Corporate Compliance

Gov’t audit insider: Contract termination and severance costs

Healthcare Auditing Weekly, October 7, 2003

The OIG recently audited Anthem Blue Cross and Blue Shield of Connecticut. Its goal was to determine whether Anthem's claim for termination and severance costs that related to its Medicare contract termination represented allowable, allocable, and reasonable costs under the following provisions: applicable federal regulations; the Medicare contract; CMS instructions; and Anthem company policies.

The OIG took the following steps in its audit:

1. Examined the $518,049 Anthem claimed for the termination process; $97,568 related to termination costs, and $420,481 related to severance costs.

2. Gathered applicable federal regulations, Medicare contract provisions, CMS instructions, and Anthem company severance policies to determine whether the amounts claimed met reimbursement requirements. The OIG also discussed its audit with CMS headquarters and regional office to identify any other requirements CMS places on contractors.

3. Examined supporting expense reports, payroll reports, and personnel records to do the following:

·  Perform detailed audit tests of various cost categories

·  Determine the eligibility of terminated employees for severance benefits

·  Determine the accuracy of Anthem's calculations for termination and severance costs

4. Interviewed Anthem officials to determine the methods used in calculating some claimed costs, which according to the OIG's analysis, did not meet reimbursement requirements.

Click here to read the audit report "Review Of Anthem Blue Cross Blue Shield Of Connecticut Medicare Contract Termination And Severance Costs."

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