CGS Administrators, LLC, Claimed Some Unallowable Medicare Excess Plan Costs Through Its Incurred Cost Proposals

During our audit period, CGS was a subsidiary of BCBS South Carolina, whose home office is in Columbia, South Carolina. CGS performed Medicare work upon being awarded the MAC contracts for Medicare Durable Medical Equipment (DME) Jurisdiction C and Medicare Parts A and B Jurisdiction 15 (including home health and hospice services), effective September 27, 2006, and July 8, 2010, respectively. , CGS continues to perform Medicare work for DME Jurisdiction C (re-awarded August 31, 2012) and Medicare Parts A and B Jurisdiction 15. During our audit period, CMS and BCBS South Carolina entered into an agreement called the “Advance Agreement on the Computation of Nonqualified Defined-Benefit Pension Plan Costs for Periods Beginning January 1, 2015” (agreement). This agreement allowed BCBS South Carolina to change its accounting methodology from a pay-as-you-go to an accrual method. This agreement also closed costs prior to January 1, 2015. Starting with January 1, 2015, the Excess Plan would, under the terms of this agreement, have three Medicare segments: (1) Palmetto Government Benefits Administrator, LLC (Palmetto), (2) Companion Data Services, LLC (CDS), and (3) Partial Medicare. This report addresses CGS’s compliance with the provisions of the Federal requirements and its Medicare contracts in claiming Excess Plan costs. We are addressing the Excess Plan costs claimed for the Palmetto and CDS Medicare segments in separate audits. The disclosure statement that CGS submits to CMS states that CGS uses pooled cost accounting. Medicare contractors use pooled cost accounting to calculate the indirect cost rates (whose computations include pension plan, Excess Plan, Supplement Executive Retirement Plan III, and PRB plan costs) that they submit on their ICPs. Medicare contractors use the indirect cost rates to calculate the contract costs that they report on their ICPs. In turn, CMS uses these indirect cost rates in determining the final indirect cost rates for each contract. Blue Cross Blue Shield of South Carolina Excess PlanBCBS South Carolina sponsors the Excess Plan. The purpose of the Excess Plan is to provide benefits in excess of the limits imposed by the Employee Retirement Income Security Act of1974 for participants in BCBS South Carolina’s qualified defined-benefit plan.