Ohio BWC medicine spending oversight called lax

6/8/2007

COLUMBUS - The top internal auditor at the Ohio Bureau of Workers' Compensation said yesterday that it is unclear if $637 million that has passed through the agency's prescription drug program since 2002 was properly spent by an outside company hired to administer pharmacy benefits to Ohio's injured workers.

The company, ACS State Healthcare, told the bureau that the millions have flowed into one bank account, mixed in with money from 12 other customers around the nation that have hired the firm to manage prescription benefits, according to an internal audit.

The audit found ACS has not verified banking statements against accounting records for bureau funds, which are used to reimburse pharmacies or outpatient injured workers for prescription drug bills.

"The status of BWC funds designated to providers or injured workers is unknown," the internal audit said. "There is significant risk of error, loss, or misappropriation of BWC funds.

"There is also increased risk that providers and injured workers may not be paid [in a timely fashion] or correctly," it said.

Asked if he was sure that the bureau's $637 million had been properly handled, Joe Bell, the bureau's chief of internal audit, said yesterday: "I don't know we can say one way or another."

The accounting concerns are among numerous issues raised in the 44-page audit. The audit offers another stinging indictment of the bureau's management and operations, which have been the focus of scandal for more than two years.

The bureau in 2002 awarded a four-year, $4.5 million contract to ACS, which is based in Dallas. The firm also was the successful bidder in 2005 for a two-year, $4.75 million contract. ACS did not respond to questions from The Blade yesterday.

Pharmacy benefit managers like ACS State Healthcare are contracted to administer prescription drug programs for employers and health insurance companies. They are designed to negotiate large discounts and invest in leading-edge technology, often resulting in lower costs, the audit states.

In an April, 2005, memo, James Conrad, then the bureau's CEO-administrator, informed Gov. Bob Taft that ACS would continue to receive the prescription-benefits manager contract.

"The PBM acts as a conduit from the bureau to the pharmacist who is filling a script for an injured worker. .... The new contract includes updated stipulations including a preferred-drug list and other cost-saving initiatives. These steps should help further contain rising medical costs, as they are expected to save between $4 million to $6 million per year," he wrote.

But the bureau's contract with ACS - which comes under fire in the audit - didn't require a single bank account for BWC funds and the scandal-plagued agency did not audit the firm until late last year.

Bob Coury, chief of medical policy and compliance, said it will be important to examine the contract with ACS and to improve it.

Bureau officials yesterday said they didn't know who wrote the contract with ACS and wouldn't say whether any agency employees would be held accountable.

Mr. Bell said it is unclear why ACS was not required in the current contract to keep a separate bank account for the bureau's funds. Mr. Bell said the ACS is now "moving toward establishing a separate account" for the bureau so the accuracy of the agency's transactions can be verified.

In December, ACS - citing "privacy concerns" - wouldn't show bank statements to the bureau's internal auditors when they visited the company's office in Atlanta.

After internal auditors returned from Atlanta to Ohio, ACS sent the bureau copies of checks that cleared the account but did not provide records of deposits, withdrawals, fees, and interest.

The internal audit also found that ACS had $319,958 in uncashed checks - mainly duplicate payments or overpayments - that should have been returned to the bureau.

The report recommends that the bureau "improve oversight to ensure all funds pass through the account" in a timely way.

ACS also has not conducted 25 on-site reviews of pharmacies - as required by the contract - because the bureau failed to approve the process of how the reviews should be done, the internal bureau audit states.

"The performance of the pharmacies is currently unknown," the report states.

The internal audit cites a 2006 study that found many of the most used drugs in the workers' compensation system don't have a generic equivalent.

The bureau's contract with ACS prohibits the company from collecting rebates - which the bureau's management says is designed to maximize the use of generic drugs.

Bureau officials could save an estimated $9 million a year by receiving rebates through ACS when it buys brand-name drugs without a generic equivalent, the internal audit said.

"The vendor may be receiving rebates, discounted reimbursement rates, or other incentives that are not passed through to the BWC. These practices may result in a lost opportunity for cost savings, which may lower employer premiums," the internal audit said.

The bureau has sent a letter to ACS asking it to certify that it has not received any rebates.

Contact James Drew at:

jdrew@theblade.com

or 614-221-0496.