draft report response.”

The 2013 BlueCross and BlueShield Service Benefit Plan brochure, page 133, Primary Payer
Chart, illustrates when Medicare is the primary payer. In addition, page 135 of that brochure
states, “We limit our payment to an amount that supplements the benefits that Medicare would
pay under Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance),
regardless of whether Medicare pays.”

Association’s Response:
In response to the draft audit report, which questioned $18,715,091 in potential overpayments,
the Association states, “The Plans responded that they agreed that claim overpayments totaling
$1,987,727 were paid in error and that recovery was initiated on these claim overpayments as
a result of this audit. Of this amount, Plans reported that they have recovered $1,557,529 to
date.”

Regarding corrective actions, the Association indicated that to improve COB claims processing,
and to timely detect and prevent claim payment errors, the Association has implemented and
updated the following:

	 “Modified the FEP claims system on July 11, 2014 to accept the Medicare denial reason
   code from Plans for all Medicare denied claims.

	 Worked with Plans to ensure that Plans modify their claims systems . . . where possible.

	 Enhanced the FEP Claims Audit Monitoring Tool (CAMT) to include all retroactive
   enrollment notices processed (including Medicare).

	 In 2015, BCBSA [Association] will identify opportunities to implement new deferrals based
   upon the Medicare denial reason code. …

	 In January 2015, the CAMT will be enhanced to include additional uncoordinated
   Medicare claims based upon the OIG uncoordinated Medicare audit program for Plans to
   review and initiate recovery as appropriate.”

The Association also states that to ensure the Plans review all claims incurred back to the
Medicare effective date, the following corrective actions were implemented by the Association:

	 Updated the Plan Administrative Manual to instruct Plans on how to work the Retroactive
   Enrollment Report.
                                              10 	                        Report No. 1A-99-00-14-046
	 Review each Plan’s procedures for reviewing the retroactive enrollment reports and how they
   test to ensure claims are reviewed and properly updated and/or adjusted back to Medicare
   effective dates.

	 Updated the FEP CAMT on October 27, 2014 to capture all retroactive enrollment activity.

	 Starting in 2015, require Plans to perform a self-assessment on the retroactive enrollment
   process to ensure they are identifying all affected claims in member history. The Plans will
   be required to provide a report of this self-assessment to the Association and implement
   corrective actions where necessary.

OIG Comments:
After reviewing the Association’s response and additional documentation provided by the BCBS
plans, we revised the questioned charges from our draft report to $2,947,816. If claim
overpayments were identified by the BCBS plans before our audit notification date
(i.e., June 26, 2014) and adjusted or voided by the draft report due date (i.e., October 31, 2014),
we did not consider these as claim payment errors in the final report.

Based on the Association’s response and the BCBS plans’ documentation, we determined that
the Association and/or plans agree with $2,104,323 and disagree with $843,493 of the questioned
charges outlined in this final report. Although the Association only agrees with $1,987,727 of
the questioned charges in its written response, the BCBS plans’ documentation supports
concurrence with $2,104,323.

The $843,493 that the Association does not agree with represents the following items:

	 $651,538 of the contested amount represents claim overpayments where the BCBS plans did
   not initiate recovery efforts before our audit notification date (i.e., June 26, 2014) or did not
   complete the recovery process by the draft report due date (i.e., October 31, 2014).

	 $109,773 of the contested amount represents claims that the BCBS plans identified as paid
   correctly, but the diagnosis and procedure codes appear to be acceptable with Medicare
   billing guidelines.

	 $82,182 of the contested amount represents claim overpayments that the BCBS plans agree
   were COB errors, but the Plans state that all recovery efforts have been exhausted, and these
   overpayments are uncollectible.



                                                 11 	                         Report No. 1A-99-00-14-046
Although the Association disagrees with $843,493 of the questioned charges, we will continue to
question these overpayments because either 1) the BCBS plans did not provide sufficient
documentation to support why the FEHBP paid as the primary issuer, or 2) the plans did not
provide sufficient documentation indicating all efforts for uncollectible recoveries had been
exhausted as defined by CS 1039. All of the questioned charges were, in fact, identified as part
of this audit - as opposed to claim payment errors identified by the BCBS plans prior to the start
of the audit.

Recommendation 1
We recommend that the contracting officer disallow $2,947,816 for claim overpayments and
verify that the BCBS plans return all amounts recovered to the FEHBP.

Recommendation 2
Although the Association has developed a corrective action plan to reduce COB findings, we
recommend that the contracting officer instruct the Association to provide evidence or
supporting documentation ensuring that all BCBS plans are following the corrective action plan.
We also recommend that the contracting officer ensure that the Association’s corrective actions
for improving the prevention and detection of uncoordinated claim payments are being
implemented. These additional corrective actions are included in the Association’s response to
the draft report.

Recommendation 3 (Rolled Forward from COB 2012)
                                                                         Procedural
We continue to recommend that the contracting officer require the
                                                                         recommendations
Association to ensure that the FEP OC continues to utilize the
                                                                         related to COB claims
Medicare Data Exchange Agreement that requires a quarterly
                                                                         remain open since
exchange of enrollment data between Medicare and the FEHBP. We
                                                                         2012.
also continue to recommend that the contracting officer require the
Association to ensure that the enrollment data provided by Medicare is updated in a timely
manner in the FEP Express Claims System.

Recommendation 4 (Rolled Forward from COB 2012)
We continue to recommend that the contracting officer require the Association to ensure that the
implementation of the FEP OC’s corrective action of inputting a field(s) in the FEP Express
Claims System to collect Remittance Advice Remark Codes (RARC) and Claim Adjustment
Reason Codes (CARC) from the BCBS plans is underway, and that the progress of such is
monitored. These Medicare generated codes (RARC and CARC) provide the reason Medicare
denied a claim payment. The Association should also have the FEP OC and BCBS plans utilize
the RARC and CARC field(s) when implementing the Medicare Disposition Code corrective
actions.


                                               12                           Report No. 1A-99-00-14-046
B. Statistical Review of Category F Claims                                                        $4,486,775

Category F claims are outpatient facility and professional claims for members with Medicare
Part B primary coverage for which a processor manually overrode the FEP Express System claim
deferral by applying a Medicare Payment Disposition code of “F.” For Category F claims with
dates of service on or after August 15, 2013 and reimbursed from September 1, 2013 through
May 31, 2014, we performed a computer search and identified 369,492 claim lines, totaling
$35,112,765 in payments, that were potentially not coordinated with Medicare.

From this universe, we reviewed 100 percent of the claim lines for patients with cumulative
claim payments of $2,500 or more, a review survey of 35,588 claim lines, totaling $9,835,954 in
payments. The results of our review of Category F claims are addressed in section A, above.

In addition to the review of Category F patients with cumulative claim payments over $2,500, we
performed a sample review of Category F claims for patients with cumulative payments under
$2,500. The universe of patients with cumulative claim line payments under $2,500 contains
333,904 claim lines, totaling $25,276,811 in payments, that potentially were not coordinated
with Medicare. From this universe, we reviewed a statistical sample of 5,648 claim lines,
totaling $1,577,291 in payments. With the intent of projecting the results of the sample to the
population, we used automated software to generate a random dollar-unit sample targeting a five
percent margin of error and a 95 percent confidence level, with a presumed universe error rate of
seven percent.3 Each sample unit was identified as a single FEHBP paid claim line.

             Exhibit IV - Universe and Sample of Category F Claim Lines Reviewed

                                         Claim Line Universe               Claim Lines Sampled/Reviewed
                                    Claim Lines   Amounts Paid             Claim Lines    Amounts Paid
Patients with cumulative
payments over $2500                         35,588          $9,835,954             35,588        $9,835,954
Patients with cumulative
payments under $2500                      333,904          $25,276,811              5,648        $1,577,291
Category F Total Universe                 369,492          $35,112,765             41,236       $11,413,245

Our review of patients with cumulative payments under $2,500 determined that the BCBS plans
did not properly coordinate 1,124 of the 5,648 claim lines from the statistically valid sample,




3
 The presumed universe error rate of seven percent was calculated using the results from our prior audit
(Report No. 1A-99-00-13-032). Of the 41,363 Category F claims lines reviewed from our prior audit, the BCBS
plans did not properly coordinate 2,898 claim lines with Medicare.
                                                      13                              Report No. 1A-99-00-14-046
resulting in overcharges of $302,001 to the FEHBP.4 These claim payment errors included the
following:

	 454 claim lines, totaling $135,391 in overcharges, were not coordinated with Medicare, due to
   manual processor overrides;

	 249 claim lines, totaling $58,857 in overcharges, were not coordinated with Medicare, due to
   system processing errors;

	 289 claim lines, totaling $64,563 in overcharges, were not coordinated with Medicare, due to
   provider billing errors;

	 107 claim lines, totaling $36,667 in overcharges, were not coordinated with Medicare, due to
   various errors for which we were unable to determine a specific cause;

	 16 claim lines, totaling $5,298 in overcharges, were due to retroactive adjustments to the
   members Medicare enrollment; and

	 9 claim lines, totaling $1,225 in overcharges, were due to various pricing errors, which were
   not related to coordination of benefits with Medicare.

Based on our projection of the sample results, we are 95 percent confident that the true value of
claims not properly coordinated with Medicare for the universe described above is between
$4,174,303 and $4,799,248. Our best estimate of the true value, the point estimate, is $4,486,755,
and this is the amount we are questioning in this report.

We first questioned improperly coordinated claims payments in our 2003 global coordination of
benefits audit (Report No. 1A-10-00-03-013). Our audit recommendations in that and subsequent
audit reports included specific corrective actions to reduce the amount of these improper
payments. These corrective actions included pre-payment system enhancements and/or edits that
would prevent improperly coordinated claims from being paid. The Association’s
FEPDO developed a corrective action plan on December 9, 2003 that was designed to “reduce
Medicare Coordination of Benefits audit findings and maximize recovery efforts.”

The FEPDO’s corrective action has clearly been inadequate to resolve these issues. Since our
first audit, we have questioned a total of approximately $93 million in claim payments that were


4
 Since Medicare Part B pays 80 percent of most outpatient charges and professional claims after the calendar year
deductible has been met, we questioned 80 percent of the amount paid for the claim lines we could not reasonably
determine the actual overcharge.
                                                        14 	                             Report No. 1A-99-00-14-046
not appropriately coordinated with Medicare; approximately $43 million of which were
questioned after FEPDO developed its corrective action plan. CS 1039 states that costs charged
to the FEHBP must be actual, allowable, allocable, and reasonable.
No prudent person would continue to knowingly make these improper Claim payment
payments in the conduct of competitive business without taking         errors were not paid
effective measures to prevent them. Therefore, we conclude that the    in good faith.
FEPDO unreasonably charged the FEHBP for claims that were not
paid in good faith in accordance with CS 1039. The full amount of
the estimated improper payments should be returned to the FEHBP trust fund, regardless of the
FEPDO’s ability to recover the improper payments from the specific providers to whom they
were made.

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.

48 CFR 31.201-3 states, “(a) A cost is reasonable if, in its nature and amount, it does not exceed
that which would be incurred by a prudent person in the conduct of competitive business.”

BCBS Association Response:
“The Plans agreed that claims totaling $302,001 were paid in error and were not identified by
the audit. . . . We contest OIG’s point estimate of [$4,486,755] in claim payment errors for the
universe of Medicare payments where the members total Medicare payments are >/= $2,500.
We contest this methodology for because it does not allow Plans to use the requirements as
stated in CS1039 related to Audit Resolution and Reportable findings. Further, we do not
agree to the validity of the statistical calculation used to determine the total estimated
overpayment for the stated population.”

The full remainder of the Association’s response is included in the Appendix of this report. In
summary, it states that it contests the finding because 1) it cannot resolve the audit finding
because Plans do not have the exact claims that are being questioned, and 2) that there was not a
mutually agreed upon understanding of the following elements of the statistical methodology:

   Population to be sampled;

   Sample Size determination;

   Error Rate Calculation;

   Factor(s) used to determine Point estimation; and
                                                 15                            Report No. 1A-99-00-14-046
	 Point estimation used (i.e., Average, Median).

OIG Comments:
We acknowledge that the statistical sampling methodology used in this review does not present
the Association with the specific claim lines questioned, and that it is therefore unable to research
and resolve these claims in accordance with CS 1039.

However, the elements of CS 1039 cited by the Association are only applicable to claim
overpayments made in good faith. As mentioned above, the Association has continued to make
these egregious and repeated overpayments without taking effective measures to prevent them. In
other words, the payments were not “reasonable” as defined by the CFR, and therefore we do not
consider the Association’s inability to associate the questioned dollars to a specific claim line
applicable to this audit finding.

With regards to the details of the sampling methodology, we believe that all of the relevant
statistical information is contained in the explanation above, but will directly address the specific
elements questioned by the Association.

	 The population sampled for this review was Category F claims with cumulative payments
   under $2,500.

	 The sample size was determined using statistical analysis software that applied a random
   dollar-unit sample targeting a five percent margin of error and a 95 percent confidence level,
   with a presumed universe error rate of seven percent.

	 The error rate was calculated using the error rate identified in our prior COB audit (Report
   No. 1A-99-00-13-032).

	 The point estimate was derived using the average ratio method, which is an appropriate
   estimator to use in the context of stratified dollar-unit sample designs, where each dollar in a
   stratum’s value has the same probability of selection.

The sampling approach we used during this audit represents a valid statistical sampling
methodology, and all of the relevant details and variables have been outlined in this report.

Recommendation 5
We recommend that the contracting officer disallow $4,486,775 for claims that were not paid in
good faith and unreasonably charged to the FEHBP.

                                                 16 	                         Report No. 1A-99-00-14-046
IV. MAJOR CONTRIBUTORS TO THIS REPORT

Information Systems Audits Group

                , Auditor

             , Auditor-in-Charge


           , Senior Team Leader

             , Group Chief




                                   17   Report No. 1A-99-00-14-046
                                        APPENDIX A 





                                                                                 Federal Employee Program
                                                                                 1310 G. Street, NW
                                                                                 Washington, DC 20005
                                                                                 202.942.1000
                                                                                 Fax 202.942.1125
October 31, 2014

                , Chief
Information Systems Audit Group
Office of the Inspector General
U.S. Office of Personnel Management
800 Cranberry Woods Drive, Suite 130
Cranberry Township, PA 16066


Reference:          OPM DRAFT AUDIT REPORT
                    Tier XIV Global Coordination of Benefits
                    Audit Report #1A-99-00-13-032

Dear           :

This is in response to the above – referenced U.S. Office of Personnel Management (OPM) Draft
Audit Report concerning the Global Coordination of Benefits Audit for claims paid from August
15, 2013 through May 31, 2014. Our comments concerning the findings in the report are as
follows:

Recommendation 1:

Coordination of Benefits with Medicare Questioned Amount                           $18,715,091

The OPM OIG submitted their sample of potential Medicare Coordination of Benefits errors to
the Blue Cross Blue Shield Association (BCBSA) on August 1, 2014. The BCBS Association
and/or the BCBS Plans were requested to review these potential errors and provide responses by
October 31, 2014. These listings included claims incurred on or after August 15, 2013 that were
reimbursed from September 1, 2013 through May 31, 2014 and potentially not coordinated with
Medicare. OPM OIG identified 404,775 claim lines, totaling $49,239,602 in payments, which
potentially were not coordinated with Medicare. From this universe, OPM OIG selected for
review a sample of 67,552 claim lines, totaling $23,785,091 in payments with a potential
overpayment of $18,715,091 to the Federal Employee Health Benefit Program (FEHBP).

The OIG recommended that the contracting officer disallow $18,715,091 for uncoordinated
claim line payments and have the BCBS plans return all amounts recovered to the FEHBP.
BCBSA Response

After reviewing the OIG listing of potentially uncoordinated Medicare COB claims totaling
$18,715,091, the BCBS Association noted that the actual amount reviewed by Plans totaled
$18,775,814. The Plans responded that they agreed that claim overpayments totaling $1,987,727
were paid in error and that recovery was initiated on these claim overpayments as a result of this
audit. Of this amount, Plans reported that they have recovered $1,557,529 to date.

For the remaining $16,737,587 in claim payment errors questioned, Plans reported that:

  $16,727,355 in claim payments were paid correctly.
  $554,229 in claim payment errors were identified and returned to the Program before the
   OIG Audit Notification letter.
	 $84,996 in claim payment errors that were initially paid incorrectly but the error was
   identified before the OIG Audit Notification letter and the overpayment was recovered and
   returned before the response was due to OPM.
	 $529,548 in claim payment errors that were identified and recovery was initiated before the
   Audit Notification letter, but the overpayment has not yet been returned to the Program.
	 $203,463 that was initially paid incorrectly but recovery was initiated before receiving the
   OIG sample, however recovery was not initiated because the claim payment error was below
   the recovery threshold of $50 or overpayment was not initiated because the claim was passed
   the Plan’s provider contract overpayment recovery limit.

Where possible, the Plans will continue to pursue the remaining overpayments as required by CS
1039, Section 2.3(g) (l).

Recommendation 2

The OIG recommended that documentation to support each COB error that is included in the
sample selections and part of this preliminary finding (even if the BCBS plan initiated the
overpayment recovery prior to the audit notification date and completed the recovery process by
the IR due date).

BCBSA Response

Documentation to support the contested amounts and the initiation of overpayment recovery
before the audit has been provided. In addition, we have attached a schedule listed as
Attachment A that shows the amount questioned, contested, and agreed to by each Plan location.

Recommendation 3

Although the Association has developed corrective actions to reduce COB findings, we
recommend that the contracting officer instruct the Association to ensure that all BCBS plans are
following the corrective action plan. Also, the Association should continue to identify additional
corrective actions to further reduce COB findings.
BCBSA Response

As noted by the OIG, in order to continue to improve Medicare claims processing, and timely
prevent Medicare claim payment errors and detect Medicare payment errors, BCBSA
initiated/completed the following:

  Modified the FEP claims system on July 11, 2014 to accept the Medicare denial reason code
   from Plans for all Medicare denied claims.
 Worked with Plans to ensure that Plans modify their claims systems to submit of the
   Medicare denial reason code, where possible.
	 Enhanced the FEP Claims Audit Monitoring Tool (CAMT) to include all retroactive
   enrollment notices processed (including Medicare) so that Plan processing can be monitored
   and Plans contacted if they do not appear to be addressing the Medicare retro notices.
	 In 2015, BCBSA will identify opportunities to implement new deferrals based upon the
   Medicare denial reason code. The deferral will require the claims to either be reviewed by
   claims processors before payment or will deny the claim and instruct Plans to return the
   claim system will be modified to defer claims for additional Plan review for certain Medicare
   denial reason codes.
	 In January 2015, the CAMT will be enhanced to include additional uncoordinated Medicare
   claims based upon the OIG uncoordinated Medicare audit program for Plans to review and
   initiate recovery as appropriate.

Recommendation 4:

OPM OIG recommended that the contracting officer require the Association to ensure that the
BCBS Plans have procedures in place to review all claims incurred back to the Medicare
effective dates when updated, Other Party Liability information is added to the FEP national
claims system. When Medicare eligibility is subsequently reported, the Plans are expected to
immediately determine if previously paid claims are affected and, if so, to initiate the recovery
process within 30 days.

BCBSA Response:

To ensure that Plans review all claims incurred back to the Medicare effective date:

   Updated the Plan Administrative Manual to instruct Plans on how to work the Retroactive
    Enrollment Report.
   Review Plans procedures for reviewing retroactive enrollment reports as well as tests
    transactions to ensure that all claims are reviewed back to the Medicare effective dates.
   Updated its FEP CAMT on October 27, 2014 to capture all retro-active enrollment activity.
    The CAMT
         Allows BCBSA to review Plan activity to ensure that Plans are reviewing member
            history.
         Includes a message to all Plans that they must review history for all affected claims as
            part of the retroactive enrollment review process.
	 Require Plans to perform a self-assessment on the retroactive enrollment process in 2015 to
   ensure that Plans are going back in the member history to identify all affected claims. The
   Plans will also be required to provide a report of this activity to our office and implement
   corrective action where necessary.

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

Sincerely,



Managing Director
FEP Program Assurance

Attachment
                                     APPENDIX B



Response to Audit Inquiry Global COB Tier 14
Wednesday, February 25, 2015
Page 22

                               Audit Inquiry 1 Response


The Plans agreed that claims totaling $302,001 were paid in error and were not
identified by the audit. Of this amount:

      	 $40,741 in claim payments were identified after the audit notification letter
         was received but before receipt of the OIG claim sample. These claims have
         now been fully recovered.
       $8,662 in claim payments were identified before the audit notification letter
         was received but are still in the recovery process.
       $4,793 in claim payments are below the CS1039 Overpayment Recovery
         threshold for Medicare Claims, or have been deemed uncollectible.


We contest OIG’s point estimate of $4,185,178 in claim payment errors for the universe
of Medicare payments where the members total Medicare payments are >/= $2,500.
We contest this methodology for because it does not allow Plans to use the
requirements as stated in CS1039 related to Audit Resolution and Reportable findings.
Further, we do not agree to the validity of the statistical calculation used to determine
the total estimated overpayment for the stated population.

CS1039 Requirements

SECTION 3.15 AUDIT RESOLUTIONS (JAN 2011)

When OIG issues a Draft Report of findings to the Carrier, the Carrier must respond
with all available, accurate and relevant documentation to validate or invalidate the
findings. This must be done within the timeframe specified in the OIG Draft Report
transmittal letter.

To enable this, Carriers must expeditiously tender all documentation necessary for
resolution of the audit. This includes overpayment recoveries via check or certification,
full documentation of the Carriers position for findings
being contested, evidence supporting due diligence assertions, and support for all other
pertinent issues which OPM must consider, as appropriate

SECTION 3.16 REPORTABLE FINDINGS (JAN 2013)

(b) Claim payment findings (i.e., claim overpayments) in the scope of an OIG audit are
reportable as questioned charges unless the Carrier provides documentation supporting
that these findings were already identified (i.e., documentation that the plan initiated
recovery efforts) prior to audit notification letter.

Because Plans do not have the exact claims that are being questioned, there is no way
that they can determine which claims to provide support for uncollectible, contested or
recovered claims, thus Plans are unable to resolve the audit finding.

Evaluation of Statistical Validity of OIG’s Conclusion

                                                                      Claim Line
                                           Claim Line Universe        Reviewed/
         Measure                           (333,904)                  Error(1,126)
         Mean                               $            76           $         327
         Standard Deviation                 $            35           $         435
         Median                             $           128           $         153
         Minimum                            $            10           $          11
         Maximum                            $         2,300           $       2,384

We performed a distribution graph of the Claims Paid in Error and of the Universe;

   	 The distribution of the Universe and the actual claim line errors appears to be
      skewed towards the lower dollar end of the scale. This does not appear to
      correlate to the OIG point estimate of $4.1 million questioned in the AI.
   	 The mean value for the errors is $327 and the median value is $153. Based
      upon these values, we were not able to recalculate the total error point estimate
      of $4.1 million. Without additional documentation to support the validity of
      methodology and estimate, we are not able to agree to the questioned amount.

If the approach is to be from a statistical perspective, we should have a clear and an
agreed upon understanding of the Methodology used to determine the;

      Population to be sampled (how/why was a cumulative amount of $2,500 derived)
      Sample Size determination
      Error Rate Calculation
      Factor(s) used to determine Point estimation
      Point estimation used (i.e., Average, Median)

In summary, because detail claims questioned as errors is not provided with the OIG
questioned amount and because insufficient documentation was provided to
replicate/validate the point value estimate of $4.1 million used in the report, BCBSA
disagrees to the proposed total questioned amount of $4.1 million for Medicare COB
claim errors paid by the Program as non-covered Medicare charges.
                                                                                                                         



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