A Performance Audit
An Audit Report on Blue Cross Blue Shield of Texas, a Managed Care Organization
Blue Cross Blue Shield of Texas (Health Plan) accurately reported medical, administrative, and quality improvement expenses in its fiscal year 2018 financial statistical reports (FSRs). However, the Health Plan’s processes and controls were not sufficient to ensure that reported pharmacy expenses reflected the final amount retained by pharmacy providers.
The Health Plan reported $26.4 million paid to pharmacy providers in its fiscal year 2018 STAR Kids FSRs. However, that amount did not reflect the final cost of pharmacy services because it did not include funds that the Pharmacy Benefit Manager calculated the pharmacy must return post payment. Any inaccuracies may impact the State’s long-term Medicaid costs because the Health and Human Services Commission (Commission) uses that reported information to set the monthly amount that Managed Care Organizations (MCOs) are paid per member (known as the premium or capitation rate).
The Health Plan’s $26.4 Million in Reported Pharmacy Expenses Did Not Reflect the Final Amount Paid to Pharmacies
The $26.4 million in pharmacy expenses that the Health Plan reported in its fiscal year 2018 FSR did not reflect the final amount paid to the pharmacy providers. While the $26.4 million represents what was initially paid to pharmacy providers, it did not reflect the final amount retained by pharmacies because it did not include the impact of funds a pharmacy was required to return to the Pharmacy Benefit Manager. That return effectively reduced what the Pharmacy Benefit Manager paid for ingredient and dispensing costs. In addition, the encounter data reported by the Health Plan did not include any returned funds.
According to the Commission, the Pharmacy Benefit Manager’s process to require a pharmacy to return funds is an unallowable practice. For one contract tested, the Pharmacy Benefit Manager calculated the amount of funds to return using an analysis that aggregated Medicaid claims with claims from non-Medicaid programs. In addition, it is the Pharmacy Benefit Manager’s practice to require a pharmacy provider to return funds post payment. Both of those practices are unallowable, according to the Commission.
The return of funds resulted from an “effective rate” contract. The payment methodology established in that contract between the Pharmacy Benefit Manager and the pharmacy provider does not comply with the requirements in the Commission’s contract with the Health Plan.
The Health Plan Paid Pharmacy Claims for Eligible Members Only; However, It Should Strengthen Its Reporting of Claims for Certain Drug Types
The Health Plan complied with eligibility requirements for pharmacy claims; however, it should strengthen its processes for reporting claims for certain drug types. Specifically, the Health Plan did not report 1,297 pharmacy encounters for drugs that included more than one ingredient (known as compound drugs).
The Health Plan accurately reported its STAR Kids medical (fee-for-service) expenses, totaling $109.1 million, on its fiscal year 2018 FSRs and in its encounter data submitted to the Commission.
The Health Plan also paid medical claims for eligible members and to providers who had not been excluded by either the U.S. Department of Health and Human Services’ Office of Inspector General or the Commission’s Office of Inspector General as required.
The Health Plan accurately reported administrative expenses. The Health Plan accurately reported administrative and quality improvement expenses totaling $49.1 million in its fiscal year 2018 FSRs. Information in the Health Plan’s accounting system supported the reported expenses, and that system allocated indirect costs as intended.
Graphics, Media, Supporting documents