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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Results of a Limited Scope Audit of Medical Supplies and Equipment that Baptist Memorial Hospital billed to Medicare as Skilled Nursing Facility Ancillary Services," (A-06-96-00045)

September 27, 1996

Complete Text of Report is available in PDF format (618 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This report provides you with the results of a limited scope audit of medical supplies and equipment that Baptist Memorial Hospital System (BMHS) billed to Medicare as Skilled Nursing Facility (SNF) ancillary services between September 1, 1992 and August 31, 1994. During this period, BMHS billed Medicare $1,634,035 for medical supplies. The objective of our audit was to determine whether medical supplies and equipment billed as ancillary were allowable under Medicare guidelines.

The BMHS billed unallowable routine care medical supplies and equipment as SNF ancillary services. Twenty-eight percent of 141 medical items classified as ancillary were considered routine. Routine care items cannot be billed to Medicare as ancillary. The cost of routine items is included in the SNF's per diem reimbursement rate.

We are not recommending an adjustment for the period under review because BMHS was operating under the exemption provided for in the Code of Federal Regulations, 42 CFR 413.30(e)(2). Under this exemption, BMHS was not subject to the routine cost reimbursement limitations because it was a new SNF provider. BMHS may be reimbursed for the cost of misclassified routine items during the period covered by our audit. This exemption expired after the period covered by our audit.

According to the Fiscal Intermediary's, Blue Cross Blue Shield of Texas (BCBSTX), medical review of SNF medical supplies, routine items continued to be billed to Medicare as ancillary supplies during FYs 1995 and 1996. The BMHS took corrective action that will prevent billing Medicare for routine items. The corrective action was initiated for bills submitted on or after December 12, 1995.