Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Cape Cod Hospital's Wage Data Used for Calculating Inpatient Prospective Payment System Wage Indices," (A-01-04-00501)

November 22, 2004

Complete Text of Report is available in PDF format (771 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of this audit was to determine whether Cape Cod hospital reported fiscal year (FY) 2000 Medicare cost report wage data in compliance with Medicare regulations.  We found that the hospital did not fully comply with Medicare regulations on reporting wage data in its FY 2000 Medicare cost report.  Specifically, the hospital overstated its wage data by $4.2 million for the Medicare FY 2000 cost report period.  Furthermore, because of the impact of overstated wages, the FY 2004 wage index for the hospital and the two other hospitals in this metropolitan statistical area was overstated by 1.1 percent, and the average payment to the two other hospitals was overstated by about $46 per hospital discharge.  Overstated wage data occurred because the hospital had not established a financial management system to track all wage data or performed sufficient review and reconciliation procedures to ensure that all reported wage data were accurate, supportable, and in compliance with Medicare regulations.  We recommended that the hospital strengthen financial reporting controls by improving its financial management system to ensure accountability for all wage data, and implementing procedures to ensure that the wage data reported on its Medicare cost reports are accurate, supported, and in compliance with Medicare regulations.  The hospital concurred with our recommendations.