Sutter Oaks-Arden and Sutter Oaks-Carmichael, Skilled Nursing Facility Billings and Costs for Ancillary Medical Supply for the Period January 1, 1994 Through December 31, 1995

We determined that Sutter misclassified costs on its Medicare cost reports and incorrectly billed for ancillary medical supplies. We found that about 39 percent of costs for ancillary medical supplies were misclassified and about 7 percent of items billed as ancillary medical supplies were actually routine supplies. We also noted that Sutter incorrectly classified $282,018 of supply accounts resulting in excessive ancillary costs. Due to Sutter's election to change fiscal intermediaries (FI) effective January 1, 1998, we issued a report to each FI. This report was directed to Sutter's new FI. In it, we recommended that Sutter review its procedures for classifying ancillary medical supplies and provide training to its staff to ensure that accounts are properly classified.