Why OIG Did This Audit

• Medicare cost reports are a crucial component of the operation and oversight of the Medicare program.
• Cost reports are used to set future Medicare prospective payment rate and wage indexes and reimburse providers for the care that the facilities provide to Medicare enrollees.
• This audit examined whether individual Medicare Administrative Contractors (MACs) met Medicare cost report oversight requirements.

What OIG Found

MACs did not consistently meet Medicare cost report oversight requirements.

• For Federal fiscal years 2019–2021 (audit period), each of the 12 MAC jurisdictions failed to comply with the contract requirements for audit and reimbursement desk review and audit quality (AR-4) for at least 1 of the 3 years.
• CMS identified 287 total audit issues among all MAC jurisdictions during our period, including MACs not performing proper reviews; inadequate review of graduate medical education and indirect medical education reimbursement; improper review of allocation, grouping, or reclassification of charges to cost centers; improper calculation and reimbursement for nursing and allied health programs; and inadequate review of bad debts.
• MAC officials from selected jurisdictions suggested multiple causes for the findings including unclear guidance from CMS, limited feedback on the cost report reviews, inadequate training, and staffing and workload issues.
• CMS addressed some of these issues after our audit period.

What OIG Recommends

We made three recommendations to CMS to improve its efforts in ensuring that MACs meet their cost report oversight requirements, including increasing transparency about its processes and providing additional training.

CMS generally concurred with all three recommendations and has taken steps to address all of our recommendations.

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