EXECUTIVE SUMMARY:

The objective of this audit was to determine if capitation payments to PacifiCare of California were appropriate for beneficiaries reported as institutionalized.  We determined PacifiCare received Medicare overpayments totaling $9,700 for 14 beneficiaries incorrectly classified as institutionalized.  The 14 beneficiaries were part of a statistical sample of 100 Medicare beneficiaries reported as institutionalized during the period October 1, 1994 through September 30, 1996.  Based on our sample results, we estimate that PacifiCare received Medicare overpayments of at least $398,084 for beneficiaries incorrectly classified as institutionalized during the audit period.