Use of Unaudited Hospital Cost Data Resulted in Overstatement of Medicare's Prospective Payment System Rates
HRD-85-74
Published: Jul 18, 1985. Publicly Released: Jul 18, 1985.
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Highlights
GAO reviewed: (1) the effect of the Health Care Financing Administration's (HCFA) use of unaudited cost reports to determine the standardized amount used in computing prospective payment system (PPS) rates; and (2) the effect of not removing all capital costs from the cost data even though these costs are paid separately from PPS rates.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Health and Human Services | The Secretary of Health and Human Services should direct the Administrator, HCFA, to adjust the standardized amounts for FY 1986 to remove the overstatement resulting from using unaudited cost data and the inclusion of some capital costs in calculating the base year costs. |
Closed – Implemented
HHS froze the prospective payment rates for FY 1986. However, this action will not correct the problem with the databases used to compute the rates, so future updates to the rates will still be based on erroneous data that overstates hospital costs. Thus, future updates based on this data could result in inflated payments to hospitals.
|
| Department of Health and Human Services | The Secretary of Health and Human Services should direct the Administrator, HCFA, to use audited cost data and ensure capital costs are appropriately handled if the standardized amount is rebased. |
Closed – Implemented
HHS agreed to use audited cost data which excludes all capital costs when it rebases hospital prospective payment rates. However, rebasing may not occur for a number of years.
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Topics
Cost analysisCost controlHealth care costsHealth care servicesMedical services ratesMedicarePaymentsProspective paymentsHospitalsAllowable costs