Review of Vendor Rebates Paid to Hospitals, Option Care, Inc., Buffalo Grove, Illinois

The objective of our review was to determine whether Option Care, Inc. (the provider) reduced costs reported on its fiscal year 2003 Medicare cost report by the $173,805 vendor rebate it received. For the $173,805 rebate reviewed, the provider did not reduce costs reported on its 2004 Medicare cost report by $43,451, contrary to Federal regulations and CMS guidance.

We recommended that the provider (1) revise and resubmit its 2003 Medicare cost report, if not already settled, to properly reflect the $43,451 portion of the rebate as a credit reducing its health care costs and (2) consider performing a self-assessment of its internal controls to ensure that future vendor rebates are properly credited in its Medicare cost reports.  The provider disagreed with our finding and recommendations.