An Audit Report on HealthSpring Life and Health Insurance Company, Inc., a Medicaid STAR+PLUS Managed Care Organization
HealthSpring Life and Health Insurance Company, Inc.'s (HealthSpring) controls over its financial reporting process provided reasonable assurance
that the $601.3 million in medical claims and prescription drug claims that HealthSpring paid in fiscal year 2015 for the Medicaid STAR+PLUS
managed care program (STAR+PLUS) were accurately reported on its financial statistical reports to the Health and Human Services Commission (Commission).
However, the salaries, other medical expenses, bonuses, allocated corporate costs, and professional services costs that HealthSpring reported on its
financial statistical reports for fiscal year 2015 were not compliant with the Commission's contract requirements. Those costs were approximately $53.8 million. Specifically:
Unallowable Costs - Auditors identified approximately $3.8 million in unallowable costs. HealthSpring (1) reported bonuses paid by its affiliate
companies and (2) included advertising costs, charitable donations, non-STAR+PLUS affiliate company expenses, employee events expense, gifts, and stock options
in its reported allocated corporate costs on its financial statistical reports. The Commission's Medicaid program requirements specify that those costs are unallowable
and, therefore, should not be reported on the financial statistical reports. In addition, $163,977 in reported professional services costs were for costs incurred in fiscal year 2014.
Questioned Costs - Auditors identified approximately $34.0 million in questioned salaries, other medical expenses (service coordinator salaries), and professional services costs.
HealthSpring did not prepare certifications or personnel activity reports that the Commission requires to show that its reported salaries, approximately $33.7 million,
were for services that supported STAR+PLUS. In addition, HealthSpring could not provide documentation to show that $359,912 in professional service costs tested were for STAR+PLUS.
The unallowable and questioned costs identified affect the accuracy of HealthSpring's calculation of net income, which the Commission uses to calculate the experience rebate amounts
that HealthSpring is required to pay the Commission. For fiscal year 2015, HealthSpring paid the Commission an experience rebate of approximately $12.5 million.
In addition, HealthSpring had weaknesses in the controls over its process for documenting the reasons for post-payment adjustments to medical claims and for ensuring that
medical claims are paid within 30 days of receipt of a "clean claim” as required. The weaknesses identified in the claims payment process could affect the continued
participation of HealthSpring's medical providers in STAR+PLUS.
Jump to Overall Conclusion
HealthSpring’s financial reporting processes and controls provided reasonable assurance that the $601,313,929 in medical claims and
prescription drug claims it paid in fiscal year 2015 were accurately calculated and reported on its financial statistical reports to the Commission.
Auditors tested samples of HealthSpring’s medical claims and vendor payments to its pharmacy benefit manager that were reported as paid during fiscal
year 2015 (see text box for additional details on the medical claims and pharmacy claims tested). The tested medical claims and pharmacy claims were accurate,
supported by documentation, and submitted for eligible STAR+PLUS members.
Jump to Chapter 1-A
HealthSpring included unallowable costs and questioned costs on its financial statistical reports for fiscal year 2015. Auditors identified
$786,457 in bonuses that HealthSpring should not have reported on its financial statistical reports for fiscal year 2015. The amount that
HealthSpring reported was for bonuses that were paid to staff employed by its affiliate companies. The Commission’s reporting requirements
specify that bonuses paid to affiliates are unallowable costs.
In addition, auditors identified $33,679,703 in questioned salaries and other medical expenses (see Table 3).
HealthSpring did not prepare certifications and personnel activity reports to show that the amounts reported for salaries and other
medical expenses were for staff who worked on STAR+PLUS as required by the Commission.
The unallowable costs and questioned costs that auditors identified affect the Commission’s calculation of the experience rebate amount that
HealthSpring may owe the Commission for fiscal year 2015. (See Appendix 5 for more information about how the Commission calculates the experience rebate amounts that an MCO may owe it.)
Jump to Chapter 1-B
HealthSpring's methodology for calculating allocated corporate costs, totaling $15,355,392, reported on its financial statistical reports for
fiscal year 2015 was not in compliance with the Commission's requirements. The Commission's Uniform Managed Care Manual requires an MCO to ensure that:
• It develops a written allocation methodology policy.
• Costs clearly represent specifically identified operating services provided.
• Services directly benefit the Commission or its clients/customers.
However, HealthSpring did not have a written allocation methodology policy in place for fiscal year 2015 as required.
In addition, its methodology for calculating allocated corporate costs included certain costs that were not allowable by the Commission.
As a result, HealthSpring included $2,881,358 in unallowable costs in the allocated corporate cost it reported (see Table 4).
Jump to Chapter 1-C
HealthSpring did not consistently maintain documentation to support the reasonableness and appropriateness of the vendor payment amounts that it
used to calculate and report its legal and professional services costs, totaling $3,680,042, on its financial statistical reports for fiscal year 2015.
Auditors tested a sample of 26 vendor payments that totaled $934,227 and identified unallowable costs and questioned costs (see Table 5).
Specifically, 10 (38.5 percent) of those 26 vendor payments tested were for services provided in fiscal year 2014 but paid for in fiscal year 2015.
Those 10 payment totaled $163,997. The Commission’s Uniform Managed Care Manual requires administrative expenses to be reported based on the date
incurred rather than the date paid. It also requires prior quarters’ data to be updated as needed.
In addition, 6 (23.1 percent) of the 26 vendor payments tested did not have documentation to show that the vendor payment was related to STAR+PLUS
(see text box for information about the sample tested). Those 6 payments totaled $359,912. The Commission’s Uniform Managed Care Manual specifies
that a cost is allowable only to the extent of the benefits the Commission received under the contract.
Jump to Chapter 1-D
HealthSpring reported inaccurate information about its affiliate companies involved with the services provided for its STAR+PLUS contracts with the Commission.
The Commission’s contract requires that an MCO submit an annual affiliate report that provides organizational and financial information on affiliate companies
involved with the services provided under managed care contracts.
In addition, HealthSpring did not provide the Commission with copies of its contracts with its affiliate companies that provide administrative services under
its STAR+PLUS contracts with the Commission. The Commission’s contract specifies that an MCO must submit to the Commission a copy of its contract agreements with affiliate companies.
Auditors also identified payments to affiliate companies that did not have documentation to support amounts paid or were not calculated according to contract requirements.
The Commission uses the affiliate information and copies of affiliate company contracts with MCOs to support its monitoring efforts to ensure the transparency and reasonableness of an MCO’s related-party transactions.
Jump to Chapter 1-E
Auditors tested a sample of 61 post-payment adjustments to medical claims, totaling $52,209 that HealthSpring reported to the Commission
(see text box for more information about the claims tested). The post-payment adjustments tested resulted in HealthSpring reversing the
original payment amount to a provider. For 27 (44 percent) of 61 medical claims tested, totaling $32,067, HealthSpring did not record the
reason it made the post-payment adjustment in its claims processing system. The Commission’s Uniform Managed Care Claims Manual requires an
MCO’s claims system to maintain adequate audit trails and report accurate medical provider service data on paid medical claims to the Commission.
In addition, HealthSpring did not document the reason it adjusted a claim on the Explanation of Payment (EOP) for 9 (33 percent) of those 27 medical claims.
An EOP notifies a medical provider about the processing status of a medical claim that HealthSpring has received. Those 9 medical claims totaled $12,780.
For the other 18 medical claims tested, the EOP included a code that indicated only that the medical claim was adjusted.
The code did not provide any details about the reason the medical claim was adjusted.
Jump to Chapter 2-A
Auditors tested a sample of 77 paid medical claims that totaled $786,889 (see text box for more information about the claims tested).
HealthSpring did not process 15 (20 percent) of the 77 paid medical claims tested within 30 days of receipt of a clean claim as required (see Table 6).
Those 15 claims totaled $386,779.
Jump to Chapter 2-B