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April 11, 2012

 

NYSHIP Contractors Wasting Millions in Taxpayer Money

Audits Fault Empire Blue Cross and Blue Shield and United HealthCare


The New York State Health Insurance Program (NYSHIP) erroneously paid as much as $11 million for special items such as implants, drugs and blood and evaluation procedures that were not performed according to two audits released today by State Comptroller Thomas P. DiNapoli.

Payments to hospitals accounted for an estimated $3.2 million of this amount, with medical providers paid as much as $7.8 million for phony evaluations.  In one of the audits, DiNapoli’s auditors found errors resulting in overpayments in 57 percent of the claims reviewed.

“While most New Yorkers are watching their spending, Blue Cross and Blue Shield and United HealthCare are not monitoring bills and are letting the state overpay health providers,” DiNapoli said. “An error rate showing that nearly 6 of every 10 claims are billed incorrectly is simply unacceptable and cannot continue. These companies have to do a better job watching taxpayer dollars.”

NYSHIP provides health insurance coverage to active and retired state, participating local government and school district employees and their dependents. The Department of Civil Service contracts with Empire Blue Cross and Blue Shield (Empire) to provide hospitalization coverage under the Empire Plan, the largest insurance option provided by NYSHIP. Separately, Civil Service contracts with United HealthCare (United) to process and pay medical and surgical claims for services provided to Empire Plan members. Annually, United processes over 21 million claims (totaling about $1.9 billion) for the Empire Plan.

Empire’s hospital agreements provide for additional payments, above standard rate schedule amounts, for certain special items such as implants, drugs, and blood. Looking at the time period Jan. 1, 2006 to June 30, 2010, auditors found Empire paid 179 hospitals $357 million for special items. Agreements with many of Empire’s member hospitals often limit charges for special items.

DiNapoli’s auditors found errors in 111 (57 percent) of the 194 claims reviewed. A chart of those claims can be seen at http://www.osc.state.ny.us/audits/allaudits/093012/10s74table.pdf.  The errors resulted in an overpayment of $387,772 for the sample. For example, Empire paid one hospital $34,542 for one special item that should have been reimbursed at $7,979. Using statistical sampling methods, auditors estimate Empire made total overpayments of $3.2 million during the audit period, mostly because Empire did not apply prescribed reimbursement limits to the special item claims.  

United’s payments for medical procedures include increments for certain evaluation and management (E/M) services that are necessary prior to the performance of a procedure. United only allows additional payments for E/M services when the services are significant beyond the usual care associated with the procedure.  To obtain reimbursement for E/M services in these instances, providers prepare a claim that includes a “modifier 25 code.” In 2009, United paid over $59 million for about 1.1 million E/M claims submitted with this modifier.

In the second audit released today, DiNapoli’s auditors selected a random sample of 214 E/M claims with modifier 25 coding and found that for 27 (12.6 percent) of the claims, a significant, separately identifiable E/M service was not provided. For example, one provider billed United for a lesion removal and an E/M service during a single appointment. United paid the provider $561 for the lesion removal and another $204 for the E/M service. However, reimbursement for the provider’s normal evaluation and treatment of the patient was included in the standard payment ($561) for the procedure, resulting in a $204 overpayment. Using statistical sampling techniques, auditors estimated that United overpaid providers $3.2 million to $7.8 million for claims in 2009.

Auditors recommended Empire:

  • Pay back the projected overpayment of $3,210,478, or remit the $387,772 of overpayments identified by the audit plus amounts determined from reassessing the other claims from the audit period.
  • Develop a system of internal controls to ensure that payments for special items are made in accordance with the agreements and are supported by appropriate documentation.

Empire generally agreed with the audit’s recommendations, but disputed the statistical projection of the total overpayments. A copy of the audit of Empire can be found at: http://www.osc.state.ny.us/audits/allaudits/093012/10s74.pdf

Auditors recommended United:

  • Develop and distribute formal guidance to clarify the proper use of the modifier 25 coding.
  • Perform a formal risk assessment of providers’ use of modifier 25 and follow-up with providers exhibiting unusual modifier 25 billing patterns.
  • Review the claims of higher risk providers and recover any overpayments identified.

United officials generally agreed with the audit’s findings and have initiated outreach and education on the proper use of modifier 25.

A copy of the complete audit of United can be found at: http://www.osc.state.ny.us/audits/allaudits/093012/10s67.pdf


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