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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Audit of Medicare Administrative Costs Claimed by Blue Shield of California for the Period October 1, 1995 through November 30, 1996," (A-09-98-00095)

October 1, 1999

Complete Text of Report is available in PDF format (156 KB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


During the period October 1, 1995 through November 30, 1996, California Physicians' Service, dba Blue Shield of California, claimed administrative costs totaling $33,951,916. The administrative costs charged to Medicare were overstated by $234,378. The $234,378 consisted of unreasonable increases in executive compensation costs ($60,230), salaries over the Federal limit ($20,122), unallowable consulting fees ($111,679), legal fees ($29,418), executive search fees ($4,829) and understated complementary credits ($8,100). We recommended that Blue Shield reduce its Medicare claims for the $234,378 in overstated costs. With the exception of our recommended adjustment of $8,100 for the complementary insurance credit, Blue Shield concurred with our audit findings.