Purpose

To determine the extent of implementation of the three recommendations made in our audit report, New York State Health Insurance Program: Empire BlueCross BlueShield Selected Payments for Special Items for the Period July 1, 2012 Through December 31, 2012 (Report 2013-S-28).

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 New York State Department of Civil Service contracts with Empire BlueCross BlueShield (Empire) to administer the hospitalization portion of the Plan.

Empire processes and pays Plan claims for hospital services in accordance with agreements Empire negotiates with member hospitals. Payments for hospital services are generally based on standard fee schedules that are negotiated between Empire and its member providers. Hospitals may be entitled to additional payments for special items (implants, drugs and blood) that are not covered by the standard fee schedules. Agreements with many of Empire’s member hospitals limit the payments for special items. For the period July 1, 2012 through December 31, 2012, Empire paid over $63 million for 39,993 claims for special items.

Our initial audit report, which was issued on January 16, 2014, found that Empire did not have adequate controls to ensure special items were paid according to contract provisions. As a result, during the six-month period July 1, 2012 through December 31, 2012, Empire made a net overpayment of $898,541 on 96 claims from hospitals that had contracts with Empire that limited the amounts that should have been charged for special items. We made three recommendations to Empire to recover the overpayments we identified and implement certain controls to ensure that payments for special items are accurate and properly supported by appropriate documentation.

Key Finding

• Empire officials made considerable progress in implementing the recommendations we made in our initial audit report, which included recovering $639,896 in overpayments. Of the initial report’s three audit recommendations, one was implemented and two were partially implemented.

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 July 1, 2012 Through December 31, 2012 (2013-S-28)