Purpose

To determine the extent of implementation of the three recommendations made in our audit report, Empire BlueCross BlueShield: Selected Payments for Special Items for the Period April 1, 2011 Through June 30, 2011 (2011-S-42).

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 contracts with Empire BlueCross BlueShield (Empire) to administer the hospitalization benefit portion of the Plan.

Empire processes and pays claims for hospital services in accordance with agreements Empire negotiates 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 (such as implants and drugs) that are not covered by the standard fee schedules. Many of Empire’s agreements with member hospitals limit payments for special items, while agreements with other hospitals do not have such limitations. From April 1, 2011 to June 30, 2011, Empire paid over $31 million for 19,032 claims for special items.

We determined Empire did not have adequate controls to ensure special items were paid according to contract limitations. As a result, Empire made a net overpayment of $119,141 on 33 claims.

Key Finding

• Empire officials made considerable progress in implementing the recommendations we made in our initial audit report. Of the three prior recommendations, two were implemented and one was partially implemented. Empire recovered the overpayments from hospitals for the improperly paid claims, implemented controls to ensure payments for special items are made in accordance with hospital agreements, and made significant progress to ensure that future agreements with hospitals contain language limiting the reimbursement of special items.

Key Recommendation

• Officials are given 30 days after the issuance of the follow-up report to provide information on any actions that are planned to address the unresolved issues discussed in this report.

Other Related Audit/Report 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)