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. The audit covered the period from January 1, 2012 through June 30, 2012.

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 fee 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 January 1, 2012 to June 30, 2012, Empire paid over $71 million for 38,381 claims for special items.

Key Findings

• Empire did not have adequate controls to ensure special items were paid according to contract provisions. As a result, Empire made a net overpayment of $391,894 on 81 of the 100 claims we tested. The overpayment of $391,894 was 22 percent above the amount Empire should have paid for the items in question. For one hospital, Empire paid $68,382 for three claims for special items. However, documents provided by the hospital supported payments of only $31,189. Thus, Empire overpaid the hospital $37,193 ($68,382 - $31,189) for the claims.
• Using statistically valid methods and a 90 percent confidence level, the projected overpayments for the population of special items totaled at least $2.1 million.
• Empire officials advised us they have engaged a consultant to review claims with charges for special items. The consultant will subject special item claims to a computer algorithm, and those that exceed the algorithm’s cost parameters will be flagged for review, adjustment, and recovery.

Key Recommendations

• Recover the net overpayment of $391,894 for the improperly paid claims.
• Ensure that the future agreements with hospitals contain language that: specifies the basis of reimbursement for the purchase and acquisition of special items; and requires hospitals to provide appropriate support documentation upon request.
• Complete the development and implementation of internal controls to ensure that payments for special items are made according to hospital agreements and are supported by appropriate documentation.

Other Related Audits/Reports of Interest

New York State Health Insurance Program: Empire BlueCross BlueShield – Selected Payments for Special Items for the Period April 1, 2011 Through June 30, 2011 (2011-S-42)
New York State Health Insurance Program: Empire BlueCross BlueShield – Selected Payments for Special Items for the Period July 1, 2011 Through December 31, 2011 (2012-S-3)