Purpose

To determine whether Empire BlueCross BlueShield (Empire) paid claims for special items according to the provisions of the agreements between Empire and its member hospitals. We also sought to determine if charges for certain cardiac devices from hospitals with contractually defined reimbursement limits differed significantly from hospitals with no such limits. The audit covered the period from July through December 2011.

Background

The New York State Health Insurance Program (NYSHIP) provides health coverage to active and retired State, participating local government and school district employees and their dependents. The Department of Civil Service contracts with Empire to administer the hospitalization portion of the Empire Plan (Plan), which includes coverage for inpatient and outpatient hospital services.

Empire processes Plan claims for hospital services in accordance with agreements they negotiate with member hospitals. Payments for hospital services are generally based on standard fee schedules. However, hospitals may be entitled to additional payments for special items that are not covered by the standard schedules. Many of Empire's agreements with member hospitals limit charges for special items, while agreements with other hospitals do not have such limitations. From July 1, 2011 to December 31, 2011, Empire paid over $63 million for 37,508 claims for special items.

Key Findings

• Empire did not have adequate controls to ensure special items were paid according to contract limitations. As a result, Empire made net overpayments of $486,212 on 52 claims. From one hospital, Empire overpaid four claims by $77,342.
• Hospitals without contractual reimbursement limits for special items marked up charges for certain cardiac devices significantly more than hospitals with such limits. On average, the hospitals without reimbursement limits marked up their charges (over cost) by about 74 percent (or $13,140); whereas hospitals with limits marked up charges by only 17 percent. On one particular claim, we estimate that a hospital made a profit of about $59,000.

Key Recommendations

• Recover the net overpayment of $486,212 for the improper claims we identified.
• Ensure that all agreements with hospitals contain language which limits the basis of reimbursement for special items.
• Develop and implement a system of internal controls to ensure that payments for special items are made according to agreements and are supported by appropriate documentation.

Other Related Audits/Reports of Interest

New York State Health Insurance Program: Empire BlueCross BlueShield Payments Made to Hudson Valley Hospital Center (2009-S-99)
New York State Health Insurance Program: Empire BlueCross BlueShield Selected Payments for Special Items for the Period January 1, 2011 Through March 31, 2011 (2011-S-17)