Detailed Information on the
Inspector General Oversight of Federal Health Benefits Program Assessment

Further develop evaluation capacity and analytical abilities through computer assisted audit techniques and tools, and develop a health benefits claims data warehouse.

Measure: Return on Investment (Dollars returned to FEHB Trust Fund per direct OIG program dollar spent)

Explanation:Explanation: This measure is meant to measure the effectiveness of OIG efforts by comparing the dollars returned to the FEHBP Trust Fund with the dollars spent to conduct OIG operations. A critical component of the return on investment (ROI) statistic is the audit/investigation result (i.e., program commitments to recover funds as well as actual monetary recoveries). Calculation: The ROI is calculated by dividing the positive financial impact (PFI) of OIG operations by the amount of direct program resources (DPR) expended each year. Thus, ROI = PFI/DPR. The PFI is the total of actual recoveries and program commitments to recover funds based on both audit and investigative findings in the fiscal year of the recovery or commitment to recover funds. The DPR includes all appropriated resources less rent and common service assessments. Comments: In many cases, the positive financial impact does not occur in the same year as the expenditure of funds that led directly to that PFI. This is due to the lag time from the actual performance of the audit or investigation to the issuance of an audit report and/or recovery of funds, and the fact that some audits and investigations can take several years. Therefore, this measure should really be analyzed by looking at a period of years, as opposed to focusing on just one year. Also many of our audit initiatives focus on preventing, rather than recovering, overpayments. Target: Over the last two years, the IG has been working with agency officials to revise FEHBP contract language and legislation to impose stricter requirements and more effective controls over the FEHBP. These changes have resulted in fewer overpayments and therefore, a lower ROI. Therefore, the IG's office believes that an ROI of 5.0 continues to be a realistic goal.

Measure: Percentage of audit recommendations ($) that OPM program office agrees to collect

Explanation:Explanation: The purpose of this measure is to show what percentage of the costs that the IG questions in audits that the program office agrees with and agrees to pursue for collection. If this percentage is too low, it is an indication that the IG may be interpreting regulations or issues differently than the program office, and that they need to work more closely to ensure agreement with audit results. Calculation: This measure is calculated by dividing the management commitments to recover funds, or disallowed costs, from audits by the total of audit recommendations for recovery of funds, or questioned costs.

Measure: Percent of Insurance Carriers Audited Within 3 Years

Explanation:Explanation: To maximize audit efficiency and effectiveness, audits of insurance carriers should be completed once every three years. This measure is the ratio of insurance carriers that we have audited within the last three years to the total number of carriers in our audit universe. Efficiency: Detailed records are more readily available and carrier personnel are more familiar with current information and processes allowing audit staff to complete thorough analytical reviews more quickly. The recommendations are then targeted to current processes. Review efforts of contract years over three years old require additional review time. Effectiveness: One goal of the audit is to identify weak internal controls which may result in improper payments. It is difficult, if not impossible, to recover improper payments that are over three years old, especially overpayments related to health benefit claims. This restriction negatively impacts our insurance programs. Also, the positive "sentinel effect" resulting from routine audits serves to ensure that carriers are maintaining adequate internal controls, as well as appropriate levels of documentation and process descriptions. Target: IG targets are based on estimated staffing levels; projected staff skill sets (our mix of experienced versus entry level auditors); and planned audit process improvements, as well as technology-based audit initiatives.

Is the program purpose clear?

Explanation: The purpose of OIG oversight of the FEHBP is clear. OIG's oversight program is designed to protect the integrity of the health benefits component of the total federal employee compensation package. OIG accomplishes this purpose through (1) audits of health benefits carrier contracts and (2) enforcement activities comprised of criminal investigations of health care providers and persons receiving benefits through FEHBP and administrative sanctions of health care providers who commit violations identified by statute or regulation.

Evidence: Inspector General Act of 1978, as amended [5 U.S.C. App.], provides OIG with audit and investigative jurisdiction for all OPM programs. 5 U.S.C. 8902a establishes administrative sanctions authorities for FEHBP providers. The Federal Employees Health Benefits Acquisition Regulation (FEHBAR) and OPM's contracts with FEHBP carriers establish requirements for their operations. The Homeland Security Act of 2002, P.L. 107-296, section 812, provides permanent law enforcement authority to certain federal offices of inspector general. Executive Order 12805 (May 11, 1992), established the President's Council on Integrity and Efficiency (PCIE) as the governmentwide coordinating body for the offices of inspector general.

Does the program address a specific and existing problem, interest, or need?

Explanation: Oversight is an essential factor in (a) detecting fraud, waste, and abuse by health care providers and covered persons; (b) assuring that FEHBP carriers comply with their contracts. FEHBP provides health coverage to over 9 million persons and handles in excess of $24 billion in premiums annually.

Evidence: Based on our experience, erroneous payments totaled approximately $129 million in FY 2002, or less than 1 percent of total premiums of $24 billion. Since the beginning of FY 1992, OIG oversight of the FEHBP has resulted in $1 billion of positive financial impact. OIG review and enforcement activities have verified that fraud by providers and covered persons exists in the FEHBP context. Further, most OIG audits identify deficiencies in contract compliance and funds management by FEHBP carriers.

Is the program designed so that it is not redundant or duplicative of any Federal, state, local or private effort?

Explanation: OIG is the only entity that exercises ongoing, systematic oversight of FEHBP. It is specifically empowered by the IG Act to conduct oversight of FEHBP, as well as all other OPM programs. We achieve oversight through audits of FEHBP carriers, criminal investigations of health care providers and FEHBP participants, and administrative sanctions. GAO and the Department of Justice hold governmentwide audit and investigative authority, and complement OIG's efforts.

Evidence: No state or local government, nor any private entity, has the authority to review the FEHBP program. FEHBP contracts represent separate lines of business for all carriers, and are managed under federal regulation. Claims from both providers and covered persons are subject to enforcement under federal law. Criminal violations investigated OIG are adjudicated in the federal court system. Administrative sanctions are imposed under specific federal law and regulations.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: At this time, as determined through our peer review process, there are no significant design flaws that hamper the effectiveness of OIG's oversight activities. In addition, we have resolved all material weaknesses previously identified through Federal Manager's Financial Integrity Act (FMFIA) review process .

Evidence: (1) OIG has full statutory authority under the IG Act to conduct independent audits of FEHBP carriers and operations. OIG's audit program complies with the Government Auditing Standards issued by GAO. (2) Homeland Security Act (2002) resolved previous limitations on our investigative operations by providing full criminal law enforcement authority to OIGs. (3) Federal Employees Health Care Protection Act resolved procedural inefficiencies related to earlier administrative sanctions authority and provided OPM with civil monetary penalty authority to recover funds lost to health care fraud through provider violations.

Is the program effectively targeted, so program resources reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: OIG's responsibility is to provide independent oversight of the FEHBP, for the purposes of improving protecting the integrity of its financial and health care activities. Decisions regarding FEHBP program operations and policies are outside OIG's jurisdiction. OIG's audit and enforcement activities are targeted to detect and prevent wrongdoing that threatens FEHBP's integrity.

Evidence: OIG allocates its resources to oversight activities through processes that include: (1) audit plans based on annual risk analyses and program office input/comment; (2) locating investigative personnel throughout the United States in areas containing the highest concentrations of federal employees and annuitants, thus impacting the highest number of FEHBP transactions; and (3) setting financial thresholds for investigations so that violations representing the most egregious threats to FEHBP integrity are addressed on a priority basis.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: (1) Reduce erroneous payments from the FEHBP fund and (2) detect and prevent fraud, waste, and abuse in the FEHB Program.

Evidence: The FEHBP audit cycle is the average number of years between audits of all carriers. By reducing the audit cycle, OIG is able to increase the percentage of FEHBP program funds that it audits each year. (In FY 2000 the actual audit cycle was 4.5 years; the target audit cycle for FY 2004 is 3 years). See chart # 3. By targeting investigations to areas of high FEHBP usage, OIG will increase health care-related investigations of providers or other entities that abuse the federal employees health benefits program. Exclusion-related sanctions regulations were implemented during FY 2003; financial sanctions regulations will be implemented in FY 2004.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: (1) Conduct audits of all FEHBP carriers on a 3 year basis; (2) Increase successful investigations (i.e., resulting in conviction, administrative sanction, or recovery of funds) of fraud and abuse by 25 percent in geographical areas containing highest density of program participants; (3) Propose administrative sanctions (either debarment or civil monetary penalty or both) within 6 months against all providers referred through investigative activities.

Evidence: Key long-term measures include (1) Return on Investment [dollars returned to FEHBP trust fund per direct program dollar spent - all OIG programs]: FY 1999 baseline was $6; FY 2004 target is $10, an increase of 67%; see chart #1; (2) Positive financial impact [actual recoveries plus management committment to collect questioned costs]; FY 2000 baseline was $105 million; FY 2004 target is $143 million, an increase of 36%; see chart #4; (3) Carrier Audit Cycle: FY 2000 baseline was 4.5 years; FY 2004 target is 3.0 years; an improvement of 33%; see chart # 3; (4) Number of FEHBP carriers not audited within 5 years: FY 2000 baseline was 153 or 42% of the universe; FY 2004 target is 76 or 27% of the universe; an improvement of 31%; see chart # 5; and (5) Number of Debarments and Suspensions of Health Care Providers from participating in FEHBP; FY 2000 baseline was 2706; FY 2004 target is 4300; an increase of 59%; see chart # 6. (6) Reduce erroneous payments by 50 percent.

Does the program have a limited number of specific annual performance measures that demonstrate progress toward achieving the program's long-term measures?

Explanation: (1) Reduce audit cycle for each category of FEHBP carrier (fee-for-service, community-rated, experience-rated, and employee organization affiliated); (2) Increase numbers of successful investigations in targeted high-density areas; (3) Assess risk profile of all health care providers referred through investigative activities, and propose suspension or debarment of those who pose a risk to FEHBP covered persons within 6 months of referral.

Evidence: Overall, audit cycle for FEHBP carriers has declined from 4.5 years in FY 2000 to 4 years in FY 2002. Target is 3 years for FY 2005. Beginning in FY 2002, OIG began to locate investigators in field locations identified as high density for FEHBP usage. All providers identified as having committed violations were debarred or suspended in FY 2002; civil monetary penalty regulations will be implemented beginning in FY 2004. See attached charts.

Does the program have baselines and ambitious targets and timeframes for its annual measures?

Explanation: In each annual performance plan since FY 2000, OIG has captured baseline data for each of the performance measures indicated above, and has set targets that reflect progress toward ultimate achievement of long-term goals.

Evidence: Please see 2.2 and 2.3 above; also see attached charts.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, etc.) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Oversight work is performed primarily by OIG personnel. Stakeholders outside of the OIG include OPM offices with responsibility to contract for/manage FEHBP and program enrollees.

Evidence: Stakeholders have been highly supportive of OIG's oversight activities, on both a short- and long-term basis. OPM offices managing FEHBP participate in setting OIG audit agenda; take action on 70 - 75% of OIG audit findings regarding FEHBP carriers; assure carrier support and implementation of administrative sanctions orders. FEHBP enrollees provide tips to the OIG Health Care Fraud Hotline that generate approximately 250 investigations per year.

Are independent and quality evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: The President's Council on Integrity and Efficiency (PCIE) has promulgated standards for external quality review and assessment of federal OIGs, and assures that such reviews are conducted on a regularly-scheduled basis. In addition, OIG has, on an as-needed basis, obtained independent review (by other agencies, contractors, or independent consultants) of aspects of its operations.

Evidence: A mandatory peer review of OIG review activities is conducted under auspices of PCIE every three years. The reviewing organization is selected by PCIE and has full independence. These reviews are conducted based on guidelines developed by PCIE and apply Government Auditing Standards. PCIE is implementing an equivalent peer review process of criminal investigative enforcement activities, which is approved by the Attorney General. Results of these reviews are forwarded to the Attorney General. OIG will be in the first group of agencies to be reviewed.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: OIG's budget is fully integrated with performance plans and results data. In preparation of budget requests, OIG analyzes previous year's actual performance data and uses risk - benefits analysis to allocate resources among the core FEHBP oversight functions (audits and enforcement). Amounts are determined by computing varying costs of auditors, investigators, and sanctions analysts, along with travel costs and other object spending. Based on performance data, budget request clearly indicates projected levels of results for varying levels of available resources. All FEHBP oversight activities are financed through appropriated transfers from the Trust Fund.

Evidence: OIG annual budget request/performance plans reflect strategic goals, necessary resources to accomplish these goals, financial and nonfinancial performance measures, and activities performed by OIG in support of the goals. Requests for additional resources are linked to short- and long-term outcomes that would be achieved with increased levels of resources. Performance indicators include: positive financial impact, return on investment, audit cycles and recovery rates, and numbers of arrests, indictments, convictions, and administrative sanctions.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: OIG extensively redesigned its 5-year strategic plan in April 2003. This plan reduced the number of long-term goals, and aligned all goals in the new plan with both annual and strategic performance measures. The previous plan did not set ambitious long-term performance goals, but the revised plan sets specific goals for each long-term objective that, when achieved, will represent a significantly improved level of oversight beyond the current baseline.

Evidence: Strategic plan redesign included (1) refining the short- and long-term goals so that they strictly represent outcomes; (2) integrating all goals and measures with the GPRA process; and (3) assuring that work reporting and tracking systems generate data needed to measure performance against goals.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: OIG internal work reporting and tracking systems collect and analyze performance data on results of all FEHBP oversight activities. Information is collected in real time, and is used as the basis for: risk - benefit analysis that support allocation of resources; setting annual audit agendas; specific audit programs; prioritizing investigative enforcement activities; tracking compliance with administrative sanctions orders; preparing the semiannual OIG reports to Congress (required by the IG Act); and responding to inquiries from Congress, OMB, FOIA/Privacy Act.

Evidence: OIG data systems include Automated Audit Receivables Tracking System; Investigations Tracking System; and OPM Debar (administrative sanctions database). OIG has invested substantial resources since FY 2000 to upgrade capabilities of all of these systems. AARTS is also used by OPM to track implementation of audit recommendations concerning FEHBP.

Are Federal managers and program partners (grantees, subgrantees, contractors, cost-sharing partners, etc.) held accountable for cost, schedule and performance results?

Explanation: All OIG managers involved in FEHBP oversight have an element in their performance contracts holding them accountable for timeliness, effectiveness, and efficiency of their activities.

Evidence: Performance contracts include the SES Standard for Excellence and fulfillment of annual performance plan, audit agendas, and/or annual work plans as key elements on which OIG managers and supervisors are evaluated.

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: OPM's financial management system is a transaction driven system that permits budgetary accounts to be recorded in a timely manner. OIG funds are obligated and accounted for through OPM's system. OIG obligates/expends its funds consistent with its strategic plan and associated annual performance plans.

Evidence: OPM financial management systems and reports verify that OIG funds are spent in a timely manner and that only a minimal amount of unobligated funds remains at the end of each fiscal year. Year-end balances for each of the last two years have been approximately $25,000, out of annual appropriation of $11 - 12 million.

Does the program have procedures (e.g., competitive sourcing/cost comparisons, IT improvements, approporaite incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Resources are allocated to maximize achievement of goals identified in performance plans.

Evidence: OIG tracks timeliness of audit processes by individual auditors, and links auditor efficiency with annual performance appraisal system. OIG has developed a process to reduce travel costs, under which individual auditors are given an incentive to reduce their travel expenditures by sharing with OIG the savings they achieve. OIG has implemented an automated audit system (TEAMMATE) which, by fully automating workpapers at all stages of an audit, including generation of the report, saves time and resources, allowing more efficient use of staff and resources.

Does the program collaborate and coordinate effectively with related programs?

Explanation: Related programs exist in several federal agencies with audit and enforcement authority for other health care programs. Examples include the special fraud investigative units of each FEHBP carrier; the Offices of Inspector General at the Departments of Health and Human Services, Defense, and Veterans Affairs; the Medicaid Fraud Control Units in each state; the FBI; and U.S. Attorneys Offices, which prosecute cases and chair regional health care fraud task forces. OIG has both received and given full cooperation/coordination with these agencies on all annual and long-term goals. In addition, OIG is an active member of professional groups interested in health care integrity matters, such as the National Health Care Antifraud Association, the Association of Government Accountants, and the Interagency Committee on Suspension and Debarment.

Evidence: OIG review activities frequently are a basis for criminal or civil legal action, and OIG auditors, investigators, and attorneys are proficient in coordinating with Department of Justice attorneys. OIG participates in law enforcement task forces (both permanent and ad hoc) that address criminal activity in federal health care systems. Administrative sanctions data is routinely shared through an agreement with the Office of the Inspector General/DHHS, and OIG holds membership in the governmentwide Debarment and Suspension Coordinating Committee.

Does the program use strong financial management practices?

Explanation: OIG uses the recently implemented OPM GFIS, FEDESK, and Data Portal systems to account for expenditure of its funds. OIG does not maintain financial management systems independently of OPM.

Evidence: Independent financial audit of OPM's financial statements, including OIG financial activities, have resulted in "unqualified" opinions for the past five fiscal years.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: OIG's FEHBP review activities have not been cited for management deficiencies by any regularly-scheduled evaluative mechanism. However, OIG has implemented management changes in response to specific issues that have been either self-generated or imposed by OPM.

Evidence: As part of a self-generated management study, OIG implemented a revised organizational structure to better focus resources on FEHBP audits and administrative sanctions. In response to a personnel management evaluation by OPM, OIG modified its personnel recruitment practices and developed a pilot program to improve recruitment of professional auditors in a highly competitive labor market.

Has the program demonstrated adequate progress in achieving its long-term outcome performance goals?

Explanation: Within current resource structure, OIG is making progress to achieve long-term goals.

Evidence: OIG's annual performance plans and reports track performance measures from FY 1999 - present. All key measures in FY 2002 reflect improvement over FY 1999 baseline level, and projected measures reflect continued improvement in FY 2003 and beyond. For example, at FY 2004 resource levels, OIG will meet the critical 3-year audit cycle for FEHBP carriers; FEHBP investigative caseloads in targeted high-usage areas have increased 50% since FY 2000; and all administrative sanctions authorities will be implemented and in active use.

Does the program (including program partners) achieve its annual performance goals?

Explanation: OIG's FY 2002 Performance and Accountability Report indicates that OIG met all key measures associated with FEHBP oversight. These measures are: positive financial impact; return on investment; and arrests, indictments, and convictions.

Evidence: Refer to charts 1-6 attached for detailed information on OIG's performance in meeting annual goals.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program performance goals each year?

Explanation: The best measures of the efficiency and cost effectiveness of our oversight program are return on investment and positive impact. Both of these measures have reflected dramatic improvement over FY 1999 baseline levels.

Evidence: FY 2002 OPM Performance and Accountability Report indicates that return on investment improved from $6 per direct program dollar spent in FY 1999 to $12 in FY 2002. Positive financial impact improved from $51.9 million in FY 1999 to $116 million in FY 2002.

Does the performance of this program compare favorably to other programs, including government, private, etc., that have similar purpose and goals?

Explanation: For investigative enforcement functions, an OIG comparative study indicated that our health care-related caseload per investigator is four times that of VA/OIG and three times that of DCIS. FY 2002 PCIE Progress Report to the President, providing consolidated performance information on all OIG, indicates that OIG/OPM stood 6th out of 28 IG's in amout of recommended audit recoveries, and 5th of 28 in receivables/recoveries from successful investigations.

Evidence: OIG performance is reported annually side-by-side with that of other Offices of Inspectors General in annual PCIE Reports.

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: OIG participates fully in the program of independent quality reviews of OIGs administered by the President's Council on Integrity and Efficiency.

Evidence: The three most recent PCIE-administered peer reviews indicated that OIG review activities meet applicable professional standards. These reviews were conducted by GSA in 1994; Railroad Retirement Board in 1997; and Federal Emergency Management Agency in 2000. OIG will be in the first group to undergo the equivalent peer review process for enforcement activities (FY 2003).