King County Medical Blue Shield, Seattle, Washington, Audit of Termination Costs Under Medicare Contract No. HCFA 90-045-2

This report presents the results of our audit of costs claimed for reimbursement by King County Medical Blue Shield that related to the termination of its Medicare contract with the Health Care Financing Administration. Of the $1,895,823 claimed, the audit disclosed that $539,021 was considered not acceptable for reimbursement. The unacceptable costs consisted of (i) costs related to continuing activities subsequent to the contract termination date ($105,797); (ii) severance and incentive costs ($210,989); (iii) facilities costs involving a related organization ($100,697); (iv) professional fees for an outside consultant ($107,184); and, (v) costs claimed for separate organizations that assisted in processing Medicare claims ($14,354).