Follow Up Review of Administrative Costs Claimed by Blue Cross Blue Shield of Florida for Fiscal Years 1995 Through 1998

EXECUTIVE SUMMARY:

The objective of this audit was to review the records and supporting documentation relating to $104.8 million of administrative costs set-aside in a prior audit of costs claimed by Blue Cross & Blue Shield of Florida (Contractor) during the period from fiscal years (FY) 1995 through 1998 and to determine if the costs were reasonable, allocable and allowable for Medicare reimbursement.

The Contractor was able to support the $104,836,580 in costs previously set-aside in our earlier audit (report number A-04-99-05561, issued in July 2002).  We found the Contractor to be much more responsive to our audit requests for supporting documentation.  For the most part, the FY 1998 costs we reviewed were adequately supported, their allocation to Medicare was reasonable, and the costs were considered allowable.  We found certain Return on Investment (ROI) costs claimed to be unallowable for reimbursement ($1,277,247).  However, we also concurred with the Contractor's revised claim for additional ROI reimbursement totaling $1,433,237.

Additionally, information presented by the Contractor about the method of cost allocation in the prior years (FY 1995-1997) provided assurance that we could apply our FY 1998 results to the prior years.  Therefore, we recommend that $104,992,570 be allowed for Medicare reimbursement purposes.  This amount represents the original amount set-aside of $104,836,580 less $1,277,247 for non-allowable ROI costs plus $1,433,237 for additional allowable ROI costs.

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