This final audit report points out that Horizon West, Inc. misclassified certain costs as ancillary medical supplies. The costs should have been classified and claimed as other types of costs, such as routine, dietary, and administrative and general costs. As a result of this misclassification, Horizon was overpaid Medicare funds totating $1.1 million for Fiscal Year (FY) 1991. Horizon concurred with out finding and has voluntarily repaid the Federal Government $1.7 million. This amount includes the $1.1 million we identified as an overpayment plus an additional $0.7 million to cover our estimate of overpayments made for FYs 1992 through 1995.