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Office of the Comptroller reveals control deficiencies due to the lack of oversight of the billing and collections company at ASEM

The Office of the Comptroller of Puerto Rico (OCPR) issued a qualified opinion on the fiscal operations of the Medical Services Administration of Puerto Rico (ASEM).  A qualified opinion is issued when the noncompliances, individually or together, are significant but not pervasive.

The Report reveals that ASEM did not charge a $1,438,076 penalty to the company contracted on March 15, 2021, for the management of the medical revenue cycle.  The contracted services included preadmission, billing, collection, negotiation of rates with medical plans, and others.

The director of the Office of Fiscal Resources and Budget of ASEM notified the company on May 6, 2022, that it had not reached the calculated collection goal of $36,622,339.  The company collected $22,241,582, which results in a difference of $14,380,757 in the collection deficit. According to the contract, ASEM was supposed to apply the 10% penalty; however, as of January 18, 2023, it had not charged the approximate penalty of $1,438,076 to the company, whose contract expired on March 14, 2023.

The six-finding audit notes that ASEM did not require the contractor to submit detailed reports on the results of the activities carried out in the areas of revenues, invoice resubmission, precertifications, or work plan, among others.  Instead, the company submitted consolidated reports which, from the examination performed, none was certified by the president.

ASEM also did not ensure that the company complied with the contracting of 167 employees as established in the contract.  In this regard, the director of Fiscal Resources notified the company of its noncompliance by letter, but no additional measures were taken.  In addition, the company did not keep the required policies in force, but rather they were formalized up to three months after the signing of the contract.  Because of this situation, ASEM did not have the guarantees offered by the policies in case of noncompliance.

On October 17, 2022, ASEM contracted an audit firm for $9,000 to determine the penalty, or metric adjustment, and the company's noncompliance.  This contract was amended up to $17,000 so that they could validate the company's compliance with the workforce roster and the distribution of personnel by area.

The OCPR auditors detected multiple control failures with the collections and billing.  From the examination of a sample of 15 invoices, the insurers refused to pay four for receiving them after the established term, one was not processed because the company did not register the patient, and after more than 20 months an invoice of $11,325 had not been paid.

The Report indicates that in the first 17 months of the contract's term, the personnel of the contracted company did not have manuals and procedures approved by the Board of Participating Entities of the Medical Center.  The director of Fiscal Resources also did not have the procedures to supervise the company's operations. This situation fosters the commission of irregularities related to the billing and collection of services.

The audit revealed delays by ASEM of up to 14 months in registering 121 contracts and 139 amendments totaling $8,133,618 with the OCPR.  These delays did not allow these public documents to be accessible to the public within the required time. A similar situation had been commented on in Audit Report DA-16-01 of 2015.

Also, it submitted late to the OCPR the Monthly Payroll and Positions Report, the Annual Certification in compliance with the fiscal reform act, and the Certification of Compliance with Act 273-2003.  This situation is attributed to the fact that the Internal Audit Office, responsible for this function, was transferred in 2021 to the Office of the Inspector General without an effective transition process taking place.

From July 1, 2017, to November 30, 2022, ASEM received own revenues of $593,928,601, fund appropriations of $476,609,776, and other revenues of $133,912,810 for a total of $1,204,451,187. During that period it incurred expenses of $1,069,687,839, with a surplus of $134,763,348. The financial statements for fiscal years 2018 through 2021 reflected accumulated deficits of $993,017,271, $855,812,371, $765,012,951, and $742,021,991, respectively.

The audit recommends to the Secretary of Health and president of the Board of Participating Entities of the Medical Center that he ensure that the executive director complies with the recommendations of the OCPR Report.

This first report of ASEM covers the period from January 1, 2018, to December 31, 2022.

The Audit Report OC-25-06 can be obtained on our website: www.ocpr.gov.pr.