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Medicaid Vendor Drug Program Pilot Study Findings

The prescription review together with the online medical claim review provided the most useful information of the three review methods. Of the 1,070 sample prescriptions, the pharmacy providers sent records for 975 prescriptions (91 percent), of which 232 were found to have errors. The most common error, found in 193 records, was not sending a copy of the original prescription. In place of the physician’s prescription copy or a copy of the original telephone order, pharmacies sent patient account summaries, tax statement summaries and copies of the computerized prescription label. Computerized labels are acceptable when accompanied with a telephone order or copy of the prescribing physician’s prescription. Thirty-six prescriptions had a variety of documentation errors. Most notably, prescribing providers were missing one or more of the prescription requirements such as the date or the physician’s address. Also received were prescriptions written by a prescribing provider but billed by the pharmacy with a different physician’s name. Two prescriptions for controlled narcotic drugs, Vicodin and Darvocet, did not have the provider’s required DEA registration number.
Table II-3 summarizes these results.

Table II-3: Medicaid VDP Prescription Review Findings

Review Finding Number of
Not Counted
As Overpayments
Number of
*No prescription received from the pharmacy
(Not counted as overpayment for this pilot study)
Documents received from the pharmacy without a copy of the original prescription   193
Prescription did not meet federal documentation requirement for controlled substance   2
Prescription did not meet State Board of Pharmacy documentation requirements   36
Medication requested by prescribing physician not filled by the pharmacy   0
Refilling prescription for long term/rehabilitation recipient not confirmed with provider   0
Prescription claim for a drug not age appropriate for the recipient   1
*No corresponding Medicaid medical claims related to the sample prescription
(Not counted as overpayment for this pilot study)
Total 74 232

The project team will refer all of these pharmacies and prescribing providers to the HHSC’s Office of Investigation and Enforcement for further review and investigation. HHSC will send an educational letter appropriate for the error. In the cases where the prescription did not meet federal or state documentation requirements, the prescribing physician will also receive an educational letter.

Potential Overpayment Measurement
The overpayment calculation used is similar to the FFS study with the exception of weighting the sample. Since the sample was selected with a simple random program without strata, the sample did not require the averaging procedure. When the sample was selected, the State Auditor’s Office performed statistical analysis tests to confirm that the samples represented the universe of paid prescription claims. The calculation consisted of dividing the total dollars paid for the prescriptions identified with potential overpayments by the total dollars paid for the sample prescriptions.


Medicaid Vendor Drug Program Pilot Study Overpayment Calculation
Amount of potential overpayments:
Total amount paid for the sample prescriptions:
$ 9,608.04
= 20.5 percent overpayment rate

Dollars at Risk
The overpayment measurement can be applied to the annual Medicaid VDP expenditures to determine the “dollars at risk” in the Medicaid VDP. The term “dollars at risk” is used because the amount that is computed when applying the overpayment measurement to the annual expenditures is not recoverable unless all of those
prescription claims that are questionable are identified through a complete utilization review of all prescription claims submitted for payment, which is not possible given the size of the Texas Medicaid Vendor Drug program. Instead, HHSC can use the findings in this study to target specific areas of investigation as they do for the Fee-for-Service study.

The “dollars at risk” for 2001 is $287 million. This figure was computed by multiplying the overpayment measurement rate of 20.5 percent times $1.4 billion of the Medicaid Vendor Drug Program expenditures for calendar year 2001.