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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Medicare Inpatient Hospital Prospective Payment System Discharges Improperly Reported and Paid After Hospital Consolidations," (A-06-00-00044)

July 23, 2002

Complete Text of Report is available in PDF format (585 MB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Under Medicare rules, a consolidation of hospitals is considered a change of ownership. After a consolidation, only the surviving hospital would be entitled to Medicare payments because it was the legal owner on the date patients were discharged. This final report points out that 15 hospitals, that technically ceased to exist after consolidation with another hospital, were paid for 1,118 discharges that should not have been billed to Medicare. Issues that arise include potential duplicate payments and inflated cost reports. We have identified claims overpayments of more than $4.5 million for 6 of the 15 hospitals and will make appropriate referrals to fiscal intermediaries for recovery. Fiscal intermediaries have recovered nearly $300,000 related to 2 consolidations and have begun recovery actions related to 2 additional consolidations. Further, the Department of Justice has reached settlements totaling nearly $3.2 million related to 5 consolidations. Among other things, we recommended that the Centers for Medicare & Medicaid Services (CMS) review current claim, cost report, audit, and change of ownership instructions to determine whether revisions or additions are necessary to clearly address proper claim fining and cost treatment when a change of ownership or consolidation occurs. The CMS concurred with our recommendations.