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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Audit of Medicare Termination Costs Claimed by Blue Shield of California for the Period December 1, 1996 through November 30, 1997," (A-09-99-00083)

December 14, 1999

Complete Text of Report is available in PDF format (146 KB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Effective December 1, 1996, California Physicians' Service, dba Blue Shield of California (BSC), voluntarily withdrew from the Medicare program as a carrier. During the period December 1, 1996 through November 30, 1997 BSC claimed termination costs totaling $2,813,246. The termination costs charged to Medicare were overstated by $574,615. The overstatement consisted of improperly allocated severance costs, unallowable building reconfiguration costs, unapproved professional fees, and unallowable outplacement services costs. We recommended that BSC reduce its Medicare claim for the $574,615 in overstated costs.

We also set aside building reconfiguration costs of $85,148 for the Health Care Financing Administration's determination because BSC was unable to provide the needed documentation to support that these costs were Medicare related.