Objective

To assess the extent of implementation of the two recommendations included in our initial audit report, Controls Over Payments for Special Items (Report 2016-S-57).

About the Program

The New York State Health Insurance Program (NYSHIP) covers active and retired State, participating local government and school district employees, and their dependents. The Empire Plan is the primary health benefits plan for NYSHIP. Empire BlueCross (Empire) administers the hospital portion of the Empire Plan. Empire processes claims for hospital services according to contracts it negotiates with member hospitals. Empire’s contracts with member hospitals include rate schedules for the payment of inpatient and outpatient hospital services. Hospitals may be entitled to additional payments for special medical items (implants, drugs, and blood) that are not covered by fee schedules. Contracts with many of Empire’s member hospitals limit payment amounts for special items; however, some contracts do not have such limitations.

Our initial audit report, issued on June 22, 2017, examined whether Empire implemented sufficient controls over the identification and recovery of overpayments made to hospitals for special items, and took sufficient steps to minimize the State’s risk of excessive payments resulting from contracts with hospitals that did not include language that limits the reimbursement of special items. The audit covered the period January 1, 2013 through December 31, 2016. We concluded Empire needed to strengthen certain internal controls and hospital contract language to help ensure payments for special items are accurate.

Key Findings

Empire officials made significant progress in addressing the problems we identified in the initial audit. In particular, Empire recovered $11.5 million on behalf of the Empire Plan and implemented both of the report’s audit recommendations.