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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Quality Improvement Organization in Washington," (A-09-06-00039)

February 25, 2008

PDF File Complete Text of Report is available in PDF format (537 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The Senate Finance Committee requested that we assess the fiscal integrity of the Medicare Quality Improvement Organizations with respect to six specified fiscal integrity areas. 

Of the $12.2 million of costs reviewed, $12.1 million appeared reasonable for Federal reimbursement.  The remaining $73,636 represented unallowable indirect costs, which Qualis Health allocated to subcontracts in excess of the allowable limit.  In addition, Qualis Health overstated its (1) modified total direct costs (MTDC) bases by $404,302 in total for fiscal years 2003 through 2005 by including subcontract costs in excess of the allowable $25,000 per subcontract and (2) indirect cost pool by $71,741 for fiscal year 2005 by including unallowable organization costs. 

We recommended that Qualis Health (1) refund the $73,636 of unallowable indirect costs claimed on subcontracts and (2) reduce the MTDC allocation bases by $404,302 in total for unallowable subcontract costs and the indirect cost pool by $71,741 for unallowable organization costs when finalizing the indirect cost rates with CMS.  Qualis Health agreed with the finding related to unallowable indirect costs but disagreed with the amount of the recommended refund.  Based on our evaluation of additional information concerning the finalization of indirect cost rates, we revised our report to reflect a refund amount of $73,636.