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UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

Inspeclor General 

AUDIT REPORT 

Federal Employees Health Benefits Program
 

Service Benefit Plan Contract CS 1039
 

BlueCross BlueShield Association
 

Plan Code 10
 

BlueCross BlueShield of Nebraska
 

Plan Codes 260 and 760
 

Omaha, Nebraska
 

REPORT NO. lA-10-53-08-045 DATE: .Tanuary 7,2009 

Michael R. Esser 

Assistant Inspector General 

for Audits 

www.opm.gov www.usajDbs.gov 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington, DC 20415
 

Office of the 

InspeclOr General 

EXECUTIVE SUMMARY
 

Federal Employees Health Benefits Program
 

Service Benefit Plan Contract CS 1039
 

BlueCross BlueShield Association
 

Plan Code 10
 

BlueCross BlueShield ofNebraska
 

Plan Codes 260 and 760
 

Omaha, Nebraska
 

REPORT NO. lA-10-53-08-045 DATE: January 7, 2009 

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

BlueCross BlueShield ofNebraska (Plan) in Omaha, Nebraska questions $440,327 in health 

benefit charges. The BlueCross BlueShield Association agreed (A) with all questioned charges. 

Our limited 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. 

The questioned health benefit charges are summarized as follows: 

• Omnibus Budget Reconciliation Act of 1990 Review fA) $413,408 

The Plan incorrectly paid 47 claims that were priced or potentially should have been priced 

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

Plan overpaid 40 claims by $441,688 and underpaid 7 claims by $28,280, resulting in net 

overcharges of $413,408 to the FEHBP. 

www.opm.gov www.usajobs.gov 
• Claim Payment Errors (A) 526,919 

The Plan incorrectly paid 76 claims, resulting in overcharges of $26,919 to the FEHBP. 

11
 
CONTENTS
 

PAGE
 

EXECUTIVE SUMMARy i
 

1. INTRODUCTION AND BACKGROUND	 1
 

II. OBJECTIVES, SCOPE, AND METHODOLOGy	 3
 

III. AUDIT FINDINGS AND RECOMMENDAnONS	 5
 

A. HEALTH BENEFIT CHARGES	 5
 

1. Omnibus Budget Reconciliation Act of 1990 Review	 5
 

2. Claim Paytnent Errors	 8
 

IV. MAJOR CONTRIBUTORS TO THIS REPORT	 11
 

V. SCHEDULE A - HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED 

APPENDIX	 (BlueCross BlueShie1d Association reply, dated December 4, 2008, 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 

BlueCross BlueShield ofNebraska (Plan). The Plan is located in Omaha, Nebraska. 

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

General (OIG), as established by the Inspector General Act of 1978, as amended. 

BACKGROUND 

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law 

86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance 

benefits for federal employees, annuitants, and dependents. OPM's Center for Retirement and 

Insurance Services has overall responsibIlity for administration of the FEHBP. The provisions of 

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

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

made available through contracts with various health insurance c.arriers. 

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

BlueShield plans, has entered into a Govenunent-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 B1ueShield plans participating in the FEHBP. 

The Association has established a Federal Employee Program (FEpl

) Director's Office in 

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

Director's Office coordinates the administration of the 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 ofFEHBP claims (using computerized system edits), maintaining a history file of all 

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

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

Phm. When we referto 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 of the Plan is responsible for establishing 

and maintaining a system of internal controls. 

The findings from our previous audit of the Plan (Report No. lA-1O-53-0l-01O, dated January 19, 

2001) for contract years 1997 through 1999 have been satisfactorily resolved. 

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

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

presented in detail in a draft report, dated September 17, 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 evidence to provide a reasonable basis for our findings and 

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

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

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

to Plan codes 260 and 760 for contract years 2005 through 2007. During this period, the Plan paid 

approximately $337 million in health benefit charges. Specifically, we reviewed $7.8 million in 

claim payments made from 2005 through 2007 for proper adjudication. 

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

structure to help determine the nature, timing, and extent ofour 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 aild 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 of our tests indicate that, with respect to the items tested, the Plan did 

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

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

section of this 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 

provlslOns. 

In conducting our audit, we relied to varying degrees on computer~generateddata 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 

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

3
 
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 office in Jacksonville) Florida from June 13) 2008 through 

July 31) 2008. 

METHODOLOGY 

We obtained an understanding of the internal controls over the Plan's claims processing system 

by inquiry of Plan officials. 

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

reviewed samples of 553 claims.2 We used the FEHBP contract, the Service Benefit Plan 

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

detennine the allowability of benefit payments. The results ofthese samples were not projected 

to the universe of claims. 

2 See the audit findings for "Omnibus Budget Reconciliation Act of 1990 Review" (AI) and "Claim Payment 

Errors" (A2) on pages 5 through 10 for specific details ofour sample selection methodologies. 

4
 
III. AUDIT FINDINGS AND RECOMMENDATIONS
 

A. HEALTH BENEFIT CHARGES
 

1. Omnibus Budget Reconciliation Act of 1990 Review $413,408 

The Plan incorrectly paid 47 claims that were priced or potentially should have been 

priced under the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) pricing 

guidelines. Specifically, the Plan overpaid 40 claims by $441,688 and underpaid 7 claims 

by $28,280, resulting in net overcharges of $413,408 to the FEHBP. 

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, "If the Carrier or OPM 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 ... (b) The 

Carrier shall not pay benefits under this contract until it has determined whether it is the . " pnmary camer .... 

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 amounts for the claims in our 

samples that were subject to and/or processed as OBRA 90. 

The following summarizes the claim payment errors. 

.oHRA 90 Claim Pricing Errors 

For the period 2005 through 2007, we identified 300 claims, totaling $3,724,457 in 

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

selected and reviewed a judgmental sample of 114 claims, totaling $2,556,600 in 

payments, to determine ifthese 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$10,000 or more. 

Based on our review, we determined that 34 claims were paid incorrectly, resulting in net 

overcharges of $424,788 to the FEHBP. Specifically, the Plan overpaid 31 claims by 

$433,370 and underpaid 3 claims by $8,582. 

5
 
The claim payment errors resulted from the following: 

•	 The Plan inadvertently did not price 27 claims under OBRA 90, resulting in net
 

overcharges of $382,264 to the FEHBP. Specifically, the Plan overpaid 26 claims by
 

$387,263 and underpaid I claim by $4,999.
 

•	 The Plan did not properly coordinate two claims with Medicate Part B, resulting in
 

overcharges of $22,481 to the FEHBP.
 

•	 The FEP Operations Center priced one claim using the incorrect billed charges,
 

resulting in an overcharge of$17,473 to the FEHBP.
 

•	 The FEP Operations Center priced one claim using an incorrect Medicare Diagnostic
 

Related Group (DRG) code, resulting in an overcharge of $5,239 to the FEHBP.
 

•	 In one instance, the Plan paid a split claim incorrectly, resulting in an overcharge of
 

$914 to the FEHBP.
 

•	 The Plan paid two claims using incorrect reimbursement rates, resulting in undercharges 

of$3,583 to the FEHBP. 

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

For the period 2005 through 2007, we identified 96 claims, totaling $508,682 in payments, 

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

under the Plan's standard pricing procedures. We selected all 96 claims and determined if 

the Plan paid these claims properly. 

.Based on our review, we determined that 13 claims were paid incorrectly, resulting in net 

undercharges of $1] ,380 to the FEHBP. Specifically, the Plan overpaid nine claims by 

$8,318 and underpaid four claims by $19,698. 

The claim payment errors resulted from the following: 

•	 The Plan incorrectly paid six split claims, resulting in overcharges of $4,823 to the
 

FEHBP.
 

•	 The Plan paid one claim using an incorrect local pricing amount, resulting in an
 

undercharge of $476 to the FEHBP.
 

•	 The Plan priced one claim using an incorrect reimbursement rate, resulting in an 

undercharge of$1,263 to the FEHBP. 

6
 
•	 The Plan inadvertently did not price five claims under OBRA 90, resulting in net 

wldercharges of$14,464 to the FEHBP. Specifically, the Plan overpaid three claims 

by $3,495 and underpaid two claims by $17,959. 

Association's Response: 

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

recoveries on the overpayments and has already returned $393,640 ($386,831 + $6,809) to 

the FEHBP. The Association also states that these payments were good faith erroneous 

benefit payments and fall within the context ofCS 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, "As a result of the audit, the Plan noted several discrepancies in 

the assigning ofMedicare provider numbers in the local Plan database. The Plan 

immediately reviewed aU local files containing Medicare provider numbers against a 

list retrieved from the local Medicare Part A contractor to ensure that the database used 

to accurately price OBRA 90 claims was correct. ... Efforts will be made to 

periodicaUy examine existing procedures and add additional controls where necessary." 

·OIG Comments: 

After reviewing the Association's response and documentation provided by the Plan, we 

revised the amount questioned from the draft report to net overcharges of $413,408. 

Using the FEP Direct System, we could only verify that the Plan has returned $347,127 of 

the questioned overcharges to the FEHBP. 

Recommendation 1 

We verified that the Plan has returned $347,127 of the questioned overcharges to the 

FEHBP. Therefore, no further action is required for these overpayments. 

Recommendation 2 

We recommend that the contracting officer disallow $94,561 ($441,688 overcharges­

$347,127 amount already returned) in claim overcharges, and verify that the Plan returns 

all amounts recovered to the FEHBP. 

Recommendation 3 

We recommend that the contracting officer allow the Plan to charge the FEHBP $28,280 

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

7
 
Recommendation 4 

Although the Association has developed a corrective action plan to reduce OBRA 90 

findings, we recommend that the contracting officer instruct the Association to ensure 

that the Plan is following the corrective action plan. 

2.	 Claim Payment Errors $26,919 

The Plan incorrectly paid 76 claims, resulting in overcharges of$26,919 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. 

The following summarizes the claim payment errors. 

Assistant Surgeon Review 

For the period of2005 through 2007, we identified 428 assistant surgeon claim groups, 

totaling $64,207 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 172 assistant surgeon claim groups, totaling $49,888 in 

potential overpayments, to detennine ifthe Plan paid these claims properly. Our sample 

included all assistant surgeon claim groups with potential overpayments of $100 or more. 

Based on our review, we detennined that 70 claims were paid incorrectly, resulting in 

overcharges of $23,827 to the FEHBP. 

The claim payment errors resulted from the following: 

•	 The Plan inadvertently priced 39 claims incorrectly, resulting in overcharges of 

$14,278 to the FEHBP. In each instance, the Plan paid the claim based on the assistant 

surgeon pricing even though the claim did not require assistant surgeon pricing. 

•	 The Plan incorrectly paid 18 assistant surgeon claims that were subject to Omnibus 

Budget Reconciliation Act of 1993 (OBRA 93) pricing guidelines, resulting in 

overcharges of $3,745 to the FEHBP. These errors were due to Palmetto (OBRA 93 

pricing vendor) not recognizing the assistant surgeon pricing modifier and 

erroneously calculating the assistant surgeon fee. 

•	 The Plan paid three claims using the incorrect assistant surgeon pricing percentage, 

resulting in overcharges of $2,657 to the FEHBP. 

•	 The Plan paid six claims at incorrect allowed amounts, resulting in overcharges of 

$2,569 to the FEHBP. 

8
 
•	 The Plan paid four claims without applying the multiple surgery reduction, resulting 

in overcharges of$578 to the FEHBP. 

Amounts Paid Greater than Covered Charges 

For the period 2005 through 2007, we identified 71 claims where the amounts paid were 

greater than the covered charges by a total of$115,573. We selected all 71 claims and 

determined if the Plan adjudicated these claims properly. Based on our review, we 

identified six claim payment errors, resulting in overcharges of $3,092 to the FEHBP. 

The claim payment errors resulted from the following: 

•	 The Plan paid two claims using incorrect local pricing methods, resulting in 

overcharges of $2,235 to the FEHBP. 

•	 The Plan paid four claims using incorrect aJIowances, resulting in overcharges of 

$857 to the FEHBP. 

System Review 

For health benefit claims reimbursed from January 1,2007 through December 31, 2007, 

we identified 782,310 claim lines, totaling $99,613,703 in payments, using a standard 

criteria based on our audit experience. From this universe, we selected and reviewed a 

judgmental sample of 100 claims (representing 874 claim lines), totaling $4,545,554 in 

payments, to determine ifthe Plan adjudicated these claims properly.3 We identified two 

immaterial claim payment errors, which are not being questioned in the report. 

Association's Response: 

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

initiated recoveries on the overpayments and has already returned $23,069 to the FEHBP. 

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

payments and fall within the context ofCS 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 has retrained several claims auditors regarding when 

and how to pay Assistant Surgeon claims. This training is ongoing and as a follow up, 

additional quality is performed to ensure the training was successful. 

3 We selected our sample from an DIG-generated "Place ofService Report" (SAS application) that stratified the claims 

by place of service (POS), such as provider's office, and payment category, such as $50 to $99.99. We judgmentaJly 

determined the number ofsample items to select from each POS stratum based on the stratum's total claim dollars paid. 

9
 
For the Assistant Surgeon claim errors noted during the audit, the FEPDO implemented 

the following: 

•	 The OBRA '93 vendor, Palmetto, corrected pricing of the Assistant Surgeon modifier 

during May 2008; this should result in more accurate pricing in the future. 

•	 A final comprehensive list that identifies all unadjusted Assistant Surgeon claims will 

soon be issued so that claims can be adjusted as necessary." 

In addition, the Association states, "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 ofAssistant Surgeon 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." 

OIG Comments: 

Using the FEP Direct System, we could only verify that the Plan has returned $16,046 of 

the questioned charges to the FEHBP. 

Recommendation 5 

We verified that the Plan has returned $16,046 of the questioned charges to the FEHBP. 

No further action is required for these overpayments. 

-~~c 'Recommendation 6 

We recommend that the contracting officer disallow $10,873 ($26,919 questioned­

$16,046 amount already returned) in claim overcharges, and veritY that the Plan returns all 

amounts recovered to the FEHBP. 

10
 
IV. MAJOR CONTRIBUTORS TO THIS REPORT 

EX..Qerienced-Rated Audits Group 

, Auditor-In-Charge 

Senior Team Leader 

11
 
, , ' 

" 

V. SCHEDULE A 

BLUECROSS BLUESHIELD OF NEBRASKA 

OMAHA, NEBRASKA 

HEALTH BENEFIT CHARGES AND AMOUNTS QUESTIONED 

HEALTH BENEFIT CHARGES	 2005 2006 

HEALTH BENEFIT CHARGES 

PLAN CODE 260 $61,672,846 $67,992,512 

MISCELLANEOUS PAYMENTS AND CREDITS (14,481) 871,083 

PLAN CODE 760 39,211,999 44,901,878 

MISCELLANEOUS PAYMENTS AND CREDITS 0 0 

TOTAL HEALTH BENEFIT CHARGES I $100,870,364 $113,765,473 1 ., ",,,,,,,,,mm''',,,,,,,,'''''''''''''' " 

AMOUNTS QUESTIONED 2005 2006 

I. OMNIBUS BUDGET RECONCILIATION ACT OF 1990 REVIEW $205,165 $99,760 

2.	 CLAIM PAYMENT ERRORS 9,568 8,008 

TOTAL QUESTIONED CHARGES I $214,733 $107,768 I '''"'''.'''''0,1,	 , 

2007 

$72,166,774 

807,315 

49,056,344 

0 

$122,030,433 ,'''''''''''''',,_,,,,,.''',,,,,.,,'''',, ., 

2007 

$108,483 

9,343 

$117,826 

TOTAL 

$201,832,132 

1,663,917 

133,170,221 

0 

$336,666,270 I 

TOTAL 

$413,408 

26,919 

$440,327 
APPENDIX
 

.v
 

BlueCross B]ueShicld 

Association 

(Revised 12/4/08)	 An Assoda 0011 of lndependent 

BIlle Cross and Blue Shield PI/lDS 

November 14, 2008 

Federal Employee .Prop·am Group Chief 1510 G Slreel, N.W. 

Experience-Rated Audits Group Washington, D.C. 20005 

Office of the Inspector General 202.942.1000 

U.S. Office of Personnel Management Fax 202.9·12.1125 

1900 E Street, Room 6400 

Washington. DC 20415-1100 

Reference:	 OPM DRAFT AUDIT REPORT 

BlueCross BlueShleld of Nebraska 

Audit Report Number 1A-10-53-08-045 

(Dated and received September 17, 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 alueCross BlueShield of Nebraska. 

Our comments concerning the findings in the report are as follows: 

B. HEALTH BENEFIT CHARGES 

1. Omnibus Budget Reconciliation Act of 1990 $435.720 

Specifically, the Plan overpaid 42 claims by $464,000 and underpaid seven
 

claims by $28,280 for a net of $435,720. The breakdown is as follows:
 

• OBRA '90 Claim Pricing Errors 

There were $436,618 in overpayments and $8,582 in underpayments for a
 

net total of $428,036. The Plan contests four claims totaling $3,248 but does
 

not contest that a net $424,788 in claim payments may have been paid in
 

error.
 

The Plan has returned $386,831 to the Program through
 

November 11, 2008 and has initiated refund recovery on all remaining
 

identified overpayments.
 

As a result of the audit, the Plan noted several discrepancies in the assigning
 

of Medicare provider numbers in the local Plan database. The Plan
 

immediately reviewed al110cal files containing Medicare provider numbers
 

against a list retrieved from the local Medicare Part A contractor to ensure
 

.. 
Group Chief 

OPM Draft Audit Response 

November 14,2008 

Page 2 

that the database used to accurately price OBRA 90 claims was correct. 

In addition, 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. 

• Claims Not Priced Under OBRA t90 (Possible OBRA t90) 

We do not contest an overpayment of $8,318 and an underpayment of 

$19,698 for a net underpayment of $11 ,380. We do contest one clatm 

(Claim Sample #26), for $10,274 because this refund was recovered and 

adjusted prior to the audit. Additionally there were three claims totaling 

$8,790 (Claim Sample #27,39 and 78) that when re-priced by the 

Operations Center OBRA '90 pricer software resulted in a different price 

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

OBRA '90 pricer software is the official O?M 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, FE? 

continues to believe that the pricing differences obtained by the Operations 

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

.since 2005, the Operations Center updates the OBRA '90 pricing software 

. - on a quarterly basis. This has minimized pricing differences. 

The Plan returned $6,809 to the Program through November 11,2008 and 

has init1ated refund recovery on the remaining identified overpayments. 

As stated above, 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. 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 payments, lost investment income does not 

apply to the payments identified in this finding. 
Group Chief 

OPM Draft Audit Response 

November 14, 2008 

Page 3 

2. Claim Payment Errors	 $26,919 

We do not contest this finding. The Plan reviewed the errors identified on the 

Assistant Surgeon claim list and realized that these errors could be identified 

as auditor errors. The Plan has retrained several claims auditors regarding 

when and how to pay Assistant Surgeon claims. This training is ongoing and 

as a follow up, additional quality is performed to ensure the training was 

successful. 

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

implemented the following: 

•	 The OBRA '93 vendor, Palmetto, corrected pricing" of the Assistant 

Surgeon modifier during May 2008. This should result in more accurate 

pricing in the future. 

•	 A final comprehensive list that identifies aU unadjusted Assistant Surgeon 

claims will soon be issued so that claims can be adjusted as necessary. 

As stated above, 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), 

COB claims reports and Duplicate claims reports provided by the FE? 

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 faU 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 

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

in this finding. 

The Plan returned $23,069 to the Program through November 11, 2008 and 

has initiated refund recovery on the remaining identified overpayments. 
_Group Chief 

~sponse

November 14.2008 

Page 4 

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

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

Audit Report.