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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Report to Blue Cross of California for Audit of Medical Supply Ancillary Costs Claimed by 31 Skilled Nursing Facilities Owned by Horizon West, Inc." (A-09-98-00097)

March 23, 1999

Complete Text of Report is available in PDF format (238 KB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This final audit report to Blue Cross of California, Horizon West Inc.'s (Horizon) current fiscal intermediary, points out that Horizon 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 totaling $1.1 million for Fiscal Year (FY) 1991. Horizon concurred with our findings and voluntarily repaid the Federal Government $1.7 million. This amount included 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. On February 4, 1999, Horizon agreed to a settlement with the U.S. Department of Justice and the OIG. As part of this agreement, Horizon entered into a Corporate Integrity Agreement with the OIG and paid an additional $2.3 million to settle claims with the Government relating to the audit findings.

We recommended that Blue Cross ensure that medical supplies are properly classified as ancillary or routine on all Horizon cost reports after the Fiscal Year Ended June 30, 1995.