Stronger Management Needed To Improve Employee Organization Health Plans' Payment Practices

HRD-79-87: Published: Sep 7, 1979. Publicly Released: Sep 17, 1979.

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The Office of Personnel Management (OPM) has not done an effective job of guiding and overseeing the Employee Organization Plans participating in the Federal Employees Health Benefits program. OPM has allowed the plans to make claim payments without determining whether the claims represented sound comprehensive systems to determine the reasonableness of charges as the contracts require.

The Plans have paid claims without having information necessary to demonstrate medical necessity. Paid claims were found that: (1) appeared to represent noncovered routine physical examinations; (2) had been paid with no indication of symptoms or diagnoses; (3) had diagnoses or symptoms that were not clearly related to the tests provided; (4) were for hospitalizations that appeared either unnecessary or too long; and (5) were paid as emergencies when the patients' diagnoses did not indicate emergencies. The Plans' payment system did not fully comply with the contracts. The Plans are required to develop reasonable charge allowances and pay only up to those amounts except in unusual circumstances. OPM has been aware of some of these problems, but it has provided little formal guidance to help the plans determine medical necessity or reasonable allowances.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should: (1) provide guidance to Employee Organization Plans participating, or applying for participation, in the Federal Employees Health Benefits program on the contractual provisions of medical necessity, and customary and reasonable allowances; (2) establish means for increased coordination between program auditors and managers to provide oversight of the Plans' operations; (3) require program auditors to evaluate the Plans' development and application of medical necessity criteria and customary and reasonable payment systems as part of their periodic audits; (4) require adherence to the medical necessity and customary payment provisions of the contracts as conditions of the Plans' continued participation in the program; and (5) require Plans applying for admission to the program to demonstrate their potential to adhere to the medical necessity and customary and reasonable payment provisions of program contracts as a condition for admission.

    Agency Affected:


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