Audit of the Office of Medicaid (MassHealth)—Review of Claims Paid for Pharmacy Drugs Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Office of Medicaid (MassHealth)—Review of Claims Paid for Pharmacy Drugs.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor (OSA) has conducted a performance audit of certain activities of MassHealth for the period January 1, 2015 through June 30, 2017.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.

Below is our audit objective, indicating the question we intended our audit to answer, the conclusion we reached regarding the objective, and where the objective is discussed in the audit findings.

Objective	Conclusion
Does MassHealth pay for pharmacy drugs in accordance with its regulations?	Partially; see Finding 1

Methodology

From MassHealth’s Pharmacy Online Processing System (POPS), which is used for processing pharmacy drug claim data and administered by the pharmacy program staff at the University of Massachusetts Medical School’s Commonwealth Medicine division, we obtained claim data for non-compounded drugs that pharmacies supplied to MassHealth members during the audit period. It was also necessary to obtain pharmacy claims for drugs that were dispensed in 2014 to track the prescription histories for certain audit procedures.

We also interviewed MassHealth and MassHealth Pharmacy Program officials and other key staff members to gain an understanding of internal controls over POPS that we deemed significant to the audit objective. In addition, we visited five pharmacies to learn about the procedures they followed and the data systems they used to fill drug prescriptions for MassHealth members and submit drug claims to MassHealth for review.

To assess the reliability of the data, we relied on the work of other auditors who examined the information-system controls for POPS by reviewing applicable reports, known as Service Organization Control 1 reports, for 2015, 2016, and 2017. We also performed the following procedures: (1) testing for missing data, (2) testing for values outside designated ranges, and (3) reconciling record counts. Based on these procedures, we determined that POPS and the pharmacy drug claim data were sufficiently reliable for the purposes of this report.

To design tests to detect overpayments to pharmacies for improper drug claims, it was necessary to extend our audit period back through January 1, 2014 to account for drugs dispensed before January 1, 2015, the start of our audit. We next performed data analytics to compile all drug fills⁵ related to each prescription by matching six data elements found in MassHealth’s pharmacy drug claim data: (1) member identification number, (2) prescriber national provider identification number, (3) prescribed date, (4) National Drug Code,⁶ (5) pharmacy national provider identification number, and (6) prescription number (a pharmacy-assigned control number). We then calculated the number of fills for each prescription (calculated fill number).

Using the results of the above compilation, we performed  data analytics to identify drug claims improperly paid during the period January 1, 2015 through June 30, 2017. We filtered drug fill compilation data to identify the following:

• all drug claims in which the calculated fill number exceeded the number of refills authorized by the prescriber
• all drug claims with back-to-back emergency fills
• all over-the-counter drugs (except insulin⁷) supplied to MassHealth members living in nursing facilities or skilled nursing facilities

After we identified overpayments to pharmacies for drug claims, we performed audit procedures to ensure that there was no overlap among the improper payments described in our findings.

5.    The number of drug fills is the number of times a drug has been dispensed from the same prescription.

6.    National Drug Codes are unique 10-digit product identifiers for drugs that indicate the manufacturer or distributor, the product strength and dose, and the package size and type.

7.    Insulin, a drug used to manage blood sugar levels for patients with diabetes, is a MassHealth-covered drug for members in institutional settings.

Date published:	August 29, 2019