Review of Medicare Severance and Termination Costs Claimed By Blue Cross & Blue Shield of Rhode Island for February-December 2004

EXECUTIVE SUMMARY:

Our objective was to determine whether the severance and termination costs that Blue Cross & Blue Shield of Rhode Island (Rhode Island) claimed are allowable, allocable, and reasonable, in accordance with Medicare contract provisions, Federal regulations, and company policies.  From February 1, 2004, through December 1, 2004, Rhode Island claimed $205,474 in severance and termination costs that were not allowable for Medicare reimbursement.  These unallowable claims were made because Rhode Island did not have adequate internal control procedures to ensure that costs were claimed in accordance with Federal regulations.

We recommended that Rhode Island reduce its severance and termination vouchers by $205,474 ($73,971 Part A and $131,503 Part B).  In response to our draft report, Rhode Island agreed with the recommended disallowances of $193,450 in unallowable costs.  However, Rhode Island did not agree with $12,024 in unallowable depreciation and asset write-off costs.

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