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 M.D. Individual Practice
Association, Inc.
Report No. lC-JP-OO-09-051
Date: February 19, 2010
-- CAUTION -
<This audit reporl has been distributed to Fede.-al orticials who are responsible for the administration of the audited program. This
"·audit report may contain p("oprictar}' data which is 11I'olecied by Federal law (18 U.S.c. 1905). The("efore, while Ihis audit report is
available under the Freedom of Infornlalion Act and made available 10 the public on the OIG webpage, eaulion needs to be exercised
before releasing the repo("t to the general public as it may contain proprie~ry information Ihat was redacted from the publicly
distributed copy.
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
Washington, DC 20415
Office of the
Inspector General
AUDIT REPORT
Federal Employees Health Benefits Program
Community-Rated Health Maintenance Organization
M.D. Individual Practice Association, Inc.
Contract Number CS 1935 - Plan Code JP
Hartford, Connecticut
Report No. lC-JP-OO-09~051 Date: February 1 9, 201 0
Michael R. Esser
Assistant Inspector General
for Audits
www.opm.gov www.usaJobs.gov
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
Washington, DC 20415
Office of the
Inspector General
EXECUTIVE SUMMARY
Federal Employees Health Benefits Program
Community-Rated Health Maintenance Organization
M.D. Individual Practice Association, Inc.
Contract Number CS 1935 - Plan Code JP
Hartford, Connecticut
Report No. lC-JP-OO-09-051 Date: February 1 9« 2 0 1 0
The Office of the Inspector General performed an audit of the Federal Employees Health Benefits
Program (FEHBP) operations at M.D. Individual Practice Association, Inc. (Plan). The audit
covered contract years 2005 and 2007 through 2009 and was conducted at the Plan's office in
Hartford, Connecticut. This report details procedural findings related to the Plan's claims data
submission. We found that the FEHBP rates were developed in accordance with the Office of
Personnel Management's rules and regulations in contract years 2005 and 2007 through 2009.
www.opm.goY WWW.U521Jobs.goy
CONTENTS
EXECUTIVE SUMMARy , i
I. INTRODUCTION AND BACKGROUND , 1
II. OBJECTIVES, SCOPE, AND METHODOLOGY ~ 3
III. AUDIT FINDINGS AND RECOMMENDAnON 5
Premium Rate Review 5
Claims Review 5
1. Payment for Non-Covered Services 5
2. Incorrect Unbundling of Claims 5
IV. MAJOR CONTRIBUTORS TO THIS REPORT 7
Appendix (M.D. Individual Practice Association, Inc.'s January 13,2010, response
to the draft report)
I. INTRODUCTION AND BACKGROUND
Introduction
We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at M.D. Individual Practice Association, Inc. (Plan) in Hartford, Connecticut. The audit covered
contract years 2005 and 2007 through 2009. The audit was conducted pursuant to the provisions
of Contract CS 1935; 5 U.S.C. Chapter 89; and 5 Code ofFederal Regulations (CFR) Chapter I,
Part 890. 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 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 through regulations codified in Chapter I, 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
which is defined as the best rate offered to March 31
either of the two groups closest in size to 200,000
the FEHBP. In contracting with 175,000
community-rated carriers, OPM relies on 150,000
carrier compliance with appropriate laws 125,000
and regulations and, consequently, does not
100,000
negotiate base rates. OPM negotiations
75,000
relate primarily to the level of coverage and
other unique features of the FEHBP. 50,000
25,000
The chart to the right shows the number of o . 2008
2006 2007 2009
FEHBP contracts and members reported by • Contracts 77,498 69,221 62,228 57,632
the Plan as of March 31 for each contract ClMembers 183,068 164,442 NlA 136,154
year audited (the number of members for
2008 was not available).
I
The Plan has participated in the FEHBP since 1983 and provides health benefits to FEHBP
members throughout the Washington, D.C., Maryland, Northern Virginia, Roanoke, Richmond,
and Tidewater areas. The last audit conducted by our office covered contract year 2006. As a
result of that audit, we found that the Plan's rating of the FEHBP in contract year 2006 was in
accordance with the applicable laws, regulations, and aPM rating instructions.
The preliminary results of this 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 incompliance with the
provisions of the laws and regulations governing the FEHBP.
We conducted this performance audit in accordance
with generally accepted government auditing FEHBP Premiums Paid to Plan
standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate $630
evidence to provide a reasonable basis for our $620
findings and conclusions based on our audit r1I
$610
objectives. We believe that the evidence obtained ~ $600
provides areasonable basis for our findings and i $590
conclusions based on our audit objectives. $580
$570
This performance audit covered contract years 2005 $560
and 2007 through 2009. For contract years 2005, $550
2007, and 2008, the FEHBP paid approximately $1.8 • Revenue
billion 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 detennine 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
I The Subscription Income Report for 2009 was not available at the time this report was completed.
3
• the loadings to the FEHBP rates were reasonable and equitable.
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 came 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 performed at the Plan's office in Hartford, Connecticut, during July
2009. Additional audit work was completed at our office in Washington, D.C.
Methodology
We examined the Plan's federal rate submissions and related documents as a basis for validating
the market price rates. In addition, we examined the rate development documentation and
billings to other groups, such as the SSSGs, to determine ifthe 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 determine 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 ofthe FEHBP was in accordance with the applicable
laws, regulations, and OPM's rating instructions to carriers for contract years 2005 and 2007
through 2009. Consequently, the audit did not identifY any questioned costs.
Claims Review
In FEHBP Program Carrier Letters 2006-14, 2007-09, and 2008-09, the Office of Personnel
Management requires all carriers to keep on file all data necessary to justify its Adjusted
Community Rating CACR) rate and save back-up copies of their claims databases for audit
purposes. We reviewed FEHBP claims data for contract years 2007 through 2009. We ran
queries on the claims data that relate to hospital, physician, out-of-area, prescription drugs and
injectible drugs, large claims, coordination of benefits, bundlingof claims, and non-covered
benefits according to the FEHBP benefit brochures. We found that in 2007 through 2009, the
Plan paid for non-covered benefits.
1. Payment for Non-Covered Services
The elective abortion claims review produced several claims that were questionable. Based on
our review, there were non-covered abortion claims paid for 2007 through 2009. The claims
totals were not significant enough to affect the 2007 through 2009 premiums; however, the
Plan should not cover claims for elective abortions.
2. Incorrect Unbundling of Claims
There were claims that were incorrectly unbundled for contract years 2007 through 2009. The
claims that should have been bundled are Current Procedural Tenninology codes 80048 (Basic
Metabolic Panel) and 80051 (Electrolyte Panel). The claims that had these codes
were questioned because the primary code should have been applied for a one-time charge.
The Plan agrees that several claims in 2008 should have been bundled. Additionally, we
understand that there are certain types of claims that are exempt from medical edit software
based on the plan's medical policy for 2007 through 2009. However, we still questioned these
claims because it is a best practice for all claims to go through the medical edit software.
Claims that are exempt from medical edits software because they are from a non-participating
provider have a greater risk of being processed inaccurately and generating erroneous
payments, increasing the costs to the FEHBP. The claims totals were not large enough to have
an effect on the premiums for 2007 through 2009. However, the Plan should take the
necessary precautions to verify that the claims are being bundled appropriately.
5
Plan's Comments (See Appendix)
The Plan concurs.
Recommendation 1
We recommend that the Plan take the necessary precautions to remove elective abortion
claims and bundle claims appropriately in the future.
6
IV. MAJOR CONTRIBUTORS TO THIS REPORT
Community-Rated Audits Group
Auditor-In-Charge
Auditor
Auditor
Chief
enior Team Leader
7
Appendix
. . . ZOle.Jr;~J ! tl Pr1 3= 28
Locke Lord Blsscll& LJdclelt,p
Attorneys & Counselors
January 13, 2010
Chief. Community-Rated Audits Group
Office of lhe Inspector General
US, Office of Personnel Management
1900 E Street. NW, Room 6400
Washington, DC 20415-1100
Re: COlllrncnls..!9. the Draft Audit R~Q.!LQ~ M.D. Individual Practic:c Association, Inc., Plan Code
~_ReQQ.f~~_lC-JPQ9-09-Q~J.
Dear • • • •
We represent M.D. Individual Practice Association, Inc, a UnitedHealthcare Company
{"UniledHealthcare") in connection witll tile above referenced malter. UnitedHeallhcare IS responding
to this audil on behalf 01 M.D. IndIVidual Practice Associalion, lllc. ("MDIPI\" or "Ihe Plan").
011 November 24, 2009, {he Urllted Stales Office 01 Personnel Management, Office of the
Inspector General ("OPMfO IG") sublnilled 10 the Plan a "Draft Report" (1 C -JP-OO-09-051 ) ("DIan
Report"), detailing the results of its audit of Ihe Federal Employee HeaHh Benefits Program ("FEHBP")
operallons of M01PA for contract yc,us 2005 and 2007 through 2009 Upon submiSSion, OPM/OIG
requested that the Plan provide commenls to nle Dran Report The Plan appreclales the 0PPorlunily 10
fCspond to Ihis Oraf! Report.
At the time of the audll. the Plan discussed with Ihe QIG auditors the erroneous payment of
claims for non-covered elechve abortions. fhe Plan agrees that ilshould not pay for non~covered
eleclive abortions.
The Plan agrees with the OIG auditors lhat some 2008 claims should have been bundled
differently. The Plan is not aware of any 20070r 2009 claims lhat were not properly bundled. We do
agree, however. that some claims for 2007 and 2009 were not subject to the medical edit software.
because they were claims for services provided by free-standing racihties.
The OIG has concluded lhatthe above erroneous payments were not significant enough to
affect the FEHBP Premiums for 2007 lhrougrl 2009. aild that no amounts are due OPM.
DELETED BY TIlE OlG
NOT RELEVANT TO TilE }'INAL
January 13. 2010
Page 2
DELETED BY THE OIG
NOT RELEVANT TO THE FINAL
Please contact me at the address, phone number or e-mail on this letlerhead if you have any
queslions or require additional Information. We appreciate your ongoing cooperation.
Very truly yours,
LOCKE. LORD. BISSEll & LIDDEll LLP
cc:
Director, Underwriling
UnlledHealthcare
Audit of the Federal Employees Health Benefits Program Operations of M.D. Individual Practice Association, Inc
Published by the Office of Personnel Management, Office of Inspector General on 2010-02-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)