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 and to determine if payments for certain special items, in relation to the hospitals' actual purchase and acquisition costs, were reasonable. The audit covered the period from July through December 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 (Department) 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 that are negotiated between Empire and its member providers.  However, hospitals may be entitled to additional payments for special items (such as implants, drugs, and blood) that are not covered by the standard fee schedules.  Agreements with many of Empire’s member hospitals often limit payments for special items.  However, agreements with other hospitals do not have similar limitations.  From July 1, 2012 to December 31, 2012 Empire paid over $63 million for 39,993 claims for special items.

Key Finding

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 $898,541 on 96 of the 100 claims we tested.

Key Recommendations

• Recover the net overpayment of $898,541 for the improperly paid claims.
• 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)
New York State Health Insurance Program: Empire BlueCross BlueShield – Selected Payments for Special Items for the Period January 1, 2012 Through June 30, 2012 (2012-S-132)