In May this year, the Auditor General investigated escalating overseas medical costs incurred by the Cayman Islands National Insurance Company.
The Auditor General’s office looked at how CINICO managed its overseas medical services between May 2009 and April 2011 and concluded that the insurance company’s overseas medical expenses “were not effectively managed” and that the amount of money paid for some healthcare services could not be quantified because of a lack of documentation.
Between 2006 and 2011, CINICO’s annual claim losses for its civil service and pensioner members, rose by 35 per cent, from $11.5 million in 2006/07 to $15.5 million in 2010/11. Healthcare losses for indigents almost doubled during the same time period, according to the audit, and the total cost of overseas medical claims incurred was more than $29 million in the 2010/11 financial year.
Last month, the CINICO board of directors, chaired by Scott Cummings, reviewed the auditor’s findings with the aim of implementing the recommendations.
“Even prior to our June meeting and prior to the release of the Auditor General’s report, we were already begun to enact some of the things that the Auditor General recommended,” said Cummings.
One of the issues that was raised in the report was the unauthorised use of a third-party case management company, that handles negotiations and payment of overseas medical claims. CINICO had an exclusive contract with a case management company called CMN, but another company, International Healthcare Associates, had also been used in certain cases, the auditors reported.
Cummings said that issue was one that CINICO itself had flagged to the Auditor General’s Office. “We approached them with the issue that we’d discovered internally,” Cummings said.
“The board at the June meeting discussed a number of recommendations we had implemented and what we need to do going forward, including specifically the new strategic plan which we were already working on prior to the Auditor General’s report. Now, it will encompass some of the things the Auditor General referred to,” he added.
CINICO, in its official management response to the Auditor General’s report, said rising medical costs, at an average of 10 per cent per year, had played a part in the overseas medical costs incurred by the insurance company and that it was “incorrect” to conclude that the year-on-year increase in claims was solely a result of ineffective oversight of the overseas medical management programme.
A lack of records and paperwork on the use of the second case management company, as well as in other instances, was highlighted by the auditors, who said there was no evidence of any oversight within CINICO of the work performed by International Healthcare Limited.
“No documentation was made available to us to verify what was being done,” auditors noted. “We found no documentation relating to the terms and conditions under which the new case management company was to operate.”
The same situation existed for a certain number of overseas medical cases that were administered internally within CINICO. That shifted responsibility in those cases from the case manager to CINICO itself.
“We see this as an area of considerable risk,” auditors noted. “It was ... a concern as to why CINICO would take on certain cases in the first instance. Since documentation could not be made available to us for the cases administered internally, there was no evidence to examine. This was a very significant shortcoming,” the audit report stated.
CINICO advised the Cayman Islands Health Services Authority in October 2010 to only utilise the first case manager, CMN. In January 2012, CINICO entered into a two-year contract with a case management company, called MMSI, a subsidiary of the United States-based Mayo Clinic Health Solutions.
Lonny Tibbetts, CEO of CINICO, said the measures that have been put in place since he took up the role in December 2010 ensured that a proper paper trail and documenting of procedures and processes were now in place.
He said the Auditor General’s report had contained “no real surprises” as much of it related to issues that the insurance company was already aware of and working on.
Tibbetts said the almost $30 million spent on overseas care by CINICO in 2010/2011 had been accounted for and there was no question of any of that amount being missing or unaccounted.
What was in question, according to the Auditor General, was documentation that might have shown if any money was overpaid for the services.
The work that has been done by CINICO over the past 18 months or so, has “not just shored up the foundations, it has re-concreted CINICO to move forward,” said Tibbetts.
Auditors also noted there was no general policy to determine why certain cases were considered exceptional and others were not. It was also not clear some cases were taken away from the originally selected case management company.
The auditors pointed out that during a two year period from 2008 to 2010, CINICO was effectively leaderless, until Lonny Tibbetts took up the role as CEO of the insurance company in late 2010.
That earlier lack of leadership “led to a situation where the delivery of overseas health management services was not controlled and administered in a manner that would provide any meaningful information on how well the programme was being delivered,” the audit report said.
It advised CINICO to establish a succession plan for long- and short-term absences of the CEO.
The auditors criticised the one-year term appointments of CINICO board members, saying it led to a lack of historical knowledge and experience within the organisation, and advised that appointments should be for a minimum of three years.
CINICO, which was set up in December 2003, is wholly government owned and administered by a board of directors. The government pays 100 per cent of premiums to CINICO for its members.
The audit report pointed out that there did not appear to be a strategic plan and recommended that the CINICO board of directors undertake strategic planning and risk assessment process, resulting in a three- or five-year plan.
Cummings said that work is already under way.
CINICO late last month completed a customer satisfaction survey of its biggest group of members - civil servants and pensioners.