oversight

Limited Scope Audit of Blue Cross and Blue Shield's Pricing of Pharmacy Claims as Administered by Caremark PCS Health LLC for Contract Year 2012

Published by the Office of Personnel Management, Office of Inspector General on 2014-10-06.

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:




         LIMITED SCOPE AUDIT OF 

 BLUE CROSS AND BLUE SHIELD'S PRICING OF 

  PHARMACY CLAIMS AS ADMINISTERED BY 

       CAREMARKPCSHEALTHLLC 

        FOR CONTRACT YEAR 2012 





                                           Report No. 1H-01-00-14-008

                                                         October 6, 2014
                                          Date:




                                                            --CAUTION-­
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
                                 UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                                 Washington, DC 20415 


  Office of the
InspectOr   General




                                                              AUDIT REPORT



                                      LIMITED SCOPE AUDIT OF 

                              BLUE CROSS AND BLUE SIDELD'S PRICING OF 

                               PHARMACY CLAIMS AS ADMINISTERED BY 

                                    CAREMARK PCS HEALTH LLC 

                                     FOR CONTRACT YEAR 2012 



                                                       CONTRACT CS 1039 

                                                      PLAN CODES 10 AND ll 




                        Report No. 1H-01-00-14-008                                           Date: October 6, 2014




                                                                                               ~~-
                                                                                              MicllaeiR: ~r
                                                                                              Assistant Inspector General
                                                                                                for Audits


                                                                    -CAUTION-
       This audit report bas beta distributed to Federal officials wbo are rupousiblt for tbt adaalaiJtratioa of tbt a Deli ted proc:raaa. This audit
       report aaay contain proprietary dat1 wblcb Is protected by Federal law (Ill U.S.C. 1905). T budort, wllilt tbis audit report u available
       uudtr tbt Frttdom of laformatiou Act aad made available to t.be public on the OIG webpe&e, cautlou ueeds t o be aaciJed before
       rdeuiiiJ tilt report to tbt ceueral p11blk as It may coataiu proprietary information tbat was redacted from tilt publicly distributed copy.




        www.opm.cov                                                                                                                  www.uaa)oba.co•
                             UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                Washington, DC 20415 



   Office of the
Inspector General




                                          EXECUTIVE SUMMARY 



                                    LIMITED SCOPE AUDIT OF 

                            BLUE CROSS AND BLUE SHIELD'S PRICING OF 

                             PHARMACY CLAIMS AS ADMINISTERED BY 

                                  CAREMARK PCS HEALTH LLC 

                                   FOR CONTRACT YEAR 2012 



                                           CONTRACT CS 1039 

                                          PLAN CODES 10 AND 11 




                         Report No. 1H-01-00-14-008                 Date: October 6 , 2 014

        The enclosed audit report details the results of our limited scope audit of Blue Cross and Blue
        Shield's (BCBS) pricing of pharmacy claims as administered by Caremark PCS Health LLC
        (Caremark) for contract year 2012.

        New phannacy transparency standards for all Federal Employees Health Benefits Program
        carriers came into effect in January 2011 for new carrier/Pharmacy Benefit Manager Contracts.
        Contract year 2012 was the first where those transparency standards were included in the
        contracts between the BCBS Association (BCBSA) and Caremark. Therefore, the primary
        objective of our audit was to verify, on a limited basis, if the pharmacy claims processed and
        paid by Caremark on behalf of BCBSA were transparent and accurately priced. The audit was
        performed in our Washington, D.C. office from March 10, 2014 to April18, 2014.

       Additionally, we also determined if Caremark and BCBSA were in compliance with the Health
       Insurance Portability and Accountability Act and Fraud and Abuse requirements of the contract
       between the U.S. Office of Personnel Management (OPM) and BCBSA. This audit identified
       one procedural finding related to fraud and abuse.




                                                         1


         www. opm .gov                                                                         www.usajobs.gov
The results of our audit have been summarized below.

                            TRANSPARENCY AND PRICING

The results of our review, based on our limited sample size of 120 pharmacy claims (40 claims
each from retail, mail order, and specialty pharmacy; retail was further limited to four high
volume pharmacies), found that the pricing calculations utilized by Caremark in its
administration ofthe BCBSA's Federal Employees Health Benefits Program' s pharmacy claims
were transparent and accurately priced.

        HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT

The results of our review show that Caremark and BCBSA have policies and procedures in place
to address the Health Insurance Portability and Accountability Act's Standards for Electronic
Transactions, Privacy Rule, and Security Rule.

                                    FRAUD AND ABUSE

1. 	 Fraud and Abuse Cases Identified by Caremark but not                           Procedural
     Reported by BCBSA

   The BCBSA did not report to OPM's Office of the Inspector General (OIG) all of the
   suspected fraud and abuse cases that were reported to it by Caremark for contract year 2012.
   Additionally, ofthose cases that were reported to the OIG, 50 percent were not reported
   within the 30 working day requirement.




                                               11
                                                      CONTENTS 

                                                                                                                         PAGE

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


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


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


III. 	   AUDIT FINDINGS AND RECOMMENDATIONS ......................................................... 6 


         A.     TRANSPARENCY AND PRICING ......................................................................... 6 


         B.     HEALTH INSURANCE PORTABILITY AND ACCOUNTABILTY ACT ........... 6 


         C.     FRAUD AND ABUSE .............................................................................................. 6 


                1. 	 FRAUD AND ABUSE CASES IDENTIFIED BY CAREMARK 

                     BUT NOT REPORTED BY BCBSA ................................................................ 6 


IV. 	    MAJOR CONTRIBUTORS TO THIS REPORT .............................................................. 11 


         SCHEDULE A- CONTRACT CHARGES 


         APPENDIX (BCBSA's response to the draft report, dated May 23, 2014) 

                     I. INTRODUCTION AND BACKGROUND 


INTRODUCTION 


This report details the results of our limited scope audit of Blue Cross and Blue Shield's (BCBS)
pricing of pharmacy claims as administered by Caremark PCS Health LLC (Caremark) for
contract year 2012. The audit was conducted pursuant to the provisions of Contract CS 1039;
Title 5, United States Code, Chapter 89; and Title 5, Code of Federal Regulations, Chapter 1,
Part 890 (5 CFR 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. The audit was performed in our Washington, D.C. office from March 10,
2014 to April18, 2014.

BACKGROUND

The Federal Employees Health Benefits Program (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 (HIO) has overall responsibility for
administration of the FEHBP, including the publication of program regulations and agency
guidance. As part of its administrative responsibilities, the HIO contracts with various health
insurance carriers that provide service benefits, indemnity benefits, and/or comprehensive
medical services. The provisions of the FEHB Act are implemented by OPM through
regulations codified in 5 CFR 890.

The BCBS Association (BCBSA), on behalf of participating BCBS plans, entered into a
Government-wide Service Benefit Plan contract (CS 1039) with OPM to provide a health benefit
plan authorized by the FEHB Act. BCBSA delegates authority to participating local BCBS plans
throughout the United States to process the health benefit claims of its federal subscribers.

BCBSA established a Federal Employee Program (FEP) Director's Office in Washington, D.C.
to provide centralized management for the Service Benefit Plan. The FEP Director's Office
(FEPDO) coordinates the administration of the contract with BCBSA, BCBS plans, and OPM.
Compliance with the laws and regulations applicable to the FEHBP is the responsibility of
BCBS's management, which includes establishing and maintaining a system of internal controls.

BCBSA also established an FEP Operations Center. The activities of the FEP Operations Center
are performed by CareFirst BCBS, located in Washington, D.C. These activities include acting
as fiscal intermediary between BCBSA and member plans, verifying subscriber eligibility,
approving or disapproving the reimbursement of local plan payments of FEHBP claims (using
computerized system edits), maintaining a history file of all FEHBP claims, and maintaining an
accounting of all program funds.

Pharmacy Benefit Managers (PBMs) are primarily responsible for processing and paying
prescription drug claims. The services typically include both retail and mail order drug benefits.
For drugs acquired through the "local" drugstore, PBMs contract directly with the approximately

                                                1

50,000 retail pharmacies located throughout the United States. For maintenance prescriptions
that typically do not need to be filled immediately, PBMs offer the option of mail order
pharmacies. PBMs are used by the Plan to develop, allocate, and control costs related to the
pharmacy claims program.

Pharmacy operations and responsibilities under contract CS 1039 are carried out by Caremark,
which is located in Scottsdale, Arizona. Contract CS 1039 section 1.11 includes a provision
which allows for audits of the program's operations. Additionally, section 1.26(a) of contract
CS 1039 outlines transparency standards related to PBM arrangements (effective January 2011)
that require PBMs to provide pass-through pricing based on the PBM's cost. Our responsibility
is to review the performance of Caremark to determine if BCBSA charged costs to the FEHBP
and provided services to its members in accordance with this contract.

This is our first audit ofBCBSA's pharmacy pricing under the new transparency standards.




                                               2

               II. OBJECTIVES, SCOPE, AND METHODOLOGY 

OBJECTIVES 


New pharmacy transparency standards for all FEHBP carriers came into effect in January 2011
for new carrier/PBM Contracts. Contract year 2012 was the first where those transparency
standards were included in the contracts between the BCBSA and Caremark. Therefore, the
primary objectives of this audit were to:

• 	 Obtain an understanding of Caremark's claims adjudication process and how CS 1039' s
    transparency standards have been implemented.
• 	 Determine if pharmacy claims for Federal subscribers were processed and priced in a
    transparent manner as required by CS 1039, section 1.26, on a limited basis.

Additionally, we also included the following objectives:

• 	 Determine ifBCBSA's and Caremark's policies and procedures address the Health Insurance
    Portability and Accountability Act's (HIP AA) Standards for Electronic Transactions, Privacy
    Rule, and Security Rule and are in compliance with this regulation.
• 	 Determine ifBCBSA's and Caremark's policies and procedures for fraud and abuse
    complied with section 1.9( c) of Contract CS 1039 and met all eight industry standards for
    fraud and abuse programs outlined in FEHBP Carrier Letters 2003-23 and 2011-13 .

SCOPE

We conducted this performance audit in accordance with generally accepted goverrunent
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our audit findings and
conclusions based on the audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on the audit objectives.

This performance audit covered a limited review of pharmacy pricing and adherence to
transparency pricing standards for contract year 2012. The audit scope also included compliance
with HIP AA and program requirements for fraud and abuse for contract year 2012.

In 2012 BCBSA paid $6,068,584,781 in prescription drug charges (claims and administrative
costs) to Caremark. A summary of those costs by pharmacy type for the contract year is below:

                             Contract Char2es by Pharmacy Type
                      Retail Pharmacy              $3 ,593,022,713
                      Mail Order Pharmacy          $1,421,440,966
                      Specialty Pharmacy           $1 ,054,121,102
                      Total                        $6,068,584,781

In planning and conducting the audit, we obtained an understanding ofBCBSA's internal control
structure to help determine the nature, timing, and extent of our auditing procedures. This was
                                                3
determined to be the most effective approach to select areas of audit. For those areas selected,
we primarily relied on substantive tests of transactions and not tests of controls. Additionally,
since our audit would not necessarily disclose all significant matters in the internal control
structure, we do not express an opinion on BCBSA's system of internal controls taken as a
whole.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
Caremark. Due to time constraints, we did not verify the reliability of the data generated by the
various information systems involved. However, while utilizing the computer-generated data
during audit testing, nothing came to our attention to cause us to doubt its reliability. We believe
that the data was sufficient to achieve the audit objectives.

We also conducted tests to determine whether BCBSA complied with the Contract, Service
Agreements, applicable procurement regulations (i.e., Federal Acquisition Regulations and
FEHB Acquisition Regulations, as appropriate), and the laws and regulations governing the
FEHBP. Exceptions noted in the areas reviewed are set forth in the "Audit Findings and
Recommendations" section of this report. With respect to the items not tested, nothing came to
our attention that caused us to believe that BCBSA and Caremark had not complied, in all
material respects, with those provisions.

METHODOLOGY

To test whether pharmacy claims were priced accurately under the new transparency standards
for contract year 2012, we identified a claims universe of 84,480,990 claim lines, totaling
$6,068,584,781.

Due to the fact that the new transparency standards implemented by OPM would institute a much
more complex pricing formula for pharmacy claims, we planned this limited scope audit to
understand the new methods of pricing claims and to ensure that we can obtain all necessary
documentation. As a result, we performed the following audit steps as a precursor to a more
thorough review to be completed at a later date:

    Transparency Pricing Review
    • 	 We identified a retail pharmacy universe of76,215,108 claims totaling $3 ,593,022,713
        for contract year 2012. We selected a random sample of 40 claims totaling $3,962 for
        review to determine ifthe claims were priced in accordance with CS 1039' s transparency
        standards.

    • 	 We identified a mail order pharmacy universe of 8,085,445 claims totaling
        $1,421,440,966 for contract year 2012. We selected a random sample of 40 claims
        totaling $12,572 for review to determine if the claims were priced in accordance with
        CS 1039's transparency standards.

    • 	 We identified a specialty pharmacy universe of 180,437 claims totaling $1,054,121,102
        for contract year 2012. We selected a random sample of 40 claims totaling $128,224 for


                                                 4

       review to determine ifthe claims were priced in accordance with CS 1039's transparency
       standards.

   The samples selected during our review were not statistically based. Consequently, the
   results could not be projected to the universe since it is unlikely that the results are
   representative of the universe as a whole. We used Contract CS 1039 to determine if
   claims charged to the FEHBP were in compliance with the terms of the Contract.

   Health Insurance Portability and Accountability Act
   • 	 We obtained BCBSA's and Caremark's updated 2012 policies and procedures that
       address the HIPAA Standards for Electronic Transactions, Privacy Rule, and Security
       Rule for review to determine if the carrier has documented its compliance with this
       regulation.

   Fraud and Abuse
   • 	 We reviewed BCBSA's and Caremark's updated 2012 policies and procedures for fraud
       and abuse to determine ifthe Plan complied with section 1.9 (c) of Contract CS 1039 and
       met all eight industry standards for fraud and abuse programs outlined in FEHBP Carrier
       Letters 2003-23 and 2011-13.

The results of our audit were discussed with Caremark and BCBSA officials throughout the
audit. In addition, a draft report, dated April24, 2014, was provided to BCBSA for review and
comment. BCBSA's response to the draft report, dated May 23, 2014, was considered in
preparing the final report and is included as an Appendix to this report.




                                               5

             III. AUDIT FINDINGS AND RECOMMENDATIONS 


A. 	 TRANSPARENCY AND PRICING

  The results of our review, based on our limited sample size of 120 pharmacy claims (40
  claims each from retail, mail order, and specialty pharmacy; retail was further limited to four
  high volume pharmacies), found that the pricing calculations utilized by Caremark PCS
  Health LLC (Caremark) in its administration of the Blue Cross and Blue Shield Association's
  (BCBSA) Federal Employee Health Benefits Program's (FEHBP) pharmacy claims were
  transparent and accurately priced.

B. 	 HEALTH INSURANCE PORTABILITY AND ACCOUNTABILTY ACT

  The results of our review show that Caremark and BCBSA have policies and procedures in
  place to address the Health Insurance Portability and Accountability Act's Standards for
  Electronic Transactions, Privacy Rule, and Security Rule.

C. FRAUD AND ABUSE

  1. 	 Fraud and Abuse Cases Identified by Caremark but not                            Procedural
       Reported by BCBSA

     The BCBSA did not report to Office of Personnel Management's (OPM) Office ofthe
     Inspector General (OIG) all of the suspected fraud and abuse cases that were reported to
     it by Caremark for contract year 2012. Additionally, of those cases that were reported to
     the OIG, 50 percent were not reported within the 30 working day requirement.

     Contract CS 1039 Section 1.9(a) requires BCBSA to "operate a system designed to detect
     and eliminate fraud and abuse ... by providers providing goods or services to FEHB
     Members, and by individual FEHB Members."

     Additionally, FEHBP Carrier Letter 2011-13 (Carrier Letter) states that all FEHBP
     Carrier Special Investigative Units are required to submit a written notification to the
     OIG within 30 working days of becoming aware of a fraud, waste, or abuse issue where
     there is reasonable suspicion that fraud has occurred or is occurring against the FEHBP.
     It also states that, in order to meet the 30 working day requirement, the carriers may
     provide notification on cases where their investigation is still in the early stages and it has
     not yet determined if there is sufficient evidence to substantiate the allegation. There is
     no dollar threshold for this Carrier Letter requirement.

     During our audit we requested that Caremark provide a listing of all of its FEHBP fraud
     cases related to BCBSA which were entered into BCBSA' s Fraud Information
     Management System (FIMS) for contract year 2012. This information was then provided
     to the OIG's Office oflnvestigations (OI) to compare to the pharmacy-related cases
     reported to it by BCBSA for calendar year 2012 . Our review of the subsequent
     information provided by the OIG's OI determined that BCBSA did not report all

                                                6

potential fraud, waste, or abuse issues entered into FIMS by Caremark and that half of the
issues reported to the OIG were untimely. Specifically, we identified the following:

• 	 Cases Entered into FIMS but not Reported to the OIG: Of the 61 cases that Caremark
    entered into FIMS (all of which met the Carrier Letter's criteria for reporting), only
    18, or 30 percent, were reported to the OIG by BCBSA.

• 	 Cases Submitted After the 30 Working Day Timeliness Guideline: Of the 18 cases
    that were reported to the OIG, only 9 were submitted within the 30 working day
    requirement. The nine cases reported late were referred to the OIG an average of 126
    working days after the cases were entered into FIMS by Caremark (we assumed that
    the "Date Referred" in the notification information provided to the OIG is the date the
    case was entered into FIMS).

The BCBSA's Federal Employee Program Directors Office (FEPDO) has established
vast anti-fraud activities with over 500 investigators at 53 local Blue Cross and Blue
Shield (BCBS) anti-fraud units contained within the 37 BCBS companies. Additionally,
it utilizes a dedicated fraud unit at Caremark, and employs 12 FEPDO staff and
consultants. The cost ofthe FEPDO anti-fraud activities in 2012 was $5,845,156.
Additionally, Caremark's anti-fraud activities charged to the FEHBP totaled $1,905,366
in 2012. (Please note that these amounts were provided to us by BCBSA and have not
been verified by our office.) However, as noted in this finding, and in three final
BCBS audit reports issued by our office since March 2012, the costs charged by
BCBSA for its anti-fraud activities have not led it to comply with the Carrier Letter
requirement of reporting all of its fraud cases to the OIG in a timely manner, while
Caremark, charging approximately one-third the costs, provided the information
timely to the FIMS system. It should also be noted that the OIG has no remote access to
FIMS, a system that OPM has paid to create and maintain, and, therefore, relies solely on
the FEPDO to provide FIMS case notifications and referrals.

By not reporting all potential fraud and abuse cases to the OIG, BCBSA is adversely
affecting the OIG's ability to investigate those potential fraud cases and potentially
recover FEHBP monies charged fraudulently. Additionally, by not reporting all potential
fraud cases reported to it by Caremark in a timely manner, BCBSA is further limiting the
OIGs investigative efforts. Finally, by not adhering to the requirements ofthe Carrier
Letter, the FEHBP is paying BCBSA's anti-fraud units significant amounts each year for
services that are not being provided as required by the contract and Carrier Letter.

Recommendation 1

We recommend that the contracting officer require BCBSA to implement changes to
ensure that all cases reported in FIMS are referred to the OIG and that those cases are
reported within 30 working days of being entered as required by the Carrier Letter.




                                         7

BCBSA Response:

BCBSA partially disagrees with this recommendation.

It stated that Carrier Letter 2011-13 requires that all Carrier Special Investigation Units
(SIU) submit a written notification, where there is a reasonable suspicion that fraud has
occurred or is occurring in the FEHBP and indicated that it felt that not all cases reported
by Caremark met this requirement.

Additionally, BCBSA stated that when Caremark enters a case into FIMS, its SIU staff
reviews the entire entry in the activity log and the recommendations made by Caremark
before choosing a course of action. BCBSA states that it is sometimes necessary to
conduct a preliminary investigation to determine if there is sufficient information to
support a reasonable suspicion that fraudulent activity may be occurring. If reasonable
suspicion is determined, at that point it notifies the OPM-OIG ofthe allegations.

Out of the 61 cases identified, BCBSA provided the following disposition of the cases:
        Pharmacy Referrals (submitted to OPM)                                    7
        Pharmacy Notifications (Submitted to OPM)                               11
        Provider Shopper Case Management Referral Program (PSCMRP)              20
        Not Fraud                                                                7
        Member Termed Out of Program                                             2
        Referred to Plans for Further Investigation                              6
        Request for Information                                                  4
        Ongoing Investigations                                                   3
        Other Law Enforcement                                                    1

The PSCMRP is a means of altering abusive behavior and has been in effect for many
years. The OIG is aware that PSCMRP is an opportunity for intervention made available
to members and the OIG has even requested Caremark use this program for other FEHBP
Carriers.

After further analysis BCBSA determined that of the 18 cases that met its "reasonable
suspicion" requirement, 9 were submitted within the 30 day requirement and 1 was a day
late. Its objective is 100 percent compliance, but it feels that further investigation is
necessary to determine if "reasonable suspicion" of fraud exists.

To improve the timeliness of reporting Caremark cases, BCBSA stated that it would
develop additional processes and procedures by June 30, 2014.

OIG Response:

BCBSA's response only focused on one portion of Carrier Letter 2011-13 and did not
account for the additional requirements that state "in order to meet the 30 day notification
requirement, Carriers may provide notification on cases where their investigation is still


                                          8

in the early stages and the Carrier has not yet determined whether there is sufficient
evidence to substantiate the allegation."

The OIG believes that if a local plan or PBM investigator enters the case into FIMS and
makes a recommendation, there is already "reasonable suspicion" in place; if not the case
wouldn't have been entered into FIMS. If non-fraud related cases are entered into FIMS,
then BCBSA should train its local plans and PBMs as to what should and should not be
entered into FIMS. Nowhere is it stated that the FEPDO must perform further
investigation or confirm fraud has occurred before notifying the OIG of the case. If the
FEPDO is further investigating a case it may state that in the notification to the OIG.
BCBSA consultants should not be applying their own standards to determine when a case
entered into FIMS should or should not be reported to the OIG.

The OIG is aware ofPSCMRP. However, those cases should be reported as well and
noted that the member has agreed to enter the program. The program was designed as an
intervention of possible prescription drug abuse.

We acknowledge that 9 ofthe 18 cases reported to the OIG were reported in the 30-day
notification requirement. BCBSA did not provide any documentation showing the one
case was a day late, but nonetheless it would still be considered late.

The non-reporting and late reporting of cases to OPM hinders the OIG's ability to
investigate potential cases in a timely manner and to determine if any of the cases affect
other areas of the FEHBP.

Recommendation 2

We recommend that the contracting officer require BCBSA to provide the OIG with
access to all of the data entered into or contained in FIMS. That being said, we believe
that direct (read-only) access to the FIMS system is the most efficient means of making
the data available to the OIG.

BCBSA Response:

BCBSA will continue to work with the OIG to provide any specific data needed.

However, BCBSA disagrees with the OIG's opinion regarding access to the FIMS
system. It states that FIMS is an internal management reporting system used by BCBSA
and local plans to report fraud, waste, and abuse cases and resides on a secured
proprietary platform accessible to Blue Plan employees only. Furthermore, BCBSA
states "it would be physically impossible for the OPM/OIG to have access to FIMS."
BCBSA stated that before cases can be fully accepted into FIMS, they must be reviewed
and evaluated by its consultants. BCBSA then works with the local plans to ensure all of
the proper data elements are entered. Access to FIMS by the OIG would result in
potential inefficiencies to the FEP.


                                         9

OIG Response:

We continue to recommend that the contracting officer direct BCBSA to provide OPM
and the OIG with full access to FIMS data. We disagree with BCBSA's reasons for not
providing this access, and in fact feel that providing this access would be the most
efficient and cost effective way to provide the data to the OIG.




                                     10 

               IV. MAJOR CONTRIBUTORS TO THIS REPORT
Office of Investigations

                Special Agent-In-Charge

Special Audits Group

                    Auditor-In-Charge

                , Auditor

             , Auditor



                     Group Chi

                  , Senior Team Leader




                                          11 

                                         AUDIT OF BLUE CROSS AND BLUE SHIELD'S
                                             TRANSPARENT PHARMACY PRICING
                                                FOR CONTRACT YEAR 2012

                                              REPORT NUMBER 1H-01-00-14-008


SCHEDULE A - CONTRACT CHARGES

PHARMACY CLAIMS



   2012 Retail Prescription Drug Claim Payments                                  $   3,593,022,713
   2012 Mail Order Prescription Drug Claim Payments                                  1,421,440,966
   2012 Specialty Prescription Drug Claim Payments                                   1,054,121,102


TOTAL CONTRACT CHARGES                                                           $   6,068,584,781
                                                                ... 
            APPENDIX 



                                                                 BlueCross BlueShield
                                                                 Association
                                                                 An Aasodation of Independent
                                                                 Blue Cross and Blue Shield Plans
May 23, 2014
                                                                  Federal Employee Program
                                                                  1310 0 Street, N.W.
Ms.                       Group Chief                             Washington. D.C. 20005
Spec1al Au        roup                                           202.942. 1000
Office of the Inspector General                                  Fax 202.942. 11 25
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington , D.C. 20415-11000

Reference: OPM DRAFT AUDIT REPORT
           CVS Caremark Transparency Audit
           Audit Report Number 1H-01-00-14-008
           (Dated April 24, 2014 and Received April 24, 2014)

Dear -         ·:

This is the BCBSA response to the above referenced U.S . Office of Personnel
Management (OPM) Draft Audit Report covering the Federal Employees Health
Benefits. BCBSA would first like to take the opportunity to address the overall tone of
the OIG Draft Aud it Report. After close examination of the comments that were made in
the draft report, BCBSA is concerned that some statements are not objective . For
example , comments such as "vast anti-fraud activities ," 11 the exorbitant costs," 11the
simple requirement," "significant amounts each year for services that are not
being provided" and " reporting the cases in the first place".

                                    Deleted by OIG
                            Not Relevant to the Audit Report

These comments are not objective and undermine the professional and cooperative
relation ship FEP has always experienced with OIG. Additionally, many statements as
described are demonstrably false and do not facilitate productive resolutions of audit
issues .

The FEP SIU has extensively re-assessed their processes and provided focused
training to Plans since 2012 . Consequently, BCBSA respectfully requests that these
types of comments be removed from the Final Audit Report.

                                    Deleted by OIG
                            Not Relevant to the Audit Report
                                                                          APPENDIX 





Our comments concern ing the findings in the report are as follows :

                                      Deleted by OIG
                              Not Relevant to the Audit Report

Recommendation 1

We recommend that the contracting officer require the BCBSA to implement changes to
ensure that all cases reported on FIMS are referred to the OIG and that those cases are
reported within 30 working days of being entered as required by the Carrier Letter.

BCBSA Response:

BCBSA partially disagrees with this recommendation . FEHBP Carrier Letter 2011-13
states that all Carrier SIUs are required to submit a written notification , where there is a
reasonable suspicion that fraud has occurred or is occurring in the FEHBP. Based
upon the analysis below, not all the cases reported by CVS met this requirement.

Upon receiving a new CVS Caremark case submitted in FIMS, the BCBSA SIU staff
reviewed the entire entry in the activity log before considering any recommendations
made by CVS . The CVS recommendations are just that, a recommendation that is
taken into consideration when choosing a course of action .

A review of the actual 61 cases cited in the recommendation identified the following
disposition :

   Pharmacy Referrals                                                    7
   Pharmacy Notifications                                               11
   Provider Shopper Case Management Referral Program
   (PSCMRP)                                                             20
   Not Fraud                                                             7
   Member Termed Out of Program                                          2
   Referred to Plans for Further Investigation                           6
   Request for Information (RFI)                                         4
   Ongoing Investigations                                                3
   Other Law Enforcement                                                .1
    Total Cases:                                                         61

                                      Deleted by OIG
                              Not Relevant to the Audit Report

The OPM-OIG has been aware of the process of enrolling members into the PSCMP as
a means of altering abusive behavior. The PSCMP enrollment process wh ich has been
in effect for many years enables BCBSA to provide an opportunity for intervention that

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                                                                         APPENDIX 





the member may not have had , but often is willing to accept. In fact , the OIG has even
requested that CVS Caremark use this program for other FEHBP Carriers.

                                     Deleted by OIG 

                             Not Relevant to tbe Audit Report 


Eighteen (18) cases were ultimately submitted to OPM as referrals and notifications
after all other options were considered . Seven (7) of the remaining cases were
examined and additional information was obtained to determine that no evidence of
fraud existed . Two (2) members terminated the network, Six (6) were referred back to
their Plans for specific follow-up, Three (3) are considered ongoing preliminary
investigations, and four (4) were requests for information (RFI). The one (1) remaining
case was referred to another Law Enforcement agency.

In order to determine that there is a "reasonable suspicion" that a fraud was occurring , it
is often necessary to conduct a preliminary investigation. Once sufficient information
has been obtained to support a reasonab le suspicion that fraudulent activity may be
occurring , then that would be the appropriate time to notify the OPM-OIG of the
allegations of wrongdoing.

In further analyzing the above results, BCBSA did determine that 9 of the 17 cases
identified as meeting the "reasonable suspicion" requirement were submitted within the
30 day requ irement , and one case was one day late. Clearly, 100% compliance is our
objective; however, at times cases are opened with the recommendation that additional
investigation be conducted to determine whether there is a reasonable suspicion that
fraud exists .

To improve the timeliness of reporting CVS Caremark cases, BCBSA will develop
additional processes and procedures by June 30 , 2014.

Recommendation 2

OPM recommended that the contracting officer direct the Association to provide OPM
and the OIG full access to FIMS.

BCBSA Response:

BCBSA continues to disagree with the recommendation to provide the OPM OIG full
access to FIMS. FIMS is an internal management reporting system used by BCBSA
and Local Plans to report Fraud , Waste and Abuse cases. The FIMS system resides on
a secured proprietary platform accessible to Blue Plan employees only. It would be
physi cally impossible for the OPM/OIG to have access to FIMS. Before cases can be
fully accepted into FIMS , they must be reviewed and evaluated by BCBSA consultants,
who then work with Local Plans to ensure the proper data elements are entered . As

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such , unlimited access by the OIG to the system would result in potential inefficiencies
for FEP.

BCBSA continues to be open to alternative processes to provide OPM-OIG with any
specific data elements they desire .

We appreciate the opportunity to provide our response to this Draft Audit Report and
request that our comments be included in their entirety as an amendment to the Final
Audit Report.

Sincerely,



. . . . .. CISA, CRMA, PMP , CRISC
~ector, FEP Program Assurance




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