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GOV'T AUDIT INSIDER: Capitation payment proposal inconsistent with BIPA

Healthcare Auditing Weekly, July 20, 2004

PacifiCare of Oklahoma submitted a revised proposal that reflected an increase in Medicare capitation payments for contract year 2001. Of the proposed $16.4 million increase, PacifiCare used approximately $5.2 million in a manner inconsistent with the Benefits Improvement Protection Act (BIPA), according to an OIG audit report released June 17. During the audit, the OIG did the following: 

• Reviewed applicable laws and regulations 
  
• Reviewed the cover letter PacifiCare submitted with its revised 
  proposal in which it stated how it would use the additional funds for the 
  contract year 
  
• Compared the initial proposal with the revised proposal to determine 
  the modifications 
• Reviewed support for changes in membership projections indicated in the revised proposal 
  
• Compared the provider payment assumptions used in the initial proposal 
  with those in the revised proposal 
       
• Reviewed support for the revised direct medical care cost projections 
• Reviewed provider contracts in effect in 2001 
       
• Recalculated PacifiCare's provider payment projections based on the 
  actual contract terms in effect for 2001, using PacifiCare's cost projection methodology 
  
• Verified the mathematical accuracy of the plan's direct medical cost 
  projections 
  
• Interviewed PacifiCare officials 
     
• Calculated the increase in 2001 Medicare capitation payments using 
  actual membership data obtained fromCMS 

//">Click here to read the audit report "Review of PacifiCare of 
Oklahoma's Modifications to Its 2001 Adjusted Community Rate Proposal Under the Benefits Improvement Protection Act of 2000," (A-06-02-00060).

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