REPORT OF INTERNAL AUDIT

Transcription

1 REPORT OF INTERNAL AUDIT PRESENTED TO AUDIT/TASK: #07-04a, Health Care Trust Audit-External Component AUDIT CLIENT: Health Care Trust/Blue Cross of Idaho INTRODUCTION AUDIT DATE: September 8, 2007 May 16, 2008 REPORT DATE: July 15, 2008 AUDITOR: Jim McMahon CPA, CIA APPROVAL: Steven Rehn CIA, CFSA In accordance with Boise Municipal Code Title 1, Chapter 9; and at the general direction of the City Council, the Office of Internal Audit undertook a review of medical, dental, and pharmacy claims processed and paid by Blue Cross of Idaho (BCI) and their pharmacy benefits manager WellPoint during calendar years 2005 and The City of Boise utilizes a Trust registered with the Idaho State Department of Insurance to administer its health care program. The City contracts with a third-party administrator, Blue Cross of Idaho ( BCI ), to provide for the payment of claims and general administrative services. Blue Cross of Idaho processes medical and dental claims for the City. BCI contracts with external service provider WellPoint to process and pay the pharmacy claims. This audit was the second of a two-part comprehensive review. Overall, the review was divided into internal and external components. The internal component was reported within Audit Report #07-04 Health Care Trust Audit-Internal Component. That report was issued September 7, 2007 and contained a satisfactory opinion as to the administration of the City s over the health care program by the Health Care Trust. The objective of the external component of the audit was to determine whether: 1) BCI had established an adequate internal control environment and associated procedures to support the successful processing and payment of the City s medical, dental, and pharmacy claims; and, 2) Provide a determination, based on sample results, of whether the recently experienced medical, dental, and pharmacy claims were processed and paid correctly.

2 Consequently, this review was limited to: 1) A brief review of BCI s internal control environment as it related to claims processing; and, 2) An examination of selected medical, dental, and pharmacy claims. Vision claims were not audited, as these claims were significantly lower in total dollar magnitude than the other three claim groups. SCOPE AND METHODOLOGIES The overall objective of the audit was to test the accuracy of the Blue Cross of Idaho systems, as they related to processing and paying of medical, dental, and pharmacy claims. Based on discussions with Plan Trustees and ex-officio members of the Trust, Internal Audit established the following work plan to accomplish the aforementioned audit objectives: Perform a high-level review of BCI s internal control documentation as it relates to the payment of medical, dental, and pharmacy claims. Select a sample of medical, dental, and pharmacy claims for calendar years 2005 and Test those claims to determine whether they were processed and paid correctly. Scope Limitation Internal Audit encountered a condition during testing of pharmacy claims that imposed a limitation of scope relative to the original audit objectives, scope, and methodology that were established for the review. For the forty-nine (49) pharmacy claims selected for testing, BCI could not produce the historical information related to the pricing for each of the first fourteen (14) 2005 claims within the sample. The pricing of each drug is instrumental in determining whether a pharmacy claim in question was processed and paid correctly. Unavailability of data was due to problems that occurred in BCI s transitioning from a legacy pharmacy benefits manager (Caremark) to its current service provider, WellPoint (as represented by BCI s Internal Audit management team). This transition resulted in certain data elements, one of which was pricing data, reflecting either incorrect or unavailable information in the older 2005 pharmacy data. This situation was corrected (as of October 2005) going forward. Consequently, Internal Audit could not complete all aspects of its designed tests for this small subgroup of claims. (Refer to the sections that follow for a more detailed presentation of Audit s findings in this area.) 2

3 EVALUATION AND COMMENTS Blue Cross of Idaho Overall Claims Processing and Payment Evaluation Internal Audit noted that Blue Cross of Idaho has a fairly robust system of internal controls surrounding the processing and payment of medical, dental, and pharmacy claims. Generally, Internal Audit found Blue Cross of Idaho to be discharging their contractual responsibilities under the Administrative Service Agreement between BCI and the City in a satisfactory manner. Claims processing and the associated payments appeared to be occurring accurately and timely based on the samples of claims that were tested. A detailed presentation of sample results follows. Medical, Dental, and Pharmacy Claims Sample Results Medical Claims Testing Background: Internal Audit selected a sample of 2005 and 2006 medical claims containing a broad cross-section of co-payments, coinsurance, and deductible amounts incorporated into the various claims that comprised the sample. A total number of eighty-three (83) medical claims comprised the sample. The total dollar amount of the sample was $1,066, Results of Testing: Six (6) claims were found to contain errors within the sample of claims tested. The sample deviation rate was 7.23% (6/83). Three (3) claims processing errors resulted in an over-payment of $1, Three (3) claims processing errors resulted in an underpayment of $1, The six errors, when taken as a whole, resulted in a net underpayment of $ This amount was considered to be immaterial. Conclusion: Based on sample results, BCI has correctly adjudicated and paid the City s medical claims for calendar years 2005 and A higher than expected sample deviation rate (7.23%) was evident from the testing. However, the dollar impact related to these errors was immaterial. The findings in this area, while not material, are suggestive of potential benefits that could be realized through the ongoing education of Plan participants in the review of claims-related information. An informed review of Explanation of Benefits information that is received from providers could assist Plan participants in validating provider charges for services rendered, and help ensure that only valid claim amounts are paid. 3

4 Dental Claims Testing Background: Internal Audit selected a sample of 2005 and 2006 dental claims. These claims contained a broad cross-section of copayments, coinsurance, and deductible amounts. A total number of forty-three (43) dental claims comprised the sample. The total dollar amount of the sample was $21, Results of Testing: One (1) claim was found to be processed incorrectly. This claim was subsequently corrected by BCI. The sample deviation rate was 2.23% (1/43). Conclusion: Based on sample results, BCI has correctly adjudicated and paid the City s dental claims for calendar years 2005 and Pharmacy Claims Testing Background: Blue Cross of Idaho maintains a contractual relationship with WellPoint to facilitate the processing and payment of pharmacy claims. WellPoint is the pharmacy benefits manager for BCI. BCI maintains the City membership information and transmits that information to WellPoint. WellPoint, in turn, pays the pharmacy claims based on that membership eligibility information. WellPoint sends BCI a weekly file of paid claims that are identified by group. The City is subsequently billed for its pharmacy claims on a weekly basis. Internal Audit selected a sample of 2005 and 2006 pharmacy claims containing a broad cross-section of drugs. A total number of forty-nine (49) pharmacy claims comprised the sample. The total dollar amount of the sample was $41, Scope Limitation As indicated earlier, for the forty-nine pharmacy claims submitted for testing, BCI could not produce the historical information related to pricing specifically the Average Wholesale Unit Price (AWP) for each of the first fourteen (14) processed during the early months of The Average Wholesale Unit Price of each drug is instrumental in determining if a pharmacy claim has been processed and paid correctly. AWP information was not available to BCI for claims processed during the first eight months of The data was rendered unavailable due to problems that occurred when BCI transitioned from their legacy pharmacy benefits manager (Caremark) to WellPoint. This 4

5 transition resulted in incorrect or unavailable information in this, and other data elements in the older 2005 pharmacy data. This situation was corrected as of October 2005 and going forward. BCI was able to provide Internal Audit with comparable pricing for seven (7) of the fourteen (14) claims for which the AWP was not available. These claims were taken from the same time period for the plan member that was included in the original sample. The prices of these substitute claims appeared reasonable in comparison to the original sampled claim. Pricing comparisons could not be conducted for the remaining seven (7) claims. Consequently, Internal Audit cannot express an opinion as to the correctness of the pricing component of the claims for this remaining portion of the sample. Results of Testing: Internal Audit tested the early 2005 claims to the extent practicable (as indicated immediately above). For those first (without AWP information) fourteen claims; one (1) claim was found to have been processed incorrectly, with the member not being assessed a co-payment; one claim was priced incorrectly but subsequently reversed and corrected prior to the audit; and seven could not be tested for pricing. For the remaining thirty-five (35) claims that could be tested in full, no exceptions were noted. The overall sample deviation rate for those claims that could be fully tested was 2.38% (1/42). Conclusion: Exclusive of the scope limitation and based on the sample results, BCI / WellPoint has correctly adjudicated and paid the City s pharmacy claims for calendar years 2005 and

6 Concluding Audit Comments The Administrative Services Agreement between the City of Boise and Blue Cross of Idaho mandates that audits of claims and benefit payments be coordinated with Blue Cross internal audit department. Due to the highly specialized nature of healthcare claims audits, pre-auditing by BCI is likely a necessary component of the process. Accordingly, BCI audit staff reviewed or pre-audited each of the items chosen for testing by the City s internal auditors. The City s auditors then re-performed the tests and confirmed the results. The process experienced delays in the pharmacy claims phase of the audit (approximately 90 days) as BCI worked with its external service provider in an effort to retrieve the early 2005 claims information that ultimately proved to be unobtainable. Going forward, these types of delays likely will not be experienced as the causal factors appear to have been identified and corrected. Internal Audit would like to take this opportunity to express its gratitude to members of the Health Care Trust, and to the staff and management at Blue Cross of Idaho for their assistance in the completion of this project. Management, Trustee, and Blue Cross Participants Shawn Miller, Human Resources Director / City of Boise Kent Rock, City of Boise Treasurer and Risk Manager, Health Care Trust Chairman Carla Miller-Lowe, Benefits and Compensation Manager and Trust Ex-officio / City of Boise Ann-Darneille Lail, Blue Cross of Idaho 6