Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Compliance with Medicare Regulations Related to the Consolidation of Two Sharp Healthcare Hospitals Located in San Diego, California," (A-06-02-00002)

November 20, 2002

Complete Text of Report is available in PDF format (882 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of this review was to determine whether the fiscal intermediary and two Sharp HealthCare hospitals--Sharp Cabrillo (Cabrillo) and Sharp Memorial (Memorial) complied with Medicare's regulations, which pertains to Medicare reimbursement when a hospital has a change of ownership.  The consolidation of two hospitals is considered a change of ownership.  Cabrillo improperly received $100,340 in payments for 18 claims that it should not have submitted to Medicare.  The claims should not have been submitted because Cabrillo consolidated with Memorial, which was the legal entity entitled to submit these 18 claims.

The consolidation of Cabrillo and Memorial resulted in claim submission errors and cost report errors that neither the hospitals nor the FI had procedures in place to recognize and correct.  Therefore, we recommended that UGS and Sharp HealthCare work together to determine the correct consolidation date for Cabrillo and Memorial; determine and make the necessary adjustments to Medicare claims and cost reports based on the confirmed consolidation date; and report the results of the corrective actions taken to the OIG.  In addition, we recommend that UGS, as the successor FI, determine whether it needs to establish procedures to (1) identify when hospital consolidations occur and (2) ensure that all of the hospitals involved in a consolidation comply with the Medicare regulations.  The UGS agreed with our recommendations and has worked with Sharp to resolve these issues.  At this time, UGS and Sharp have voided and adjusted claims as appropriate, but the final cost report corrections have not been finalized.  Additionally, UGS officials have informed us that they have established procedures that should prevent similar errors in the future when two or more hospitals consolidate.