Financial Audit, Case Study #1
The Challenge
Our team was hired by a large public school system to do a financial audit for their 2020 plan year. The plan included a Commercial and EGWP plan. The plan ingredient cost spends totaled approximately $63 million for the Commercial plan and $43 million for the EGWP plans. The scope of work included auditing contract guarantees to include discounts, fees, and rebates.
Due to the high number of pharmacy claims adjudicated electronically through a plan annually, any errors in plan setup with contract pricing and rebates, can result in recovery dollars. The last few years we have seen very aggressive pharmacy contract guarantees from PBMs and Carriers wanting to win business. As a result, we are seeing more contracts not meeting these guarantees.
The Approach
The period of the audit included plan year 2020. To begin the audit, we collected the executed contract, pharmacy claim files, rebate claim files, specialty drug list specific to this group, and other required files and documents. The audit included:
- Comparing the PBM’s AWP price on the date of fill to Medispan to verify a match before we evaluate discount performance.
- Evaluate the bucketing of claims by brand/generic and retail/mail/specialty to ensure the claims were processed as defined in the executed contract.
- Removed claims excluded from discount and dispensing fee guarantees and then again for rebates that were listed in the executed contract.
- Compared the actual discount, dispensing fee, and rebate performance to the contract guarantees.
The Results
For the Commercial plan we reprocessed 282,141 claims and found a shortfall in both Specialty and Non-Specialty claims totaling $326,664.41 in recovery dollars for the plan. For the EGWP plan we reprocessed 210,025 claims and found a shortfall in Specialty claims totaling $53,919.15 in recovery dollars for the plan. Total recovery was $380,583.56. Most of the recovery monies were due to the PBM not implementing the correct Specialty drug pricing.
This audit was interesting as the PBM being audited used two types of discount guarantees. The first type was an overall average discount across all claims in certain delivery channels. This type of discount was used for retail brand and generic claims, and Mail Brand claims. The second type was a locked in discount guarantee per each claim dispensed that were applied to Mail Generics and all Specialty claims. Also included in the contract was a generic dispensing rate (GDR) guarantee.
Financial Audit, Case Study #2
The Challenge
Our team was hired by a large public school system to do a financial audit for their 2020 plan year. The plan included a Commercial and EGWP plan. The plan ingredient cost spends totaled approximately $63 million for the Commercial plan and $43 million for the EGWP plans. The scope of work included auditing contract guarantees to include discounts, fees, and rebates.
Due to the high number of pharmacy claims adjudicated electronically through a plan annually, any errors in plan setup with contract pricing and rebates, can result in recovery dollars. The last few years we have seen very aggressive pharmacy contract guarantees from PBMs and Carriers wanting to win business. As a result, we are seeing more contracts not meeting these guarantees.
The Approach
The period of the audit included plan year’s 2019 and 2020. To begin the audit, we collected the executed contract, pharmacy claim files, rebate claim files, specialty drug list specific to this group, and other required files and documents. The audit included:
- Comparing the PBM’s AWP price on the date of fill to Medispan to verify a match before we evaluate discount performance.
- Evaluate the bucketing of claims by brand/generic and retail/mail/specialty to ensure the claims were processed as defined in the executed contract.
- Removed claims excluded from discount and dispensing fee guarantees and then again for rebates that were listed in the executed contract.
- Compared the actual discount, dispensing fee, and rebate performance to the contract guarantees.
The Results
For the 2019 plan year audit we reprocessed 435,785 claims and found a shortfall in both Specialty and Non-Specialty claims totaling $387,953.22 in recovery dollars for the plan. For the 2020 plan year we reprocessed 437,495 claims and found a shortfall in Specialty claims totaling $267,251.30 in recovery dollars for the plan. Total recovery was $655,204.52.
This audit was interesting as the PBM being audited used WAC (Wholesale Acquisition Cost) pricing for Specialty drugs, but AWP (Average Wholesale Price) pricing for non-Specialty drugs.
Plan Design and Clinical Audit, Case Study #3
The Challenge
Our team was hired by a large hospital system in Texas to do a plan design and clinical audit for their 2017 plan year. The plan ingredient cost spends totaled approximately $30 million. 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 period of the audit was initially for the 2017 plan year. To begin the audit, we collected the pharmacy claims file, original plan design 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:
- Incorrect copays charged for specialty drugs,
- Missed Quantity limits,
- Claims processed for excluded drugs,
- Claims filled at pharmacies excluded from the network,
- Manual claims allowed reimbursement that did not meet plan specifications, and
- Claims processed for drugs with a prior authorization without proper authorization procedure.
The Results
The recovery for 2017 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 2016 and 2018 plan years. The same errors were found with a recover to the plan in the amount of $422,000 for plan year 2016 and $250,00 for plan year 2018. Total recovery was $1,272,000.00.
As a result of this plan design audit, we have been retained on-going to do monthly plan design, clinical and eligibility audits, and bi-annual financial audits to include pricing and rebates.