An Audit Report on Blue Cross Blue Shield of Texas, a Managed Care Organization
Learn how the AI-generated research projects were createdOverall Conclusion
The audit found that while the Health Plan accurately reported medical, administrative, and quality improvement expenses, its pharmacy expense reporting was flawed due to unallowable practices by the Pharmacy Benefit Manager, which could impact Medicaid costs and program integrity.
Source Document
Audit Scope
fiscal year 2018
Key Findings Summary
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 pharmacies, as it did not include funds a pharmacy was required to return to the Pharmacy Benefit Manager due to a year-end aggregation process. This process, based on an 'effective rate' contract, is considered unallo…
The Health Plan paid medical and pharmacy claims for eligible members and accurately reported its STAR Kids medical expenses of $109.1 million and administrative expenses of $49.1 million in its fiscal year 2018 FSRs. The expenses were supported by the accounting system and allocated correctly.
The Health Plan paid claims for members eligible for the STAR Kids program and did not pay providers who were excluded by the Office of Inspector General. However, it failed to report 1,297 encounters for compound drugs due to coding errors, which totaled $132,511, and did not work with the Commission to correct and resubmit these claims.
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AI-Assisted
AI Scope Summary
The audit aimed to assess the accuracy and completeness of financial data reported by Blue Cross Blue Shield of Texas for fiscal year 2018, focusing on pharmacy expenses, medical claims, and administrative costs, and to evaluate compliance with Medicaid program requirements and contractual obligations.
AI-Generated Insight
This report highlights significant issues in pharmacy expense reporting within Medicaid managed care, emphasizing the need for stricter oversight of pharmacy benefit management practices to ensure transparency, accuracy, and compliance with contractual and regulatory standards. The findings suggest potential long-term cost implications and the importance of robust internal controls and monitoring mechanisms.
Audit Objectives
to determine whether selected financial processes and related controls at selected Medicaid managed care organizations are designed and operating to help ensure the accuracy and completeness of data that MCOs report to the Commission and compliance with applicable requirements.
Audit Findings (5)
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 pharmacies, as it did not include funds a pharmacy was required to return to the Pharmacy Benefit Manager due to a year-end aggregation process. This process, based on an 'effective rate' contract, is considered unallowable by the Commission because it aggregates Medicaid claims with non-Medicaid claims, reducing price transparency and complicating validation of pharmacy payments.
The Health Plan paid medical and pharmacy claims for eligible members and accurately reported its STAR Kids medical expenses of $109.1 million and administrative expenses of $49.1 million in its fiscal year 2018 FSRs. The expenses were supported by the accounting system and allocated correctly.
The Health Plan paid claims for members eligible for the STAR Kids program and did not pay providers who were excluded by the Office of Inspector General. However, it failed to report 1,297 encounters for compound drugs due to coding errors, which totaled $132,511, and did not work with the Commission to correct and resubmit these claims.
The encounter data reported by the Health Plan did not include any returned funds, and the methodology used by the Pharmacy Benefit Manager to calculate the return of funds was unallowable, as it combined multiple lines of business and did not specify the portion related to STAR Kids or other Medicaid programs.
The contract between the Pharmacy Benefit Manager and pharmacy providers established an 'effective rate' pricing methodology, which is different from spread pricing and is not prohibited by the Uniform Managed Care Contract. However, this methodology reduces price transparency and may impact the accuracy of reported pharmacy expenses, which are used to set capitation rates and determine experience rebates.
Recommendations (3)
The Health Plan should work with the Commission to ensure its Pharmacy Benefit Manager’s practices comply with the STAR Kids contract and report pharmacy expenses based on the final amount paid to pharmacy providers.
The Commission should monitor MCOs to verify compliance with the prohibition of spread pricing and ensure reported pharmacy expenses reflect the final amount retained by pharmacies.
The Health Plan should develop, document, and implement a process to review rejected encounters, correct coding errors, and resubmit rejected claims.