OIG releases audit of Driscoll administrative expenses

The OIG conducted an audit of the Driscoll Health Plan Administrative Expenses Financial Statistical Report (FSR) process for fiscal year 2019. Driscoll was selected for audit based on risks identified through an OIG analysis of its FSR.

The FSR process is a reporting mechanism used by managed care organizations (MCOs) to provide financial information, including administrative operations expenses, related to the Medicaid programs in which the MCO participates. MCOs are required to submit quarterly and annual FSRs for each program and every service area for which the MCO provides coverage, and a separate FSR to report administrative expenses.

The audit objective was to determine whether Driscoll accurately reported selected administrative expenses to HHS. The audit scope was Driscoll’s 334-day 2019 administrative expenses FSR and related internal controls over the preparation of the administrative expenses FSR.

Driscoll reported unallowable and unsupported costs on its 2019 administrative expenses FSR, and it misclassified other costs. These errors occurred because Driscoll did not establish an effective system of internal controls over the preparation of its administrative expenses FSR.

Specifically:

• Driscoll’s 2019 administrative expenses FSR included (a) $606,183 in unallowable and unsupported expenses and (b) $288,243 in allowable expenses reported to incorrect administrative expenses FSR line items.
• Driscoll did not conduct a true-up of its affiliate third-party administrator costs as required. As a result, the OIG could not determine whether the budgeted amount of $2,839,425 reported as a corporate allocation on the 2019 administrative expenses FSR accurately represented the affiliate third-party administrator’s actual expense.

In addition, Driscoll did not have documented policies and procedures to prepare the administrative expenses FSR, including a secondary review process, to help ensure the 2019 administrative expenses FSR submitted to HHS was accurate, reported only allowable expenses, and was supported by documentation.

The OIG offered recommendations to Driscoll, which, if implemented, will address unallowable and unsupported expenses reported on Driscoll’s administrative expenses FSR for 2019 and other years.

Read the full report in the OIG’s Audit section.