Review of Vendor Rebates Paid to Hospitals - St. Luke's Hospital & Health Network, Bethlehem, Pennsylvania

EXECUTIVE SUMMARY:

The objective of our review was to determine whether St. Luke's Hospital and Health Network (the provider) reduced costs reported on its 2004 Medicare cost report by the $34,579 vendor rebate it received. The provider did not reduce costs reported on its fiscal year 2004 cost report by the $34,579 rebate, contrary to Federal regulations and Centers for Medicare and Medicaid Services guidance. 

We recommended that the provider (1) revise and resubmit its 2004 Medicare cost report, if not already settled, to properly reflect the $34,579 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 on its Medicare cost reports. The provider agreed with our recommendations.