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UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

Inspector General 

AUDIT REPORT 

Federal Employees Health Benefits Program
 

Service Benefit Plan Contract CS 1039
 

BlueCross BlueShield Association
 

Plan Code 10
 

WeUpoint Southeast
 

Plan Codes 060/560 (Connecticut), 180/680 (Maine),
 

2701770 (New Hampshire), and 423/923 (Virginia)
 

Mason, Ohio
 

REPORT NO. lA-10-63-08-044 DATE:March 3, 2009 

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
 

Service Benefit Plan Contract CS 1039
 

BlueCross BlueShield Association
 

Plan Code 10
 

Wellpoint Southeast
 

Plan Codes 060/560 (Connecticut), 180/680 (Maine),
 

2701770 (New Hampshire), and 423/923 (Virginia)
 

Mason, Ohio
 

REPORT NO. IA-1O-63-08-044 DATE: March 3. 2009 

This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations at 

WellPoint Southeast (Plan) in Mason, Ohio, questions $693,795 in health benefit charges. The 

BlueCross BlueShield Association (Association) agreed (A) with $679,256 and disagreed (D) 

with $14,539 ofthe questioned charges. 

OUflimited scope audit was conducted in accordance with Government Auditing Standards. The 

audit covered claim payments from 2005 through 2007 as reported in the Annual Accounting 

Statements. 

Questioned health benefit charges are summarized as follows: 

• Amounts Paid Greater than Covered Charges (A) $314,993 

During our review of claims where the amounts paid were greater than the covered charges, 

we determined that the Plan incorrectly paid 20 claims, resulting in net overcharges of 

$314,993 to the FEHBP. Specifically, the Plan overpaid 17 claims by $317,383 and 

underpaid-3 claims by $2,390. 

www.opm.goY www.usalobs.goY 
• Assistant Surgeon Review fA) $170,820 

The Plan incorrectly paid 185 assistant surgeon claims. 

• System Review fA) $117,354 

Based on our review of a judgmental sample of 290 claims, we determined that the Plan 

incorrectly paid five. claims, resulting in net overcharges of $117,354 to the FEHBP. 

Specifically, the Plan overpaid four claims by $118,617 and underpaid one claim by $1,263. 

• Omnibus Budget Reconciliation Act of 1990 Review $90,628 

The Plan incorrectly paid 18 claims that were priced or potentially should have been priced 

under the Omnibus Budget Reconciliation Act of 1990 pricing guidelines. Specifically, the 

Plan overpaid 13 claims by $120,647 and underpaid 5 claims by $30,019, resulting in net 

overcharges 0[$90,628 to the FEHBP. The Association agreed with $76,089 (A) and 

disagreed with $14,53 9 (D) of the questioned charges. 

11 
CONTENTS
 

PAGE
 

EXECUTIVE SUMMARY , i
 

L INTRODUCTION AND BACKGROUND 1
 

II. OBJECTIVES, SCOPE, AND METHODOLOGy	 3
 

III. AUDIT FINDINGS AND RECOiv1MENDATIONS	 5
 

A. HEALTH BENEFIT CHARGES	 5
 

I. Amounts Paid Greater than Covered Charges	 5
 

2. Assistant Surgeon Review	 7
 

3. System Review	 8
 

4. Omnibus Budget Reconciliation Act of 1990 Review 10
 

IV, MAJOR CONTRIBUTORS TO THIS REPORT. 13
 

V. SCHEDULE A - HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED 

APPENDIX	 (BlueCross BlueShield Association reply, dated January 19, 2009, to the 

draft audit report) 
I. INTRODUCTION AND BACKGROUND
 

INTRODUCTION
 

This final audit report details the findings, conclusions, and recommendations resulting from our 

limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at 

WellPoint Southeast (Plan). The Plan includes the Connecticut, Maine, New Hampshire and 

Virginia BlueCross and BlueShield plans. The Plan's central office is located in Mason, Ohio. 

The audit was performed by the Office of Personnel Management's (OPM) Office of the Inspector 

General (DIG), 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 Center for Retirement and 

Insurance Services has overall responsibility for administration ofthe FEHBP. The provisions of 

the FEHB Act are implemented by OPM through regulations, which are codified in Title 5, 

Chapter 1, Part 890 ofthe Code ofFederal Regulations (CFR). Health insurance coverage is 

made available through contracts with various health insurance carriers. 

The BlueCross BlueShield Association (Association), on behalf of participating BlueCross and 

BIueShield plans, has entered into a Government-wide Service Benefit Plan contract (CS 1039) 

with OPM to provide a health benefit plan authorized by the FEHB Act. The Association 

delegates authority to participating local BlueCross and BlueShield plans throughout the United 

States to process the health benefit claims of its federal subscribers. The Plan is one of 

approximately 63 local BlueCross and BlueShield plans participating in the FEHBP. 

The Association has established a Federal Employee Program (FEl") Director's Office in 

Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP 

Director's Office coordinates the administration ofthe contract with the Association, member 

BlueCross and BlueShield plans, and OPM. 

The Association has also established an FEP Operations Center. The activities of the FEP 

Operations Center are performed by CareFirst BlueCross BlueShield, located in Washington, 

D.C. These activities include acting as fiscal intermediary between the Association and member 

plans, verifying subscriber eligibility, approving or disapproving the reimbursement of local plan 

payments of FEHBP claims (using computerized system edits), maintaining a history file of all 

FEHBP claims, and maintaining an accounting of all program funds. 

I Throughout this report, when we refer to "FEP" we are referring to the Service Benefit Plan lines of business at the 

Plan. When we refer to the "FEHBP" we are referring to the program that provides health benefits to federal employees. 

1
 
Compliance with laws and regulations applicable to the FEHBP is the responsibility of the 

Association and Plan management. Also, management ofthe Plan is responsible for establishing 

and maintaining a system of internal controls. 

All findings from our previous audits of the Plan (Report No. lA-10-59-01-022 for Maine, dated 

May 14,2001; Report No. lA-1O-27-02-022 for New Hampshire, dated February 14,2003; Report 

No. lA-10-50-03-021 for Connecticut, dated June 24,2004; and Report No. lA-1O-62-04-003 for· 

Virginia, dated January 4, 2005), covering various contract years during the period 1997 through 

2002, have been satisfactorily resolved. 

The results of our audit were provided to the Plan in written audit inquiries; were discussed with 

Plan and/or Association officials throughout the audit and at an exit conference; and were 

presented in detail in a draft report, dated November 18,2008. The Association's comments 

offered in response to the draft report were considered in preparing our final report and are 

included as an Appendix to this report. 

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 to determine whether the Plan complied with contract provisions relative to 

health benefit payments. 

SCOPE 

We conducted our limited scope performance audit in accordance with generally accepted 

government auditing standards. Those standards require that we plan and perform the audit to 

obtain sufficient and appropriate eviderice to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit objectives. 

We reviewed the BlueCross and BlueShield FEHBP Annual Accounting Statements as they 

pertain to Plan codes 060/560 (Connecticut), 180/680 (Maine), 2701770 (New Hampshire), and 

423/923 (Virginia). During this period, the Plan paid approximately $2.6 billion in health benefit 

charges (See Schedule A). Specifically, we reviewed approximately $74 million in claim 

payments made from 2005 through 2007 for proper adjudication. 

In planning and conducting our audit, we obtained an understanding ofthe Plan's internal control 

structure to help determine the nature, timing, and extent of our auditing procedures. This was 

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. Based on our 

testing, we did not identify any significant matters involving the Plan's internal control structure 

and its operation. However, since our audit would not necessarily disclose all significant matters 

in the internal control structure, we do not express an opinion on the Plan's system of internal 

controls taken as a whole. 

We also conducted tests to determine whether the Plan had complied with the contract, the 

applicable procurement regulations (i.e., Federal Acquisition Regulations and Federal Employees 

Health Benefits Acquisition Regulations, as appropriate), and the laws and regulations governing 

the FEHBP. The results ofour tests indicate that, with respect to the items tested, the Plan did 

not comply with all provisions ofthe contract and federal procurement regulations. Exceptions 

noted in the areas reviewed are set forth in detail in the "Audit Findings and Recommendations" 

section ofthis audit report. With respect to the items not tested, nothing came to our attention 

that caused us to believe that the Plan had not complied, in all material respects, with those 

provisions. 

In conducting our audit, we relied to varying degrees on computer-generated data provided by the 

FEP Director's Office, the FEP Operations Center, the Plan, and the Centers for Medicare and 

Medicaid Services. Due to time constraints, we did not verify the reliability ofthe data generated 

3
 
by the various information systems involved. However, while utilizing the computer-generated 

data during our audit testing, nothing came to our attention to cause us to doubt its reliability. 

We believe that the data was sufficient to achieve our audit objectives. 

The audit was performed at our offices in Cranberry Township, Pennsylvania and Jacksonville, 

Florida from August 5 through November 19, 2008. 

METHODOLOGY 

We obtained an understanding ofthe internal controls over the Plan's claims processing by 

inquiry ofPlan officials. 

To test the Plan's compliance with the FEHBP health benefit provisions, we selected and 

reviewed samples of 1,536 claims.' We used the FEHBP contract, the Service Benefit Plan 

brochure, the Plan's provider agreements, and the Association's FEP administrative manual to 

determine the allowability of benefit payments. The results of these samples were not projected 

to the universe of claims. 

2 See the audit findings for "Amounts Paid Greater than Covered Charges" (AI), "Assistant Surgeon Review" (A2), 

"System Review" (A3), and "Omnibus Budget Reconciliation Act of 1990 Review" (A4).on pages 5 through 12 for 

specific details of our sample selection methodologies. 

4
 
III. AUDIT FINDINGS AND RECOMMENDATIONS
 

A. HEALTH BENEFIT CHARGES
 

1.	 Amounts Paid Greater than Covered Charges $314,993 

The Plan incorrectly paid 20 claims, resulting in net overcharges of $314,993 to the 

FEHBP. Specifically, the Plan overpaid 17 claims by $317,383 and underpaid 3 claims 

by $2,390. 

Contract CS 1039, Part III, section 3.2 (b)(I) 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, "Ifthe Carrier or aPM determines that a Member's claim 

has been paid in error for any reason, the Carrier shall make a diligent effort to recover an 

overpayment ...." 

Contract CS 1039, Part II, section 2.6 states, "(a) The Carrier shall coordinate the 

payment of benefits under this contract with the payment of benefits under Medicare, 

other group health benefits coverages ... (b) The Carrier shall not pay benefits under this 

contract until it has determined whether it is the primary carrier ... ." 

For the period 2005 through 2007, we identified 13,886 claims where the amounts paid 

were greater than the covered charges by a total of$18,222,691. From this universe, we 

selected and reviewed a judgmental sample of 517 claims with a total variance of 

$7,327,591 ,and determined ifthe Plan adjudicated these claims properly. Our sample 

included all claims where the amounts paid exceeded covered charges by $2,500 or more 

for the Connecticut, Maine and New Hampshire plans, and $10,000 or more for the 

Virginia plan. Based on our review, we determined that 20 of these claims were paid 

incorrectly, resulting in net overcharges of$314,993 to the FEHBP. Specifically, the Plan 

overpaid 17 claims by $317,383 and underpaid 3 claims by $2,390. 

These claim payment errors resulted from the following reasons: 

•	 The Plan paid three claims using the incorrect pricing methodology, resulting in 

overcharges of $164,497 to the FEHBP. 

•	 The Plan priced one claim using the incorrect number of units, resulting in an
 

overcharge of $36,491 to the FEHBP.
 

•	 The Plan incorrectly paid four claims due to processor errors, resulting in net 

overcharges of$34,160 to the FEHBP. Specifically, the Plan overpaid three claims 

by $34,760 and underpaid one claim by $600. For example, the Plan inadvertently 

priced two separate claims (split bills) for a patient when only one claim should have 

been priced for the entire admission. 

5
 
•	 The Plan did not correctly bundle claim line charges for two claims, resulting in
 

overcharges of $30,331 to the FEHBP.
 

•	 The Plan paid two claims using incorrect billed charges, resulting in overcharges of 

$16,389 to the FEHBP. 

•	 The Plan paid three claims using incorrect per diem allowances, resulting in net 

overcharges of$13,076 to the FEHBP. Specifically, the Plan overpaid two claims by 

$14,246 and underpaid one claim by $1,170. 

•	 The Plan did not properly coordinate one claim with Medicare, resulting in an
 

overcharge of$10,805 to the FEHBP.
 

•	 The Plan did not properly coordinate one claim with the patient's primary insurance 

carrier, resulting in an overcharge of $5,700 to the FEHBP. 

•	 The Plan paid one claim using an incorrect fee schedule amount, resulting in an
 

overcharge of $3,440 to the FEHBP.
 

•	 The Plan paid two claims using the incorrect types of services, resulting in net 

overcharges of $104 to the FEHBP. Specifically, the Plan overpaid one claim by 

$724 and underpaid one claim by $620. 

Association's Response: 

The Association agrees with this finding. The Association states that the Plan has initiated 

recoveries of the overpayments and has recovered $216,067 as of December 31, 2008. 

- The Association also states, "The errors that occurred in this area appear to be mostly 

human error. To ensure these types of errors do not occur in the future, the Plan will 

review processing procedures and ensure training materials are up to date. This review 

should be concluded by February 28,2009. The FEP Director's Office System Wide 

Claims Review process includes Amounts Paid Greater than Covered Charges claims for 

Plan review and identification of overpayments. This review process should continue to. 

reduce these types of findings in the future." 

Recommendation 1 

We recommend that the contracting officer disallow $317,383 in claim overcharges, and 

verii)' 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 $2,390 if 

additional payments are made to the providers to correct the underpayment errors. 

6
 
2.	 Assistant Surgeon Review $170,820 

The Plan incorrectly paid 185 assistant surgeon claims, resulting in overcharges of
 

$170,820 to the FEHBP.
 

As previously cited from CS 1039, 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. Also, the Plan must coordinate the payment 

of benefits with Medicare. 

For the period 2005 through 2007, we identified 2,350 assistant surgeon claim groups, 

totaling $826,013 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 406 assistant surgeon claim groups, totaling $609,129 

in potential overpayments, to determine ifthe Plan paid these claims properly. Our 

sample included all assistant surgeon claim groups with potential overpayments of $500 

or more. The majority ofthese claim groups contained one primary surgeon and one 

assistant surgeon claim. Based on our review, we determined that 185 claims were paid 

incorrectly, resulting in overcharges 0[$170,820 to the FEHBP. 

These claim payment errors resulted from the following: 

•	 The Plan incorrectly paid 172 assistant surgeon claims, resulting in overcharges of 

$158,564 to the FEHBP. These overcharges were due to errors in the calculation of 

the assistant surgeon fee, which should have been priced at 10, 16, 20, or 25 percent 

ofthe primary surgeon's allowed amount. 

•	 The Plan incorrectly paid 12 assistant surgeon claims, resulting in overcharges of 

$11,934 to the FEHBP. These overcharges were due to errors in the calculation ofthe 

assistant surgeon fee for claims that were subject to the Omnibus Budget 

Reconciliation Act of 1993 (OBRA 93), which should have been priced at 13.6 or 16 

percent ofthe primary surgeon's Medicare allowed amount, 

•	 The Plan did not properly coordinate one claim with Medicare, resulting in an overcharge 

of$322 to the FEHBP. 

Association's Response: 

The Association agrees with this finding. The Association states that the Plan has initiated 

recoveries of the overpayments and has recovered $169,796 as ofDecember 31,2008. 

The Association also states, "The Plan reviewed the errors identified ... and determined 

that these errors could be identified as system errors. The Plan has created or strengthened 

thelf proce . dures. . . . " 

7
 
In addition, the Association states, "For the Assistant Surgeon claim errors noted during 

the audit, the FEPDO implemented the following: 

•	 .Palmetto began correctly pricing AS modifier claims. A final comprehensive list that 

identifies all unadjusted Assistant Surgeon claims will be issued to all Plans by 

January 31, 2009 so that claims can be adjusted as necessary. 

•	 .Assistant Surgeon claims are included in the periodic System-Wide Claims Review 

process to ensure that any claim payment errors are identified and corrected in a timely 

manner." 

Recommendation 3 

We recommend that the contracting officer disallow $170,820 in claim overcharges, and 

verify that the Plan returns all amounts recovered to the FEHBP. 

3.	 System Review $117,354 

The Plan incorrectly paid five claims, resulting in net overcharges of $117,354 to the
 

FEHBP. Specifically, the Plan overpaid four claims by $118,617 and underpaid one
 

claim by $1,263.
 

As previously cited from CS 1039, costs charged to the FEHBP must be actual,
 

allowable, allocable, and reasonable. Iferrors are identified, the Plan is required to make
 

a diligent effort to recover the overpayments. Also, the Plan must coordinate the payment
 

of benefits with Medicare or other health insurance coverage.
 

For health benefit claims reimbursed during the period January 1, 2007 through
 

December 31, 2007, we identified 8,696,487 claim lines, totaling $858,826,237 in
 

'payments, using a standard criteria based on our audit experience. From this universe, we
 

selected and reviewed a judgmental sample of290 claims (representing 3,191 claim
 

lines), totaling $13,349,211 in payments, to determine if the Plan adjudicated these claims
 

properly.3 Our review identified five claim payment errors, resulting in net overcharges
 

0[$117,354 to the FEHBP. Specifically, the Plan overpaid four claims by $118,617 and
 

underpaid one claim by $1,263.
 

These claim payment errors resulted from the following:
 

•	 The Plan made one duplicateclaim payment, resulting in an overcharge of $97,230 to 

the FEHBP. 

3 We selected our sample from an OIG-generated "Place of Service Report" (SAS application) that stratified the 

claims by place of service (paS), 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 pas stratum based on the stratum's total 

claim dollars paid. 

8 
•	 The Plan did not properly coordinate one claim with the patient's primary insurance 

carrier, resulting in an overcharge of$10,335 to the FEHBP. 

•	 The Plan paid one claim at total billed charges instead of applying the applicable 

contract rate, resulting in an overcharge of$5,543 to the FEHBP. 

•	 The Plan paid one claim at percent of charges instead of applying the applicable fee 

schedule amount, resulting in an overcharge of $5,509 to the FEHBP. 

•	 The Plan paid one claim using an incorrect percent of charges, resulting in an 

undercharge of $1,263 to the FEHBP. 

Association's Response: 

The Association agrees with this finding. The Association states that the Plan has initiated 

recoveries ofthe overpayments and has recovered $108,282 as ofDecember 31, 2008. The 

Association also states that these payments were good faith erroneous benefit payments and 

fall within the context of CS 1039, Part II, section 2.3(g). Any payments the Plan is unable 

to recover are allowable charges to the FEHBP. As good faith erroneous payments, lost 

investment income does not apply to the claim payment errors identified in this finding. 

The Association states, "The Plan will review processing procedures and documentation 

to ensure training materials are up to date as well as provide refresher training to claims 

processors as necessary to reduce these types of payment errors in the future. 

The Plan has several methods in place to identify overpayments. These methods include, 

but are not limited to the System Wide Claims Reports ... COB claims reports and 

Duplicate claims reports provided by the FEP Director's Office and routine claims quality 

assurance audits performed by the Plan's Internal Auditors. While these measures are not 

absolute, they provide reasonable assurances that such items will be identified. Efforts 

will be made to periodically examine existing procedures and add additional controls 

where necessary." 

Recommendation 4 

We recommend that the contracting officer disallow $118,617 in claim overcharges, and 

verify that the Plan returns all amounts recovered to the FEHBP. 

Recommendation 5 

We recommend that the contracting officer allow the Plan to charge the FEHBP $1,263 if 

an additional payment is made to the provider to correct the underpayment error. 

9
 
4.	 Omnibus Budget Reconciliation Act of 1990 Review $90,628 

The Plan incorrectly paid 18 claims that were priced or potentially should have been 

priced under the Omnibus Budget Reconciliation Act of 1990 (OBRA 90), resulting in 

net overcharges of $90,628 to the FEHBP. Specifically, the Plan overpaid 13 claims by 

$120,647 and underpaid 5 claims by $30,019. 

As previously cited from CS 1039, 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. 

Contract CS 1039, Part III, Section 3.8 states, "the Carrier shall retain and make available 

all records applicable to a contract term that support the annual statement of operations 

and ... the rate submission for that contract term ...." 

OBRA 90 limits the benefit payments for certain inpatient hospital services provided to 

annuitants age 65 or older who are not covered under Medicare Part A. The FEHBP 

fee-for-service plans are required to limit the claim payment to the amount equivalent to 

the Medicare Part A payment. 

Using a program developed by the Centers for Medicare and Medicaid Services to price 

OBRA 90 claims, we recalculated the claim payment amount for the claims in our sample 

that were subject to and/or processed as OHRA 90. 

The following summarizes the claim payment errors. 

OBRA 90 Claim Pricing Errors 

"For the period 2005 through 2007, we identified 4,083 claims, totaling $30,932,902 in 

payments, that were subject to OBRA 90 pricing guidelines. From this universe, we 

selected and reviewed a judgmental sample of 175 claims, totaling $5,936,959 in 

payments, to determine if these claims were correctly priced by the FEP Operations Center 

and paid by the Plan. Our sample included all OBRA 90 claims with amounts paid of 

$20,000 or more. Based on our review, we determined that nine ofthese claims were paid 

incorrectly, resulting in net overcharges of $28,663 to the FEHBP. Specifically, the Plan 

overpaid six claims by $39,745 and underpaid three claims by $11,082. 

These claim payment errors resulted from the following: 

•	 The FEP Operations Center priced seven claims at incorrect Medicare diagnosis 

related grouping (DRG) allowances. Consequently, the Plan overpaid four claims by 

$25,621 and underpaid three claims by $11,082, resulting in net overcharges of 

$14,539 to the FEHBP. 

10
 
•	 The Plan priced one claim using an incorrect Medicare DRG code, resulting in an 

overcharge of $12,564 to the FEHBP. 

•	 The Plan paid one claim using an incorrect percent of charges, resulting in an 

overcharge of $1,560 to the FEHBP. 

Claims Not Priced Under OBRA 90 (Possible OEM 90 Claims) 

For the period 2005 through 2007, we identified 1,756 claims, totaling $3,565,768 in 

payments, that were potentially subject to OBRA 90 pricing guidelines but appeared to be 

paid under the Plan's standard pricing procedures. From this universe, we selected and 

reviewed ajudgmental sample of68 claims, totaling $1,699,353 in payments, to 

determine ifthe Plan paid these claims properly. Our sample included all possible OBRA 

90 claims with amounts paid of$lO,OOO or more. Based on our review, we determined 

that nine ofthese claims were paid incorrectly, resulting in net overcharges of $61,965 to 

the FEHBP. Specifically, the Plan overpaid seven claims by $80,902 and underpaid two 

claims by $18,937. 

These claim payment errors resulted from the following: 

•	 The Plan did not provide supporting documentation for five claims, resulting in 

overcharges of$75,336 to the FEHBP. 

•	 The Plan inadvertently did not price one claim under OBRA 90, resulting in an 

overcharge of$530 to the FEHBP. 

•	 The FEP Operations Center priced three claims at incorrect Medicare DRG 

allowances. Consequently, the Plan overpaid one claim by $5,036 and underpaid two 

claims by $18,937, resulting in net undercharges of$13,901 to the FEHBP. 

Association's Response: 

The Association agrees with $76,089 and disagrees with $14,539 of the questioned 

charges. The Association states that the Plan has recovered $8,577 of the uncontested 

amount as of December 31,2008. 

For the contested amount, the Association states, "The claims were contested because 

when re-priced by the Operations Center OBRA '90 pricing software, it resulted in a 

different price than the price calculated by the CMS PC pricer. The Operations Center 

OBRA '90 pricing software is the official OPM approved source for FEP OBRA '90 

pricing and must be used to determine payment. The claims were repriced with the most 

up-to-date version ofthe Operations Center OBRA '90 pricer software. Because the final 

updated version ofthe Operations Center OBRA '90 pricer was used to reprice the 

claims, FEP continues to believe that the resulting price obtained by the Operations 

Center OBRA '90 Mainframe pricer software is the most accurate." 

11 
In addition, the Association states, "To reduce pricing errors in the future, the Plan has 

implemented and updated its Policy & Procedure for OBRA 90 and an OBRA 90 

Processing guide. Further, the FEP Director's Office includes ... OBRA '90 priced 

claims on the periodic System-Wide Review process to facilitate early identification and 

recovery ofOBRA '90 claim payment errors." 

DIG Comments: 

For the contested amount, the FEP Operations Center's OBRA 90 pricing amounts 

differed from the eMS Pricer amounts. Based on our experience with auditing BJueCross 

and BlueShield plans, we have found that these pricing differences occur because the . 

mainframe pricing software used by the FEP Operations Center is not always up-to-date. 

Therefore, we will continue to use the latest version of the eMS Pricer program, which 

includes up-to-date pricing, to determine if claims paid under OBRA 90 were correctly 

priced by the FEP Operations Center and paid by the Plan. 

In addition, the Association did not provide documentation to support the amounts that 

were repriced by the FEP Operations Center for the contested items. 

Recommendation 6 

We recommend that the contracting officer disallow $120,647 in claim overcharges, and 

verify that the Plan returns all amounts recovered to the FEHBP. 

Recommendation 7 

We recommend that the contracting officer allow the Plan to charge the FEHBP $30,019 

if additional payments are made to the providers to correct the underpayment errors. 

12
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Experience-RatedAudits Group 

Auditor-In-Charge 

_uditor 

Chief 

Senior Team Leader 

13
 
V. SCHEDULE A 

,

, WELLPOINT SOUTHEAST 

MASON, OHIO 

HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED 

HEALTH BENEFIT CHARGES 2005 2006 

CONNECTICUT: 

PLAN CODE 060 

MnSCELLANEOUSPAYMENTS 

$34,441,782 

(483,252) 

$38,461,343 

675,486 

PLAN CODE 560 

MUSCELLANEOUSPAYMENTS 

34,330,771 

0 

38,190,380 

0 

MAINE: 

PLAN CODE 180 

MISCELLANEOUS PAYMENTS 

56,160,565 

1,146,882 

61,702,739 

189,301 

PLAN CODE 680 

MISCELLANEOUS PAYMENTS 

27,100,197 

0 

29,354,775 

0 

NEW HAMPSHIRE: 

PLAN CODE 270 

MISCELLANEOUS PAYMENTS 

69,706,529 

227,229 

80,590,561 

631,075 

PLAN CODE 770 

MISCELLANEOUS PAYMENTS 

37,760,586 

0 

41,387,654 

0 

VIRGINIA: 

PLAN CODE 423 

MISCELLANEOUS PAYMENTS 

273,684,651 

3,027,186 

295,986,960 

4,149,757 

PLAN CODE 923 

MISCELLANEOUS PAYMENTS 

245,080,499 

0 

273,307,410 

0 

TOTAL HEALTH BENEFIT CHARGES I $782,183 626 $864627440 

AMOUNTS QUESTIONED	 2005 2006 

1. AMOUNTS PAID GREATER THAN COVERED CHARGES	 $293,625 $16,104 

2. ASSISTANT SURGEON REVIEW	 50,763 24,041 

3. SYSTEM REVIEW	 0 

4. OMNIBUS BUDGET RECONCILIATION ACT OF 1990 REVIEW	 28,661 4,668 

TOTAL AMOUNTS QUESTIONED I $373,049 $44,813 

2007 

43,880,063 

369,772 

41,590,817 

0 

62,090,550 

218,624 

31,042,179 

0 

85,948,394 

487,931 

45,069,304 

0 

334,081,611 

4,250,063 

307,334,758 

0 

$956.364.066 

2007 

$5,264 

96,016 

0 117,354 

57,299 

$275,933 

TOTAL 

$116,783,188 

562,006 

114,111,968 

0 

179,953,855 

1,554,806 

87,497,151 

0 

236,245,484 

1,346,235 

124,217,544 

0 

903,753,222 

11,427,006 

. 825,722,667 

0 

$2 603 175,131 

TOTAL 

$314,993 

170,820 

117,354 

90,628 

$693,795 

II
 

III 
APPENDIX 

. BlUt,'Cross BlueShicld 

Association 

All !>ssDcililioll of lndepen(jl~m January 19, 2008 

£lIueCross and BIlleShield PI,lJIs 

Group Chief 

Experience-Rated Audits Group federal Employee Program Office of the Inspector General 1310 G Street. N.W. 

U.S. Office of Personnel Management Washington, D.C. 20005 

1900 E Street. Room 6400 202.942.1000 

Washington, DC 20415-1100 Fax 202.942.1 125 

Reference:	 OPM DRAFT AUDIT REPORT 

Well Point Southeast 

Audit Report Number 1A·10-63"()8-044 

(Dated November 18 and received November 19, 2008) 

Dear

This is our response to the above referenced U.S. Office of Personnel 

Management (OPM) Draft Audit Report covering the Federal Employees' Health 

Benefits Program (FEHBP) operations for WellPoint Southeast. Our comments 

concerning the findings in the report are as follows: 

A. HEALTH BENEFIT CHARGES 

1. Amounts Paid Greater than Covered Charges	 $314,993 

We do not contest this audit finding. Recovery has been initiated to recover
 

the overpayments. The errors that occurred in this area appear to be mostly
 

human error. To ensure these types of errors do not occur in the future, the
 

Plan will review processing procedures and ensure training materials are up
 

to date. This review should be concluded by February 28. 2009. The FEP
 

Director's Office System Wide Claims Review process includes Amounts Paid
 

Greater than Covered Charges claims for Plan review and identification of
 

overpayments. This review process should continue to reduce these types of
 

findings in the future.
 

As of December 31, 2008, the Plan has recovered $216,067. 

2. Assistant Surgeon Review	 $170,820 

We do not contest this finding. Recovery has been initiated to recover the
 

overpayments. The Plan reviewed the errors identified on the Assistant
 

Surgeon claims list and determined that these errors could be rdentified as
 

system errors. The Plan has created or strengthened their procedures to
 

include the following:
 
Group Chief 

OPM Draft Audit Response 

January 19, 2009 

Page 2 

•	 Virginia Corporate Provider Allowance Assistant Surgeon Pricing 

defect: When modifier 80, 81, or 83 was reported on claims for 

providers with specially negotiated contract rates, the corporate provider 

allowance file gave the same allowance for both type service 200 and 

2TO. Corrective action was implemented on August 19, 2008 to set up a 

separate allowance for type service 2TO which reflects the appropriate 

reduction for assistant surgeons (10% of type service 200) and then apply 

the appropriate negotiated rate. 

•	 Virginia Streamline Provider Allowance Assistant Surgeon Pricing 

defect: When modifier AS was reported on claims for providers with 

specially negotiated contract rates, the Streamline system incorrectly set a 

type of service 2TO which allows 10% of the base allowance. Corrective 

action was implemented on August 19, 2008 so that when a provider has 

a specially negotiated contract rate, the Streamline system uses type of 

service 200 and calculates the correct allowance using the base 

allowance for type of service 200 multiplied by the provider's negotiated 

rate. 

•	 NE (CT, ME, & NH) Assistant Surgeon Pricing defect: 

When multiple modifiers were reported on claims, a system limitation of 

the ACES pricer accepted only the modifier located in position # 1. The 

Streamline system was programmed to send only the modifier in position 

# 1 to ACES for pricing. Modifiers located in positions 2,3, and 4 were not 

considered. A system enhancement was implemented in production on 

February 17,2008 to correct the pricing problems in both systems. 

For the Assistant Surgeon claim errors noted during the audit, the FEPDO 

implemented the following: 

•	 .Palmetto began correctly pricing AS modifier claims. A final 

comprehensive list that identifies all unadjusted Assistant Surgeon claims 

. will be issued to all Plans by January 31, 2009 so that claims can be 

adjusted as necessary. 

•	 Assistant Surgeon claims are included in the periodic System-Wide 

Claims Review process to ensure that any claim payment errors are 

identified and corrected in a timely manner. 

As of December 31, 2008, the Plan has recovered $169,796. 
Group Chief 

OPM Draft Audit Response 

January 19, 2009 

Page 3 

3. Omnibus Budget Reconciliation Act 1990 Review $90,628 

The Plan does not contest $76,089. However, the Plan does contest 

$14,539. The claims were contested because when they were re-priced by 

the Operations Center OBRA '90 pricer software, it resulted in a different 

price than the price calculated by the CMS PC pricer. The Operations Center 

OBRA '90 pricer software is the official OPM approved source for FEP OBRA 

'90 pricing and must be used to determine payment. The claims were 

repriced with the most up-to-date version of the Operations Center OBRA '90 

pricer software. Because the final updated version of the Operations Center 

OBRA '90 pricer was used to reprice the claims, FEP continues to believe 

that the resulting price obtained by the Operations Center OBRA '90 

Mainframe pricer software is the most accurate. 

To reduce pricing errors in the future, the Plan has implemented and 

updated its Policy &Procedure for OBRA 90 and an OBRA90 Processing 

guide. Further, the FEP Director's Office includes not OBRA '90 priced 

claims on the periodic System-Wide Review process to facilitate early 

identification and recovery of DBRA'90 claim payment errors. 

As of December 31,2008, the Plan has recovered $8,577. 

4. System Review. $117,354 

We do not contest this audit finding. All claims have been adjusted to recover 

the overpayments. The Plan will review processing procedures and 

documentation to ensure training materials are up to date as well as provide 

refresher training to claims processors as necessary to reduce these types of 

payment errors in the future. 

The Plan has several methods in place to identify overpayments. These 

methods include, but are not limited to the System Wide Claims Reports 

(which includes a listing of Assistant Surgeon Claims, Amount Paid Greater 

than Charges Claims, OBRA '90, and Termination Claims), COB claims 

reports and Duplicate claims reports provided by the FEP Director's Office 

and routine claims quality assurance audits performed by the Plan's Internal 

Auditors. While these measures are not absolute, they provide reasonable 

assurances that such items will be identified. Efforts will be made to 

periodically examine existing procedures and add additional controls where 

necessary. Accordingly, to the extent that errors did occur, the payments are 

good faith erroneous benefits payments and fall within the context of CS 

1039, Section 2.3(g). Any benefit payments the Plan is unable to recover are 

allowable charges to the Program. In addition, as good faith erroneous 
Group Chief
 

OPM Draft Audit Response
 

January 19, 2009
 

Page 4
 

payments, lost investment income does not apply to the payments identified 

in this finding. 

As of December 31,2008, the Plan has recovered $108,282. 

We appreciate the opportunity to provide our response to each of the findings 

and request that our comments be included in their entirety as part of the Final 

Audit Report 

Executive Director 

Program Integrity 

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