We found that about 24 percent of the ancillary medical supply costs claimed by Heartland were misclassified on its Medicare cost reports. In addition, about 13 percent of items billed to Medicare as ancillary pharmacy items were actually routine supplies. Heartland is one of 127 nursing facilities owned by Health Care Retirement Corporation (HCRC). Since the errors we found may also have occurred at the other HCRC facilities, we recommended that HCRC determine the fiscal impact at all 127 facilities for incorrectly claimed costs and billing errors and make an appropriate refund to Medicare. We also recommended that HCRC review is master list to identify and correct its classifications of ancillary medical and pharmacy supplies that should be treated as routine.