U.S. flag

An official website of the United States government

Dot gov

The .gov means it's official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.


The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Skip to Content

Department of Health and Human Services

Office of Inspector General -- AUDIT

"Assist Audit of HCFA's FY 1997 Financial Statements at Palmetto Government Benefits Administrators," (A-04-98-03009)

July 24, 1998

Complete Text of Report is available in PDF format (2.75 mb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


We performed our audit work at Blue Cross and Blue Shield of South Carolina (BCBSSC) doing business as Palmetto Government Benefits Administrators (PGBA) serving as both the fiscal intermediary (FI) and carrier for the State of South Carolina as well as the DMERC and regional home health intermediary (RHHI) for several States.

Our audit objective is to assist in expressing an opinion on HCFA's Fiscal Year (FY) 1997 combined financial statements and to report on their compliance with laws and regulations. An aspect of overall work is to determine whether the Medicare fee-for-service benefit payments expenses are made in accordance with the provisions of Title XVIII and implementing regulations in Title 42 of the U.S. Code of Federal Regulations (42 CFR). Specifically, we were to determine if services were: (1) furnished by certified Medicare providers to eligible beneficiaries; (2) reimbursed by Medicare contractors in accordance with Medicare laws and regulations; and (3) medically necessary, accurately coded, and sufficiently documented in the beneficiaries' medical records.


We selected a stratified random sample of 50 beneficiaries for whom PGBA had adjudicated 493 claims during the fourth quarter of FY 1997 - our audit period. The PGBA paid $422,798 for these claims. With the assistance of PGBA and peer review organizations' medical review personnel, we identified overpayments totaling $29,451 and underpayments totaling $92 for these claims. The overpayments and underpayments occurred for various reasons, including insufficient documentation, incorrect coding of procedures, and lack of medical necessity. We also identified three durable medical equipment (DME) payment error which may indicate the need for PGBA to improve its claims processing edits.

Other independent auditors under contract with the Office of Inspector General identified reportable conditions with respect to electronic data processing (EDP) controls and non-claims activities and have made recommendations to PGBA in separate reports.


We recommend that PGBA:

- initiate recovery of the overpayments, reimburse the underpayments, and periodically provide us with the status of recovery and reimbursement actions;

- analyze the DME errors noted and make the necessary improvements in their claims processing edits to prevent these or similar types of payment errors from reoccurring; and

- address the recommendations made by the independent auditors and provide us a copy of such responses with respect to EDP controls and non-claims activities.

Comments by PGBA Officials

The PGBA officials concurred with our findings and recommendations and stated they were in the process of analyzing errors noted in the DME claims and will make any improvements in DME processing edits resulting from the analysis. They also have addressed the recommendations made by the independent auditor with respect to EDP controls and non-claims activities.