Office of Personnel Management, Office of Inspector General | U.S. Office of Personnel Management | Audit of Government Employees Health Association, Inc. Benefit Plan Lee's Summit, Missouri

Audit of Government Employees Health Association, Inc. Benefit Plan Lee's Summit, Missouri

Published by the Office of Personnel Management, Office of Inspector General on 2012-03-12.

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

u.s. OFFICE OF PERSONNEL MANAGEMENT
OFF ICE OF TH E INSPE CTOR GENE RAL
OFFICE OF AUDITS

Final Audit Report

Subject:

AUDIT OF
GOVERNMENT EMPLOYEES HEALTH ASSOCIATION, INC.
BENEFIT PLAN
LEE'S SUMMIT, MISSOURI

Report No. 18-31-00-10-038

Date: March 1 2, 20 12

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UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
Washington, D C 20415

Oflice of !he
Inspector General

A UDIT REPORT

Federal Employees Health Benefits Program
Employee Organi zati on Plan

Government Employees Health Association, Inc. Benefit Plan
Contract CS 1063 Plan Codes 3 1 and 34
Lee's Summit, Missouri

RErORT NO . IB -3 1-00-1O-038 DATE: Marc h 1 2, 2 0 12

2 J2C:<5A'_
Michael R. Esser
Assistant Inspector General
for Audits

.........,opm, coy
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
washing ton. DC 2U415

omcc o,lf lhe
IU\I,«'I"r General

EXECUTIVE SUMMARY

Federal Employees Health Benefits Program
Employee Organization Plan

Government Employees Health Association, Inc. Benefi t Plan
Contract CS 1063 Plan Codes 3 1 and 34
Lee' s Summit, Missouri

REPORT NO . 18-3 1-00-10-038 DATE: March 1 2, 201 2

This final audit report on the Federal Employees Health Benefits Program (FEHBP) operati ons at
the Governm ent Employees Health Association , Inc. (GEHA) Benefit Plan (Plan) questions
$1, 177,068 in health benefit charges and includes procedural findings regarding the Plan ' s
network pric:ing oversight and Fraud and Abuse (F&A) Program . The Plan agreed (A ) with
$ 1.055,9 10 end disagreed (D) with $121 . 158 of these questioned charges. In addition. the Plan
agreed with the procedural finding regarding the network pricing oversigh t, but only partiall y
agreed with the procedural findings relating to the F&A Program .

Our audit was cond ucted in accordance with Government Auditing Standards. The audit covered
claim payments from Jan uary I, 2007 through May 3 1, 2010, as well as misce llaneous heal th
benefit payments and credits and admin istrative expenses from 2006 throu gh 2009 as reported in
the Annual Accounting Statements. In addition, we reviewed the Plan ' s cas h management
practices related to FEHBP fund s for contract years 2006 through 2009.

The audit res ults are swnmarized as follows:

....... u lllj ob s ,&o v
HEALTH BENEFIT CHARGES

Claim Payments

• Coordination of Benefits with Medicare (A) $436,544

The Plan incorrectly paid 578 claim lines, resulting in net overcharges of $436,544 to the
FEHBP. Specifically, the Plan did not properly coordinate 540 claim line payments with
Medicare as required by the FEHBP contract. As a result, the FEHBP paid as the primary
insurer for these claims when Medicare was the primary insurer. Therefore, we estimate that
the FEHBP was overcharged by $414,700 for these 540 claim lines. The remaining 38 claim
line payments were not coordination of benefit errors but contained other Plan payment
errors, resulting in net overcharges of $21,844 to the FEHBP. In total, we estimate that the
Plan overpaid 576 claim lines by $436,973 and underpaid 2 claim lines by $429.

• Assistant Surgeon Review $224,163

The Plan incorrectly paid 530 assistant surgeon claims, resulting in net overcharges of
$224,163 to the FEHBP. Specifically, the Plan overpaid 409 claims by $264,488 and
underpaid 121 claims by $40,325. The Plan agreed with $220,857 (A) and disagreed with
$3,306 (D) of these questioned charges.

• Modifier 62 and 66 Review (A) $173,117

The Plan incorrectly paid 275 multiple surgeon claim lines, resulting in net overcharges of
$173,117 to the FEHBP. Specifically, the Plan overpaid 223 claim lines by $196,279 and
underpaid 52 claim lines by $23,162.

• Claims Paid for Ineligible Patients $146,481

The Plan paid 286 claims that were incurred when no patient enrollment records existed,
during gaps in patient coverage, or after termination of patient coverage with the GEHA
Benefit Plan, resulting in overcharges of $146,481 to the FEHBP. These claims were paid
for ineligible patients. The Plan agreed with $68,893 (A) and disagreed with $77,588 (D) of
these questioned charges.

• Inpatient Facility Claims - Duplicate or Overlapping Dates of Service (A) $103,977

The Plan incorrectly paid 14 inpatient facility claims, resulting in overcharges of $103,977 to
the FEHBP.

ii
• Duplicate Claim Payments (A) $50,984

During our review of potential duplicate claim payments, we found that the Plan incorrectly
paid 68 claims, resulting in overcharges of $50,984 to the FEHBP. Specifically, we
determined that the Plan improperly charged the FEHBP $34,052 for 44 duplicate claim
payments. Also, we identified 24 claims that were not duplicate claim payments but
contained other Plan payment errors, resulting in overcharges of $16,932 to the FEHBP.

• System Review $41,802

Based on our review of a judgmental sample of 125 claims, we determined that the Plan
incorrectly paid 2 claims, resulting in overcharges of $41,802 to the FEHBP. Also, we
identified five instances where the Plan’s claims system did not contain the dates when the
providers’ contracted pricing rates were loaded into the system. The Plan agreed with
$1,538 (A) and disagreed with $40,264 (D) of these questioned charges.

• Network Pricing Oversight (A) Procedural

The Plan contracts with 15 regional preferred provider organization (PPO) networks
throughout the United States to provide members with comprehensive access to in-network
providers. Most of these PPO networks administer the pricing of claims and submit pricing
sheets to the Plan for claims processing. We found that the Plan does not sufficiently verify
the accuracy and integrity of these pricing sheets prior to processing and paying the claims.
The Plan relies on what the PPO networks instruct them to price the claims at, leading to
potentially increased risk of claim payment errors.

Miscellaneous Payments and Credits

The audit disclosed no findings pertaining to miscellaneous health benefit payments and credits.
Overall, we concluded that the Plan returned health benefit refunds and recoveries, including
prescription drug rebates, to the FEHBP in a timely manner.

ADMINISTRATIVE EXPENSES

The audit disclosed no findings pertaining to administrative expenses. Overall, we concluded
that the administrative expenses charged to the FEHBP were actual, allowable, necessary, and
reasonable expenses incurred in accordance with the terms of the contract and applicable laws
and regulations.

CASH MANAGEMENT

The audit disclosed no findings pertaining to cash management. Overall, we concluded that the
Plan handled FEHBP funds in accordance with Contract CS 1063 and applicable laws and
regulations.

iii
CONTENTS
PAGE

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

I. INTRODUCTION AND BACKGROUND ......................................................................1

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

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

A. HEALTH BENEFIT CHARGES .............................................................................7

1. Claim Payments .................................................................................................7

a. Coordination of Benefits with Medicare .....................................................7
b. Assistant Surgeon Review .........................................................................11
c. Modifier 62 and 66 Review .......................................................................14
d. Claims Paid for Ineligible Patients ............................................................15
e. Inpatient Facility Claims - Duplicate or Overlapping Dates of Service ....18
f. Duplicate Claim Payments.........................................................................19
g. System Review...........................................................................................21
h. Network Pricing Oversight ........................................................................22

2. Miscellaneous Payments and Credits ..............................................................24

B. ADMINISTRATIVE EXPENSES .........................................................................24

C. CASH MANAGEMENT .......................................................................................24

D. FRAUD AND ABUSE PROGRAM ......................................................................24

1. Notification of Fraud and Abuse Cases ...........................................................24
2. Fraud and Abuse Annual Reports ....................................................................26
3. Program Management ......................................................................................28
4. Pharmacy Benefit Manager ..............................................................................30

IV. MAJOR CONTRIBUTORS TO THIS REPORT ...........................................................31

V. SCHEDULES

A. CONTRACT CHARGES AND AMOUNTS QUESTIONED
B. QUESTIONED CHARGES

APPENDIX (Government Employees Health Association, Inc. Benefit Plan response,
dated September 2, 2011, to the draft audit report)
I. INTRODUCTION AND BACKGROUND

INTRODUCTION

This final audit report details the findings, conclusions, and recommendations resulting from our
audit of the Federal Employees Health Benefits Program (FEHBP) operations at the Government
Employees Health Association, Inc. (GEHA) Benefit Plan (Plan). The Plan is located in Lee’s
Summit, Missouri.

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

BACKGROUND

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law
86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance
benefits for federal employees, annuitants, and dependents. OPM’s Healthcare and Insurance
Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB
Act are implemented by OPM through regulations, which are codified in Title 5, Chapter 1, Part
890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available
through contracts with various health insurance carriers.

The Plan is a fee-for-service health plan with a preferred provider organization (PPO). The Plan
enrollment is open to all federal employees and annuitants who are eligible to enroll in the
FEHBP and who are, or become, members of GEHA. GEHA is the underwriter, sponsor and
administrator of this Plan, operating under Contract CS 1063 to provide a health benefits plan
authorized by the FEHB Act. 1 Members have a choice of enrollment in High Option or Standard
Option.

GEHA’s contract with OPM is experience-rated. Thus, the costs of providing benefits in the
prior year, including underwritten gains and losses which have been carried forward, are
reflected in current and future years’ premium rates. In addition, the contract provides that in
the event of termination, unexpended program funds revert to the FEHBP Trust Fund. In
recognition of these provisions, the contract requires an accounting of program funds be
submitted at the end of each contract year. The accounting is made on a statement of operations
known as the Annual Accounting Statement.

Compliance with laws and regulations applicable to the FEHBP is the responsibility of the Plan
management. Also, management of the Plan is responsible for establishing and maintaining a
system of internal controls.

1
GEHA is a nonprofit organization whose primary purpose is to provide health insurance coverage to current and
retired federal employees. In 2007, GEHA’s name changed from the Government Employees Hospital Association,
Inc. to the Government Employees Health Association, Inc.

1
All findings from our previous audit of the Plan (Report No. 1B-31-00-06-044, dated February 6,
2007) for contract years 2000 through 2005 have been satisfactorily resolved.

The results of this audit were provided to the Plan in written audit inquiries; were discussed with
Plan officials throughout the audit and at an exit conference; and were presented in detail in a
draft report, dated June 10, 2011. The Plan’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 Plan on various dates through October 13, 2011
was considered in preparing our final report.

2
II. OBJECTIVES, SCOPE, AND METHODOLOGY

OBJECTIVES

The objectives of our audit were to determine whether the Plan charged costs to the FEHBP and
provided services to FEHBP members in accordance with the terms of the contract. Specifically,
our objectives were as follows:

Health Benefit Charges

• To determine whether the Plan complied with contract provisions relative to benefit
payments.

• To determine whether miscellaneous payments charged to the FEHBP were in
compliance with the terms of the contract.

• To determine whether credits and miscellaneous income relating to FEHBP benefit
payments were returned timely to the FEHBP.

Administrative Expenses

• To determine whether administrative expenses charged to the contract were actual,
allowable, necessary, and reasonable expenses incurred in accordance with the terms
of the contract and applicable regulations.

Cash Management

• To determine whether the Plan handled FEHBP funds in accordance with applicable
laws and regulations concerning cash management in the FEHBP.

Fraud and Abuse Program

• To determine whether the Plan operates an effective Fraud and Abuse (F&A)
Program for the prevention, detection, and/or recovery of fraudulent claims as
required by the FEHBP contract.

SCOPE

We conducted our 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.

3
The audit was performed at the Plan’s office in Lee’s Summit, Missouri from October 18
through November 12, 2010. Audit fieldwork was also performed at our office in Cranberry
Township, Pennsylvania on various dates from October 2010 through June 2011. Throughout
the audit process, we encountered several instances where the Plan responded untimely, or
initially provided incomplete responses, to various requests for supporting documentation. As a
result, completion of our audit work and issuance of our draft and final reports was delayed.

METHODOLOGY

We obtained an understanding of the internal controls over the Plan’s claims processing,
financial, cost accounting, and cash management systems by inquiry of Plan officials.

To test the Plan’s compliance with the FEHBP health benefit provisions, we selected and
reviewed samples of 9,379 claims. 3 We used the FEHBP contract, the benefit plan brochure,
and the Plan’s provider agreements to determine the allowability of benefit payments. The
results of these samples were not projected to the universe of claims.

We interviewed Plan personnel and reviewed the Plan’s policies, procedures, and accounting
records during our audit of miscellaneous health benefit payments and credits. We also
judgmentally selected and reviewed 387 high dollar health benefit refunds, totaling $22,816,616
(from a universe of 136,717 refunds, totaling $87,386,792); 4 monthly subrogation recovery
receipts, totaling $607,409 (from a universe of 48 monthly subrogation recovery receipts,
totaling $1,830,325); 8 monthly credit balance audit recovery receipts, totaling $1,800,404 (from
a universe of 48 monthly credit balance audit recovery receipts, totaling $6,544,128); 4 quarterly
prescription drug rebates, totaling $28,364,115 (from a universe of 18 quarterly drug rebates,
totaling $137,496,194); and 8 “other” monthly refund and recovery receipts, totaling $509,358
(from a universe of 48 “other” monthly refund and recovery receipts, totaling $2,220,061), to
determine if refunds and recoveries were promptly returned to the FEHBP and if miscellaneous
payments were properly charged to the FEHBP. 4 The results of these samples were not
projected to the universe of miscellaneous health benefit payments and credits.

We judgmentally reviewed administrative expenses charged to the FEHBP for contract years
2006 through 2009. Specifically, we reviewed administrative expenses relating to cost centers,
natural accounts, pension, post-retirement, executive compensation, gains and losses, return on
investment, and vendor cost containment. We used the FEHBP contract, the FAR, and the
FEHBAR to determine the allowability, allocability, and reasonableness of charges.

3
See the audit findings for “Coordination of Benefits with Medicare” (A1.a), “Assistant Surgeon Review” (A1.b),
“Modifier 62 and 66 Review” (A1.c), “Claims Paid for Ineligible Patients” (A1.d), “Inpatient Facility Claims - Duplicate
or Overlapping Dates of Service” (A1.e), “Duplicate Claim Payments” (A1.f), and “System Review” (A1.g) on pages 7
through 22 for specific details of our sample selection methodologies.
4
The sample of health benefit refunds included all refunds greater than $25,000. For subrogation, the sample
consisted of the month with the highest dollar recovery receipts from each year. For credit balance audit recoveries,
the sample consisted of the two months with the highest dollar recovery receipts from each year. For prescription
drug rebates, the sample consisted of one randomly selected quarter from each year. For “other” refunds and
recoveries, the sample consisted of the two months with the highest dollar receipts from each year.

5
We reviewed the Plan’s cash management practices to determine whether the Plan handled
FEHBP funds in accordance with Contract CS 1063 and applicable laws and regulations.

We also interviewed the Plan’s Special Investigations Unit regarding the effectiveness of the
Plan’s F&A Program.

6
III. AUDIT FINDINGS AND RECOMMENDATIONS

A. HEALTH BENEFIT CHARGES

1. Claim Payments

a. Coordination of Benefits with Medicare $436,544

The Plan incorrectly paid 578 claim lines, resulting in net overcharges of $436,544 to
the FEHBP. Specifically, the Plan did not properly coordinate 540 claim line
payments with Medicare as required by the FEHBP contract. As a result, the FEHBP
paid as the primary insurer for these claims when Medicare was the primary insurer.
Therefore, we estimate that the FEHBP was overcharged by $414,700 for these 540
claim lines. The remaining 38 claim line payments were not coordination of benefit
errors but contained other Plan payment errors, resulting in net overcharges of
$21,844 to the FEHBP. In total, we estimate that the Plan overpaid 576 claim lines
by $436,973 and underpaid 2 claim lines by $429.

The 2010 GEHA Benefit Plan brochure, page 85, Primary Payer Chart, illustrates when
Medicare is the primary payer. In addition, page 21 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.”

Contract CS 1063, 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 . . . .”

In addition, Contract CS 1063, 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.” 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 . . .
.”

For claims incurred and paid from October 1, 2008 through May 31, 2010, we
performed a computer search and identified 356,182 claim lines, totaling
$26,509,487 in payments, that potentially were not coordinated with Medicare. From
this universe, we selected for review a sample of 3,962 claim lines, totaling
$5,727,448 in payments, to determine whether the Plan complied with the contract
provisions relative to coordination of benefits (COB) with Medicare. When we
submitted our sample of potential COB errors to the Plan on July 15, 2010, the claims
were within the Medicare timely filing requirement and could be filed with Medicare
for coordination of benefits.

7
The following table is a summary of the claim lines that were selected for review:

Claim Sample Selection
Claim Type Amounts Paid
Lines Methodology
Medicare Part A Primary for 152 $1,955,867 All patients
Inpatient (I/P) Facility
Medicare Part A Primary for 41 $55,256 Patients with cumulative
Skilled Nursing, Home Health claims of $250 or more
Care (HHC), and Hospice Care
Medicare Part B Primary for 214 $1,860,531 All patients
Certain I/P Facility Charges
Medicare Part B Primary for 0 $0 The potential COB errors
Skilled Nursing, HHC, and were immaterial. Therefore,
Hospice Care no claim lines were selected.
Medicare Part B Primary for 357 $446,251 Patients with cumulative
Outpatient Charges claims of $1,000 or more
Medicare Part B Primary for 3,198 $1,409,543 Patients with cumulative
Professional Charges claims of $2,500 or more
Total 3,962 $5,727,448

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

Medicare Part B pays 80 percent of most outpatient charges and professional claims
after the calendar year deductible has been met. Also, Medicare Part B covers a
portion of inpatient facility charges for ancillary services such as durable medical
equipment, 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. When we could not reasonably determine the actual
overcharge for the ancillary items, we questioned 25 percent of the amount paid for
the inpatient claim (0.30 x 0.80 = 0.24 ~ 25 percent).

Based on our review of the potential COB errors in our sample, we identified 578
claim lines that were paid incorrectly, resulting in net overcharges of $436,544 to the
FEHBP. Specifically, we estimate that 576 claim lines were overpaid by $436,973
and 2 claim lines were underpaid by $429.

8
The following table details the questioned payments by claim type:

Amounts
Claim Type Claim Lines Amounts Paid
Questioned
Medicare Part A Primary for 26 $230,911 $195,121
I/P Facility
Medicare Part A Primary for 1 $55,256 $4,000
Skilled Nursing, HHC, and
Hospice Care
Medicare Part B Primary for 9 $133,237 $28,159
Certain I/P Facility Charges
Medicare Part B Primary for 0 $0 $0
Skilled Nursing, HHC, and
Hospice Care
Medicare Part B Primary for 102 $142,635 $135,812
Outpatient Charges
Medicare Part B Primary for 440 $84,791 $73,452
Professional Charges
Total 578 $646,830 $436,544

Our audit disclosed the following for these claim payment errors:

• For 231 (40 percent) of the claim lines questioned, the patient's Medicare
eligibility information was incorrect in the Plan’s claims system when the claims
were paid. However, when the correct Medicare eligibility information was
subsequently added to the claims system, the Plan did not review and/or adjust the
patient's prior claims back to the Medicare effective dates. As a result, we
estimate that the FEHBP was overcharged $254,565 for these claim lines that were
not coordinated with Medicare.

• For 224 (39 percent) of the claim lines questioned, the Plan incorrectly paid these
claims due to manual processing errors. Specifically, the claims were deferred for
Medicare COB on the claims system, but the system edits were overridden by the
processors. As a result, we estimate that the FEHBP was overcharged $22,082 for
these claim lines that were not coordinated with Medicare.

• For 55 (9 percent) of the claim lines questioned, various other COB errors caused
these claim lines to be processed incorrectly. As a result, we estimate that the
FEHBP was overcharged $128,547 for these claim lines that were not coordinated
with Medicare.

9
• For 38 (7 percent) of the claim lines questioned, we found that these claim lines
were not actually COB errors but contained other Plan payment errors, resulting
in net overcharges of $21,844 to the FEHBP. Specifically, the Plan overpaid 36
claim lines by $22,273 and underpaid 2 claim lines by $429.

• For 30 (5 percent) of the claim lines questioned, manual processing errors caused
improper coordination of these claim lines. In each instance, the claims processor
inadvertently did not apply the Medicare payment, which was available on the
Medicare Explanation of Benefits Statement, when processing the claim. As a
result, we estimate that the FEHBP was overcharged $9,506 for these claim lines
that were not coordinated with Medicare.

Of the $436,544 in questioned charges, $135,979 (31 percent) was identified by the
Plan before receiving our audit request (i.e., sample of potential COB errors) on
July 15, 2010. However, since the Plan had not completed the recovery process
and/or adjusted these claims by our audit request date, we are continuing to question
these claim payment errors. The remaining questioned charges of $300,565 (69
percent) were identified as a result of our audit.

Plan’s Response:

In response to the amount questioned in the draft report, the Plan agrees with
$436,599 ($457,428 - $20,869) and disagrees with $20,869. The Plan had recovered
$411,709 and waived $2,279 of the uncontested amount as of September 2, 2011.
The Plan will continue recovery efforts on the remaining uncontested overpayments.
Also, the Plan has made additional payments to correct the underpayment errors.

For the contested amount, the Plan states, “Overpayments of $20,869 are being
disputed because the amount deemed overpaid is less than previously reported.”

In addition, the Plan states, “The following controls are in place to minimize the
overpaid claims due to other coverage. Once it is discovered that an enrollee has
other coverage, a process has been established to identify all medical and pharmacy
claims that were paid after the effective date of coverage to the date we were notified
of the other coverage. The claims are investigated for possible overpayments and
collections are pursued. GEHA has also established a procedure to automatically
code an enrollee’s record as having Medicare primary (if the enrollee is in a retired
status) once they are eligible to obtain Medicare. Claims incurred after the Medicare
eligibility date are pended awaiting information regarding the enrollee’s Medicare
status.

10
GEHA is required by CMS (Centers for Medicare/Medicaid Services) to send
medical coverage information on a quarterly basis for all members over age 45 that
are actively employed on the MSP (Medicare Secondary Payer) file under Section
111. GEHA also participates in the optional Section 111 Non-MSP Part D sharing of
information by providing a monthly file to CMS of retirees that are covered by
GEHA. CMS provides a response file to both the mandatory quarterly MSP file and
the optional monthly Non-MSP file with Medicare information. The information is
used to update eligibility data on GEHA’s claim system and identify overpayments that
may have occurred.”

OIG Comments:

After reviewing the Plan’s response and additional documentation, we revised the
questioned charges from our draft report to $436,544. The Plan’s response and
additional documentation support concurrence with the revised questioned charges.

Recommendation 1

We recommend that the contracting officer disallow $436,973 for claim overcharges
($414,700 for COB errors and $22,273 for other claim payment errors) and verify that
the Plan returns all amounts recovered to the FEHBP.

Recommendation 2

We recommend that the contracting officer allow the Plan to charge the FEHBP $429
for additional payments made to the providers to correct the underpayment errors.
However, before allowing any additional payment(s) to a provider, the contracting
officer should require the Plan to first recover any questioned overpayment(s) for that
provider.

b. Assistant Surgeon Review $224,163

As previously cited from CS 1063, costs charged to the FEHBP must be actual,
allowable, allocable, and reasonable. If errors are identified, the Plan is required to
make a diligent effort to recover the overpayments.

For the period January 1, 2007 through May 31, 2010, we identified 2,688 assistant
surgeon claim groups, totaling $646,737 in potential overpayments, that may not have
been paid in accordance with the Plan’s assistant surgeon pricing procedures. From
this universe, we selected and reviewed a judgmental sample of 111 assistant surgeon
claim groups (representing 181 claims), totaling $190,903 in potential overpayments,

11
to determine if the Plan paid these claims properly. Our sample included all assistant
surgeon claim groups with potential overpayments of $750 or more. The majority of
these claim groups contained at least one primary surgeon and one assistant surgeon
claim.

Since most of the assistant surgeon claims in our initial sample (claims in 109 of the
111 assistant surgeon claim groups) were paid incorrectly, we expanded our testing to
include all groups in the universe with potential overpayments of $100 or more. This
expanded sample included an additional 1,610 assistant surgeon claim groups,
totaling $547,878 in potential overpayments.

Based on our review, we determined that 530 claims were paid incorrectly, resulting
in net overcharges of $224,163 to the FEHBP. Specifically, the Plan overpaid 409
claims by $264,488 and underpaid 121 claims by $40,325.

The claim payment errors resulted from the following reasons:

• The Plan incorrectly paid 73 assistant surgeon claims, resulting in overcharges of
$79,063 to the FEHBP. These overcharges were due to errors in the calculation
of the assistant surgeon fee, which should have been priced at 20 percent of the
primary surgeon’s allowed amount.

• The Plan incorrectly applied the PPO network pricing when processing 169
claims, resulting in net overcharges of $70,908 to the FEHBP. Specifically, the
Plan overpaid 136 claims by $85,493 and underpaid 33 claims by $14,585.

• The Plan incorrectly paid 238 claims due to manual processing errors, resulting in
net overcharges of $36,447 to the FEHBP. Specifically, the Plan overpaid 155
claims by $64,296 and underpaid 83 claims by $27,849.

• The Plan paid 12 claims twice, resulting in duplicate charges of $20,165 to the
FEHBP. In each instance, the Plan paid the same surgeon as both the primary and
assistant on the procedures.

• The Plan incorrectly paid six claims that were subject to the Omnibus Budget
Reconciliation Act of 1993 (OBRA 93) pricing guidelines, resulting in
overcharges of $6,528 to the FEHBP. These claims were paid in error due to the
Plan not recognizing the physician assistant pricing modifier and erroneously
calculating the assistant surgeon fee. In each instance, the assistant surgeon claim
should have been priced according to the Medicare fee schedule amount (i.e., 16
percent of the primary surgeon’s allowed amount).

12
• The Plan incorrectly paid four multiple surgeon claims, resulting in overcharges
of $5,016 to the FEHBP. These overcharges were due to the Plan not recognizing
the co-surgeon procedure modifier “62” or surgical team procedure modifier “66”
when pricing these claims. Specifically, the Plan priced these claims without
applying the co-surgeon reimbursement rate of 62.5 percent to the applicable
procedure allowances.

• The Plan incorrectly paid 19 assistant surgeon claims where either the primary
surgeon procedure codes were different than the assistant surgeon procedure
codes, the primary surgeon claims were denied, or the primary surgeon claims
were not submitted. In each instance, the Plan should have denied the assistant
surgeon claim. As a result, the FEHBP was overcharged $4,631 for these claims.

• The Plan incorrectly paid nine claims with procedure modifier “51”, resulting in
overcharges of $1,935 to the FEHBP. These overcharges were due to the Plan
incorrectly processing procedure modifier “51” when calculating the assistant
surgeon fee. In each instance, the Plan should have priced the highest allowable
procedure amount at 100 percent and each remaining allowable procedure
amount at 50 percent.

Plan’s Response:

In response to the amount questioned in the draft report, the Plan agrees with
$209,298 ($133,276 plus $76,022) in overpayments, and disagrees with $566,829
($776,127 minus $209,298) in overpayments and $3,222 in underpayments. The Plan
had recovered $84,107 of the uncontested overpayments as of September 2, 2011.
For the contested amounts, the Plan states that these claims were paid with the correct
assistant surgeon benefits.

In addition, the Plan states, “GEHA relies on the pricing systems of our multiple leased
PPO networks to provide accurate pricing. Each network surveyed has a process in
place to audit pricing and resolve deficiencies. We are implementing periodic audits of
PPO network pricing. On a quarterly basis GEHA audits a sample of provider contracts
in order to confirm network pricing is accurate.”

OIG Comments:

After reviewing the Plan’s response and additional documentation, we revised the
questioned charges from our draft report to $224,163. The Plan’s response and/or
additional documentation support agreement with $220,857 and disagreement with
$3,306 of the revised questioned charges.

Regarding the contested amount, the Plan could not determine if the claims were
priced at the correct percentage because the primary surgeon did not bill for the
procedure or the assistant surgeon billed a different procedure code than the primary

13
surgeon. We will continue to question the total charges for each of these claims
because the assistant surgeon should not be paid if there is no support for a primary
surgeon for the procedure.

Recommendation 3

We recommend that the contracting officer disallow $264,488 for claim overcharges
and verify that the Plan returns all amounts recovered to the FEHBP.

Recommendation 4

We recommend that the contracting officer allow the Plan to charge the FEHBP
$40,325 if additional payments are made to the providers to correct the underpayment
errors. However, before making any additional payment(s) to a provider, the
contracting officer should require the Plan to first recover any questioned
overpayment(s) for that provider.

c. Modifier 62 and 66 Review $173,117

The Plan incorrectly paid 275 multiple surgeon claim lines, resulting in net
overcharges of $173,117 to the FEHBP. Specifically, the Plan overpaid 223 claim
lines by $196,279 and underpaid 52 claim lines by $23,162.

For the period January 1, 2007 through May 31, 2010, we identified 544 multiple
surgeon claim groups, totaling $897,677 in potential “estimated” overpayments, that
contained at least one claim line with co-surgeon procedure modifier “62” or surgical
team procedure modifier “66”. From this universe, we selected and reviewed a
judgmental sample of 516 groups (representing 937 claim lines), totaling $882,500 in
potential overpayments, for the purpose of determining if the Plan paid these claim
lines properly. Our sample included all groups with potential overpayments of $100
or more.

Based on our review, we determined that 275 multiple surgeon claim lines were paid
incorrectly due to the Plan not recognizing the procedure modifier “62” or “66” when
pricing these claims. The Plan priced these claim lines without applying the co-
surgeon reimbursement rate of 62.5 percent to the applicable procedure allowances.
Consequently, the Plan overpaid 223 claim lines by $196,279 and underpaid 52 claim
lines by $23,162, resulting in net overcharges of $173,117 to the FEHBP.

14
Plan’s Response:

In response to the amount questioned in the draft report, the Plan agrees with $170,290
and disagrees with $712,210. The Plan will pursue the uncontested overpayments.

For the contested amount, the Plan states, “The overpayment amount computed by
the OIG was based on the allowed amount at the time of original adjudication
multiplied by the standard co-surgeon rate of 62.5%. This amount inflates the
overpayments because it assumes that all of the claims are not reduced to the 62.5%
co-surgeon rate . . . We disagree with the remaining balance of $712,210 as it was
determined that the claims were paid according to the co-surgeon benefits.”

In addition, the Plan states, “GEHA relies on the pricing systems of our multiple
leased PPO networks to provide accurate pricing. Each network surveyed has a
process in place to audit pricing and resolve deficiencies. We are implementing
periodic audits of PPO network pricing. On a quarterly basis GEHA audits a sample
of provider contracts in order to confirm network pricing is accurate.”

OIG Comments:

Based on our review of the Plan’s response and additional documentation, we revised
the questioned charges from our draft report to $173,117. The Plan’s response and/or
additional documentation support concurrence with the revised questioned charges.

Recommendation 5

We recommend that the contracting officer disallow $196,279 for claim overcharges
and verify that the Plan returns all amounts recovered to the FEHBP.

Recommendation 6

We recommend that the contracting officer allow the Plan to charge the FEHBP
$23,162 if additional payments are made to the providers to correct the underpayment
errors. However, before making any additional payment(s) to a provider, the
contracting officer should require the Plan to first recover any questioned
overpayment(s) for that provider.

d. Claims Paid for Ineligible Patients $146,481

The Plan paid 286 claims that were incurred when no patient enrollment records
existed, during gaps in patient coverage, or after termination of patient coverage with
the GEHA Benefit Plan, resulting in overcharges of $146,481 to the FEHBP. These
claims were paid for ineligible patients.

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As previously cited from CS 1063, costs charged to the FEHBP must be actual,
allowable, allocable, and reasonable. If errors are identified, the Plan is required to
make a diligent effort to recover the overpayments.

Enrollee Coverage Conflicts with Dates of Service

We performed a computer search to identify claims paid that were potentially
incurred during gaps in patient coverage or after termination of patient coverage with
the GEHA Benefit Plan. For the period January 1, 2007 through May 31, 2010, we
identified 10,937 claim line payments, totaling $2,180,291, for 1,922 patients that
met this search criteria. Our search criteria took into consideration the 31-day grace
period of temporary continuing coverage following termination of eligibility.

From this universe of 1,922 patients, we selected all patients with cumulative claim
line payments of $2,500 or more to review. Our sample included 3,377 claim lines,
totaling $1,719,678 in payments, for 124 patients. Based on our review, we determined
that 218 claims, totaling $133,671 in payments, were paid for ineligible patients.

Patients with No Enrollment Records

We performed a computer search to identify claims paid that were potentially
incurred when no patient enrollment records existed. For the period January 1, 2007
through May 31, 2010, we identified 63,849 claim line payments, totaling
$9,637,511, for 1,265 patients that met this search criteria. Our search criteria took
into consideration the 31-day grace period of temporary continuing coverage
following termination of eligibility.

From this universe of 1,265 patients, we selected all patients with cumulative claim
line payments of $5,000 or more to review. Our sample included 42,516 claim lines,
totaling $8,563,560 in payments, for 285 patients. Based on our review, we
determined that 68 claims, totaling $12,810 in payments, were paid for ineligible
patients.

Summary of Claims Paid for Ineligible Patients

In total, the Plan overcharged the FEHBP $146,481 for 286 claims that were paid for
ineligible patients. Our audit disclosed the following reasons for these claim
payment errors:

• For 218 of the claims questioned, the members’ enrollment data records that
identified the patients’ eligibility status in the Plan’s claims system were incorrect
when the claims were paid. However, after receiving the patients’ updated
enrollment data, the Plan did not review and/or adjust these claims that were
incurred after the patients’ termination dates of coverage. For these 218 claims,
the enrollment data errors were identified on the members’ rosters or the

16
members’ termination notices, which were received from the federal payroll
offices, after the claims were already paid. As a result, the FEHBP was
overcharged $59,579 in claim payments for patients not eligible for benefits.

• For 68 of the claims questioned, there were various processing errors. For
example, we identified multiple cases where the patients were not eligible for
coverage due to loss in coverage from divorce and the Plan erroneously paid these
claims. As a result, the FEHBP was overcharged $86,902 in claim payments for
patients not eligible for benefits.

Plan’s Response:

The Plan agrees with $157,442 of the questioned charges from the draft report and
states, “GEHA identified . . . $100,533 . . . of the questioned costs prior to the OIG
audit. . . . As of the date of the response, we have recovered $29,839 and waived
$11,707. We will continue collection efforts on the remaining outstanding balance.”

In regards to preventing these types of errors, the Plan states, “When a termination is
received or a member changes from a self and family contract to a self contract, a
report is systematically generated that lists all the medical claims paid from the
effective date of the termination or change in plan. The claims are reviewed and
collection action is initiated for claims that were paid after the effective date. Most
of the claims cited as overpayments were the result of GEHA receiving retroactive
termination notices from federal payroll offices.”

OIG Comments:

Based on our review of the Plan’s response and supporting documentation, we
revised the questioned charges from our draft report to $146,481. After providing the
response, the Plan provided additional documentation supporting agreement with
$68,893 and disagreement with $77,588 of the revised questioned charges.

Regarding the contested charges, the Plan states that these overpayments were waived
because the providers refused to refund these amounts. However, since these claims
were paid for ineligible patients, we will continue to question these improper
payments.

Recommendation 7

We recommend that the contracting officer disallow $146,481 for claims that were
paid for ineligible patients, and verify that the Plan returns all amounts recovered to
the FEHBP.

17
e. Inpatient Facility Claims - Duplicate or Overlapping Dates of Service $103,977

The Plan incorrectly paid 14 inpatient facility claims, resulting in overcharges of
$103,977 to the FEHBP.

Section 6(h) of the FEHB Act provides that rates should reasonably and equitably
reflect the costs of benefits provided.

We performed a computer search for potential duplicate payments on inpatient
facility claims paid during the period January 1, 2007 through May 31, 2010. We
identified 146 groups of inpatient facility claims with duplicate or overlapping dates
of service. These 146 groups included 301 claims with total amounts paid of
$6,507,532. Based on our review, we determined that 14 of these claims were paid
incorrectly (i.e., as duplicate claim payments), resulting in overcharges of $103,977
to the FEHBP.

These duplicate claim payments resulted from the following reasons:

• For 12 of these duplicate payments, the Plan incorrectly paid the claims due to
manual processing errors, resulting in overcharges of $88,264 to the FEHBP.
Specifically, these claims were deferred as potential duplicates on the claims
system, but the system edits were overridden by the processors.

• For two of these duplicate payments, the Plan incorrectly paid the claims due to
systematic processing errors, resulting in overcharges of $15,713 to the FEHBP.
Specifically, these claims were not deferred on the claims system as potential
duplicates for review by the processors.

Plan’s Response:

The Plan agrees with this finding. The Plan had recovered $38,762 of the duplicate
payments as of September 2, 2011. The Plan will continue to pursue the remaining
duplicate payments.

In regards to preventing these types of errors, the Plan states, “GEHA’s claims system
has edits that screen claims for duplicates. The system automatically ranks duplicate
claims as disallowable or possible duplicates. In addition, GEHA’s Internal Audit
Department conducts an audit of potential duplicate claims each quarter. Duplicates
are referred to the Claims Department for review and collections are pursued.”

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Recommendation 8

We recommend that the contracting officer disallow $103,977 for duplicate claim
payments charged to the FEHBP, and verify that the Plan returns all amounts
recovered to the FEHBP.

f. Duplicate Claim Payments $50,984

During our review of potential duplicate claim payments, we found that the Plan
incorrectly paid 68 claims, resulting in overcharges of $50,984 to the FEHBP.
Specifically, we determined that the Plan improperly charged the FEHBP $34,052 for
44 duplicate claim payments. Also, we identified 24 claims that were not duplicate
claim payments but contained other Plan payment errors, resulting in overcharges of
$16,932 to the FEHBP.

Section 6(h) of the FEHB Act provides that rates should reasonably and equitably
reflect the costs of benefits provided.

We performed a computer search for potential duplicate payments on claims paid
during the period January 1, 2007 through May 31, 2010. We selected and reviewed
869 groups, totaling $1,309,865 (out of 33,169 groups, totaling $1,644,823) in
potential duplicate payments, under our “best matches” criteria. We also selected
and reviewed 829 groups, totaling $1,394,960 (out of 101,575 groups, totaling
$3,605,449) in potential duplicate payments, under our “near matches” criteria. Our
samples included all groups with potential duplicate payments of $350 or more under
the “best matches” criteria and $500 or more under the “near matches” criteria.

Based on our review, we determined that 21 claim payments in our “best matches”
sample were duplicates, resulting in overcharges of $15,715 to the FEHBP. Also, we
determined that 23 claim payments in our “near matches” sample were duplicates,
resulting in overcharges of $18,337 to the FEHBP. In total, the Plan charged the
FEHBP $34,052 for these 44 duplicate claim payments from January 1, 2007 through
May 31, 2010.

These duplicate claim payments resulted from the following reasons:

• For 31 of these duplicate payments, the Plan incorrectly paid the claims due to
manual processing errors, resulting in overcharges of $25,149 to the FEHBP.
Specifically, these claims were deferred as potential duplicates on the claims
system, but the system edits were overridden by the processors.

19
• For 13 of these duplicate payments, the Plan incorrectly paid the claims due to
systematic processing errors, resulting in overcharges of $8,903 to the FEHBP.
Specifically, these claims were not deferred on the claims system as potential
duplicates for review by the processors.

During our review of potential duplicate claim payments in our “best matches”
sample, we identified 14 claims that were not duplicate claim payments but contained
other Plan payment errors, resulting in overcharges of $10,373 to the FEHBP. In our
“near matches” sample, we also identified 10 claims that were not duplicate claim
payments but contained other Plan payment errors, resulting in overcharges of $6,559
to the FEHBP. In total, the Plan overcharged the FEHBP $16,932 for these 24 claim
payment errors.

These non-duplicate claim payment errors resulted from the following reasons:

• The Plan incorrectly paid 15 claims since the patients’ anesthesia allowable
benefits had been exhausted, resulting in overcharges of $12,817 to the FEHBP.

• The Plan incorrectly paid six claims due to manual pricing errors, resulting in
overcharges of $3,082 to the FEHBP.

• The Plan paid two claims using the incorrect procedure allowances, resulting in
overcharges of $573 to the FEHBP.

• In one instance, the Plan priced a claim without applying the multiple procedure
discount, resulting in an overcharge of $460 to the FEHBP.

Plan’s Response:

The Plan agrees with this finding. The Plan had recovered $35,885 of the
overpayments as of September 2, 2011. The Plan will continue to pursue the
remaining overpayments.

Recommendation 9

We recommend that the contracting officer disallow $50,984 for claim overcharges
($34,052 for duplicate claim payments and $16,932 for other claim payment errors)
and verify that the Plan returns all amounts recovered to the FEHBP.

20
g. System Review $41,802

Based on our review of a judgmental sample of 125 claims, we determined that the
Plan incorrectly paid 2 claims, resulting in overcharges of $41,802 to the FEHBP.
Also, we identified five instances where the Plan’s claims system did not contain the
dates when the providers’ contracted pricing rates were loaded into the system.

For health benefit claims paid during the period January 1, 2009 through May 31,
2010 (excluding OBRA 90, OBRA 93, and case management claims), we identified
12,500,531 claim lines, totaling $1,527,263,087 in payments, where the FEHBP paid
as the primary insurer. From this universe, we selected and reviewed a judgmental
sample of 125 claims (representing 449 claim lines), totaling $6,546,415 in payments,
to determine if the Plan adjudicated these claims properly and/or priced them
according to the provider contract rates. 5 As part of our review, we also verified if
the provider contract rates were accurately and timely updated in the pricing systems
of the Plan’s PPO networks for 38 claims in our sample.

Based on our review, we identified two claim payment errors, resulting in
overcharges of $41,802 to the FEHBP. In each instance, the Plan paid the claim
without applying the discounted pricing rate. In addition to these overcharges, we
identified five instances where the Plan’s claims system did not include the dates
when the providers’ contracted pricing rates were loaded into the system. Therefore,
we could not determine if these contracted rates were loaded timely into the system.
Because these could result in potential systematic errors, the Plan should identify
when the providers’ contracted pricing rates were loaded into the claims system and
determine if the applicable claims were priced and paid correctly.

Plan’s Response:

In response to the amount questioned in the draft report, the Plan disagrees with the
questioned overpayments.

For the contested amount, the Plan states, “We verified the discounts to provider
agreements without exception on the 38 sample items. For the provider agreements
above we obtained information from PPO networks to confirm the date provider rates
were entered into the network’s pricing systems. We noted only three sample items
where the rate load dates were after the effective date of the provider agreements and

5
We selected our sample from an OIG-generated “Place of Service Report” (SAS application) that stratified the
claims by place of service (POS), such as provider’s office and payment category, such as $50 to $99.99. We
judgmentally determined the number of sample items to select from each POS stratum based on the stratum’s total
claim dollars paid.

21
none of those claims were overpaid. . . . we don’t believe this issue is a systemic risk
and there may be very good reasons why the load date would vary from the effective
date. The networks have established procedures for the maintenance of rates in their
systems to ensure that pricing is accurate.

The remainder of the provider agreements had rates loaded prior to the effective date of
the agreement or our PPO networks were not in place as of the effective date of the
provider agreements.

There were also four provider agreements on GEHA’s pricing system with effective
dates from January 1, 1999 to January 1, 2005 that the rate input date could not be
confirmed. All of these discount rates have not changed since the initial provider
contract was effective.”

Regarding corrective actions to prevent these types of errors, the Plan states, “We
will evaluate the results of the OIG’s audit findings and implement procedures we
deem necessary to resolve the issues noted. The PPO networks we have contacted
have policies and procedures in place to address provider contracting and the
administration of discounts rates. We are implementing periodic audits of PPO
network pricing. On a quarterly basis GEHA audits a sample of provider contracts in
order to confirm network pricing is accurate.”

OIG Comments:

Based on our review of the Plan’s response and supporting documentation, we
revised the questioned charges from our draft report to $41,802. After providing the
response, the Plan provided additional documentation supporting agreement with
$1,538 and disagreement with $40,264 of the revised questioned charges.

We are continuing to question the contested amount as an overcharge to the FEHBP
because the Plan did not provide sufficient documentation to support that the claims
were properly paid at the contracted discount rate.

Recommendation 10

We recommend that the contracting officer disallow $41,802 for claim overcharges
and verify that the Plan returns all amounts recovered to the FEHBP.

h. Network Pricing Oversight Procedural

The Plan contracts with 15 regional PPO networks throughout the United States to
provide members with comprehensive access to in-network providers. Most of these
PPO networks administer the pricing of claims and submit pricing sheets to the Plan
for claims processing. We found that the Plan does not sufficiently verify the
accuracy and integrity of these pricing sheets prior to processing and paying the

22
claims. The Plan relies on what the PPO networks instruct them to price the claims
at, leading to potentially increased risk of claim payment errors.

The Plan has a fiduciary responsibility to the FEHBP to accurately price and process
claims according to the GEHA Benefit Plan brochure and the PPO network contracts.
A good internal control structure requires that sufficient audit testing occur to obtain
reasonable assurance that the Plan’s PPO networks are properly pricing claims in
accordance with the current provider contracts. However, we noted that the Plan is
reviewing only 60 FEHBP claims a calendar quarter. In our opinion, this sample size
is too small considering the Plan processes approximately 1.4 million claims a
calendar quarter (based on the 2010 Annual Accounting Statement) and relies on the
PPO networks to price most of these claims.

The potential risk for claim payment errors increases due to the Plan’s insufficient
oversight of the multiple PPO networks. Without sufficient network oversight, the
FEHBP claims are at risk for being priced incorrectly and/or potentially subject to
high error rates, resulting in overcharges to the FEHBP. For example, during our
review of assistant surgeon claims, we identified numerous instances where the PPO
networks were not reducing the allowed amounts on the pricing sheets for the
assistant surgeon modifiers (See “Assistant Surgeon Review” audit finding - A1.b).
Since the Plan was unaware that PPO networks were not adjusting or reducing the
allowed amounts for assistant surgeon claims, these claims resulted in overpayments.

Plan’s Response:

The Plan agrees with this finding.

The Plan states, “We obtained the auditing procedures performed by the provider
networks we lease. They all have procedures in place to audit pricing and implement
corrective action. If GEHA or the provider determines that pricing is inaccurate,
corrected pricing can be produced by the networks.

On a quarterly basis GEHA audits a sample of provider contracts in order to confirm
network pricing is accurate. We are implementing periodic audits of PPO network
pricing, with an emphasis on assistant surgeon and co-surgeon pricing.”

Recommendation 11

We recommend that the contracting officer ensure that the Plan is conducting
periodic audits of the PPO networks’ pricing practices to obtain reasonable assurance
that the correct provider contract rates are being used to accurately price the claims.

23
2. Miscellaneous Payments and Credits

The audit disclosed no findings pertaining to miscellaneous health benefit payments and
credits. Overall, we concluded that the Plan returned health benefit refunds and
recoveries, including prescription drug rebates, to the FEHBP in a timely manner.

B. ADMINISTRATIVE EXPENSES

The audit disclosed no findings pertaining to administrative expenses. Overall, we
concluded that the Plan charged expenses related to administrative expenses to the FEHBP in
accordance with the terms of the contract and applicable regulations.

C. CASH MANAGEMENT

The audit disclosed no findings pertaining to cash management. Overall, we concluded that
the Plan handled FEHBP funds in accordance with Contract CS 1063 and applicable laws
and regulations.

D. FRAUD AND ABUSE PROGRAM

1. Notification of Fraud and Abuse Cases Procedural

The Plan did not refer cases with areas of patient harm or safety issues to the Office of
Personnel Management’s Office of the Inspector General (OPM/OIG) from 2006 through
2009 that related to member fraud and abuse issues, such as doctor shopping for
pharmaceuticals/schedule II – IV drugs and/or membership eligibility issues, regardless
of monetary amounts.

The Plan has not fully adopted Carrier Letter 2007-12 (“Notifying OPM’s Office of the
Inspector General Concerning Fraud and Abuse Cases in the FEHBP Program”), which
states, “All carriers must send a written notification/referral to the OPM-OIG within 30
days of becoming aware of any cases involving suspected false, fictitious, fraudulent, or
misleading insurance claims, when . . . conditions are met . . . All carriers must also send
a prompt written notification/referral to their Contracting Officer and OPM-OIG for any
cases, regardless of the dollar amount of claims paid, if there is an indication of patient
harm, potential for significant media attention, or other exceptional circumstances.”

Carrier Letter 2003-23 (“Industry Standards for Fraud and Abuse Programs”) defines
indicators of areas that contain patient harm or patient safety issues to include, but not be
limited to: (1) pharmaceuticals, such as altered prescriptions, illegal refills, prescription
splitting, and abuse of controlled substances; (2) medical errors in both inpatient and
outpatient care, resulting in unfavorable outcomes; and (3) improper settings for
procedures and services that result in poor outcomes.

24
By not notifying or referring potential patient harm or patient safety cases, regardless of
monetary amounts, to the OPM/OIG, issues related to pharmaceutical abuse and medical
errors could go undetected, leading to the continuation of fraud and abuse.

Plan’s Response:

The Plan disagrees with this finding.

The Plan states, “As noted in the Audit Report the Carrier Letter dated March 30, 2007
provides for a threshold of $20,000 for reporting provider fraud or abuse, except when
patient harm is indicated. Because GEHA is a nationwide plan and its membership is not
evenly distributed throughout the United States, we do not reach this threshold in many
cases. That does not, however, mean fraud is not addressed. Many providers are
‘flagged’ in our system and their claims come directly to the SIU before they are paid. If
fraud or abuse is indicated, these claims are denied by SIU personnel. OPM/OIG does
not receive information on many of these providers (approximately 7,000 providers)
because the threshold is not reached. However, GEHA will evaluate this finding and will
emphasize to all involved personnel the requirements of the Carrier Letter.

GEHA management has met with all personnel in the SIU, provided them with another
copy of the Carrier Letter (it was provided when issued by OPM) and a copy of the Audit
Findings. There was discussion about both documents. GEHA management will be
monitoring our compliance and looks forward to working closely with OPM/OIG to
address fraud. We have also been communicating with GEHA’s Medical Director and
Managed Care Unit to review procedures for reporting cases of suspected fraud or
potential patient harm to the SIU for further action and reporting to OIG. GEHA believes
the quarterly Carrier/OIG task force conferences can be used to further assist Carriers in
getting feedback from OIG on a continuing basis on the quantity and quality of referrals
they receive, and on issues relating to interpretation of the Carrier Letter. We will also
be working with our Pharmacy Department and Medco to refine our procedures for
obtaining information and reports from Medco. has a pharmacy module in their
fraud detection software that we will be evaluating for purchase this year.

Although the Plan disagrees with the finding that no cases involving potential patient
harm were referred to OIG during the applicable period, it does agree these referrals were
limited in number. After discussion with OIG personnel subsequent to the audit finding,
the Plan has implemented new procedures with its case management, pharmacy unit and
the Medical Director to receive information about potential patient harm cases so they
can be referred to OIG.”

OIG Comments:

The Plan provided no further documentation to support that patient harm and/or safety
cases are being referred to the OPM/OIG. Therefore, we continue to question whether
the Plan has implemented all components of a complete and comprehensive F&A

25
Program, as described in Carrier Letters 2003-23 and 2007-12, and whether the Plan has
proper program management over F&A Program components related to patient harm and
safety issues. As a result, we continue to recommend that the contracting officer ensure
that the Plan is complying with the FEHBP Carrier Letters related to fraud and abuse.

Recommendation 12

We recommend that the contracting officer ensure that the Plan implements all
components of Carrier Letters 2003-23 (“Industry Standards for Fraud & Abuse
Programs”) and 2007-12 (“Notifying OPM’s Office of the Inspector General Concerning
Fraud and Abuse Cases in the FEHBP Program”).

2. Fraud and Abuse Annual Reports Procedural

The Plan did not provide the OPM/OIG complete F&A annual reports from 2006 through
2009.

Carrier Letter 2007-12 states that F&A annual reports, as described in Carrier Letter
2003-25 (“Revised FEHB Quality Assurance and Fraud and Abuse Reports”) are
required. Carrier Letter 2003-25 states, “The . . . F&A report will now include collecting
the following information:

• Cases Opened – only cases opened within report period
• Total Dollars Identified as Loss – total dollar amount verified as a loss
• Total Dollars Recovered – dollars actually received
• Actual Savings – dollars saved due to a claim rejection, prepayment review, etc.
• Projected Savings – calculated based on the amount of loss that would have been
incurred had the fraudulent conduct not been stopped due to anti-fraud efforts – 12
month period
• Number of Cases referred to Law Enforcement – total cases referred to local, state, or
federal law enforcement agencies
• Number of Cases Resolved through negotiated settlement – cases resolved via
settlement negotiation
• Number of Arrests – number of cases that resulted in an arrest
• Number of Criminal Convictions – number of cases that resulted in criminal
convictions”

Although the Plan implemented some of the F&A report requirements, we could not find
any information related to the number of cases referred to law enforcement (including the
OPM/OIG), the number of cases resolved through negotiated settlement, the number of
arrests, and the number of criminal convictions during the period 2006 through 2009.

Additionally, the Plan stated that they are actively involved in class action lawsuits
against the pharmaceutical industry. The Plan suggested that many of the class action
lawsuits involve adverse drug effects and off-label marketing issues. However, the Plan

26
did not report these cases to the OPM/OIG nor report these recoveries in the annual F&A
reports.

By not including all F&A reporting requirements, we could not determine the overall
outcome and success of the Plan’s prevention, detection, and F&A Program activities.

Plan’s Response:

The Plan disagrees with this finding.

The Plan states, “GEHA did submit Annual Reports as required by the contract for the
years 2006-2009, with all fields in the standard report completed. However, we
understand the Audit Findings to indicate these reports were not complete. GEHA did
provide total dollars recovered, and actual and projected savings. GEHA did work with
regional and local law enforcement entities in limited cases.

GEHA did not begin to report DOJ/OPM/OIG recoveries in our fraud report until the
OPM/OIG’s creation of a process for notifying carriers that a recovery had been achieved
and a recovery was credited to each Plan’s Contingency Reserve. Prior to that time, we
were seldom aware of the amount of the recovery or the credit to the Plan on cases in
which GEHA SIU personnel were involved. That did not occur, we believe, until late
2008. We believed that OPM/OIG wanted us to include fraud recoveries from any source
in our annual report because there was a credit to our contingency reserve from a fraud
recovery. We would appreciate being advised by OPM/OIG whether they want plans to
exclude these amounts.

With regard to drug class actions, GEHA began participating as one of many plaintiffs in
class actions in the 2001-2002 timeframe. In every case in which a settlement was
reached with a defendant, there was a specific denial of liability or wrongdoing and no
judicial determination that any violations were committed. These were all civil cases in
which GEHA had no direct information or support for a finding of fraud. For this reason,
these recoveries, as noted in the OIG Audit Findings, were reported as third party
subrogation recoveries. Since 2002, net recoveries have been obtained by GEHA for the
FEHB program of $4,709,134.53 in these cases.

GEHA will initiate discussion with OPM/OIG to be certain GEHA is providing required
Annual Reports consistent with OPM/OIG expectations and understanding of the Carrier
Letter. GEHA intends to work cooperatively with OPM/OIG to react to areas of
deficiency perceived by OIG in our procedures and in the reporting to OPM/OIG. GEHA
regards this as a serious matter and will promptly initiate discussion with OPM/OIG and
proceed with diligence to address areas identified by OPM/OIG. Based on that dialogue,
GEHA will meet regularly with all GEHA SIU personnel to discuss procedures to be
followed to ensure full compliance with the Carrier Letter, and will also review
procedures with other applicable GEHA business units and Medco to obtain all pertinent
information relative to fraud, abuse and patient harm.”

27
4. Pharmacy Benefit Manager Procedural

The Plan’s process for doctor shopping cases does not include a review by SIU staff to
determine if notification to the OPM/OIG is required. In addition, the Plan does not
require their Pharmacy Benefit Manager (PBM) to report potential F&A cases related to
pharmacies, physicians with abnormally high rates of prescribing narcotics, member drug
misuse or abuse, and other potential fraud related reporting issues. Due to these
deficiencies, the Plan is not in compliance with Carrier Letter 2007-12 (“Notifying
OPM’s Office of the Inspector General Concerning Fraud and Abuse Cases in the FEHBP
Program”).

The Plan’s PBM is MEDCO. The Plan’s protocol for fraud issues within the pharmacy
and pharmaceutical areas is for MEDCO to refer all incidents of member fraud and
doctor shopping for narcotics to the Plan’s Medical Director, who then sends letters to
the member’s physicians notifying them of the member’s activities.

As far as pharmacy related cases, there was no documentation to support that MEDCO
provided or referred any pharmacy related fraud issues to the Plan’s SIU during the
period 2006 through 2009. Furthermore, when potential pharmacy related fraud issues
and referrals from the PBM were discussed, the Plan stated that there is a process for
doctor shopping cases, but the process does not include a review from SIU staff to
determine if notification to the OPM/OIG is required. Doctor shopping losses are not
limited to the pharmacies or prescriptions, but also include the doctor and/or hospital
emergency room costs that are associated with the drug seeking activity.

Plan’s Response:

The Plan agrees with this finding.

Recommendation 15

We recommend that the contracting officer ensure that the Plan updates their process for
doctor shopping cases to include a review by SIU staff to determine if notification to the
OPM/OIG is required.

Recommendation 16

We recommend that the contracting officer verify that the Plan requires their PBM to
report all potential F&A cases related to pharmacies, physicians with abnormally high
rates of prescribing narcotics, member drug misuse or abuse, and other potential fraud
related reporting issues so that the Plan can implement all requirements in Carrier Letter
2007-12 (“Notifying OPM’s Office of the Inspector General Concerning Fraud and
Abuse Cases in the FEHBP Program”).

30
IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

, Lead Auditor

, Auditor

, Chief

Senior Team Leader

Community-Rated Audits Group

, Chief

Office of Investigations

, Special Agent-In-Charge

, Special Agent

31
SCH EDUL.E A

V. SCHEDULES

GOVERNMEN T EM PL.OYEES HEAL.T H ASSOCIAT ION. INC. BENEfIT PL.AN
L.E E'S SUMMIT, MIS SOURI

CO NTRACT C HARGES AND AMO UNTS Q UESTIONED

CONT RACT CHA RGES 2006 2007 2008 2009 TOTA L

H EAL.TH BEN EFIT CHA RGES· SI ,610,02S,I05 SI ,588,952.508 SI,665,75 1,668 $1,793,716,151 $6,658,445,432

ADMINISTRATIV E EX PENSES 75,227,082 76,413.234 81,091,662 90,704,004 323.435,982

OTHER EXPENSES AND RET ENTIONS" 14,775,460 14,382.534 14.632,358 15.207,450 58,997,802

TOTAL CONT RACT CHA RG ES $1,700.027.6-17 $ 1,679,748.276 $1,761,475.688 SI.899,627,605 $7,040 .879.216

AMO UNTS Q UESTIONEIl
2006 2007 2008 2009 2010 TOTAL.
(PER SCHEDUL E 0 )

A. HEAL.TH BENEfIT C HA RGES $0 $2" ,325 $214.992 $395,199 5322,551 $ 1,177,068
B. ADMI NISTRATIVE EX PENSES 0 0 0 0 0 0
C. CASH MANAGEM ENT 0 0 0 0 0 ()
D. FRA UO AND AB USE PROGRAM 0 0 0 0 () 0

TOTAI.. AMOUNTS QUESTIONED I 50 $244,325 $214.992 $395,199 $322,551 $1.177,068

• We reviewed claim payments from January 1, 2007 through May 3 1, 2010, and miscellaneou s health benefit paym ents and credits from 2006 through 2009.
•• We did not review othe r expen ses and retent ions, except for the cash management of these fund s.
SCIlEDlIU: It

GOV F.RN~ I f. N T D ll ' I.OV n :s il EALT il ASSOC IATlO~ , I:'\'C. Rf.NEFIT PLA N
LEE'S SUM M IT , :\11SS01lRI

Q l Jf:STlOiIi[ U C IIARGl:S

AU DIT FINU INGS 2006 2007 2008 200'J 2UlO TOTA l.

A. li EAtTIt " EN EHT C HARGES

I. Cl lIim Paym en ts
a. Coon lina lion of Ren efits" ith Medic are SO SO SJJ,7 19 S I611,781 S2-a 2,UJ8 S-aJ 6,S4-a
b. Assistant SU'l:eon Review 0 -a-a ,246 -a 5,546 8.1,867 50,504 224.16J
c, Modifier 62 a nd 66 Re\'i ew 0 22, 078 62,'J64 72,1-49 15,926 173,11 7
d. Cl a ims raid for Ineligible r lilienl S 0 116.:\20 2, 164 21,722 &,274 146,481
e, Inpatient Facility Chl.im_~ - Duplicat e or O \'erla plling Dates of Service 0 -a9,757 SJ ,S4 1 378 0 10.1,977
r. Dnplicat e Claim Paym ents 0 11,92-a 16,758 14,-a94 7,80K 50,984
,. System Review 0 0 0 41,K02 0 -a1 ,K02
h. Network I'ricing O\' ersi ght (P rocedn ral) n 0 0 0 0 0

T OIllI Cla im Paymen ts SO $244,325 5214,992 5395, 199 53 22,551 51,177,0611

2. Miscellllneon s Paym en ts lind C redits 50 SO SO 50 SO SO

TOTA L II EAI.TlI H[N H IT C II ARG .:S I SO 5244,325 5 2 14,992 5395, 199 5322,55 1 51,177.068

B. ADM INISTRATIVE EXP ENSES I SO SO SO ' 0 SO SO

0. CAS I I M A~ A GBtt: r'liT I SO '0 'B SO SO SO

n FRA UD A ND ABUSE I'ROGRAM (procedu ra l)

1. Nolilic alio o of Fra ud a nd Abase CISt.'S SO SO '0 ' 0 '0 SO
2. Fra ud and Abuse An n ua l Re po rts 0
0 0 0 0 0
.1. I>m gfll m Mana gement 0
0 0 0 0 0
4. Ph armacy Bc-oelit 1\1lIo11gcr 0 0 0 0 0 0

TOTAL . 'RAU O ANIl AHI ISt: PRO G RAM I '0 SO '0 SO SO '0

TOTAL QUESTIO N.:U C II ARG .:S I SO 5244",125 52 14992 5395,199 532 2,55 1 5 1,177,068
APPENDIX

GQ.I,4~.
The Health Plan s-Federal Employees
Septem ber 2. 20 11

Group Chief
Experience-Rated Audits Group
Office of the Inspector General
U.S. Office of Personnel Managem ent
1900 E Street, Room 6400
Washington. DC 2041 5- 1100

We have completed our review of the OIG audit report draft of the Government
Employees Health Assoc iation, Inc. (GEHA) dated June 10,2011. We have included
our responses for each audit area on the DIG report draft . We have also sent via
electr onic submission documentation to support our response.

SYST EM REVI EW

DIG Finding:

We have reviewed the System Review findings and provided an initial audit response on
July 11, 2011 to clar ify findings that were on the OIO' s report draft . Updated and
previous documentation sent to the O IG was provided on this submission. Please refer to
this response a nd the sp readsheet comments for th is audit for CrElIA's position on
individual claim exceptions .

Recornnundatlon I

We recommend that the con tracting offi cer disallow $2.657 .160 for claim overcha rges. and
verify that the Plan has returned all amounts recovered to the FElIRP.

G EIIA Re spo nse:

As agreed to by OPM-D IG , we obtained the provider agr eements for 38 sa mple items to
confirm the discounts taken. We verified the di scounts to provider agreements without
exce ption on the 38 sa mple items . For the provider agreements above we obtained
in fonnation from PPO network s to confirm the date provider rates we re entered into the
ne twork' s pricin g systems . We noted only three sample items where the rate load dates
were after th e effective date of the provider agreem ents and none o f tho se cla ims were
overpa id. As we discussed previously we don't believe this issue is a systemic risk and
there may be very good reasons why the load date would vary from the effective date. The
1

networks have established procedures for the maintenance of rates in their systems to
ensure that pricing is accurate.

The remainder of the pro vider agreements had rates loaded prior to the effec tive date of the
agreement or our PPO netw orks were not in place as of the effective date of the provider
agreements.

There were also four provider agreements on GE HA's pricing system with effective dates
from January 1. 1999 to January 1, 2005 that the rate input date could not be con firmed.
All of these discount rates have not changed since the initial provider contract was
effec tive.

We disagree with the overpayments totaling $2,657 ,160 and agree with SO.OO. See the
accompanying System Review spreadsheet and docu mentation for details regardin g our
position on these sample items.

Recommendation 2

We recommend that the contracting officer allow the Plan to charge the FEHB P $32,295
if additional payments are made to the providers to correct the underpayment erro rs.

GEHA Response:

GEHA has reso lved $30,692 of this total as described on the System Review spreadsheet
and the provided documentation. There was no underpa yment on this sample item .

The remainder of the underpayment of $1,603 is the result of rounding for unit values on
four sample items. GE HA round s unit pricing on national contracts items that are
computed based on average wholesa le pricing.. This has been GE HA 's practice since the
inception of the national contract program. It is accepted by national contract vendors
and has not resulted in enrollee's being balance billed by providers.

Recommendation 3

We recommend that the contracting officer instruct the Plan to identify the root cause(s)
of the claim payment errors and develop an action plan to prevent these types of errors in
the future.

GEIIA Response:

We will eva luate the results of the OIG' s audit findings and implement procedures we
deem necessary to resol ve the issues noted. The PPO networks we have contacted have
policies and procedures in place to address provider contractin g and the adm inistration of
discount s rates. We are implementing periodic audits of PPO network pricing. On a
quarterly basis GE HA audits a sample of provider contracts in or order to confirm
network pricing is accurate. If there is any industry practice guidelines that GE HA is not
following in the adjudication of claims we would be open to discuss them .

PROCEDURE CODE MODIFIERS 62/66 (Co-Surgeoos>

DIG Fiod ing:

For the period January I, 2007 thro ugh May 31, 2010, we identified 544 claim grouping s
con taining procedure modifier codes "62 or 66", totaling $897 ,677 in potential
overpayments that may not have been paid in accordance with the contract or the Plan' s
pricing procedu res. Fro m this universe, we selected a judgm ental sample of 5 16
procedure modifier claim groupings, totaling $882,500 in potential ove rpay ments, to
determi ne if the Plan paid these claims properly. OUf sam ple incl uded all claim
groupings containing procedure modifier codes "62 or 66" with pote ntial overpay me nts
o[S IOO or more.

We determ ined these 5 16 cla ims to be paid in erro r due to the Plan not recognizing the
co-surgeon pricing modifiers "62 or 66" , These co-surgeon claims should have been
priced at 62.5 percent for each surgeon per procedure code with attached mod ifier.
Consequently, the Plan potentially ove rpaid these cla ims. res ulting in estimated
overcharges 0[$882,500 to the FEHBP.

Recomm endation 4

We recomm end that the contracting officer disallow $882,5 00 for claim overcharges, and
verify that the Plan has returned all amounts recovered to the FEHS P.

GEHA Response:

The overpayment amount computed by the O IG was based on the allowed amount at the
time of original adj ud ication multiplied by the standard co-surgeon rate of 62 .5%. Th is
amount inflates the overpayme nts because it assumes that all of the clai ms are not reduced
to the 62 .5% co-surgeon rate.

Based on o ur review of the sample we identified 203 claim groupings that inclu ded 3 16
co-surgeon procedures, where the proper co-surgeo n ratc was not applied , result ing in a
net ove rpay men t amou nt of $170,290. We will pursue the overpa yme nts on the
outstand ing balance. We disagree with the remaining balance of$712,210 as it was
determined that the claims were paid according to the co-surgeo n bene fits.

Re commendation 5

We recommend that the contracti ng officer instruct the Plan to identify the root ca use(s)
of the claim payment error s and develop an action plan to prevent these types of errors in
the future .

GE lIA Response:

GEHA relics on the pricing systems of our multiple leased PPO networks to provide
accurate pricing. Each network surveyed has a process in place 10 audit pricing and reso lve
deficiencies. We are implementing periodic audits of PPO network pricing . On a quarterly
basis GEHA audits a sample of provider contracts in or order to confirm network pricing is
accurate.

ASSI STANT SURGEON

Ol G finding (Initia l Sample):

The Plan incorrectly paid 107 claims, resulting in net overchar ges of$225,027 .
Specifically, the Plan overpaid 103 claims by $228,249 and underpaid four claims by
$3,222. We also expanded our sample to include 1,610 assistant surgeon claim groups.
totaling $547,878 in potential overpayments.

Recomm endation 6

We recommend that the contracting officer disallow $776,127 for claim overcharges. and
verify that the Plan has returned all amounts recovered to the FEHBP .

GE IIA Resp onse:

For the initial sample of 103 overpaid claims totaling $228,249, we agree to
overpayments total ing $133,276. We have collected $84, I07and waived $3,209 to date.
We will continue collection efforts on the remaining outstanding balance. We disagree
with the remaining balance as these claims were paid with the correct assistant surgeon
benefit. See the detailed spreadsheet and documentation provided.

Recommendati on 7

We recommend that the contracting officer allow the Plan to charge the FEHBP $3.222 if
additional payments are made to the providers to correct the underpayment errors.

GE IIA Response:

We disagree with the four underpayments totaling $3,222 as they were paid with the
correct assistant surgeon benefits.

OlG Finding (Expanded Sa mple):

As a result of this high error rate in the initial assistant surgeon sample, we have
expanded our sample to include all patient groupings in the universe with potential
overcharges of $ 100 or more. This expanded sample contains 1,6 I0 assistant surgeon
claim groups, totaling $547,878 in potential overpayments that may not have been paid in
accordance with the contract or the Plan's assistant surgeon pricing procedure

4
CEliA Response :

We agree with a total of $76,022 in overpayments for the assistant surgeon - expanded
sample and disagree with $471,856. We disagree with the remaining balance as these
claims were paid with the correct assistant surgeon benefit. See the detailed spreadsheet
and documentation provided .

Recomm endation 8

We recommend that the contract ing officer instruct the Plan to identify the root cause(s)

of the claim payment errors and develop an action plan to prevent these types of errors in

the future.

G EIIA Resp onse:

GEHA relies on the pricing systems of our multiple leased PPO networks to provide

accurate pricing. Each network surveyed has a process in place to audit pricing and resolve

deficiencies. We are implementing periodic audits of PPO network pricing. On a quarterly

basis GEHA audits a sample of provider contracts in or order to conf irm network pricing is

accurate.

COO Rill NATION O F BENEFITS WI TH M EDI CAR E

OI G Find ing:

The Plan incorrectly paid 581 claim lines, resulting in net overcharges of$457,428 to the
FEHBP. Specifically, 579 claim lines were overpaid by $457 ,857 and two claim lines
were underpaid by $429. The Plan did not properly coordinate 441 claim line payments
with Medicare as required by the FEHBP contract. As a result, the FEHBP paid as the
primary insurer for these claims when Medicare was the primary insurer. Therefore, we
estimate that the FEHBP was overcharged by $435,584 for these claim lines. The
remaining 38 claim line payments were not coordination of benefit (CO B) errors but
contained other Plan payment errors, resulting in overcharges of $2 1,844 to the FEHBP.

Recommend ation 9

We recommend that the contrac ting officer disallow $457,857 for claim overcharges, and
verify that the Plan has returned all amounts recovered to the FEHBP.

GEJlA Response:

The OIG reported $457,428 in overpayments; however a total of$135 ,979 (30%) of this
total was discovered by GEHA prior to the inception of the OIG's audit. We have
collected overpayme nts totaling $411,709 and waived overpay ments totaling $2,279.
Overpayments of$ 20,869 are being disputed because the amo unt deemed overpaid is less
than previous ly reported. We will continue collection efforts on the remaining
outstanding balance. See the spreadsheet and documentation provided for details.

Recommendation 10

We recommend that the contracting office r allow the Plan to char ge the FEHBP $429 if
additional payments are made to the providers to correct the underpayment errors.

GEHA Respon se:

Additional payments have been made to correct the underpayments of $429.

Recomm end at ion II

We recommend that the contracting officer instruct the Plan to identify the root cause(s)
of the claim payment errors and develop an action plan to prevent these types of errors in
the future,

GE IIA Response:

The following contro ls are in place to minimize the overpaid claims due to other
coverage. Once it is discovered that an enrollee has other coverage, a process has been
established to identify all medical and pharmacy claims that were paid after the effective
date of coverage to the date we were notified of the other coverage, The claims are
investigated for possible overpayments and collections are pursued. GEHA has also
established a procedure to automatically code an enrollee' s record as having Med icare
primary (if the enrollee is in a retired status) once they are eligible to obtain Medicare.
Claims incurred after the Medicare eligibility date are pended awaiting information
regarding the enrollee's Medicare status,

GEHA is required by e MS (Centers for Medicare/Medicaid Services) to send medical
coverage information on a quarterly basis for all members over age 45 that are actively
employed on the MSP (Medicare Secondary Payer) file under Section 111. GEHA also
participates in the optional Section II I Non-MSP Part 0 sharing of information by
providing a monthly file to CMS of retirees that are covered by GEHA. CMS provide s a
response file to both the mandatory quarterly MSP file and the optional monthly Non
MSP file with Medicare information. The information is used to update eligibility data on
GEHA' s claim system and identify overpayments that may have occurred.

C LAIMS PAID FOR INELIGIBLE PATI ENTS

OIG Finding:

The Plan paid 234 claims that were incurred during gaps in patient coverage or after
terminati on of patient coverage, resulting in overcharges of $ 144,632 to the FEHBP. In
additio n, the Plan paid 68 claims for patients with no enrollment identification (lD)
numbers, resulting in overcharges of S12,810 to the FEHBP. In total, the FEHBP is due
$ 157,442 for claim overcharges.

6
Recommendat ion 12

We recommend that the contract ing officer disallow $157,442 for claim overcharges. and
verify that the Plan has returned all amounts recovered to the FEHBP .

GEHA Response:

The Plan agrees with $157,442 in overcharges. GEHA identified a total of$100,533
(64%) of the questioned costs prior to the OIG audit. We agree with the total amo unt of
overcharges noted by the 0 10. As of the date of the response, we have recovered
$29,839 and waived $1 1,707. We will continue collection efforts on the remaining
outstandi ng balance.

Recommendation 13

We recommend that the contracting officer instruct the Plan to identify the root cause(s)
of the claim payment errors and develop an action plan to prevent these types of errors in
the future.

GR HA Response:

When a termination is received or a member changes from a sel f and family contract to a
self contract. a report is systematically generated that lists all the medical claims paid
from the effective date of the termination or change in plan. The claims are reviewed and
collection action is initiated for claims that were paid after the effecti ve date . Most of the
claims cited as overpay ments were the result ofOEHA receiving retroac tive termination
notices from federal payroll offices.

Deleted by th e Office of the Inspector General- Not Relevant to the Final Report

7
Recomm endation 15

We recommend that the contracti ng offi cer allow the Plan to charge the FEHBP $ 13,183

if additional payments are made to the providers to correct t he und erpayment erro rs.

G EHA Response:

We disagree with $ 13, 183 in underpayments. See the spreads heet and docume ntation

provided for details.

Recomm endation 16

We recomm end that the contrac ting officer instruct the Plan to identify the root cause (s)

of the claim payment errors and develop an action plan to prevent these type s of errors in

the future.

GE lIA Response:

GEHA has procedures in place to systematically route OBRA 90 claims to specific

adjustors for processing in order for a trained empl oyee to rev iew these claims prior to

payment.

INPATI ENT FAC ILITY CLA IMS- DUPLI CAT E O R OVERLA PP ING DAT ES

OF SE RVICE

DIG Find ing:

The Plan incorrectly paid 14 inpatient facility claims, resulting in overcharges of

$103.977 to the FEHBP.

Recommend ation 17

We recommend that the contracting officer disallow $ 103,977 for claim ove rcharges, and

veri fy that the Plan has returned all am ount s recovered to the FEHBP.

GEIIA Response:

GEHA agrees with the overpay ments totalin g $ 103,977 . As of the date of this respo nse,

collections of $38.762 have been received. We will continue to pursue the rema ining
outstanding overpa yme nts.

Recommendat ion 18

We recomm end that the cont racting officer instruct the Plan to identify the root cause(s)

of the cla im payment errors and develop an actio n plan to pre vent these types of errors in

the future .

8
Deleted hy the Office of the Inspector General- Not Relevant to the Final Report

DUPLI CATE CLAIM PAYMENTS

OI G Finding:

The Plan incorrectly paid 68 claims, resulting in net overcharges of $50,984 to the
FEHBP. Specifica lly, we determined that the Plan improperly charged the FEHBP
$34,50 I for 45 duplicate claim payments. In addition, we found 23 claims that were not
duplicate claim payments but contained other Plan payment errors, resulting in net
overcharges of $16,48 3 to the FEHBP.

Recommendat ion 19

We recommend that the contracting officer disallow $50,984 for claim overcharges, and
verify that the Plan has returned all amounts recovered to the FEHBP .

GE HA Resp onse:

GEHA agree s with the overpayments totaling $50,984. As of the date of this respo nse,
collections of S35,885 have been received. We will continue to pursue the remaining
outstanding overpayments.

Recomm endation 20

We recommend that the contracting officer instruct the Plan to identify the root cause(s)
of the claim payment errors and develop an action plan to prevent these types of errors in
the future.

GEHA Respon se:

GEl-IA' s claims system has edits that screen claims for duplicates. The system
automatically ranks dup licate claims as disallowab le or possib le duplicates. In addition.
GEI·IA' s Internal Audit Department conducts an audit of potent ial duplicate claims each
quarter. Duplicates are referred to the Claims Department for review and collect ions are
pursued .

9
NETWO RK PRI CI NG O VERSIGHT

OIG Fin ding:

The Plan contracts with 15 different provider networks across the United States. The
majority of these provider networks administers the pricing of member claims and issues
a pricing sheet to the Plan. We found that the Plan does not sufficiently verify the
integrity or accuracy of these pricing sheets prior to paying FEHBP claims. The Plan
relies heavily on what the networks instruct them to pay leading to increase risk of claim
payment errors.

Recom mend ation 2 ]

We recommend that the contracting officer require the Plan to conduct routine clai m
audits of the pricing practices of its networks to obtain reasonable assurance that the
current and correc t provider contracts are being used to accurately price FEHBP claims.

GE HA Respon se:

We obtained the auditing procedures performed by the provider networks we lease. They
all have procedures in place to audit pricing and implement corrective action. If GEJ-IA or
the provider determi nes that pricing is inaccurate, corrected pricing can be produced by the
networks.

On a quarterly basis GE HA audits a sample of provider contracts in order to confirm
network pricing is accurate. We are implementing periodic audits of PPO network pricing,
with an emphasis on assistant surgeon and co-surgeon pricing.

ADMI NISTRATIVE EX PENSES

OI G Findi ng:

The audit disclosed no findi ngs pertaining to administrative expenses. Overall, we
concluded that the Plan charged expenses related to administrative expenses to the
FEHBP in accordance with the terms of the contract and applicable regulations.

G EHA Resp onse:

We agree with DIG's findings.

CAS H MAN AGEMENT

OI G Finding:

The audit disclosed no findin gs pertaining to cash management. Overall, we concluded
that the Plan handled FEHBP funds in accordance with Contract CS 1063 and applicab le
laws and regulations.

10
GE IIA Response:

We agree with OIG' s findings.

FRAUD AND ABUSE PROGRAM

NOT IFYING TIlE OFFICE OF PERSONNEL MANAGEMENT'S OFFICE OF
T HE INSP ECTO R GENERAL CONCERN ING FRAU D AND ABUSE CASES

OIG Find ing:

The Plan did not refer cases indicating areas of patient harm or safety issues to the Office
of Personnel Management's Office of the Inspector General (OPM/OIG) during 2006
through 2009 that dealt with member related Fraud and Abuse (F&A) issues, such as
doctor shop ping for pharmaceuticals/schedule II - IV drugs and/or membership eligibility
issues regardless of the dollar amount of claims paid.
The Plan has not fully adopted Carrier Letter 2007- 12 "Notifying OPM's Office of the
Inspector General Concerning Fraud and Abuse Cases in the FEHBP Program" required
by the OPM/O IG. The carrier letter states that, "All carriers must also send a prompt
written notification/referral to their Contracting Officer and OPM- OIG for any cases,
regardless of the dollar amount of claims paid, if there is an indication of patient harm ,
potential for significant media attention, or other exceptional circumstances ."

Recom mendation 22

We recommend that the contractin g officer ensure that the Plan implements all
components of Carrier Letter 2007-12 " Notifying OPM' s Office of the Inspector General
Concerning Fraud and Abuse Cases in the FEHBP Program."

GEHA Response:

As noted in the Audit Report the Carrier Letter dated March 30, 2007 provides for a
threshold of$20,000 for reporting provider fraud or abuse, exce pt when patient harm is
indicated. Because GEHA is a nationwide plan and its membe rship is not evenly
distributed throughout the United States, we do not reach this threshold in many cases.
That does not, however, mean fraud is not addressed. Many providers are "flagged" in
our system and their claims come directly to the SIU before they are paid. If fraud or
abuse is indicated, these claims are denied by SIU personnel. OPM/OIG does not receive
information on many of these providers (approximately 7,000 providers) because the
threshold is not reached. However, GEHA will evaluate this finding and will emphasize
to all involved personnel the requirements of the Carrier Letter.

addre ss frau d. We have also been communicating with GEH A' s Med ical Director an d
Managed Care Unit to re view procedur es for reporting case s of suspec ted fraud or
potential patient hann to the SIU for further action and rep orting to D IG . GEHA believes
the q uarterly Ca rrier/G IG task force conferences can be used to further assist Carr iers in
getting feed ba ck from O IG on a continuing bas is on the quanti ty and q uality of referrals
they rece ive, an d on issues re lating to interpretation of the Carrier Letter. We will also be
wor king with our Ph armacy Department and M ed co to refine our proced ures for
obta ining inform ation and reports from Medea. _ as a pharmac y module in the ir
fraud detection so ftware that we will be evaluating for purchase this year.

Although the Plan disagrees with the findin g that no ca ses involving potential patie nt
harm were referred to OIG dur ing the applicable period, it does a gree these referrals were
limited in number. After d iscussion with OIG personnel SUbseq uent to the audit find ing,
the Plan has impl eme nted ne w procedur es w ith its case managemen t, pharmacy unit and
the Medi cal Director to receive information about potential patient ha rm cases so they
ca n be referred to DIG.

FRAUD AND ABUSE ANNUAL RE POllTS
DIG Fi nding:

The Plan did not provide th e OPM/D IG co mplete F&A an nua l reports d uri ng 2006
throu gh 2009. Carrier Letter 2007-12 states that F&A ann ual repo rts, as described in
Carrie r Lett er 2003-25 " Rev ised FEHB Quality A ssur ance and Fra ud and Abuse
Reports: ' are requ ired .

The Plan did implement some of the F&A report requirements; however, we cou ld not
find evidence of one or more of: the number o f ca ses referred to law en force ment
(incl ud ing the DIG) , number of cases reso lved through negotiated settle ment, num ber of
arres ts and numb er of crimina l convictions over the past four years.

Additionally, the Plan advised that th ey are actively invo lved in Class Action lawsuits
against the pharmaceu tical industry. The Plan suggested many of the C lass Action
law suits invol ve adverse dru g e ffe cts and off-label marketing issues. The Plan docs not
report the ca ses to OPM/DIG nor do they report the se recoveri es in their a nnual F&A
report.

By not including all report requirements the OPMJOIG is unable to de termi ne the overall
outcome and success of the Plan' s prevention, detection, and F&A pro gram activities.

Reco mmendation 23

We recommend tha t the co ntracting offi cer ensur e that the Plan impl eme nts all
components of th e F&A repo rt as required and described in Carr ier Letter 2003-25
" Revised FEHB Quality Ass urance and Fraud and Abuse Report s."

12
GEHA Response:

GEHA did submit Annual Reports as required by the contrac t for the years 2006-2009,
with all fields in the standard report comp leted. However, we understand the Audit
Findings to indicate these reports were not complete. GEHA did provide total dol1ars
recovered, and actual and projected savings. OEHA did work with regional and local law
enforcement entities in limited cases.

GEHA did not begin to report DOJ/OPM /OIG recoveries in our fraud report until the
OPM/OIG ' s creation of a process for notifying carriers that a recovery had been achieved
and a recovery was credited to each Plan' s Contingency Reserve . Prior to that time, we
were seldom aware of the amount of the recovery or the cred it to the Plan on cases in
which GEHA SIU personnel were involved, That did not occur, ...ve believe, until late
2008. We believed that OPM/O IG wanted us to include fraud recoveries from any source
in our annual report becau se there was a credit to our contingency reserve from a fraud
recovery. We would appreciate being advised by OPM/OIG whether they want plans to
exclude these amounts.

With regard to drug class actions, GEHA began participating as one of many plaintiffs in
class actions in the 200 1-2002 timeframe. In every case in which a settlement was
reached with a defendant, there was a specific denial of liability or wrongdoing and no
j udicial determination that any violations were committed. The se were all civil cases in
which GEI·IA had no direct information or support for a finding of fraud . For this reason,
these recoveries, as noted in the OIG Audit Findings, were report ed as third party
subrogation recoveries. Since 2002, net recoveries have been obtained by GEHA for the
FEHB program of$4 ,709,134.53 in these cases.

GEIIA will initiate discussion with OPM/OIG to be certain GEHA is providin g required
Annual Reports consistent with OPM/OIG expectati ons and understandin g of the Carr ier
Letter. GEHA intends to work cooperatively with OPM/O IG to react to areas of
deficiency perceived by 010 in our procedures and in the reporti ng to OPM/OIG . GEHA
regards this as a serious matter and will promptly initiate discussion with OPM/OIG and
proceed with diligence to addre ss areas identified by OPM/OIG, Based on that dialogue,
GEHA will meet regularly with all GEHA SIU personnel to discuss procedure s to be
followed to ensure full compliance with the Carrier Letter, and will also review
procedures with other app licable GEHA business units and Medco to obtain all pertinent
informati on relative to fraud, abuse and patient hann .

Deleted by th e Office of th e Inspector Genera l - Not Relevant to th e Fina l Report

Delet ed hy th e Office of the Inspector General - Nnt Relevant to th e Fina l Report

PRO GR4 M M A I'A GEM EST

DIG Findi ng:

In a meeting to di scuss the Plan' s Special Investigations Unit (SIU) F&A program . Plan
personnel pro vided a brief overvi ew of a product it uses called
_ _ which is supported b>_ The Plan describe: 1 process an use o l e
~ to be a post-payment tool only. The Plan provides post payment data to.• •
_ who then uses various methodologies to review, sort and manipulate the data to
~r abnormal hilling patterns. such as providers who may be billing outside the
normal ranges for particular procedure codes. _ then sends a report back to the
Plan identifying any providers with unusual bill ing patterns. The se reports arc: sent
direc tly to the Fraud Analysts for furthe r review. However. the Plan' s use o f th~
program by ~ay be underutilized, especially if they are not actively ~
post payment recoveries or performing post payment investigations.

Sharing the _ report with the DIG on a regu lar basis as a notification tool regardless
of potent ial ~ Iosse s may increase the amo unt of re ferrals the Plan provides to the
DIG on an annual bas is and improve communication between the D IG and the Plan ' s
51U.

The Plan' s SIU provides (as one o f its top prioriti es) support for 0 10 related

investigatio ns. Th c Plan 's SIU appears to concentrate its o wn efforts on pre- payment

re vie w to stop potent ial fraud ulent pay ments . By focusing on thai cle ment of'pote mial

fraud a nd abuse other fra udulent and abusive practices are going unnoticed which may

lead to areas o f weak nesses with the F&A program at the Plan .

Recomm endation 24

We reco mme nd tha t the contracting offi cer ensure that the Plan trai ns an S IU specialist so
that _ an be a fully utili zed tool by th e SIU and provide a basis for post-payment
claims re view and invest igations by SIU staff.

GEII A Respon se:

With respect to _ GEHA agrees that this tool has been underutilized and we have
adj usted ou r procedures to requi re that all of its investigators use IS a prim ary
source of leads . Our Specialists need to make greater use o f th e 00 1and to balance
prepayme nt and post payment recove ries. We will initiate dialogue with OPM/OIG and

14
will renew our efforts with respect to emphasizing our investigati ve and reporting
obligations under the Carrier Letter. In particular. we will train all of our Specialists on
the use o f the_ t oo!. We welc ome communication and feedback from OPM/OIG at
any timc to ensure our full compliance with the Carrier Letter. We will be monitoring
our SIU' s use ol_ software to ensure that our procedures are followed and
expectations for _ use are met.

GEHA places emphasis on prepayment review and investigation. We do that by
identification of suspected fraudulent providers based on leads from a variety of sources,
i.e _ Claims Department referrals, NHCAA case information sharing meetings.
NHCAA reque sts for inves tigative assistance. and information received from OPM/O lG.
A suspected fraudulent provider is flagged in our system and any claims submitted by
that provider are directed to the SIU. We believe, to the extent possible. it is better to
prevent fraudulent claim s from being paid, rather than trying to recover it later. It is thus
correct to say we emphasize prepayment review. Post payment recovery attempts can be
difficult, time cons uming and expensive, although we agree they are 3 necessary part o f a
fraud program.

PHARM ACY BENEfiT M ANAG ER

DIG Findin g:

The Plan' s process for doctor shopping cases does not include a review by SIU statTto
determine if notl flcarion to the GIG is required. In addition, the Plan does not require its
Pharmacy Benefit Manager (PBM) to report any potential F&A cases related to
pharmacies, abnormally high prescribing physicians of narcotics, member drug
misuse/abuse and other potential fraud related reporting issues.

Due to the above deficiencies, the Plan is not in compliance with Carrier Letter 2007- 12
"Notifying OPM ' s Office of the Inspector General Concerning Fraud and Abuse Cases in
the FEHBP Program."

The Plan indicated MEDe a was their PBM. Their protocol for fraud issues within the
pharmacy and pharmaceutical area was that MEDea referred any incidents o f Member
Fraud / Doctor Shopping for Narcotic s to the Plan's Medica l Director, who writes letters
to the memb ers' physicians notifyi ng them of the member' s activities.

As far as pharmacy rela ted cases, there was no indication that M EDea has provided or
referred any pharmacy related fraud issue to the Plan' s SIU.

Furthermore when potential pharmacy related fraud issues and referrals from their PBM
were discussed, the Pion indicated it had a process for doctor shopping cases. but the
process did not includ e a review from SIU staff to determine if notification to the OIG
was required. Doctor shopping losses are not limited to the pharmacy or prescriptions,
but include the doctor or hospital emergency room costs associa ted with the dru g seeking
activity.

15
Recommendation 2S

We recommend that the contracting officer ensure that the Plan updates its process for
doctor shopping cases to include a review from SIU staff to determine if notification to
the OIG is required.

GE HA Response:

GEHA agrees with the finding.

Recommendation 26

We recommend that the contracting officer ensure that the Plan requires its PBM to
report any potential F&A cases related to pharmacies, abnormally high prescribing
physicians of narcotics, member drug misuse/abuse and other potential fraud related
reporting issues so that the Plan is able to implement all requirements in Carrier Letter
2007-12 "Notifying OPM's Office of the Inspector General Concerning Fraud and Abuse
Cases in the FEHBP Program ."

GEIIA Respons e:

GEHA agrees with the finding.

16
Conclusion

As outl ined above, GEHA has procedures in place to identify ce rta in types o f claims that
require special processin g and to detect eligibility changes that effect benefit
determination . A number of the ex ceptions noted were related to a pplying benefits with
the inform ation that was available at the time of processing . Subsequent cla im, eligibility
or polic y information was received that changed the benefit dctcnnination . Claims are
generally adjuste d once additional information is received that c hang es the benefits
paya ble. If claims are overpa id. GEHA has collection policies and procedures that meet
and often times exceed FEHB requirements.

GE HA co ntracts with a number of provider networks throughout the nation in order to
provide comp rehensive access to in-network provid ers. We rely on these network s to
perform services that prov ide seaml ess operations for our membership, including pricin g
claims and provider networ k management. In the future, we will mon itor the network s
more closely a nd question pricin g that appears suspect.

We are disappoi nted "hen overpayments occur, but we also understand that health
ins urance billing and processing can be complicated given the number o f parties invo lved
and the complex nature of the indu stry. Therefore, we apply prude nt business practices
to minimi ze the errors on the front end. and whe n necessary, execute so und collection
effo rts to recover fund s for the FEHB program.

We are cons tantly evaluat ing and improving our internal co ntrols a nd processes in areas
that gene rated cla im overpayments during the aud it. We will diligently pu rsue
collections of all overpayments. Wc thank you and your sta ff for your assistance in
identifying the areas need ing improve ment.

Sincere ly.

Richard G. Miles
Pres ident

Attachme nts: Draft Audit Report

cc: Chief of Health Insurance II Insurance Operations
Chief of Program Plannin g and Evaluation
Eileen Hu tchinson, GEHA CFa

GEHA VP - Claims

' EHA Manager of Inte rnal Audit