Audit of Baylor University Medical Center's Organ Acquisition Costs Claimed for the Period July 1, 1996, Through June 30, 2001

EXECUTIVE SUMMARY:

The objective of this audit was to determine whether organ acquisition costs claimed on the fiscal years (FYs) 1997 through 2001 Medicare cost reports by Baylor for its lung, kidney, liver, heart, and pancreas transplant programs were allowable.  Baylor did not comply with Medicare law, regulations, and guidelines for claiming organ acquisition costs in the preparation of its Medicare Part A cost reports and received excess Medicare reimbursement for organ acquisition activities.  Baylor claimed $5,010,761 in unallowable costs, of which Medicare overpaid Baylor an estimated $4,195,303.  Baylor also claimed $13,633,200 in unsupported costs.  If Baylor cannot provide support for the $13,633,200, the result would be an estimated Medicare overpayment of $9,157,378.  We recommended that the Medicare intermediary recover the Medicare overpayment of $4,195,303; work with Baylor and recover the portion of the $9,157,378 that Baylor is unable to support with allowable organ acquisition costs; review organ acquisition costs claimed in subsequent years for issues similar to those identified in FYs 1997 through 2001, and recover any Medicare overpayments; monitor future Medicare cost report claims for organ acquisition costs from Baylor to ensure compliance with Medicare requirements; and instruct Baylor to develop and maintain adequate time-and-effort reporting and accounting controls, and to provide clear direction to personnel as to Medicare requirements for claiming and documenting organ acquisition costs.  The Medicare intermediary agreed with our findings and recommendations.  Baylor did not agree with our application of reasonable compensation equivalent limits.