A Performance Audit
An Audit Report on Amerigroup Texas, Inc. and Amerigroup Insurance Company, a Managed Care Organization
November 2018
Summary Analysis
Amerigroup Texas, Inc. and Amerigroup Insurance Company (Amerigroup) accurately reported medical (fee-for-service) and prescription expenses totaling approximately $1.7 billion in its financial statistical reports for fiscal year 2016; however, it should improve its processes to ensure that it accurately reports other medical expenses and administrative expenses. Amerigroup complied with certain requirements in administering the Texas Medicaid program. In addition, it paid claims to enrolled providers, and it generally paid medical claims on time. However, it should ensure that its pharmacy benefits manager is paying pharmacy providers within the timeframe required by the contract. Amerigroup should also ensure that it maintains adequate documentation to support reported expenses and the allocation methodology it used to report corporate administrative expenses.
The $1.3 billion in paid medical expenses that Amerigroup reported in its financial statistical report for fiscal year 2016 matched the amounts in Amerigroup’s claims processing system within less than 1.0 percent. In addition, the $364.4 million in reported paid prescription expenses matched the amounts in Amerigroup’s claims data within less than 0.5 percent. Generally, Amerigroup paid medical providers for services according to its contract with each provider. For Amerigroup’s prescription expenses, Amerigroup’s pharmacy benefits manager ensured that it paid its providers according to contract requirements for all 30 claims tested.
Amerigroup reported $41.7 million in Other Medical Expenses in its STAR+PLUS financial statistical report for fiscal year 2016. However, it included expenses that did not occur in the fiscal year, and it misclassified certain expenses.
Amerigroup reported $397,054 in Personal Attendant Services expenses in the Other Medical Expenses line item. However, $395,825 of that reported amount was for allowable medical claims payments that occurred outside the reporting period resulting in unallowable costs in the financial statistical report for fiscal year 2016, according to the Uniform Managed Care Manual.
Amerigroup also misclassified $2.4 million in allowable costs related to service coordinator salaries in Administrative Expenses. As a result, Amerigroup understated its Other Medical Expense line item by $2.4 million and overstated the Administrative Expenses by the same amount.
Auditors performed data analysis and tested samples of the administrative expenses that Amerigroup reported in its fiscal year 2016 financial statistical report. That testing identified $8.7 million in unallowable administrative expenses and $78,930 in questioned costs.
In its fiscal year 2016 financial statistical report, Amerigroup reported administrative expenses that were allocated from 649 cost centers. Auditors reviewed the definitions (activity descriptions) for those cost centers and identified approximately $6.3 million in unallowable administrative expenses.
In addition, auditors performed data analysis on the entire population of administrative expenses that Amerigroup reported in its fiscal year 2016 financial statistical report. That analysis identified an additional $473,399 in expenses that were unallowable under the contract, such as lobbying costs, litigation expenses, charitable contributions, entertainment costs, and employee event expenses.
Auditors also tested a risk-based sample of 60 administrative expenses allocated from the cost centers to Amerigroup. That testing identified an additional $400,301 in unallowable expenses and $78,930 in questioned costs.
Amerigroup inappropriately included $1.5 million in unallowable executive compensation because the salaries for the top 5 executives at Anthem, Amerigroup’s parent company, that Amerigroup reported in the corporate allocation line item exceeded the limit on executive compensation that a MCO can report in its financial statistical report.
Amerigroup reported some allowable expenses in the wrong line item in its financial statistical report.
Anthem’s allocation methodology did not always ensure that allocated administrative expenses were calculated accurately, were sufficiently supported, or included only reasonable costs. Auditors identified $119,425 in unallowable allocated corporate costs and $6.9 million in questioned allocated corporate costs that Amerigroup reported in its 2016 financial statistical report.
Auditors determined that Amerigroup paid STAR+PLUS medical and prescription claims for eligible members by comparing medical and prescription claims that it paid in fiscal year 2016 to the Commission’s eligibility data.
Also, Amerigroup paid STAR+PLUS medical and prescription claims to enrolled providers. Amerigroup made payments to approximately 10,000 medical providers and approximately 4,000 pharmacy providers in fiscal year 2016.
Amerigroup generally paid its medical providers within the required timeframes in fiscal year 2016. However, it should work with its pharmacy benefits manager to ensure that it consistently pays prescription claims within the required timeframes.
Amerigroup paid 99.9 percent of the approximately 3.8 million medical claims within the required timeframe in fiscal year 2016.
Amerigroup paid more than 98.4 percent of 72,632 nursing facility claims within the required timeframe in fiscal year 2016.
Amerigroup’s pharmacy benefits manager paid about 3.5 million prescription claims totaling approximately $406.2 million in fiscal year 2016. It paid 90.6 percent of those claims within the required timeframe. The pharmacy benefits manager paid 327,311 prescription claims totaling approximately $54.9 million after the 18-day payment requirement.
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