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Audit (A-07-08-02735)

Review of Allowable Medicare Capital Disproportionate Share Payments for the Period October 1, 2000, Through September 30, 2006

Executive Summary

We found that a number of rural hospitals and hospitals with fewer than 100 beds claimed Medicare capital disproportionate share hospital (DSH) payments even though those facilities were, according to Federal requirements, ineligible for these payments. Of 2,396 acute-care hospitals that claimed $1.62 billion in capital DSH payments on submitted cost reports for the period October 1, 2000, through September 30, 2006, 397 hospitals in rural areas or with fewer than 100 beds claimed $21.9 million in unallowable capital DSH payments. The remaining $1.59 billion was claimed by hospitals that were classified as urban and had 100 or more beds.

We recommended that the Centers for Medicare & Medicaid Services (CMS) (1) direct the fiscal intermediaries to recover $21.9 million in capital DSH payments made to ineligible hospitals, in accordance with CMS policies and procedures; (2) determine whether capital DSH payments were made to ineligible hospitals for the period subsequent to the end of our review (fiscal year 2006) and direct fiscal intermediaries to recover any unallowable payments; and (3) conduct reviews on a recurring basis to determine whether capital DSH payments are being made to ineligible hospitals.

In written comments on our draft report, CMS agreed with our recommendations and described corrective actions that it was undertaking.

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