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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Audit of Administrative Costs, Part A and Part B of the Medicare Program for TrailBlazer Health Enterprises, LLC, for the Period of October 1, 1999 Through September 30, 2002," (A-06-03-00032)

April 27, 2004

Complete Text of Report is available in PDF format (286 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objectives of this audit were to determine whether (1) TrailBlazer’s Final Administrative Cost Proposals (proposals) fairly presented the cost of program administration allowable in accordance with the Federal Acquisition Regulation (FAR), Title 48, Chapter 1, Part 31, as interpreted and modified by the Medicare agreements; and (2) such costs are reasonable, allowable, and allocable to the Medicare program.  We determined that TrailBlazer’s administrative costs of $347,905,248 claimed on its proposals for the period October 1, 1999 through September 30, 2002 were generally in accordance with Part 31 of FAR and Appendix B of its Medicare agreement with Centers for Medicare and Medicaid Services.  However, we questioned $622,078 in costs relating to executive compensation, compensation limits, unallowable costs, and return on investment.  These questioned costs were not in accordance with FAR as interpreted and modified by the Medicare agreements.  We recommended that TrailBlazer (1) reduce costs claimed on proposals by $622,078 and (2) take corrective action to address the findings.  TrailBlazer concurred with $174,917 of our recommended reduction in costs, but disagreed with all of the $447,161 of the recommended cost reduction related to executive compensation costs.