Due Diligence Medical + Pharmacy Claims Audits Reveal Systemic Mistakes

Business Situation

As a fiduciary, an employer in the manufacturing industry with over 450 employees engaged BMI to audit and verify the accuracy of medical and pharmacy claims paid on their behalf by the third-party administrator (“TPA”) and pharmacy benefits manager (“PBM”). Both audits revealed several administrative and financial errors, highlighting potential areas for improvement in claims processing, plan design, and communication between the client and the claims administrators.

Solution

Utilizing our experienced staff and proprietary AUDiT iQ™ software, BMI set the following objectives:

  • Analyze 100% of all medical claims paid by the TPA during a 12-month period.

  • Test claims against plan compliance, eligibility and areas of possible fraud, waste, or abuse.

  • Audit a sample of medical and prescription claims based on the analysis.

  • Present detailed findings and specific cost-savings recommendations based on the data and audit results.

Audit Findings

Healthcare Claims Audit

Total overpayments confirmed with the TPA were $71,444.01, with additional financial impact pending further review.

  • Large Claim Error: A $64,279.81 overpayment occurred due to a manual error and missing penalty.

  • Cosmetic Services Error: $6,442.28 in cosmetic procedures were incorrectly covered due to manual error.

  • Systemic Error: Ambulance services were overpaid due to a manual coding error, affecting 16 claims and a to-be-determined financial amount.

  • Paid After Termination: There is a delay in the termination notification process, causing payment of claims for members who are no longer employed or eligible for benefits.

Recommendations

  • Confirm reimbursement to the plan and/or recovery for applicable findings.

  • Confirm results of the impact study related to ambulance errors.

  • Clarify plan intent with the TPA and update plan documentation where discrepancies were found.

  • Improve processes for notifying the TPA of eligibility changes to avoid paying claims for terminated members.

Prescription Claims Audit

Several areas of concern were identified, with an unconfirmed financial impact due to PBM dispute:

  • Drug Class Exclusion: Claims for impotence drugs were improperly covered, contradicting the plan’s Summary Plan Description (SPD).

  • Dispensed as Written Errors: Claims bypassed the brand-generic dispensing rule without applying penalties, contradicting the plan’s Summary Plan Description (SPD).

  • Paid After Termination: There is a delay in the termination notification process, causing payment of claims for members who are no longer employed or eligible for benefits.

Recommendations

  • Resolve discrepancies between the SPD and claims processing.

  • Strengthen communication with the PBM regarding member eligibility and improve documentation processes.

Audit Outcome

Both audits identified errors related to claims processing, including payment for ineligible services and systemic administrative issues. The TPA agreed to overpayment amounts totaling over $70,000 and to run additional impact reports to identify any other claims impacted by the systemic issues uncovered.

 At the audit’s conclusion, BMI assigned a specialist to walk through a variety of recommendations including additional short and long-term solutions to prevent these types of errors and other plan discrepancies from continuing to occur. Follow-up audits are recommended for both areas to monitor progress and minimize financial risk.

Healthcare Claims Audit, Medical Claims Audit, Pharmacy Claims AuditRobert Temples