Blue Cross Blue Shield of North Carolina (BCBSNC) has been the talk of the town since a state auditor report claimed the insurer's inefficient fraud recovery efforts led to the State Health Plan overpaying $49 million in medical claims. North Carolina Auditor Beth Wood also accused the state's largest insurer of failing to take any actions to recoup those overpayments.

In response, BCBSNC, which administers the State Health Plan, said the auditor report was full of inaccuracies and incomplete information. To properly flesh out some of the details related to these allegations, I spoke with BCBSNC spokesperson Lew Borman, who shed some light on the issue from the payer's perspective.

FierceHealthPayer: What is BCBSNC's reaction to the state auditor report?

Borman: BCBSNC values our relationships with both the State Health Plan and the State Auditor's Office. We believe discussions about how to improve efficiency within the Plan will be most effective if they are based on accurate, current, and complete information. We recognize the importance of continuously improving processes including overpayment and recovery rates. The report from the auditor is dated and we have made numerous improvements in cooperation with the State Health Plan.

FHP: Does BCBSNC believe some statements and conclusions in the auditor report were inaccurate and, if so, can you explain those inaccuracies?

Borman: There are several aspects of the report that are inaccurate. Overall, the report is very dated and doesn't reflect the significant progress BCBSNC and the State Health Plan have made in recent years.

The report correctly states that a previous auditor identified $48.6 million in potential overpayments by the State Health Plan. The auditor's report later says the state should expect to receive $72 to $120 million in annual recoveries. It would be impossible to achieve $72 - $120 million in recoveries from only $48.6 million in potentially overpaid claims.

In addition, it's important to note that the $48.6 million (approximately 1 percent of claims paid) potential overpayment rate is one of those instances in which BCBSNC performs significantly better than the industry standards cited in the audit.

In addition, as any payer knows, errors such as overpayment and coordination of benefits can occur for many reasons, not only from claims processing but also from provider or customer errors. BCBSNC doesn't profit from the correction of these errors. Rather, there is a fee paid to vendors who specialize in investigating and recovering those funds. This is standard industry practice.

In addition, the report mistakenly alleges a period in 2010 when no recovery effort was in place. In fact, our vendor contracts in place in 2010 and 2011 covered the entire service period, including transition.

FHP: What factors does BCBSNC believe contributed to the overpayments?

Borman: The report focuses on "potential" overpayments but doesn't deal with the fact that BCBSNC processes over $1.8 billion in claims annually, with potential overpayments being around 1 percent of that total. Overpayments and coordination of benefit payments can occur for many reasons, not just claims processing.

FHP: How does BCBSNC recoup any overpayments?

Borman: BCBSNC put in place several vendors over the past few years to deal with potential errors in the process. These vendors focus on two critical items: the recovery process and discovering errors prior to payment. Through June this year, we've recovered nearly $10 million dollars in recoveries.

FHP: What steps has BCBSNC taken to address the overpayment issue?

Borman: BCBSNC has made significant efforts to improve recoveries and we believe 1 percent of claims identified as "potential" overpayment shows the progress we are making in this area.

BCBSNC has vendors in place who are dedicated to both recoveries and prior payment strategy identifying possible incorrect and fraudulent claims. In addition, BCBSNC has its own Special Investigation Unit in place that identifies potential issues, claims problems, and fraudulent claim patterns. We work closely with the Office of the Attorney General, State Bureau of Investigation, the Department of Insurance, and other law enforcement agencies in our investigative work.

FHP: Has BCBSNC been in contact with the state auditor's office regarding this report?

Borman: BCBSNC has addressed our concerns in a letter to the North Carolina State Auditor. Our letter to Ms. Wood was necessary because the report audit was structured in such a way that we didn't have the opportunity to respond as part of the formal report.

FHP: How does BCBSNC respond to Wood's statement that she doesn't have access to copies of BCBSNC health provider contracts?

Borman: Our provider contracts are proprietary and state that we will not share reimbursement terms with any third party.

- Dina (@HealthPayer)