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Audit (A-04-10-00067)

A Medicare Contractor's Claimed Administrative Costs Were Generally Allowable

Executive Summary

Riverbend Government Benefits Administrator (Riverbend), a terminated Medicare contractor in Tennessee, generally complied with Federal requirements for claimed administrative costs from October 1, 2004, through August 3, 2009. Of the $141.5 million in administrative costs claimed, $140.1 million was allowable for reimbursement under the contract. However, $691,000 in costs was not adequately supported and allocated to the contract in compliance with applicable Federal requirements. In addition, Riverbend claimed administrative costs totaling $563,000 on its Medicare Final Administrative Cost Proposals (FACP) that exceeded the Notice of Budget Approval (NOBA). Riverbend also overstated accrued credits by $70,000. The overstated credits resulted in a $70,000 understatement of administrative costs.

We recommended that Riverbend (1) reduce costs claimed on its FACPs by $691,000, (2) work with CMS to resolve $563,000 in costs exceeding the NOBAs, and (3) work with CMS to resolve $70,000 in overstated accrued credits. Riverbend concurred with our recommendations and stated that it would work directly with CMS to address them.

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