oversight

Audit of the Federal Employees Health Benefits Program Operations at Humana Health Plans Inc.- South Florida

Published by the Office of Personnel Management, Office of Inspector General on 2010-05-06.

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

                                                        U.S. OFFICE OF PERSONNEL MANAGEMENT
                                                              OFFICE OF THE INSPECTOR GENERAL
                                                                               OFFICE OF AUDITS




Final Audit Report
Subject:



     Audit of the Federal Employees Health Benefits
   Program Operations of Humana Health Plan, Inc.
                     South Florida




                                            Report No. 1C-EE-OO-09-057

                                            Date:                    May 6, 2010




                                                           -- CAUTION -­

This audit ..epo.-t has been distl'ibuled to Fede.-al officials who a.-e ..esponsible for the administ..ation of Ihe audited p..ogl"3l1l. This
audit .-epo..' may contain pmp.-ieta ..y data which is protecled by Fede.-allaw (18 U.S.c. 1905). Tlle..efo..e, while this audit .-epo.., is
available under the Freedolll of Information Act and made available to Ihe ptlblic on tile OIG webpagc, caution needs to be exercised
before ..eleasing therepa"..t to the gene..al public as it may contain p..op..ietary jnro..matinn thaI was ..edactcd f.-om the publicly
distributed copy.
                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                            Washington, DC 20415


   Office [If the
Inspector (Jeneral




                                            AUDIT REPORT




                              Federal Employees Health Benefits Program

                           Community-Rated Health Maintenance Organization

                               Humana Health Plan, Inc. - South Florida

                                Contract Number 2110 - Plan Code EE

                                        Louisville, Kentucky




                     Report No. lC-EE-00-09w057                 Date:    May   6,   2010




                                                                    Michael R. Esser
                                                                    Assistant Inspector General
                                                                      for Audits




                                                                                           www.usajobs.gov
                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                              Washington, DC 20415



   Office of the
Inspector General




                                       EXECUTIVE SUMMARY





                                 Federal Employees Health Benefits Program

                             Cornmunity~RatedHealth Maintenance Organization

                                  Humana Health Plan, Inc. - South Florida

                                   Contract Number 2110 - Plan Code EE

                                           Louisville, Kentucky




                    Report No. lC-EE-OO-09-057                    Date:May 6, 2010

        The Office of the Inspector General performed an audit of the Federal Employees Health Benefits
        Program (FEHBP) operations at Humana Health Plan, Inc. - South Florida (Plan). The audit
        covered contract years 2006 through 2009 and was conducted at the Plan's office in Louisville,
        Kentucky. This report details a procedural finding related to the Plan's claims data submission.
        We found that the Plan's ratings of the FEHBP were developed in accordance with applicable
        laws, regulations, and the Office of Personnel Management's rating instructions for the years
        audited.




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                                     CONTENTS





   EXECUTIVE SUMMARy                                                               i


 I. INTRODUCTION AND BACKGROUND                                                    1


II. OBJECTIVES, SCOPE, AND METHODOLOGY.                                            3


III. AUDIT FINDINGS AND RECOMMENDATION                                             5


   Premium Rate Review                                                             5


   Claims Review                                                                   5


    BundlingfUnbundling Claims                                                     5


IV. MAJOR CONTRIBUTORS TO THIS REPORT                                              7


   Appendix (Humana Health Plan, Inc. - South Florida's April 6, 201 0, response
              to the draft report)
                     I. INTRODUCTION AND BACKGROUND


Introduction

We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at Humana Health Plan, Inc. - South Florida (Plan) in Louisville, Kentucky. The audit covered
contract years 2006 through 2008. The audit was conducted pursuant to the provisions of
Contract CS 2110; 5 U.S.C. Chapter 89; and 5 Code of Federal Regulations (CFR) Chapter 1,
Part 890. The audit was perfonned 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 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. The FEHBP is administered by OPM's
Retirement and Benefits Office. The provisions of the Federal Employees Health Benefits Act
are implemented by OPM tluough regulations codified in Chapter 1, Part 890 of Title 5, CFR.
Health insurance coverage is provided through contracts with health insurance carriers who
provide service benefits, indemnity benefits, or comprehensive medical services.

Community-rated carriers participating in the FEHBP are subject to various federal, state and
local laws, regulations, and ordinances. While most carriers are subject to state jurisdiction,
many are further subject to the Health Maintenance Organization Act of 1973 (Public Law 93­
222), as amended (i.e., many community-rated carriers are federally qualified). In addition,
participation in the FEHBP subjects the carriers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.

The FEHBP should pay a market price rate,                      FEHBP Contracts/Members
                                                                      March 31
which is defined as the best rate offered to
either of the two groups closest in size to           10,000
the FEHBP. In contracting with                        9,000
community-rated carriers, OPM relies on               8,000

carrier compliance with appropriate laws               7,000

and regulations and, consequently, does not           6,000
                                                      5,000
negotiate base rates. aPM negotiations
                                                      4,000
relate primarily to the level of coverage and
                                                      3,000
other unique features of the FEHBP.
                                                      2,000
                                                       1,000
The chart to the right shows the number of
FEHBP cont~acts and members reported by
                                                          o             2007     2008    2009
                                                               2006
the Plan as of March 31 for each contract       • Contracts    3,594   3,251     3,051   2,903
year audited.                                   CMembers       9,132   8,173     7,493   7,024




                                                 1

The Plan has participated in the FEHBP since 1989 and provides health benefits to FEHBP
members in South Florida. The last full-scope audit conducted by our office covered contract
years 2001 through 2005. All noted exceptions were resolved and amounts disallowed were
returned to the FEHBP.

The preliminary results ofthis audit were discussed with Plan officials at an exit conference and
through subsequent correspondence. A draft report was also provided to the Plan for review and
comment. The Plan's comments were considered in the preparation of this final report and are
included, as appropriate, as the Appendix.




                                                2

                    II. OBJECTIVES, SCOPE, AND METHODOLOGY

Objectives

The primary objectives of the audit were to verify that the Plan offered market price rates to the
FEHBP and to verify that the loadings to the FEHBP rates were reasonable and equitable.
Additional tests were performed to determine whether the Plan was in compliance with the
provisions of the laws and regulations governing the FEHBP.


                                                                               FEHBP Premiums Paid to Plan

We conducted this performance audit in accordance
with generally accepted government auditing                                 $30
standards. Those standards require that we plan and
perform the audit to obtain sufficient,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.
                                                                            $20

This performance audit covered contract years 2006     • Revenue
through 2009. For contract years 2006 through
2008, the FEHBP paid approximately $77.5 million
in premiums to the Plan. I The premiums paid for each contract year audited are shown on the
chart to the right.

OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP
contract, applicable laws and regulations, and OPM rate instructions. These audits are also
designed to provide reasonable assurance of detecting errors, irregularities, and illegal acts.

We obtained an understanding of the Plan's internal control structure, but we did not use this
information to determine the nature, timing, and extent of our audit procedures. However, the
audit included such tests of the Plan's rating system and such other auditing procedures
considered necessary under the circumstances. Our review of internal controls was limited to the
procedures the Plan has in place to ensure that:

           • The appropriate similarly sized subscriber groups (SSSG) were selected;

          •	 the rates charged to the FEHBP were the market price rates (i.e., equivalent to the best
             rate offered to SSSGs)~ and

           •	 the loadings to the FEHBP rates were reasonable and equitable.


I   The Subscription Income Report for 2009 was not available at the time this report was completed.
                                                           3
In conducting the audit, we relied to varying degrees on computer-generated billing, enrollment,
and claims data provided by the Plan. We did not verify the reliability of the data generated by
the various information systems involved. However, nothing carne to our attention during our
audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe
that the available data was sufficient to achieve our audit objectives. Except as noted above, the
audit was conducted in accordance with generally accepted government auditing standards issued
by the Comptroller General of the United States.

The audit fieldwork was perfonned at the Plan's office in Louisville, Kentucky during August
2009. Additional audit work was completed at our office in Jacksonville, Florida.

Methodology

We examined the Plan's federal rate submissions and related documents as a basis for validating
the market price rates. Further, we examined claim payments to verify that the cost data used to
develop the FEHBP rates was accurate, complete, and valid. In addition, we examined the rate
development documentation and billings to other groups, such as the SSSGs, to determine if the
market price was actually charged to the FEHBP. Finally, we used the contract, the Federal
Employees Health Benefits Acquisition Regulations, and OPM's Rate Instructions to
Community-Rated Carriers to detennine the propriety of the FEHBP premiums and the
reasonableness and acceptability of the Plan'.s rating system.

To gain an understanding of the internal controls in the Plan's rating system, we reviewed the
Plan's rating system's policies and procedures, interviewed appropriate Plan officials, and
performed other auditing procedures necessary to meet our audit objectives.




                                                 4

               III. AUDIT FINDINGS AND RECOMMENDATION

Premium Rate Review

Our audit showed that the Plan's rating of the FEHBP was in accordance with the applicable
laws, regulations, and OPM's rating instructions to carriers for contract years 2006 through 2009.
Consequently, the audit did not identify any questioned costs.

Claims Review

According to annual FEHBP Program Carrier Letters, OPM requires all carriers to keep on file
all data necessary to justify its Adjusted Community Rating rate development and save back-up
copies of its claims databases for audit purposes. As part of verifying the FEHBP's rate
development, we reviewed FEHBP claims data for contract years 2007 through 2009. We ran
queries on the claims data that relate to hospital services, physician services, out-of-area services,
prescription and injectible drugs, large claims, coordination of benefits, bundling of claims, and
non-covered benefits according to the FEHBP benefit brochures.

   BundlinglUnbundiing Claims

   During the review of the FEHBP claims for contract years 2007 through 2009, we identified
   several unbundled claims. A claim is considered bundled when multiple procedures use a
   designated panel primary code, based on currently professional terminology (CPT)
   instructions, to charge for all laboratory tests performed on the same date. However,
   sometimes a laboratory will intentionally divide and charge for each procedure
   independently, instead of using the designated panel primary code for the bundled services
   and in effect un-bundle the claim. Therefore, the laboratory, in this case, can overcharge for
   these services if not monitored.

   For our review, the audit team rall queries on the laboratory services claims for contract year
   2007 (March 1, 2005-February 28,2006),2008 (March 1, 2006-February 28,2007), and 2009
   (March 1, 2008-February 29, 2008). The sample of queries was based on frequently used
   CPT codes. The specific CPT codes queried were for the basic metabolic panels (CPT code
   80048) and electrolyte panels (CPT code 80051). We isolated any claims that contained
   charges for all of the individual procedures included within each panel. We found claims that
   charged for procedures independently instead of by one CPT code. We sent the claims in
   question to the Plan for further explanation.

   The Plan responded that its system was not set up to check claims with place of treatment
   (POT) 1, 2, or R with CPT code range of 70000 tlrrough 90000, which are the designated
   codes for all radiology, pathology, laboratory, and other medical related services. The POT
   1,2, and R are used to identify where the service was performed; Inpatient Hospital (I),
   Outpatient Hospital (2), or Hospital-Emergency Room (R). The Plan stated that POT claims
   are not reviewed. The Plan further stated that a project work request (PWR) was being
   prioritized to correct these deficiencies.

                                                  5

The removal ofthe questioned claims from the rate development for contract years 2007
through 2009 did not have a monetary impact on the total rates. However, not monitoring
this within the system affects aU claims processed by Humana in all its regions. Therefore,
this is considered a procedural finding.

Recommendation

We recommend that the contracting officer require the Plan to ensure that claims are not
inappropriately unbundled.

Plan's Comments (See Appendix):

The Plan agrees with the OIG's opinion that its claims system was lacking internal controls to
prevent claims unbundling in certain circumstances. A claims system enhancement was
activated on March 19, 2010 from a PWR designed to address unbundling for POT code 1.

"Claims logic to prevent unbundling is already in place for POT codes 2 and R, although
apparently this edit was implemented between the effective dates ofthe claims review and the
time of the onsite audit visit."

OIG Reply to the Plan's Comments:

We acknowledge the Plan's agreement and we will verify the effectiveness ofthe corrective
actions during the next audit.




                                            6

            IV. MAJOR CONTRIBUTORS TO THIS REPORT


Community~Rated Audits    Group

                      Auditor-In-Charge

              Staff

                  Staff


                      CRAG Group Chief

                 Senior Team Leader




                                          7

                                                                                   Appendix




    "UMANA RESPONSE TO DRAYf AUDIT REPORT NO. lC-EE-OO-09-0S7
          2010 APR -6 PH 12: 13                                                       .

This document is submiued by Humana Inc_ and responds to the Draft Audit Report
dated February 2, 2010 (the "Audit Rer0rt") issued by the Office ofInspector General of
the Office of Personnel Management ("OPM") regarding the Humana Inc. - South
Florida Area FEHBP Contract Number CS 2110 for contract years 2006-2009.


The Draft Audit Report discusses Claims Unbundling issues uncovered by the auditors in
the course of a detailed claims review, specifically for CPT codes 80048 and 80051 and
recommends Humana display a corrective action plan to address such lack of internal
controls, specifically for Places of Treatment (POT) codes I, 2, and R.


Humana's IT Claims area was engaged on this matter and the feedback received was
addressed separately for a) POT code I, and b) POT codes 2 and R.


A claims system enhancement was activated on 3/1912010 from a Project Work Request
(PWR) designed to address unbundling for POT code I. The project description of this
PWR was as follows, but the attached file "ClaimCheck POT I.doc" provides further
detail.
        Project Descriplion
..claims billed on a HCFA form, wilh a place oftreatment (POT) one (Inpatient), with
laboratory services ranging between 79999 and 90000 are excludedfrom Ihe
ClaimCheck Auditing logic. This enhancement will allow this exclusion to be included in
the C/aimCheck Auditing logic_ The implementation ofthis PWR will allow Humana to
save dollars lost on claims nol adJudicating against the auditing logic today. "


Claims logic to prevent unbundling is already in place for POT codes 2 and R, although
apparently this edit was implemented between the effective dates of the claims review
and the time of the onsite audit visit. The attached file "ClaimCheck Interface Document
(MCI8GMIS) (Last Updated - 07/25/2006) outlines the process already in place for
codes 2 and R.