FOR IMMEDIATE RELEASE September 25, 1997

CONTACT: Mary Ann Maloney (202) 606-1800 mamalone@opm.gov

Washington, D.C. -- A small federal office located at the U.S. Office of Personnel Management (OPM) plays an important role in combating waste, fraud, and abuse in the American health care system, resulting in approximately $300 million in recoveries and disallowed costs for the taxpayers since 1994, and ensuring the integrity of that health care system for federal employees, retirees and their survivors.

OPMs Office of the Inspector General is charged with auditing and investigating over 450 Health Maintenance Organization rating areas and 90 fee-for-service audit sites that compose the governments own health insurance plan, known as the Federal Employees Health Benefits (FEHB) Program.

The FEHB program operates as a trust fund that the enrollees and the government support. The money in the trust fund is earmarked for each of the health plans in the FEHBP and for administration of the program. In fee-for-service plans, when enrollees or their dependents visit a doctor, a hospital, or have a prescription filled, the health plan pays the claim and the trust fund reimburses the plan. For Health Maintenance Organizations (HMOs), the plan provides the health care service in exchange for the agreed upon premiums from the trust fund. Last year the trust fund paid out approximately $15 billion for health care.

It is up to OPMs Inspector Generals staff of auditors and investigators to ensure that plans are billing the trust fund correctly. The group works cooperatively with OPMs Office of Insurance Programs to root out cases of improper overpayment.

OPMs Acting Director Janice Lachance said, OPM plays an essential role in protecting the more than 9 million individuals covered in the federal health program, while maintaining its soundness and stability. The recommendations provided by the Inspector Generals audits and investigative unit have resulted in substantial savings for federal employees and taxpayers.

Usually, the first line of defense in uncovering billing mistakes or fraudulent activity is the IG auditor who typically begins preparing for audits four to six weeks before arriving on-site to conduct the actual audit.

Our responsibility is to go in and look at the administrative expenses and health benefit claims and to make sure they are paid properly, said IG auditor Lewis Parker who, along with 25 other auditors, is responsible for reviewing the experience rated plans, known as fee-for-service plans. If the claims are inflated for any reason, this will ultimately inflate the premiums for future years.

By painstakingly employing auditing principles, Parker and his colleagues find the mistakes and uncover billing patterns that may signal fraud.

For fee-for-service plans this requires: verifying that allocation methods are accurate; looking for duplicate claim payments; ensuring that the claims are properly coordinated with Medicare; making sure claims are timely; and doing a general review of the claim process system to see that the internal controls are adequate and that there are no major problems with the system itself.

Similarly, the 11 IG auditors who monitor Health Maintenance Organizations (HMOs) in the FEHB program are vigilant in checking the accuracy of HMO premiums. The premiums for HMOs are set on the basis of the expected cost of the HMOs entire population adjusted for the demographics of the FEHB program group.

IG auditor Melissa Brown says, We look at the overall cost of running the HMO plan and ensure that the federal government is dealt with equitably. This involves looking at how rates are developed in a particular area and making sure it is consistent with non-federal groups of a similar size.

Brown says that in many areas the competition among health groups is fierce. In order for HMOs to keep their membership base, they might offer a nonfederal group a discount and not apply that discount to federal subscribers.

Our contracts and federal regulation are very specific on this issue, said Brown, who says that HMOs also sometimes base their rate methodology on certain assumptions that can be incorrect and costly to the federal government. We want them to show us why they think their assumptions are realistic. To make unrealistic assumptions is to overcharge the federal subscriber and the taxpayer.

In one recent case, the IG auditors found that a particular HMO had provided discounted rates to numerous non-federal groups and that the plan was not providing the FEHB program similar discounts. Further examination revealed that these pricing issues were prevalent across the HMO region it serviced. In addition, the plans use of unsupported demographic assumptions in developing rates consistently produced discounted rates, and thus preferential treatment, for those groups. OPM auditors determined that FEHB program was entitled to a retroactive rate adjustment totaling $17.7 million. Because of the large findings and possible criminal activity, the auditors turned the case over to the IGs investigations office.

Since our agents suspected the plan was using the excuse of demographic data, for not giving us the rates we should have received, this prompted us to begin working with the Department of Justice, said Assistant Inspector General for Investigations Gary Yauger.

Justice shared the IGs concerns and joined OPM in pursuing a resolution. Ultimately a negotiated settlement between Justice, OPM, and the plan was reached whereby the health plan agreed to return $12 million to the government. This was a good example of OIG teamwork--working together for a common cause, said Yauger.

The Office of Investigations consists of two branches, the Health and Life Insurance Branch and the Retirement and Special Investigations Branch.

The Health and Life Insurance investigative unit is charged with aggressively pursuing criminal and civil sanctions against individuals and corporate entities when fraud is suspected.

It often takes the Investigators several years to put together a health fraud case. Its not an easy job, and you would have to see it to believe the boxes of records that the agents have to go through and protect. They must be prepared to testify in court, deal with court delays, and the appeals processes, said Yauger.

In addition to responding to auditors concerns, the IG investigative unit also receives leads from the health care hotline number which is provided in the federal open season enrollment brochure. We say: if you suspect waste, fraud or abuse in the health care system, call us, said Yauger. The hotline receives hundreds of calls. And if we believe fraudulent activity is taking place, we get involved.

Integral to the process of recovering funds is the team of four from OPMs Office of Insurance Programs Audit Resolution function. The employees work closely with the carriers, the IG office, and the Office of the Actuary to resolve issues highlighted in the final audit report.

We ask the insurance carriers to provide additional documentation when they disagree with the IGs findings, says Ron Ostrich. If the documentation has merit and the Office of Actuary and Office of General Counsel agree, we adjust the amount owed. Ultimately, OPM wants what is fairly owed the government.

The IGs investigative office says some of their best tips regarding doctors and patients who are abusing the system come from the insurance companies themselves.

IG agent, Michele Schmidt said, If they notice a pattern of unusual billing, the companies will monitor it for a while until they get what looks like a definite problem. Then they refer it to us.

And the word is getting out, said Yauger. Even though we are a small office, our track record is growing. Every time we have a settlement, public awareness grows.

In the end, a civil penalty can be more damaging to a company because they have to pay back in some cases double or triple the cost of the initial findings, Yauger said. But he admits he would like to see more criminal prosecutions.

For her part, agent Schmidt feels good about her working in tracking down the bad apples. This is a mega-industry and you can be sure that if you found someone cheating the FEHBP, they are also cheating Medicare, Medicaid, or anyone else they can send the bill to. When we get the crooked provider out of the system, it benefits everyone.

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