Corporate Compliance

GOV’T AUDIT INSIDER: Overstated wage data at hospital in Massachusetts

Healthcare Auditing Weekly, January 4, 2005

Cape Cod Hospital did not fully comply with Medicare regulations on reporting wage data in its fiscal year (FY) 2000 Medicare cost report, according to an OIG audit report. The hospital overstated its wage data by $4.2 million for the Medicare FY 2000 cost report period. Because of the impact of overstated wages, the FY 2004 wage index for the hospital and the two other hospitals in this metropolitan statistical area was overstated by 1.1 percent, and the average payment to the two other hospitals was overstated by about $46 per hospital discharge. The OIG recommends that the hospital improve its financial management system and implement procedures to ensure that the wage data reported on its Medicare cost reports are accurate, supported, and in compliance with Medicare regulations. During the audit, the OIG did the following:

  • Reviewed applicable Medicare regulations

  • Obtained an understanding of the hospital's internal control procedures for reporting wage data

  • Verified that wage data on the hospital's trial balance reconciled with its audited financial statements

  • Reconciled the total reported wages on the hospital's FY 2000 Medicare cost report with its trial balance

  • Selected wage data for testing from cost centers on the FY 2000 Medicare cost report that accounted for at least 2% of the total hospital wages

  • Reconciled the wage data from selected cost centers to detailed support, such as payroll registers or accounts payable invoices

  • Tested a sample of personnel from selected payroll registers and verified hours to timesheets

  • Held discussions with the hospital staff regarding the sample of personnel to obtain support for wages and to determine the services provided to the hospital

  • Reviewed fiscal intermediary audit reimbursement adjustments made to the hospital's wage data as reported on its FY 2000 Medicare cost report

    Click here to read the audit report, "Review of Cape Cod Hospital's Wage Data Used for Calculating Inpatient Prospective Payment System Wage Indices," (A-01-04-00501) issued November 22.

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