oversight

Audit of Global Coordination of Benefits for BlueCross and BlueShield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2016-10-13.

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-99-00-15-060
                                             October 13, 2016




                                                         -- 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-99-00-15-060                                                                         October 13, 2016

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

The objectives of our audit were to         This report questions $6,401,840 in health benefit charges that
determine whether the Blue Cross and        were potentially not coordinated with Medicare.
Blue Shield (BCBS) plans charged costs
to the Federal Employees Health Benefits    For many years, we have had serious concerns with the BCBS
Program (FEHBP) and provided services
                                            plans’ and Association’s efforts to implement corrective actions to
to the FEHBP members in accordance
                                            prevent COB claim payment errors. Our audits (performed
with the terms of the BCBS
Association’s contract with the U.S.
                                            annually since 2001) routinely show that retroactive adjustments
Office of Personnel Management.             and manual processing errors are the primary reasons for COB
Specifically, our objective was to          claim payment errors.
determine whether the BCBS plans
complied with contract provisions           We do acknowledge that the Association has taken several steps to
relative to coordination of benefits with   implement prior OIG audit recommendations to reduce COB
Medicare.                                   errors. However, the results of this current audit do not indicate
                                            that these corrective actions have had a substantial impact in
What Did We Audit?                          reducing the amount of COB payment errors. Considering the
                                            length of time that the Association has allowed these material
The Office of the Inspector General
                                            errors to occur, the OIG does not believe that these erroneous
(OIG) has completed a limited scope
performance audit of the FEHBP
                                            claim payment errors were paid in good faith. Therefore, we
operations at all BCBS plans. The audit     recommend that the entire questioned amount be returned to the
covered claim payments from October 1,      FEHBP regardless of the plans’ ability to recover the funds from
2014 through June 30, 2015, as reported     the providers.
in the BCBS Association’s Government-
wide Service Benefit Plan Annual
Accounting Statements. Specifically, we
reviewed claims incurred on or after
September 15, 2014, that were
reimbursed from October 1, 2014
through June 30, 2015, and were
potentially not coordinated with
Medicare (referred to as Coordination of
Benefits or COB).



 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                         i
              ABBREVIATIONS
Association    Blue Cross Blue Shield Association
BCBS           Blue Cross Blue Shield
COB            Coordination of Benefits
FEHB           Federal Employees Health Benefits
FEHBP          Federal Employees Health Benefits Program
FEP            Federal Employee Program
FEP Express    Federal Employee Program Claims Processing System
OIG            Office of the Inspector General
OPM            U.S. Office of Personnel Management
Plan(s)        Blue Cross and Blue Shield Plan(s)




                           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. High Dollar Threshold Review .................................................................................7 

          B. Statistical Sample Review .......................................................................................12 


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


          APPENDIX A: Blue Cross Blue Shield Association’s November 25, 2015 response
                      to the Draft Audit Report, issued September 28, 2015.

          APPENDIX B: Blue Cross Blue Shield Association’s May 11, 2016 response to the
                      Statistical Review Audit Inquiry, issued April 15, 2016.

          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
Blue Cross and Blue Shield (BCBS) plans. The audit was performed by the U.S. 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. Health insurance coverage is made available through
contracts with various health insurance carriers.

The Blue Cross Blue Shield 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 in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP
Director’s Office coordinates the administration of the contract with the Association, member
BCBS plans, and OPM.

The Association has also established an FEP Operations Center. The activities of the
FEP Operations Center are performed by CareFirst BlueCross BlueShield, located in
Washington, D.C. These activities include acting as fiscal intermediary between the Association
and member plans, verifying subscriber eligibility, approving or disapproving the reimbursement
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 plans. When we refer to the "FEHBP", we are referring to the program that provides health benefits to federal
employees.

                                                          1                       Report No. 1A-99-00-15-060
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-99-00-14-046, dated July 29, 2015) for claims reimbursed from
September 1, 2013 through May 31, 2014, 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 September 28, 2015. 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 May 11, 2016, was
considered in preparing our final report.




                                                 2                   Report No. 1A-99-00-15-060
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 October 1, 2014 through June 30, 2015, as
 reported in the Blue Cross and Blue Shield Association’s Government-wide Service Benefit Plan
 FEP Annual Accounting Statements. We performed a computer search on our claims data
 warehouse to identify all BCBS claims incurred on or after September 15, 2014, that were
 reimbursed from October 1, 2014 through June 30, 2015, and potentially were not coordinated
 with Medicare. This search identified 432,402 claim lines, totaling $54,169,293 in payments that
 were potentially not coordinated with Medicare.

 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 (See Exhibit I for the
 summary of our universe by Category).

 	 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.

 	 Categories C and D include inpatient claims with ancillary items that should have been
    coordinated with Medicare Part B. 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.




                                                3	                  Report No. 1A-99-00-15-060
                       Exhibit I – Universe of Potentially Uncoordinated Claim Lines
                                      Category                                            Patients         Claim Lines         Amount Paid
   Category A: Medicare Part A Primary for Inpatient Facility                                325                379              $4,296,848
   Category B: Medicare Part A Primary for Skilled
                                                                                            1,077              3,589             $1,376,309
   Nursing/HHC/Hospice Care
   Category C: Medicare Part B Primary for Certain Inpatient
                                                                                              55                 75              $1,396,644
   Facility Charges
   Category D: Medicare Part B Primary for Skilled
                                                                                              47                 68               $266,188
   Nursing/HHC/Hospice Care
   Category E: Medicare Part B Primary for Outpatient Facility and
                                                                                            2,707             13,965             $4,332,891
   Professional
   Category F: Medicare Part B Primary for Outpatient Facility and
                                                                                           133,753            414,326            $42,500,413
   Professional (with processor manual override using code ‘F’)
   Total                                                                                   137,964            432,402            $54,169,293


From this universe, we selected two separate samples of claims to review as part of this audit.
The first sample was a high dollar threshold sample, and the second was a statistical sample. 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:

	 For the high dollar threshold review, we selected claims from each category for a cumulative
   sample of 37,794 claim lines totaling $19,814,881 in payments (see Exhibit II for the
   summary of our high-dollar review claim selections). We did not project the results of this
   particular review to the universe of claims paid for potentially uncoordinated claim lines.

	 For the statistical review, we randomly selected 3,483 claim lines, totaling $2,505,759 in
   payments, from Category F claims for patients with cumulative claim payments less than
   $10,000. The results of this sample review were projected to the universe.

When we notified the Association of these potential errors on August 21, 2015, these claims were
within the Medicare timely filing requirement and could be filed with Medicare for coordination
of benefits.2 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.

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
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.
                                                                       4	                            Report No. 1A-99-00-15-060
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., November 13, 2015) for the claim payment errors in our sample.

The determination of the questioned amount is based on the FEHBP contract, the 2014 and 2015
Service Benefit Plan brochures, the Association’s FEP Procedures Administrative Manual, 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.

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 Director’s Office, the FEP Operation Center, 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 coordination of benefits claim
payment errors. The BCBS claims data is provided to us on a monthly basis by the FEP
Operations Center, 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, nothing came to our attention to cause us to doubt its reliability. We believe that the data
was sufficient to achieve our audit objectives.
                                                 5                   Report No. 1A-99-00-15-060
Audit fieldwork was performed at our offices in Washington, D.C., Cranberry Township,
Pennsylvania and Jacksonville, Florida through May 2016.




                                             6                  Report No. 1A-99-00-15-060
  IV. AUDIT
III.   MAJORFINDINGS
             CONTRIBUTORS  TO THIS REPORT
                     AND RECOMMENDATIONS
  The sections below detail the results of our 2015 global COB audit. The audit was done as two
  separate reviews – a review of claims over a high dollar threshold and a review of a statistical
  sample of claims.

A. High Dollar Threshold Review                                                          $2,986,416
   As mentioned in the Scope section above, our universe consisted of 432,402 claim lines, totaling
   $54,169,293 in payments that potentially were not coordinated with Medicare. Our first review
   from this universe included claims above various high dollar thresholds for each category. See
   Exhibit II for a summary of our sample selection methodologies and claims reviewed by
   category.

                          Exhibit II – Summary of Claim Lines Reviewed
                                                               Claim     Amounts         Potential
       Category          Sample Selection Methodology
                                                               Lines       Paid        Overcharges
   Category A        All patients selected (325 patients)       379     $4,296,848      $4,296,848
   Category B        All patients selected (1,077 patients)    3,589    $1,376,309      $1,376,309
   Category C        All patients selected (55 patients)        75      $1,396,644       $349,161
   Category D        All patients selected (47 patients)        68       $266,188         $66,547
                     Patients with cumulative claim lines of
   Category E                                                  10,528   $4,149,532      $3,319,626
                     $500 or more (1,224 patients)
                     Patients with cumulative claim lines of
   Category F                                                  23,155   $8,329,360      $6,663,488
                     $10,000 or more (283 patients)
   Total                                                       37,794   $19,814,881     $16,071,979


  In general, if we could not reasonably determine the actual overcharge for a claim, we
  determined the overpayment amount accordingly:

  	 Category A and B - Medicare Part A pays all covered costs (except for deductibles and
     coinsurance) for inpatient care in hospitals, skilled nursing facilities and hospice care. We
     calculated the overcharges by reducing the questioned amount using the applicable Medicare
     deductible and/or copayment.

  	 Category C and D - 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. We estimated that the FEHBP was overcharged 25 percent for
     these inpatient claim lines (0.30 x 0.80 = 0.24 ~ 25 percent).
                                                    7	                  Report No. 1A-99-00-15-060
	 Category E and F - 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 these claim lines.

These 37,794 claim lines, totaling $19,814,881 in payments, were reviewed to determine
whether the BCBS plans complied with contract provisions relative to COB with Medicare. Our
review determined that the plans incorrectly paid 5,070 claim lines, totaling $3,928,905 in
payments. We estimate that the FEHBP was overcharged $2,986,416 for these claim line
payments. See Exhibit III for a summary of the questioned costs by category.


             Exhibit III – Summary of Questioned Costs by Category
                                 Claim        Amount          Amount
                Category
                                 Lines          Paid         Questioned
             Category A           77          $901,535        $901,535
             Category B          1,031        $368,587        $368,587
             Category C            28         $705,485        $176,371
             Category D            25          $92,006         $23,002
             Category E          2,826       $1,042,297       $833,889
             Category F          1,083        $818,995        $683,032
             Total               5,070       $3,928,905      $2,986,416


These claim payment errors are comprised of the following (See Exhibit IV for a summary of
questioned costs by cause of error):

	 For 2,782 of the claim lines questioned, the BCBS plans failed to review and/or adjust the
   patient’s prior paid claim(s) when the member’s Medicare information was subsequently
   added to the FEP Express Claims Processing System (FEP Express). We estimate that the
   FEHBP was overcharged $1,420,442 for these COB errors.

	 For 925 of the claim lines questioned, the BCBS plans incorrectly paid these claims due to
   processor errors. In most cases, there was special information present in FEP Express to
   identify Medicare as the primary payer when these claims were paid. However, a Medicare
   Payment Disposition Code was incorrectly used to override the system’s automatic deferral
   of these claims. The Medicare Payment Disposition Code designates Medicare’s
   responsibility for payment on each charge line of a claim. According to the BCBS
   Administrative Procedures Manual, the completion of this field is required on all claims for
   patients who are age 65 or older. We estimate that the FEHBP was overcharged $1,068,291
   for these COB errors.


                                               8	                  Report No. 1A-99-00-15-060
	 For 835 of the claim lines questioned, the BCBS plans incorrectly paid these claims because
   either the plans’ local claims processing system or FEP Express did not appropriately defer
   the claims for Medicare COB review. We estimate that the FEHBP was overcharged
   $337,414 for these COB errors.

	 For 180 of the claim lines                Exhibit IV – Questioned Cost by Cause of Error
   questioned, the BCBS plans                                     Claim    Amount       Amount
   incorrectly paid these claims due         Cause of Error       Lines     Paid       Questioned
   to provider billing errors. We       Retroactive Changes       2,782   $2,000,821   $1,420,442
   estimate that the FEHBP was
                                        Manual Processing          925    $1,237,740   $1,068,291
   overcharged $93,507 for these
   COB errors.                          System Processing          835     $476,516     $337,414

                                        Provider Billing           180     $117,144      $93,507
	 For 348 of the claim lines
                                       Non-COB Errors          348    $96,684     $66,762
   questioned, the overpayments
   were not COB-related errors but     Total                  5,070  $3,928,905  $2,986,416
   were processed and paid
   incorrectly by the plans. We estimate that the FEHBP was overcharged $66,762.

Procedural Issue
For many years, we have had serious concerns with the BCBS plans’ and Association’s efforts to
implement corrective actions to prevent COB claim payment errors. Our audits (performed
annually since 2001) routinely show that retroactive adjustments and manual processing errors are
the primary reasons for COB claim payment errors. Due to the nature of the COB process, we
recognize that some COB errors will occur; however, we continue to identify material errors year
after year. We do acknowledge that the Association has taken several steps to implement prior
OIG audit recommendations to reduce COB errors. However, the results of this current audit do
not indicate that these corrective actions have had a substantial impact in reducing the amount of
COB payment errors. Considering the length of time that these material errors occurred after the
issue had been brought to the Association’s attention, the OIG does not believe that these
erroneous claim payment errors were paid in good faith. Therefore, we recommend that the entire
questioned amount be returned to the FEHBP regardless of the plans’ ability to recover the funds
from the providers. The contracting officer should also continue monitoring the Association’s
ongoing system enhancements and efforts to reduce COB errors.

The following criteria were used to support our questioning of these claim payments:

	 Contract CS 1039, Part III, section 2.3 (8)(i) states, “The Carrier may charge the contract for
   benefit payments made erroneously but in good faith . . . .”


                                                9	                   Report No. 1A-99-00-15-060
	 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 (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 2015 Blue Cross and Blue Shield Service Benefit Plan brochure, page 142, Primary
   Payer Chart, illustrates when Medicare is the primary payer. In addition, page 144 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 Response:

In response to the draft audit report, which questioned $16,071,978 in potential overpayments,
the Association stated that the BCBS plans agreed that claim payments totaling $3,039,121
were paid in error. From this amount, the plans reported that they initiated the recovery on
claim payments totaling $1,109,604 prior to receiving the OIG audit notification letter, but did
not complete the recovery process prior to the date that plans’ response to the draft audit
report was due. In addition, the recovery of $6,602 of claim payments was initiated after the
OIG audit notification letter but before the receipt of the actual potential claim overpayments
listing.



                                                  10 	                  Report No. 1A-99-00-15-060
Of the remaining $13,032,857, the plans stated that $10,459,110 in claim payments were paid
correctly and that $2,573,747 in claim payment errors were identified and returned to the
FEHBP before the OIG Audit Notification letter.

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 to accept the Medicare denial reason code from Plans
   for Medicare Crossover claims.

	 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.

	 Implemented a new claim deferral in 3rd quarter 2015 to defer claims for review when
   Medicare denial information is not received on a claim.

	 Implemented a new claim deferral effective January 1, 2016 that will defer claims where
   certain Medicare deferral reason codes are included on the claim.

	 Implemented a new audit of Plans’ timely and accurate completion of Medicare retroactive
   enrollment notices in 4th quarter 2015.

	 Implemented a new deferral effective January 1, 2016 that will defer claims that include
   GY modifiers where the procedure code is not a statutory Medicare exclusion for
   additional review and support from the Provider as to why the GY modifier was used on
   the claim.

	 BCBSA [Association] will also identify additional opportunities to implement new
   Medicare deferrals in the FEP claims system in 2016.”

OIG Comments:

The Association’s response and supporting documentation provided indicate that the BCBS
plans acknowledge that $2,986,416 in claim overpayments were made during the scope of our
audit. If claim overpayments were identified by the BCBS plans before our audit notification
date (i.e., August 6, 2015) and adjusted or voided by the draft report response due date
(i.e., November 13, 2015), we did not consider these as claim payment errors in the final report.

Acknowledged Claim Overpayments 

The $2,986,416 of acknowledged claim overpayments is comprised of the following: 

                                                11 	                Report No. 1A-99-00-15-060
  	 $2,281,844 represents claim overpayments for which the BCBS plans have committed to
     pursue recovery; and

  	 $704,572 represents claim overpayments for which the BCBS plans state the recovery efforts
     have been exhausted; however, we continue to question these costs because they have not
     provided documentation supporting that all recovery efforts have been exhausted.

  As previously cited from CS 1039, the Carrier may charge the contract for benefit payments
  made erroneously but in good faith. However, we do not agree that these claim payment errors
  were made in good faith, and therefore we recommend that the entire questioned amount be
  returned to the FEHBP regardless of the plans’ ability to recover the funds from the providers.

  Recommendation 1

  We recommend that the contracting officer disallow $2,986,416 for claim overpayments and
  verify that the BCBS plans return all amounts recovered to the FEHBP, regardless of the plans’
  ability to recover the claim payments from providers.

  Recommendation 2

  We recommend that the contracting officer continue to monitor any enhancements or updates
  that the Association implements in FEP Express to help reduce COB errors.

B. Statistical Sample Review                                                             $3,415,424
   As mentioned in the Scope section above, our second review from the universe of claims was a
   statistical sample of Category F claims for patients with cumulative claim payments less than
   $10,000. See Exhibit V for our population universe for the statistical sample.

                        Exhibit V – Total Population for Statistical Sample
                           Category F Claims                     Claim Lines   Amount Paid
           Patients with cumulative payments less than $10,000     391,171     $34,171,154


  From this population we stratified all claim lines into seven categories based on the amount paid,
  then reviewed the following:

  1)	 We reviewed all claim lines in strata “0” (i.e., claim line payments between $5,000 and
      $10,000), since this additional tier was determined to have minimal effect on the precision
      when projecting the results of our statistical review.

                                                   12 	                Report No. 1A-99-00-15-060
2) For purposes of sample size determination, we assumed the “mean-per-unit” (MPU)
   estimator for claim lines in strata “1” through “6”. Specifically, using claim error rates from
   a prior audit3, we determined the sample size necessary to achieve a margin of error on a 95
   percent confidence interval that is no greater than 4 percent. This was done independently
   within each of the six strata. With the intent of projecting the results of the sample to the
   population, we used automated software to generate a random sample from each strata.

These criteria yielded a sample to review of 3,483 claim lines totaling $2,505,759 in payments.
See Exhibit VI for the total population and sample size by strata.

                   Exhibit VI – Total Population and Sample Results by Strata
                                               Total Population                 Samples for Review
                      Amount Paid
    Strata No.                                            Amounts              Claim     Amounts Paid
                         Tier              Claim Lines
                                                             Paid              Lines
    0              $5,000 - $9,999.99          57         $360,386              57            $360,386
    1              $0 - $49.99               240,611         $5,870,628          715                $17,193
    2              $50 - $199.99             118,741        $11,794,321          910                $91,340
    3              $200 - $499.99             22,492         $6,773,834          603              $182,571
    4              $500 - $999.99              6,609         $4,548,842          406              $272,993
    5              $1,000 - $2,499.99          2,178         $3,101,692          562              $788,381
    6              $2,500 - $4,999.99           483          $1,721,451          230              $792,895
                   TOTAL                     391,171        $34,171,154         3,483           $2,505,759

Of the 3,483 claim lines reviewed, we determined that the BCBS plans incorrectly paid 329 claim
lines, resulting in overcharges of $281,195 to the FEHBP. See Exhibit VII for a summary of
overpayments by strata.

1) Strata “0”
   Our review determined the BCBS plans incorrectly paid 11 claim lines, totaling $54,338
   in overcharges to the FEHBP, and this amount is questioned in this finding.




3
 Per results of Global Coordination of Benefits for Blue Cross Blue Shield (BCBS) Plans (report number 1A-99-00-
14-046), we applied error rates of 14%, 25%, 23%, 19%, 31%, 18% for strata “1” through “6”, respectively.
                                                       13                     Report No. 1A-99-00-15-060
2) Strata “1” through “6”                                         Exhibit VII – Strata Summary
   For these strata we identified 318 claim lines, totaling             Overpayments by Strata
   $226,857 in overcharges to the FEHBP. We used
                                                                               Claim    Overpaid
   automated software to project these sample results to the        Strata
                                                                               Lines    Amounts
   population using the ratio estimator method.4 With a
                                                                    0            11      $54,338
   relative precision point of 1.06, we determined the ratio
   estimator to be the most precise estimator for determining       1–6         318     $226,857
   the projection results. Based on our review, we are 95            TOTAL      329     $281,195
   percent confident that the true value of claims that paid
   incorrectly, for the population5 of strata “1” through “6”, is between $3,038,450 and
   $3,683,722. Our best estimate of the true value, the projection estimate, is $3,361,086,
   and this projected amount is questioned in this finding. See Exhibit VIII for a summary of
   the results of this statistical review.

                                       Exhibit VIII – Ratio Estimator

                                                  Ratio Estimator

                            Total Population - Amount Paid           $33,810,768

                            Samples Reviewed - Paid in Error         $226,857

                            Total Estimate (Projection)               $3,361,086

                            Margin of Error                           +/- $322,636

                            Relative Precision                       1.06 %

                            High Point                               $3,683,722

                            Low Point                                $3,038,450


In summary, our review determined that                  Exhibit IX – Questioned Overcharges by Strata
the FEHBP was overcharged a total of                                Total Questioned Overcharges
$3,415,424 for Category F claims for
                                                         Strata               “0”          “1 – 6”        “0 – 6”
patients with cumulative claim payments
less than $10,000. See Exhibit IX for a                  Overcharges       $54,338      $3,361,086      $3,415,424
summary of total questioned overcharges
by strata.



4
  Ratio estimator is discussed at length in Chapter 6 of Cochran, W. (1977). Sampling Techniques. Third Edition. 

New York, NY: Wiley.

5
  Our population that was used to project the results of our review represented 3,426 claim lines, totaling $2,145,373

in payments. 

                                                         14                         Report No. 1A-99-00-15-060
As previously cited from CS 1039, the Carrier shall make prompt and diligent recovery efforts
when claim payment errors have been determined. Also, the Carrier may charge the contract for
benefit payments made erroneously but in good faith.

Association’s Response:

“BCBSA [Association] contests the OIG projected overpayment of $3,134,229 and agrees to
overpayments totaling $281,195. Based upon an analysis of the OIG’s sampling and
estimating methodology, BCBSA [Association] determined that:

	 The sampling methodology is biased toward higher dollar claims.

	 The distribution of the amount paid for the universe appears to be heavily biased to the
   lower dollar end of the strata and does not appear to be consistent with the distribution of
   the sample audited by the Plans.

	 The error estimate appears to assume consistency across the universe; however, the claims
   are for different amounts, procedure codes, denial reasons and processed by different
   claim processing systems.

	 The actual errors agreed to by Plans appear to be primarily due to two error reasons,
   representing 58% of the identified errors; however not all the Plans had errors, nor did all
   the sites have the error reasons representing 58% of the errors.

	 The sampling approach doesn’t appear to result in a sample representative of the Universe
   and results in an estimated error amount that is biased towards hi-dollar claims, thus
   inflating the estimated error amount.

As a result, the use of a projection to determine an appropriate error amount is inaccurate and
does not result in a true error amount and therefore should not be used in the OIG audit
process.”

OIG Comments:

The sampling approach we used during this audit represents a valid statistical sampling
methodology and is consistent with industry standards for determining dollar impact amounts
(i.e., overpayments). Additionally, the sample cannot be considered biased because weights were
calculated and applied to each claim amount paid prior to the sampling selection process.
Mathematical weighting is a standard approach to ensure all factors of sampling are kept in
balance. If this technique had not been applied, only then could we agree that the sample was
biased.



                                               15 	                Report No. 1A-99-00-15-060
With regards to the details of the sampling and estimating   The sampling methodology used
methodology questioned by the Association above, we          for our statistical review was
will directly address each specific element:                 purely a stratified random
                                                             sample and was calculated using
	 The sampling methodology used for our review was          statistical software.
   purely a stratified random sample; therefore, it could not be deemed biased towards any
   certain claim, regardless of the amount paid. Stratifying the data prior to selecting our
   samples was done to capture and apply weights based on the entire universe of data. After the
   weights were calculated, an appropriate sample size was calculated to achieve a margin of
   error on a 95 percent confidence interval to be no greater than 4 percent, and then a random
   sample was pulled from each strata. A random sample draws from a population in such a way
   that each item in the population has an equal opportunity to be selected.

	 The error estimates are purposely meant to be based on dollar amounts and claim
   overpayments which are consistent characteristics for every unit selected within the
   population. Specific characteristics, such as procedure codes, denial codes, error reasons, and
   plan sites are variable characteristics for each unit within the universe and would result in a
   biased error estimate. The error estimates were consistently designed for this sampling
   approach and ultimately compensate for variable characteristics identified in the random
   sample review.

As stated above, the OIG does not believe these claim payment errors were paid in good faith
since the errors continue to occur year after year. Therefore, we recommend that the entire
questioned amount be returned to the FEHBP regardless of the plans’ ability to recover the funds
from the providers.

Recommendation 3

We recommend that the contracting officer disallow $3,415,424 for claims that were not paid in
good faith and unreasonably charged to the FEHBP, and verify that the BCBS plans return all
amounts recovered to the FEHBP, regardless of the plans’ ability to recover the claim payments
from providers.




                                               16 	                 Report No. 1A-99-00-15-060
IV. MAJOR CONTRIBUTORS TO THIS REPORT

Information Systems Audits Group

             , Auditor-in-Charge

           , Lead Auditor


           , Senior Team Leader

             , Group Chief




                                   17   Report No. 1A-99-00-15-060
                                       APPENDIX A 





                                                                             Federal Employee Program
                                                                             1310 G. Street, NW
                                                                             Washington, DC 20005
                                                                             202.942.1000
November 25, 2015                                                            Fax 202.942.1125


                , Lead Auditor
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 XV Global Coordination of Benefits
                           Audit Report #1A-99-00-15-060

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 October 1, 2015 thru June 30, 2015. Our comments concerning the
findings in the report are as follows:

Recommendation 1:

Coordination of Benefits with Medicare Questioned Amount                    $16,071,978

The OPM OIG submitted their sample of potential Medicare Coordination of Benefits
errors to the Blue Cross Blue Shield Association (BCBSA) on August 21, 2015. The
BCBS Association and/or the BCBS Plans were requested to review these potential
errors and provide responses by November 25, 2015. These listings included claims
incurred on or after September 15, 2014 that were reimbursed from October 1, 2014
through June 30, 2015 and potentially not coordinated with Medicare. OPM OIG
identified 432,402 claim lines, totaling $54,169,293 in payments, which potentially were
not coordinated with Medicare. From this universe, OPM OIG selected for review a
sample of 37,794 claim lines, totaling $19,814,880 in payments with a potential
overpayment of $16,071,978 to the Federal Employee Health Benefit Program
(FEHBP).

The OIG recommended that the contracting officer disallow $16,071,978 for
uncoordinated claim line payments and have the BCBS plans return all amounts
recovered to the FEHBP.
                                                            Report No. 1A-99-00-15-060
BCBSA Response

After reviewing the OIG listing of potentially uncoordinated Medicare COB claims
totaling $16,071,978, BCBS Plans responded that claim payments totaling $3,039,121
were paid in error. BCBS Plans also responded that of the $3,039,121 amount in claim
payment errors, recovery was initiated on claim overpayments totaling $1,109,604
before the OIG Audit Notification Letter was received; however, the recovery process
had not been completed when the Plans’ response was due to the OIG. Recovery on
claims totaling $6,602 was initiated after the Audit Notification letter but before the
actual listing of potential claim overpayments was received.

For the remaining $13,032,857 in potential claim payment errors questioned, Plans
reported that:

   $10,459,111 in claim payments were paid correctly.
   $ 2,573,747 in claim payment errors were identified and returned to the Program
    before the OIG Audit Notification letter.

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

Recommendation 2

Although the Association has developed corrective action plan 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. 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.

BCBSA Response

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

	 Modified the FEP claims system to accept the Medicare denial reason code from
   Plans for Medicare Crossover claims.
	 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.
 Implemented a new claim deferral in 3rd quarter 2015 to defer claims for review when
   Medicare denial information is not received on a claim.
 Implemented a new claim deferral effective January 1, 2016 that will defer claims
   where certain Medicare deferral reason codes are included on the claim.

                                                             Report No. 1A-99-00-15-060
	 Implemented a new audit of Plans’ timely and accurate completion of Medicare
   retroactive enrollment notices in 4th quarter 2015.
	 Implemented a new deferral effective January 1, 2016 that will defer claims that
   include GY modifiers where the procedure code is not a statutory Medicare
   exclusion for additional review and support from the Provider as to why the GY
   modifier was used on the claim.
	 BCBSA will also identify additional opportunities to implement new Medicare
   deferrals in the FEP claims system in 2016.

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,




Senior Program Manager
FEP Program Assurance

Attachment




                                                             Report No. 1A-99-00-15-060
                                     APPENDIX B



Response to Audit Inquiry Global COB Tier 15
Wednesday, May 11, 2016

                              Audit Inquiry 1 Response


BCBSA contests the OIG projected overpayment amount of $3,134,229 and agrees to
overpayments totaling $281,195. Based upon an analysis of the OIG’s sampling and
estimating methodology, BCBSA determined that:

	 The sampling methodology is biased toward higher dollar claims.
	 The distribution of the amount paid for the universe appears to be heavily biased to
   the lower dollar end of the strata and does not appear to be consistent with the
   distribution of the sample audited by the Plans.
	 The error estimate appears to assume consistency across the universe; however,
   the claims are for different amounts, procedure codes, denial reasons and
   processed by different claim processing systems.
	 The actual errors agreed to by Plans appear to be primarily due to two error
   reasons, representing 58% of the identified errors; however not all the Plans had
   errors, nor did all the sites have the error reasons representing 58% of the errors.
	 The sampling approach doesn’t appear to result in a sample representative of the
   Universe and results in an estimated error amount that is biased towards hi-dollar
   claims, thus inflating the estimated error amount.

As a result, the use of a projection to determine an appropriate error amount is
inaccurate and does not result in a true error amount and therefore should not be used
in the OIG audit process.

Approved by:




Managing Director, FEP Program Assurance




                                                              Report No. 1A-99-00-15-060
                                                                                                                         



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