Purpose

To determine if the recommendations made in our initial audit report, Empire BlueCross BlueShield: Payments to John T. Mather Memorial Hospital (Report 2010-S-51), issued on April 23, 2012, were implemented.

Background

The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to active and retired State, participating local government and school district employees and their dependents.  The Empire Plan (Plan) is the primary health benefits plan for NYSHIP. The Department of Civil Service (Department) contracts with Empire BlueCross BlueShield (Empire) to administer the hospitalization benefit portion of the Plan. The Long Island Health Network (Health Network) is comprised of ten hospitals, including John T. Mather Memorial Hospital (Mather).  Empire’s agreement with the Health Network allows the hospitals to be reimbursed for special items (e.g., implants, drugs, and blood) that are not included on Empire’s standard rate schedules.

We determined that Empire lacked adequate policies and procedures to ensure that payments for certain special items claimed by Mather were appropriate.  Empire’s agreement with the Health Network did not define the amount hospitals could bill for special items. As a result, Mather substantially marked-up the amounts claimed for certain items, and Empire paid these excessive amounts. The agreement between Empire and the Health Network also contained a provision limiting the audit look-back period, and therefore, the Mather did not have to provide Empire with supporting documentation for payments which predate a certain point in time.  However, we obtained cost data for 11 of the special items that Mather billed to Empire.  Although the 11 items cost $10,517, Mather billed Empire $64,550.  Based on Mather’s charges, Empire paid Mather $29,047. Thus, Mather made a profit of $18,530 ($29,047 - $10,517) on the 11 items.  We recommended Empire amend their agreement with Mather and develop controls to ensure payments for special items were consistent with the provisions.

Key Findings

• Empire and the Health Network have amended their agreement to include language that prescribes the basis of payment for special items, limiting the amount the hospitals can bill and requiring hospitals to provide supporting documentation upon request.
• Empire has expanded the look back period to six years for New York State claims.
• Although Empire performed audits of claim payments to the Health Network, these audits did not focus on payments to Mather for special items.

Key Recommendation

Develop and implement internal controls to ensure that payments for special items are consistent with contract provisions and are supported by appropriate documentation.

Other Related Audits/Reports of Interest

New York State Health Insurance Program: Empire BlueCross Blue Shield - Payments to John T. Mather Memorial Hospital (2010-S-51)
New York State Health Insurance Program: Empire BlueCross Blue Shield - Payments Made to Hudson Valley Hospital Center (2009-S-99)
New York State Health Insurance Program: Empire BlueCross Blue Shield - Payments Made for Special Items to Selected Hospital (2010-S-74)