Subject: File No. 4-511
From: Pat Baird, Mr

May 8, 2006

From: Pat Baird , Tequesta, Fl
Sent: April 26, 2006
To: Mr. William Gradison, PCAOB
Subject: File NO. 4-511

Note: I have worked in the insurance industry for 25 years first, as an underwriter for an A+ rated mutual insurer, and then as a marketing rep for an international stock company. I have also served as a Business Broker for 12 years. I am now employed as a healthcare employee benefits consultant, serving clients in the state of Florida.

In the Senate Banking Committee Hearing of April 25, 2006, Senator Paul Sarbanes stressed the need for adequate internal controls. He added that the system of internal controls had to be certified as being adequate, to ensure that it wasnt a phony system. Unfortunately, the current system of healthcare internal controls could be described as phony.

Many publicly traded corporations are attempting to reduce costs by providing self-funded healthcare plans for their employees. These companies pay their employees hospital expenses directly, rather than paying insurance premiums. Most firms hire a Third Party Administrator (TPA) to pay the bills.

TPAs pay claims from UB92s (summary bills), which list the total charges for each department. Given that the UB92 format does not provide billing detail, any improper and/or fraudulent charges are impossible to detect.

Most corporations are not aware that they are being overcharged and, in fact, are not aware of the correct reimbursement rates.

This obvious fiduciary breach has a deleterious effect on employees and retirees, as their co-pays include a portion (usually 20%) of these overcharges. Of course, the system is also damaging to shareholders, as overpayments come right off the bottom line.

In the April 25 Senate Banking Committee meeting, SEC Chairman Chris Coxs stated goals included enhancing corporate responsibility and protecting investors. Senator Chris Dodd expressed a goal of making 404 work and eliminating fraud. Senator Charles Schumer stressed the need for maximum transparency.

Senator Sarbanes mentioned that some of the worst abuses in internal controls occurred in smaller companies. In my own practice, I have seen significant overbilling of health plan members in companies with fewer than 1,000 employees. For example, a Florida hospital charged a health plan $27,700.75 for an employees hospitalization. The TPA was prepared to pay the claim, as billed. After the detailed billing was reviewed by an independent auditor, the correct charges were determined to be $10,045.55. In this single case, the publicly traded corporate health plan was overcharged by $17,655.20.

I personally have not seen a correct hospital bill (from a self-funded plan) in Florida in over a year. Every day, hospitals submit bills that include excessive charges. Whenever I see a bill with a $10,000 overcharge, I know that the employee will receive an Explanation of Benefits that includes $2,000 that the employee doesnt owe.

If a companys internal control system is missing 90% of the excessive charges that appear in its health plan billing, the system is not consistent with Sarbanes-Oxley.

Given that employees are normally paying 20% of such overcharges I believe this is one of the most critical internal control issues that the PCAOB should address.

My recommendations:

1) Require all publicly traded corporations with self-funded health plans to have a list of hospital prices (to be supplied by the TPA). This information should be available to all employees.
2) Require TPAs to secure detailed, itemized billing for health benefit invoices amounting to $1,000 or more.
3) Provide specific guidelines for the verification of employee hospital billing (including detailed billing).
4) Require corporations to use the same system of checks and balances to review healthcare billing that they use to review other corporate expenses.
5) Require Audit Committee members to take a proactive approach to eliminating employee benefit accounting healthcare fraud.

By improving the system of healthcare billing, we would accomplish many of the internal control goals expressed by Senator Sarbanes and the Senate Banking Committee. The end result would be a reduction in healthcare costs for corporations, employees, and retirees increased earnings per share and enhanced shareholder value.