NASHVILLE — At least $17.58 million in medical provider overcharges were approved by third-party administrators of Tennessee's State Group Insurance Program over a three-year period, according to a private data firm's preliminary examination of $748 million worth of payments on professionals' claims.

Yet another $1.3 million in overcharges were paid by state and local government workers as well as retirees enrolled in the state's program, says ClaimInformatics, the Connecticut-based analytics firm that conducted the initial review of payments and billing involving medical professionals such as physicians.

ClaimInformatics' examination and findings, outlined in two brief reports in June, come some eight months after Chattanooga-based BlueCross BlueShield of Tennessee and Cigna Health Insurance — the insurers that contract with the state to administer the plan — filed federal lawsuits to block Tennessee Gov. Bill Lee's administration from releasing their pricing information.

That followed efforts by state Rep. Martin Daniel, a Knoxville Republican, to get the information amid questions he and others had on whether the companies were wasting taxpayer money by overpaying providers.

ClaimInformatics, which performed the work without charge to the state, did not look at potential overpayment involving facilities such as hospitals.

But the firm or a competitor soon could be doing exactly that with Tennessee Attorney General Herbert Slatery and Comptroller Justin Wilson now working on a solicitation for proposals from contractors for a full-fledged formal audit of all claims.

ClaimInformatics' review says it looked at 5.2 million professional claims paid on behalf of the state from the beginning of 2017 through the end of 2019.

The $18.88 million amount represents overcharges on 149,153 claims, the company says.

"These real results were discovered by flagging payments made out of compliance with each carrier's own coding policies," the company wrote in one of two June 9 presentations to state officials. "These findings relate to individual claims and are not a sampling with extrapolation. Further, given we are only one week into the project, the results by no means represent the entire universe of overcharges that will be identified as we have more time to conduct further analysis."

Overcharges were "primarily the result of inaccurate and incorrect coding of service codes due to unbundling (which is also known as fragmentation)," ClaimInformatics wrote.

Martin, co-chair of the General Assembly's Fiscal Review Committee, shared the ClaimInformatics report during a fiscal review committee meeting last week as the panel considered a minor, unrelated tweak in Cigna's state contract.

"At least $17.5 million dollars — rock solid, actionable claims — have been paid erroneously under our state health care plan over the past three years," Daniel said, citing that as a reason he could not agree to vote yes on renewing a $2 million Cigna-related contract. The change was approved by his colleagues.

ClaimInformatics' preliminary report also flagged over 96,000 claims in which it says the amount paid by BlueCross exceeded the amount providers actually billed by $1.88 million. The company said it would analyze that further to determine the "underlying drivers."

The analytics firm also said 88% of emergency room visits were coded for levels four or five — which in health insurance billing constitute the highest and most expensive levels of emergency room care.

"That is way in excess of the average," Daniel said during last week's committee meeting. "The average is about 60% [of emergency room visits] being in that four or five code. Hopefully we're going to have a full audit of the state health care plan and performance of the third party administrators under the state health care plan very soon."

Joan Williams, public information officer for the state benefits administration that oversees the plan and contracts with the insurers to administer it, said in an email that the agency was not given an opportunity to "vet or validate" the preliminary report.

"We have not been a party to these discussions and disagree with their preliminary findings," Williams said.

As the state's third-party administrators of the plan, BlueCross BlueShield of Tennessee and Cigna manage insurance benefits for an estimated 140,971 employees for public entities ranging from state government to K-12 education and public higher education as well as 42,997 Medicare-eligible retirees.

The total, which also includes spouses and children, came to nearly 300,000 people, according to the Tennessee State Group Insurance Program's 2018 annual report, issued last December.

Williams said the agency welcomes participating in the full audit, saying, "Benefits Administration always strives to protect the integrity of our plan. Benefits Administration supports conducting additional review of claims and billing above what we currently do, as there may be some savings opportunities."

Administrators respond

Roy Vaughn, chief communications officer for BlueCross BlueShield of Tennessee, said in an emailed statement that the insurer has "served the State Employee Health Plan for many years, and we work hard to deliver affordable health benefits for state employees and their families.

"We just received this report, which we understand is preliminary and requires validation. We were never contacted by the company producing this report. We think it is important to learn about the entity that prepared the report and their experience in this field, the data that was analyzed, the methodology undertaken and the basis for the purported findings — all of which will be important in understanding the report and putting it into context," Vaughn said.

"Regardless, we remain committed to responsible stewardship on behalf of the state of Tennessee and their health plan members," Vaughn added.

Cigna spokeswoman Holly Fussell shared a similar sentiment.

"We have been privileged to serve the state of Tennessee and their employees and to work to make health care affordable, predictable and simple for all Tennesseans. We are confident in the value we provide; we cannot comment specifically on the report as we are in the process of reviewing it," Fussell said by email.

Senate Finance Committee Chairman Bo Watson, a Hixson Republican who is the director of therapy services at Parkridge Medical Center in Chattanooga, called the review superficial, adding that "it does give us some idea of places we might begin to look to see where overpayment — and underpayment — may have occurred."

Watson noted third-party administrators such as BlueCross and Cigna "are also known to underpay providers as well. We are interested in ensuring that in our benefits program that we're paying people properly and that people are coded appropriately. And that's kind of what the report just tells me."

Calling ClaimInformatics' examination a "snapshot," House Insurance Committee Chair Robin Smith, R-Hixson, said, "I guess I would equate it to a little biopsy to make sure we need to move forward."

Noting that "it does appear there are some monies that again could probably be refunded back to the state of Tennessee," Smith said that she, Daniel and House Speaker Cameron Sexton, R-Crossville, "want to make sure that something of this level of expenditure is done with integrity but also with tremendous stewardship so taxpayers can trust us."

There is no intent to reveal BlueCross or Cigna's proprietary information, she said, also emphasizing, "there's no alleged wrongdoing. I just think that within any big entity whether government or business processes are not as routinely or regularly implemented."

Slatery spokeswoman Samantha Fisher said by email that the state did not pay ClaimInformatics anything for the examination.

"The company provided the information without charge or future obligation," she said.

Fisher said the General Assembly appropriated $400,000 for a full audit on the condition that the actual contract go through the regular procurement process.

During this week's committee meeting, Daniel emphasized that the preliminary report only looked at professional claims — not facilities such as hospitals — meaning a full audit could reveal a significant amount of additional erroneous payments.

The company says in its report that it has already "flagged" an additional $22 million involving another 189,412 claims "requiring further validation."

ClaimInformatics also said it found significant disparities in billing patterns and prices for certain health providers.

Moreover, ClaimInformatics also said in additional observations it found more than 400,000 in-network claims totalling $44.2 million "that were billed with no discount. Those claims all had identical billing codes and allowed amounts. With further analysis, ClaimInformatics says in its report that it will "determine the root causes of this processing behavior."

The fiscal review committee is co-chaired by Sen. Todd Gardenhire, R-Chattanooga, and other members include Senate Finance Committee Chairman Bo Watson, R-Hixson.

Gardenhire told the Times Free Press after last week's meeting he didn't know if any sort of examination of the state health plan was underway, let alone that a preliminary report had been prepared.

"We'll look at it," Gardenhire said. "Martin's real good at digging into these things. Everybody has their pluses and minuses. I wish Martin had shared that report before we started and we all could have had some good questions to ask and go from there. But we'll take a look at the report."

Watson said "it gives us a reason maybe to drill down a little bit deeper with our managed care organizations [BlueCross, Cigna] and with our Benefits Administration to make sure we're doing everything we can to make sure claims are paid appropriately."

Contact Andy Sher at or 615-255-0550. Follow him on Twitter @AndySher1. Contact Elizabeth Fite at or 423-757-6673. Follow on Twitter @ecfite.