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The objective of this audit was to determine whether organ acquisition costs claimed on the 1997, 1998, and 1999 Medicare cost reports by Virginia Mason for its kidney and pancreas transplant programs were allowable. Virginia Mason did not comply with Medicare law, regulations, and guidelines for claiming organ acquisition costs and received excess Medicare reimbursement for organ acquisition activities. Virginia Mason claimed $268,848 in unallowable costs and $1,339,842 in unsupported costs. The estimated Medicare overpayments for the unallowable and unsupported costs were $268,832 and $1,310,950, respectively. The unallowable costs were associated with activities that did not comply with Medicare’s definition of organ acquisition or resulted from accounting errors. The unsupported costs of $1,339,842 did not comply with Medicare’s documentation requirements for reimbursement. We recognized that some portion of the unsupported costs may have related to organ acquisition activities and would have been allowable if properly documented. We recommended that the Medicare intermediary recover the Medicare overpayment of $268,832 for the unallowable costs and that portion of the $1,310,950 that Virginia Mason is unable to support, determine the allowability of the unsupported costs, review organ acquisition costs claimed for other fiscal years, monitor future claims, and have Virginia Mason develop accounting controls and training programs. The Medicare intermediary and Virginia Mason concurred with our findings and recommendations.