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F Case Study

Plan Design Audit

The Challenge

Our team was hired by a large hospital health system in Texas to do a “plan design” audit. Plan design audits are not as common as financial audits, where we review discount, fees, and rebates, however equally important. A plan design audit reviews all clinical programs and member copays, plan details to verify members were charged the correct cost share.

Due to the rising cost of medications, it is not unusual for employee health plans to have very complex plan designs that include an upfront drug deductible, copays, generic incentive, prior authorization, step therapy, excluded drugs and various other clinical programs. A complex plan design requires the Pharmacy Benefits Manager (PBM) or Carrier to process the various plan design elements in a particular order, so the plan participant is charged the correct amount at point of service. Administering a plan design with multiple levels of processing rules can be challenging for any PBM or Carrier.

The Approach

The recovery for just one plan design feature, Reference Based Pricing, totaled over $600,000 in recovery dollars to the plan.

The time period of the audit was initially for the 2016 calendar year. In order to begin the audit, we collected the pharmacy claims file, original plan design setup documents, each plan change document, excluded drug list, specialty drug list and preferred drug formulary list specific to this group. We found the following errors repeated throughout the claims file:

 

1) Incorrect copays charged for specialty drugs

2) Missed quantity limits

3) Claims processed for excluded drugs

4) Claims filled at pharmacies excluded from the network

5) Manual claims allowed reimbursement that did not meet plan specifications

6) Claims processed for drugs with a prior authorization without proper authorization procedure

The Results

The recovery for 2016 totaled over $600,000 in recovery dollars to the plan. Due to the large number of claims processed incorrectly the PBM agreed to allow the audit to extend to the client’s 2015 plan year and YTD 2017 plan year. The same errors were found with a recovery to the plan in the amount of $422,000 for calendar year 2015 and from January to September 2017 of over $250,000.

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