Federal Reports

The Postal Inspection Service established the Proper Handling of Suspected Marijuana Parcels Mandatory Stand-Up Talk in FY 2019 as guidance for postal employees on how to handle mail suspected of containing illicit drugs (suspected mail). In addition, the Postal Inspection Service’s Administrative Nonmailability Protocol policy describes procedures for recording referred suspected mail by postal employees. This policy was established primarily to remove marijuana from the mailstream. Our objective was to evaluate the U.S. Postal Inspection Service’s controls for handling mail suspected of containing illicit drugs at U.S. Postal Service facilities.

This Office of Inspector General (OIG) Comprehensive Healthcare Inspection Program report provides a focused evaluation of the quality of care delivered in the inpatient and outpatient settings of the Atlanta VA Health Care System and multiple outpatient clinics in Georgia. The inspection covers key clinical and administrative processes that are associated with promoting quality care. This inspection focused on Leadership and Organizational Risks; Quality, Safety, and Value; Medical Staff Privileging; Environment of Care; Medication Management: Long-Term Opioid Therapy for Pain; Mental Health: Suicide Prevention Program; Care Coordination: Life-Sustaining Treatment Decisions; Women’s Health: Comprehensive Care; and High-Risk Processes: Reusable Medical Equipment.The healthcare system leaders were relatively new to their positions and had been working together as a team for less than two months. Employee and patient survey results were generally worse than the VHA averages, indicating multiple opportunities for leaders to improve employee and patient satisfaction. The OIG noted concerns with the healthcare system’s under-reporting of sentinel events and medication administration processes in the inpatient mental health unit. Although leaders were generally knowledgeable about VHA data and/or system-level factors contributing to specific poorly performing measures, these leaders have opportunities to improve quality of care and efficiency.The OIG issued 23 recommendations for improvement in seven areas:(1) Quality, Safety, and Value • Committee processes• Protected peer reviews• Root cause analysis processes(2) Medical Staff Privileging• Professional practice evaluations• Provider exit reviews(3) Medication Management• Aberrant behavior risk assessments• Urine drug testing• Informed consent(4) Mental Health• Outreach activities• Staff training(5) Women’s Health• Women’s health primary care providers• Women veterans health committee membership(6) High-Risk Processes• Storage area temperature and humidity• Staff training(7) Incidental Finding• Bar code medication administration processes

During our audit period, Cahaba GBA was a subsidiary of Blue Cross and Blue Shield of Alabama (BCBS Alabama), whose home office is in Birmingham, Alabama. Cahaba GBA administered the Medicare Parts A and B Jurisdiction 10 MAC contract under cost reimbursement contracts with CMS. The Jurisdiction 10 MAC contract ended on January 11, 2014. Cahaba GBA continued to perform Medicare work after being awarded the MAC contract for Medicare Parts A and B Jurisdiction J (formerly Jurisdiction 10) effective September 17, 2014. BCBS Alabama has two Medicare segments that participate in its PRB: (1) Cahaba GBA and (2) Cahaba Safeguard Administrators, LLC (Cahaba CSA). On January 1, 2013, BCBS Alabama created the Healthcare Business Solutions, LLC (HBS), intermediate home office segment (HBS segment) by transferring assets into it from the Cahaba GBA and Cahaba CSA segments. This report addresses the allowable Medicare PRB costs claimed by Cahaba GBA, under the provisions of its MAC contracts and CAS- and FAR-covered contracts. We are addressing Cahaba CSA’s compliance with the MAC contracts in a separate audit. Cahaba GBA claimed PRB costs using the accrual basis of accounting.The disclosure statement that Cahaba GBA submits to CMS states that Cahaba GBA uses pooled cost accounting. Medicare contractors use pooled cost accounting to calculate the indirect cost rates (whose computations include pension and PRB 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. Medicare Reimbursement of Postretirement Benefit CostsCMS reimburses a portion of the Medicare contractors’ annual PRB costs, which are funded by contributions that contractors make to their PRB plans. The PRB costs are included in the computation of the indirect cost rates reported on the ICPs. In turn, CMS uses indirect cost rates in reimbursing costs under cost-reimbursement contracts. Federal regulations (FAR 31.205-6(o)) require that to be allowable for Medicare reimbursement, PRB costs must be (1) measured, assigned, and allocated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 715-60 (formerly Statement of Financial Accounting Standards (SFAS) 106) and (2) funded as specified by part 31 of the FAR. In claiming costs, contractors must follow cost reimbursement principles contained in the FAR and the Medicare contracts. Incurred Cost Proposal AuditsAt CMS’s request, Davis Farr, LLP (Farr), performed audits of the ICPs that Cahaba GBA submitted for CYs 2014 through 2016. The objectives of the Farr ICP audits were to determine whether costs were allowable in accordance with the FAR, the U.S. Department of Health and Human Services Acquisition Regulation, and the CAS. For our current audit, we relied on the Farr ICP audit findings and recommendations when computing the allowable pension costs discussed in this report. We incorporated the results of the Farr ICP audits into our computations of the audited indirect cost rates, and ultimately the pension costs claimed, for the contracts subject to the FAR. CMS will use our report on allowable pension costs, as well as the Farr ICP audit reports, to determine the final indirect cost rates and the total allowable contract costs for Cahaba GBA for CYs 2014 through 2016. The cognizant Contracting Officer will perform a final settlement with the contractor to determine the final indirect cost rates. These rates ultimately determine the final costs of each contract.

During our audit period, Cahaba CSA was a subsidiary of Blue Cross and Blue Shield of Alabama (BCBS Alabama), whose home office is in Birmingham, Alabama. The Cahaba CSA Medicare segment administered program safeguard functions under a contract with CMS. With the implementation of the Health Insurance Portability and Accountability Act of 1996 and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), CMS established the Medicare Integrity Program zones. CMS created seven program integrity zones based on the newly-established MAC jurisdictions. CMS awarded Zone Program Integrity Contactor (ZPIC) contracts for Zone 3 and Zone 6 to Cahaba CSA effective April 8, 2011, and September 30, 2011, respectively. BCBS Alabama has two Medicare segments that participate in its PRB: (1) Cahaba Government Benefits Administrators (Cahaba GBA) and (2) Cahaba CSA. On January 1, 2013, BCBS Alabama created the Healthcare Business Solutions, LLC (HBS), intermediate home office segment (HBS segment) by transferring assets into it from the Cahaba GBA and Cahaba CSA segments. This report addresses the allowable Medicare PRB costs claimed by Cahaba CSA under the provisions of its MAC contracts. We are addressing Cahaba GBA’s compliance with the MAC contracts in a separate audit. Cahaba CSA claimed PRB costs using the segmented accrual basis of accounting.The disclosure statement that Cahaba CSA submits to CMS states that Cahaba CSA uses pooled cost accounting. Medicare contractors use pooled cost accounting to calculate the indirect cost rates (whose computations include pension and PRB 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. Medicare Reimbursement of Postretirement Benefit CostsCMS reimburses a portion of the Medicare contractors’ annual PRB costs, which are funded by contributions that contractors make to their PRB plans. The PRB costs are included in the computation of the indirect cost rates reported on the ICPs. In turn, CMS uses indirect cost rates in reimbursing costs under cost-reimbursement contracts. Federal regulations (FAR 31.205-6(o)) require that to be allowable for Medicare reimbursement, PRB costs must be (1) measured, assigned, and allocated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 715-60 (formerly Statement of Financial Accounting Standards (SFAS) 106) and (2) funded as specified by part 31 of the FAR. In claiming costs, contractors must follow cost reimbursement principles contained in the FAR and the Medicare contracts. Incurred Cost Proposal AuditsAt CMS’s request, Davis Farr, LLP (Farr), performed audits of the ICPs that Cahaba CSA submitted for CYs 2014 through 2016. The objectives of the Farr ICP audits were to determine whether costs were allowable in accordance with the FAR, the U.S. Department of Health and Human Services Acquisition Regulation, and the CAS. For our current audit, we relied on the Farr ICP audit findings and recommendations when computing the allowable pension costs discussed in this report. We incorporated the results of the Farr ICP audits into our computations of the audited indirect cost rates, and ultimately the pension costs claimed, for the contracts subject to the FAR. CMS will use our report on allowable pension costs, as well as the Farr ICP audit reports, to determine the final indirect cost rates and the total allowable contract costs for Cahaba CSA for CYs 2014 through 2016. The cognizant Contracting Officer will perform a final settlement with the contractor to determine the final indirect cost rates. These rates ultimately determine the final costs of each contract.

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $35 million contract.In our opinion, the company's cost proposal was overstated. Specifically, we found the (1) proposed total labor markup rate, for recovery of the company's indirect costs, was overstated based on its most recent actual costs, (2) labor markup rates included profit, and (3) proposed performance fee was overstated based on the request for proposal's (RFP) fee limits. We estimated TVA could avoid about $2.9 million over the planned $35 million contract by negotiating (1) reduced total labor markup rates to more accurately reflect the company's recent actual costs, (2) removal of the profit included in the labor markup rates, and (3) a reduced performance fee to comply with the RFP's fee limits. In addition, we found the company did not comply with the RFP's requirement related to labor rate ranges.(Summary Only)