Information on Selected Medicare Independent Dialysis Facility Audits

GAO was requested to provide information on the results of its analysis of selected Health Care Financing Administration (HCFA) audits of independent dialysis facilities participating in Medicare's End Stage Renal Disease program. Specifically, GAO was requested to provide data on: (1) the adjustments beyond those made by HCFA which GAO believed should have been made to facility cost reports, and (2) the related organization transaction costs included in the reports.

As part of its ongoing review of reimbursement under the HCFA program, GAO made a limited review of 13 of the 38 independent facility audits performed by Medicare fiscal intermediaries, under contract with HCFA, which also administer payments to dialysis facilities. GAO based its review of the audits on the Medicare cost-reimbursement standards contained in Federal regulations and on the interpretive material contained in Medicare manuals. Work done by the fiscal intermediaries and HCFA resulted in a reduction of about $2 million of the total costs reported by the 13 facilities. GAO estimated that there should have been additional reductions of about $700,000. Adjustments GAO made would reduce the average cost per treatment by about $5.50 for the 13 facilities. Most of the reductions GAO made related to: (1) incorrect allocations of parent company home office and regional office expenses, (2) insufficient documentation to support management fees charged by related organizations, (3) the cost of dialysis treatments provided for patients of other facilities, (4) nonrecurring and undocumented legal expenses, and (5) profits on transactions between related organizations.