oversight

Audit of Global Coordination of Benefits for Blue Cross and Blue Shield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2018-03-15.

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
    BLUE CROSS AND BLUE SHIELD PLANS
          Report Number 1A-99-00-16-062
                  March 15, 2018
              EXECUTIVE SUMMARY
                                        Audit of Global Coordination of Benefits

Report No. 1A-99-00-16-062                                                                                March 15, 2018


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

The objectives of our audit were to             For many years, we have had serious concerns with the efforts of
determine whether the Blue Cross and            the BCBS plans and the Association to implement corrective
Blue Shield (BCBS) plans charged costs          actions to prevent COB claim payment errors. Our audits
to the Federal Employees Health Benefits        (performed annually since 2001) routinely show that the primary
Program (FEHBP) and provided services
                                                reason for COB claim payment errors is the fact that BCBS plans
to FEHBP members in accordance with
                                                fail to review and/or adjust a patient’s prior paid claims when that
the terms of the BCBS Association’s
(Association) contract with the U.S.
                                                member’s Medicare enrollment information is subsequently
Office of Personnel Management.                 obtained.
Specifically, our objective was to
determine whether the BCBS plans                Although the Association has made several modifications to its
complied with contract provisions               claims adjudication system in an effort to reduce COB errors, the
relative to coordination of benefits with       results of this audit continue to indicate that these corrective
Medicare.                                       actions have not had a substantial impact in reducing the amount of
                                                COB payment errors. Our audit determined that $11,738,240 in
What Did We Audit?                              COB overpayments from the FEHBP were paid in error over a
                                                nine-month period. Since 2004, the Association has allowed over
The Office of the Inspector General
                                                $167 million in COB-related claim overpayments. The BCBS
(OIG) has completed a limited scope
                                                plans and the Association have not met their contractual obligation
performance audit of the FEHBP
operations at all BCBS plans. The audit
                                                to proactively identify or retroactively adjust overpayments
covered claim payments from                     through a robust internal control program. Considering the length
December 1, 2015, through August 31,            of time that the Association has allowed these material errors to
2016. Specifically, we identified claims        occur, the OIG does not believe that the improper payments were
incurred on or after November 15, 2015,         made in good faith. Therefore, we recommend that the entire
that were reimbursed from December 1,           questioned amount be returned to the FEHBP regardless of the
2015, through August 31, 2016, and were         plans’ ability to recover the funds from the providers.
potentially not coordinated with
Medicare (referred to as coordination of        The Association had initiated recovery for $5,231,401 of the claim
benefits or COB).                               overpayments prior to the start of this audit. This report questions
                                                the remaining $6,506,839 in health benefit charges that were
                                                potentially not coordinated with Medicare.

 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits                                                  i
        This report is non-public and
                        information
              ABBREVIATIONS
Association    Blue Cross Blue Shield Association
BCBS           Blue Cross Blue Shield
FEHB           Federal Employees Health Benefits
FEHBP          Federal Employees Health Benefits Program
FEP            Federal Employee Program
FEP Express    Federal Employee Program Express Claims Processing
               System
HHC            Home Health Care
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 .......................................................................................14 


          APPENDIX A: Blue Cross Blue Shield Association’s April 10, 2017, response
                      to the Draft Audit Report, issued October 31, 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 Blue Cross Blue Shield, 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-99-00-16-062
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-99-00-15-060, dated October 13, 2016) for claims reimbursed from
October 1, 2014, through June 30, 2015, are currently in the process of being resolved.

Our sample selections, instructions, and preliminary audit results of the potential COB errors
were presented to the Association in a draft report, dated October 31, 2016. 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 August 2, 2017, was considered in
preparing our final report.




                                               2                  Report No. 1A-99-00-16-062
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 December 1, 2015, through August 31, 2016, 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 BCBS claims data
 warehouse to identify all claim payments incurred on or after November 15, 2015, that were
 reimbursed from December 1, 2015, through August 31, 2016, and potentially were not
 coordinated with Medicare. This search identified 481,417 claim lines, totaling $61,049,780 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).

 x	 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.

 x	 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.

 x   Categories E and F include outpatient facility and professional claims where Medicare Part B
     should have been the primary payer.




                                                3	                  Report No. 1A-99-00-16-062
                       Exhibit I – Universe of Potentially Uncoordinated Claim Lines
                                      Category                                            Patients         Claim Lines         Amount Paid

    Category A: Medicare Part A Primary for Inpatient Facility                               373                447              $6,463,463

    Category B: Medicare Part A Primary for Skilled Nursing/Home
                                                                                            1,070             11,935             $2,920,009
    Health Care (HHC)Hospice Care

    Category C: Medicare Part B Primary for Certain Inpatient
                                                                                              37                 42               $463,126
    Facility Charges

    Category D: Medicare Part B Primary for Skilled
                                                                                              36                 83               $227,662
    Nursing/HHC/Hospice Care

    Category E: Medicare Part B Primary for Outpatient Facility and
                                                                                            3,457             20,631             $6,296,832
    Professional

    Category F: Medicare Part B Primary for Outpatient Facility and
                                                                                           141,653            448,279            $44,678,688
    Professional (with processor manual override using code ‘F’)

    Total                                                                                  146,626            481,417            $61,049,780


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:

x    For the high dollar threshold review, we selected claims from each category for a cumulative
     sample of 55,061 claim lines totaling $24,194,872 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.

x    For the statistical review, we randomly selected 3,389 claim lines, totaling $3,553,544 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 October 31, 2016, 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.

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-99-00-16-062
METHODOLOGY

The claims selected for review were submitted to each BCBS plan for its analysis and response.
We 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
and 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.
On a limited test basis we also verified whether 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., February 6, 2017) for the claim payment errors in our sample.

The determination of the questioned amount is based on the FEHBP contract, the 2015 and 2016
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 Operations Center, and the BCBS plans. Through audits and
a reconciliation process, we have verified the reliability of the BCBS claims data in our data

                                                 5                   Report No. 1A-99-00-16-062
warehouse, which was used to identify the universe of potential coordination of benefit 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.

Audit fieldwork was performed at our offices in Washington, D.C.; Cranberry Township,
Pennsylvania; and Jacksonville, Florida through August 2017.




                                                 6                    Report No. 1A-99-00-16-062
  IV. AUDIT
III.   MAJORFINDINGS
             CONTRIBUTORS  TO THIS REPORT
                     AND RECOMMENDATIONS
  GLOBAL COORDINATION OF BENEFITS REVIEW

  The sections below detail the results of our 2016 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. Any recommendations from prior COB audits that have not yet been resolved
  have been rolled forward below.

A. High Dollar Threshold Review                                                             $3,657,586

  As mentioned in the Scope section above, our universe consisted of 481,417 claim lines, totaling
  $61,049,780 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 (373 patients)       447     $6,463,463      $6,463,463

      Category B       All patients selected (1,070 patients)    11,935   $2,920,009      $2,920,009

      Category C       All patients selected (37 patients)        42       $463,126        $115,781

      Category D       All patients selected (36 patients)        83       $227,662        $56,916

                       Patients with cumulative claim lines of
      Category E                                                 13,852   $5,636,058      $4,508,846
                       $1,000 or more (825 patients)

                       Patients with cumulative claim lines of
      Category F                                                 28,702   $8,484,554      $6,787,644
                       $10,000 or more (333 patients)

      Total                                                      55,061   $24,194,872     $20,852,659


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

  x     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

                                                      7                   Report No. 1A-99-00-16-062
   calculated the overcharges by reducing the questioned amount using the applicable Medicare
   deductible and/or copayment.

x	 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).

x	 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 55,061 claim lines, totaling $24,194,872 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 7,679 claim lines, totaling $4,212,741 in
payments. We estimate that the FEHBP was overcharged $3,657,586 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 

                                High Dollar Threshold Review 


                                      Claim           Amount         Amount
                    Category
                                      Lines            Paid         Questioned
                 Category A             85         $1,285,526       $1,241,666

                 Category B            3,288        $662,380         $662,049

                 Category C              5            $59,938         $14,985

                 Category D             11            $46,966         $11,742

                 Category E            3,134       $1,757,692       $1,406,690

                 Category F            1,156        $400,239         $320,454

                 Total                 7,679       $4,212,741       $3,657,586




                                                 8	                   Report No. 1A-99-00-16-062
These claim payment errors are comprised of the following (See Exhibit IV for a summary of
questioned costs by cause of error):

x	 For 2,926 of the claim lines questioned, the BCBS plans failed to retroactively 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 $2,175,538 for these COB errors.

x	 For 3,362 of the claim lines questioned, the BCBS plans incorrectly paid these claims
   because FEP Express did not defer the claims for Medicare COB review. Although FEP
   Express has systematic processes to review claims that potentially should be coordinated
   with Medicare, the system deferrals “FCH,” “FF2,” and “FPY” within FEP Express were
   missing processing rules pertaining to home health claims that caused FEP to overpay in
   error3. We estimate that the FEHBP was overcharged $683,112 for these errors.

x	 For 504 of the claim lines questioned, the BCBS plans incorrectly paid these claims due to
   manual 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 $592,665
   for these COB errors.

x	 For 680 of the claim lines questioned, the overpayments were not COB-related errors but
   were processed and paid incorrectly by the plans. We estimate that the FEHBP was
   overcharged $115,694 for these non-COB errors.

x	 For 149 of the claim lines questioned, the BCBS plans incorrectly paid these claims due to
   provider billing errors. We estimate that the FEHBP was overcharged $69,855 for these
   COB errors.




3
  FCH - Medicare Part B is on file, but there is no indication of Medicare Part B payment or input for inpatient facility claims, skilled nursing
facility or home health agency claims; FF2 - Medicare Part A special information record is on file that corresponds with service dates on claim
for home health, but there is no indication of Medicare payment available; and FPY – there is no Medicare payment on Medicare crossover
professional or outpatient facility claim, but member is not liable.



                                                                         9	                            Report No. 1A-99-00-16-062
x   For 58 of the claim lines questioned,    Exhibit IV – Questioned Cost by Cause of Error
    the BCBS plans incorrectly 

                                                               Claim      Amount        Amount
    paid these claims because the 
        Cause of Error
                                                                Lines      Paid       Questioned
    plans’ local claims processing 

    systems did not appropriately 
    Retroactive Changes     2,926    $2,533,177    $2,175,538
    defer the claims for Medicare 
    FEP Express             3,362     $686,855      $683,112
    COB review. We estimate that 

    the FEHBP was overcharged 
        Processor Errors          504     $732,224      $592,665
    $20,722 for these errors. 
        Non-COB Errors            680     $144,617      $115,694

                                        Provider Billing             149        $89,966        $69,855
For many years, we have had
serious concerns with the BCBS            Local System                 58         $25,902        $20,722
plans’ and Association’s efforts to       Total                       7,679     $4,212,741     $3,657,586
implement corrective actions to
prevent COB claim payment errors. Our audits (performed annually since 2001) routinely show
that failure to retroactively adjust a patient’s prior claims after Medicare information is obtained
is the primary reason 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.

For the period of December 1, 2015, through August 31, 2016, we           A total of $11,738,240
identified $6,506,839 in COB claim payment errors. In addition, the in COB overpayments
Association had itself already identified and recovered $5,231,401        were made during a
in overcharges. In other words, a total of $11,738,240 in COB             nine-month period.
overpayments were made over a nine-month period. Although the
Association proactively recovered a portion of the overpayments, we assert that controls should
be in place to prevent these payments from occurring in the first place. The Association has made
several modifications to FEP Express in an effort to reduce COB errors, but the results of this
audit continue to indicate that these corrective actions have not had a substantial impact in
reducing the amount of COB payment errors. Since 2004, the Association has allowed an average
of $10.5 million per year (for a total of $167 million) in COB overpayments. Only $119 million
of the $167 million in overpayments have been recovered by the Association and/or OPM, further
demonstrating that the Association’s post-payment recovery strategy is not effective. We also
note that the amount of overpayments identified in this audit ($11.7 million in nine months) is
higher than the annual average of overpayments since 2004 ($10.5 million).

Based on the above we conclude that the Association has not met its contractual obligation to
proactively identify overpayments through a robust internal control program. Considering the
unreasonable length of time that these material errors occurred after the issue had been brought to

                                                 10                   Report No. 1A-99-00-16-062
                                                                                                    

                                                                                          

the Association’s attention, we believe that these erroneous claim payments were not made in
good faith. Therefore, we recommend that the entire questioned amount be returned to the
FEHBP regardless of the Plan’s 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 was used to support our questioning of these claim payments:

x	 Contract CS 1039, Part III, section 2.3 (g) states, “It is the Carrier’s responsibility to
   proactively identify overpayments through comprehensive, statistically valid reviews and a
   robust internal control program.

x	 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 . . . .”

x	 Contract CS 1039, Part III, section 2.3 (g)(8)(ii) states that “the Carrier may not charge the
   contract for the administrative costs to correct erroneous benefit payments (or to correct
   processes or procedures that caused erroneous benefit payments) when the errors are
   egregious or repeated.”

x	 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 . . . .”

x	 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.”

x	 The 2016 Blue Cross and Blue Shield Service Benefit Plan brochure, page 141, Primary
   Payer Chart, illustrates when Medicare is the primary payer. In addition, page 143 of that
   brochure states, “We limit our payment to an amount that supplements the benefits that


                                                  11 	                  Report No. 1A-99-00-16-062
    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 $20,852,659 in potential overpayments,
the Association states, “BCBS Plans identified … claim overpayments totaling $3,672,937.
BCBS Plans also responded that of the $3,672,937 in claim overpayments, recovery was
initiated on … claim overpayments totaling $1,042,319 before the OIG Audit Notification
Letter and the actual listing of potential claim overpayments were received. The remaining …
claim overpayments totaling $2,630,618 were identified as a result of the audit.”

Of the remaining $17,179,722 in potential overpayments that were questioned, the plans stated
that $11,948,321 in claim payments were paid correctly and that $5,231,401 in claim payment
errors were identified and returned to the Program 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:

x   “Modified the FEP claims system to accept the Medicare denial reason code from Plans
    for Medicare Crossover claims.

x   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.

x   Implemented several new Medicare edits that stop claims for review before payment.

x   Implemented a new denial that automatically denies charges that were denied by Medicare
    for various contractor obligation reasons.

x   Reviewed all Medicare edits to determine if they are working as intended. Edits that are
    not working as intended will be corrected.”

OIG Comments:

The Association’s response and supporting documentation provided indicate that the BCBS
plans acknowledge that $3,657,586 in claim overpayments were made during the scope of our
audit. If claim overpayments were identified by the BCBS plans before our audit notification


                                              12                  Report No. 1A-99-00-16-062
date (i.e., October 31, 2016) and adjusted or voided by the draft report response due date (i.e.,
February 6, 2017), we did not consider these as claim payment errors in the final report.

Acknowledged Claim Overpayments 

The $3,657,586 of acknowledged claim overpayments is comprised of the following: 


x	 $2,848,666 represents claim overpayments for which the BCBS plans have committed to
   pursue recovery; and

x	 $808,920 represents claim overpayments for which the BCBS plans state the recovery efforts
   have been exhausted. Documentation supporting all recovery efforts has not been provided.

As stated above, the Association has not met its contractual
obligation to proactively identify or retroactively adjust           We do not agree that the
overpayments through a robust internal control program. We do claim payments were
not agree that these claim payments were made in good faith, 
       made in good faith.
and therefore, we recommend that the entire questioned amount 

be returned to the FEHBP regardless of the Plan’s ability to recover the funds from the providers. 

Furthermore, per the contract, the Association cannot charge OPM for its efforts in correcting 

these egregious and repeated deficiencies.


Recommendation 1

We recommend that the contracting officer disallow $3,657,586 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

Failure to retroactively adjust a patient’s prior claim after Medicare information is obtained is the
primary reason for COB claim payment errors, and therefore we recommend that the contracting
officer require the Association to perform an analysis on these types of errors and determine the
reason why the members’ Medicare enrollment information is not being updated in FEP Express
prior to the payment of the Medicare claims. Once this analysis has been completed, the
contracting officer should require the Association to implement additional controls to eliminate
retroactive enrollment errors from occurring.




                                                 13 	                 Report No. 1A-99-00-16-062
  Recommendation 3

  In regards to FEP Express errors, we recommend that the contracting officer verify that the
  Association implements appropriate enhancements to FEP Express to include criteria for Master
  file edits FCH, FF2, and FPY to help reduce future home health claim payment errors.

  Recommendation 4 (Rolled-forward from COB 2015, Report No. 1A-99-00-15-060)

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

B. Statistical Sample Review	                                                                        $2,849,253

  Our second sample of claims selected for review was a statistical sample of Category F claims
  for patients with cumulative claim payments less than $10,000. Exhibit V shows this universe of
  claim lines.

                               Exhibit V – Universe for Statistical Sample
                                                                                      Claim          Amount
      Category                               Criteria
                                                                                      Lines           Paid
      Category F   Patients with cumulative payments less than $10,000               419,577       $36,194,133


  We stratified each claim line into seven categories based on amount paid, then applied the
  following criteria to our sample selection:

  x	 We selected to review all claim lines in stratum “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.

  x	 To select the sample size to review for strata “1” through “6,” we applied the “ratio
     estimator” methodology. Specifically, we used the claim error rates from a prior audit4 to
     determine the sample size necessary to achieve a margin of error on a 95% confidence
     interval to be no greater than 2%. 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 stratum.


  4
   Per results of Global Coordination of Benefits for Blue Cross Blue Shield (BCBS) Plans (report number 1A-99-00-
  15-060), we applied error rates of 4%, 9%, 11%, 9%, 13%, and 15% for strata “1” through “6,” respectively.

                                                        14 	                    Report No. 1A-99-00-16-062
These criteria yielded a sample of 3,389 claim lines, totaling $3,553,544 in payments, for review.
See Exhibit VI for our total population and sample results by strata.

           Exhibit VI – Total Population and Sample Selected for Review by Strata
                                                 Total Population                 Samples for Review
                       Amount Paid
     Strata No.                                             Amounts               Claim      Amounts
                          Tier               Claim Lines
                                                               Paid               Lines        Paid
                     Greater than or
    0                                              49            $324,045           49              $324,045
                     equal to $5,000
    1                $0 - $49.99                261,488         $6,355,485          305               $7,358
    2                $50 - $199.99              125,839         $12,468,668         698              $70,045
    3                $200 - $499.99             22,668          $6,679,367          787             $231,613
    4                $500 - $999.99              6,464          $4,529,264          572             $404,682
    5                $1,000 - $2,499.99          2,415          $3,401,549          696             $977,797
    6                $2,500 - $4,999.99           654           $2,435,755          415           $1,541,134
                     TOTAL                      419,577         $36,194,133        3,522          $3,556,674


Of the 3,522 claim lines selected for review, we determined that the BCBS plans incorrectly paid
400 claim lines, resulting in overcharges of $532,194 to the FEHBP. See Exhibit VII for a
summary by strata of overpayments identified by the review.

1)	 Stratum “0”
    Our review determined the BCBS plans incorrectly paid 10 claims lines, totaling $56,459 in
    overcharges to the FEHBP and this is the amount we are questioning from this stratum in this
    finding.
                                                                             Exhibit VII – Overpayments 

2) Strata “1” through “6”
                                                                             Identified by Manual Review

   For these strata we identified 390 claim lines, totaling
                                                                                         Claim       Overpaid
   $475,735 in overcharges to the FEHB. We used                        Strata
                                                                                         Lines       Amounts
   automated software to project the sample results
                                                                       0                   10         $56,459
   using the ratio estimator methodology.5 With a
   relative precision point of .98, we determined the                  1–6                 390       $475,735
   ratio estimator to be the most precise estimator for                TOTAL               400       $532,194
   determining the projection results. Based on our

5
 Ratio estimator is discussed at length in Chapter 6 of Cochran, W. (1977). Sampling Techniques. Third Edition.
New York, NY: Wiley.

                                                         15 	                   Report No. 1A-99-00-16-062
    review, we are 95 percent confident that the true value of claims that paid incorrectly, for the
    population6 of strata “1” through “6,” is between $2,493,058 and $3,092,529. Our best
    estimate of the true value, the projection estimate, is $2,792,794, and this is the amount we are
    questioning from strata 1 - 6. See Exhibit VIII for a summary of results of statistical review.

                                 Exhibit VIII – Projected Overpayments
                                  Using Ratio Estimator Methodology
                                     Projected Overpayments for Strata 1 - 6
                              Total Population - Amount Paid               $36,194,133
                              Samples Reviewed - Paid in Error                $532,194
                              Total Overpayments (Projection)                $2,792,7947
                              Margin of Error                              +/- $299,735
                              Relative Precision                                .98%
                              High Point                                     $3,092,529
                              Low Point                                      $2,493,059


Summary of Statistical Sample Review

Overall, our review of Category F claims with cumulative claim payments less than $10,000
determined that the FEHBP was overcharged a total of $2,849,253. See Exhibit IX for a
summary of total questioned overcharges by strata.

        Exhibit IX – Summary of Questioned Overcharges – Statistical Sample Review

                                           Total Questioned Overcharges

                               Strata                “0”         “1 – 6”         “0 – 6”

                               Overcharges        $56,459       $2,792,794     $2,849,253




6
  Our population that was used to project the results of our review represented 3,522 claim lines, totaling $3,556,674 

in payments. 

7
  In accordance with contract CS 1039, the projected overpayment excludes claims where the total claim amount (as 

opposed to individual claim lines) is $50 or under.


                                                           16                      Report No. 1A-99-00-16-062
Association Response:

In response to the draft report, the BCBS plans stated that $532,678 of the questioned claim
overpayments were paid in error, and that the remaining questioned claim overpayments
totaling $2,312,662 were paid correctly.

Further, “the BCBSA [Association] contests any projected overpayment on payment errors
identified in the statistical sample. Based upon an analysis of the OIG’s sampling and
estimating methodology for previous Medicare COB audits, BCBSA [Association] determined
that the OIG estimation methodology:

x	 Is biased toward higher dollar claims, thus inflating the estimated error amount.

x	 Results a heavily biased estimate 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.

x	 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.

x	 Treats all errors identified as universal errors in the population; however, 43% of all
   errors identified were related to paying non covered durable medical claims for members
   where services were provided in another Plan’s service area. In this instance the only
   error was that the claim was paid by the wrong Plan; however, the FEP Program is
   required to pay these claims.

x	 Includes claims where the paid amount for the claim is less than $50. CS1039 does not
   require recovery initiation on claims where the overpayment amount is less than $50. . . .

As a result, BCBSA [Association] disagrees that the Contracting Officer should use a
projected amount to determine unallowable charges. 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. Instead, BCBSA [Association] will
work with Plans to review additional claims to identify actual claims that were paid in error, if
any. The population to be reviewed by Plans will exclude claims that are below the recovery
threshold (where recovery is not required by CS1039), non-covered Medicare providers, non-
covered Medicare services as well as charges that were denied by Medicare but represents
FEP benefits. Recovery will be initiated on any overpayment amounts identified and any
amount recovered will be returned to the Program [FEHBP].”

                                               17 	                 Report No. 1A-99-00-16-062
OIG Comments:

Although the Association disagrees with the use of statistical projections in OIG audits, we assert
that this is a scientifically valid approach to estimate claim overpayments. This estimating
technique is used by the American Institute of Certified Public Accountants, the U.S. Department
of Health and Human Services, and the U.S. Internal Revenue Service. The use of statistical
sampling and extrapolation for determining overpayments in government benefits programs,
including Medicare and Medicaid, is both longstanding and commonplace. Statistical sample
testing carries evidential weight in a court of law, and conclusions drawn from statistical
sampling are defensible in court because the risk of error in the population is objectively
determined. The following points address the specific concerns raised by the Association in its
response to our draft audit report:

x   The sampling methodology used for our review was          The sampling methodology used
    purely a stratified random sample using the ratio         for our review was purely a
    estimator methodology, therefore, could not be            stratified random sample,
    deemed as biased towards any certain claim,               therefore, cannot be deemed as
    regardless of the amount paid. We stratified the data     biased towards any certain
    prior to selecting our samples in order to capture and    claim, regardless of the amount
    apply weights based on the entire population of data.     paid.
    The calculation to determine the sample size for each
    stratum also incorporated the known error rates from prior audits, and was performed to
    achieve a margin of error on a 95% confidence interval to be no greater than 2%. This
    approach is not biased toward any subset of claims, and it allows for a more precise projection
    than simply selecting a sample size proportionate to the volume of claims in each stratum.

x	 The error estimates are purposely based on dollar amount, as this is a consistent characteristic
   for every unit selected within the population. Other 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.

x	 The Association states that our sample “Includes claims where the paid amount for the claim
   is less than $50. CS1039 does not require recovery initiation on claims where the
   overpayment amount is less than $50.” In response to this comment, we adjusted the
   statistical projection to exclude total claim payments that were $50 or under.




                                                 18 	                 Report No. 1A-99-00-16-062
As stated above, the Association has not met its contractual obligation to proactively identify
overpayments through a robust internal control program. The claim payment errors are
egregious and repeated, and we do not believe they were paid in good faith. Therefore, we
recommend that the entire questioned amount be returned to the FEHBP regardless of the Plan’s
ability to recover the funds from the providers.

Recommendation 5

We recommend that the contracting officer disallow $2,849,253 for claims that were not paid in
good faith and were 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.




                                              19                   Report No. 1A-99-00-16-062
                                    APPENDIX A 


April 10, 2017
                                                                           1310 G Street, N.W.
                  , Lead Auditor                                           Washington, D.C. 20005
                                                                           202.626.4800
Information Systems Audit Group
                                                                           www.BCBS.com
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 XVI Global Coordination of Benefits
                          Audit Report #1A-99-00-16-062

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 incurred on or after November 15, 2015 and paid from December 1, 2015 thru
August 31, 2016. Our comments concerning the findings in the report are as follows:

Recommendation 1:

Coordination of Benefits with Medicare Questioned Amount              $20,852,659

The OPM OIG submitted their sample of potential Medicare Coordination of Benefits
errors to the Blue Cross Blue Shield Association (BCBSA) on October 31, 2016. The
BCBS Association and/or the BCBS Plans were requested to review these potential
errors and provide responses by February 6, 2017. These listings included claims
incurred on or after November 1, 2015 that were reimbursed from December 1, 2015
thru August 31, 2016 and potentially not coordinated with Medicare. OPM OIG identified
481,417 claim lines, totaling $61,049,780 in payments, which potentially were not
coordinated with Medicare. From this universe, OPM OIG selected for review a sample
of 55,061 claim lines, totaling $24,194,872 in payments with a potential overpayment of
$20,852,659 to the Federal Employee Health Benefit Program (FEHBP).

The OIG recommended that the contracting officer disallow $20,852,659 for
uncoordinated claim line payments and have the BCBS plans return all amounts
recovered to the FEHBP.




                                                             Report No. 1A-99-00-16-062
BCBSA Response

After reviewing the OIG listing of potentially uncoordinated Medicare COB claims
totaling $20,852,659, BCBS Plans identified 3,641 claim overpayments totaling
$3,672,937. BCBS Plans also responded that of the $3,672,937 in claim overpayments,
recovery was initiated on 1,851 claim overpayments totaling $1,042,319 before the OIG
Audit Notification Letter and the actual listing of potential claim overpayments were
received. The remaining 1,790 claim overpayments totaling $2,630,618 were identified
as a result of the audit.

For the remaining $17,179,722 in potential claim overpayments questioned, Plans
reported that:

x   $11,948,321 in potential overpayments were paid correctly.
x   $5,231,401 in potential overpayments were identified and returned to the Program
    before the response to the OIG Draft Report was due.

Of the $1,042,319 in overpayments identified before the audit began:

x   $905,369 in claim payments were paid correctly initially based upon Medicare
    coverage information known at the time the claim was paid.
x   $136,950 in overpayment errors were identified before the audit began, based upon
    processes in place to identify payment errors if they occur.

The above claim payment errors were identified and recovery was initiated in
accordance with CS1039, Section 2.3(g). Where possible, the Plans will continue to
pursue the remaining overpayments as required by CS 1039, Section 2.3(g) (l).

Further, during 2016, the FEP Program coordinated 33,377,348 claims with Medicare,
resulting in FEP Program Medicare savings of $40.1 billion. The overpayments
identified by the audit totaling $2,630,618 represent .005% of the claims coordinated
with Medicare and .0066% of reported Medicare COB savings. Although these
identified overpayments represent a small percentage of the Program’s overall
Medicare processing, BCBSA and Plans are committed to recovering these
overpayments as well as implementing additional internal controls to reduce or eliminate
these types of overpayments.

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.


                                                             Report No. 1A-99-00-16-062
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:

x	 Modified the FEP claims system to accept the Medicare denial reason code from
   Plans for Medicare Crossover claims.
x	 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.
x Implemented several new Medicare edits that stop claims for review before
   payment.
x Implemented a new denial that automatically denies charges that were denied by
   Medicare for various contractor obligation reasons.
x Reviewed all Medicare edits to determine if they are working as intended. Edits that
   are not working as intended will be corrected.

Statistical Sample Review

The OIG submitted a sample of potential COB errors to the Association on October 31,
2016. After receiving the BCBS plans’ spreadsheet responses and supporting
documentation and the Association’s draft report response, the OIG will review the
responses and applicable documentation for these 3,522 claim lines, and will determine
the appropriate questioned amount by projecting the results of the statistical sample to
the universe of Category F claims for patients with cumulative claim payments less than
$10,000. The OIG will determine the actual overcharges to the FEHB in its final report
after reviewing the Association’s response to the draft report.

Recommendation #3

The OIG recommend that the contracting officer disallow the claims overcharges (to be
determined and included in the final report) and have the BCBS plans return all
amounts recovered to the FEHBP.

BCBSA Response:

After reviewing the OIG statistical sample of uncoordinated Medicare COB claims
totaling $2,845,340, BCBS Plans responded that claim overpayments totaling $532,678
were paid in error and that the remaining claims, totaling $2,312,662 were paid
correctly. BCBS Plans also responded that of the $532,678 amount in claim payment
errors, recovery was initiated on claim overpayments totaling $4,020 before the OIG
Audit Notification Letter and the actual listing of potential claim overpayments were
received for review.

                                                             Report No. 1A-99-00-16-062
BCBSA contests any projected overpayment on payment errors identified in the
statistical sample. Based upon an analysis of the OIG’s sampling and estimating
methodology for previous Medicare COB audits, BCBSA determined that the OIG
estimation methodology:

x   Is biased toward higher dollar claims, thus inflating the estimated error amount.
x   Results a heavily biased estimate 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.
x   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.
x   Treats all errors identified as universal errors in the population; however, 43% of all
    errors identified were related to paying non covered durable medical claims for
    members where services were provided in another Plan’s service area. In this
    instance the only error was that the claim was paid by the wrong Plan; however, the
    FEP Program is required to pay these claims.
x   Includes claims where the paid amount for the claim is less than $50. CS1039 does
    not require recovery initiation on claims where the overpayment amount is less than
    $50.
x   Includes charges that are not covered by Medicare because:

       x   The charges are statutory exclusions from payment of Medicare
       x   The charges include drug charges that are not covered by Medicare part B
       x   The charges represent services that were denied by Medicare because the
           provider is a non-covered Medicare provider.

As a result, BCBSA disagrees that the Contracting Officer should use a projected
amount to determine unallowable charges. 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. Instead, BCBSA will work with
Plans to review additional claims to identify actual claims that were paid in error, if any.
The population to be reviewed by Plans will exclude claims that are below the recovery
threshold (where recovery is not required by CS1039), non-covered Medicare providers,
non-covered Medicare services as well as charges that were denied by Medicare but
represents FEP benefits. Recovery will be initiated on any overpayment amounts
identified and any amount recovered will be returned to the Program.




                                                                Report No. 1A-99-00-16-062
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




                                                             Report No. 1A-99-00-16-062
                                                               



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