Audit of Medicare Termination Costs Claimed by Blue Shield of California for the period December 1, 1996 through November 30, 1997,

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.