UNITEDSTATESGENERALACCOUNT~NG OFFICE REGIONAL OFFICE ROOM 1903 JOHN F KENNEDY FEDERAL BUlLDlNG GOVERNMENT CENTER BOSTON~MASSACHUSE~S 02203 February 1, 1971 Mr Millard P Nute Reglonal Representative, Bureau of Health Insurance Social Security Adminlstratlon Department of Health, Education, and Welfare Boston, Massachusetts, 02203 Dear Mr Nute In order to ascertain the manner In which Massachusetts Blue Cross, a fiscal lntermedlary under the provlslons of Title XVIII of the Social Security Act, has been determining the reasonable- ness of cost of hospital services furnished to Medicare patients, we reviewed the procedures and practices used by Blue Cross in arrlvlng at final settlements with hospitals and audited the statements of reimbursable costs of three selected hospitals Questions raised during our review of the cost statements for two of the selected hospitals, the Mount Auburn Hospital and the CambrIdge Hospital, were discussed in our letter to you dated March 10, 1970 This letter is to advise you of certain questionable cost Items found during our review of the cost statements of the Massachusetts General Hospital (MGH) In Boston! Massachusetts, for the year ended September 30, 1967 Based on our examination of hospital documents and records and the Blue Cross audit work- papersp we belleve that costs charged to the Medicare program totaling about $319,600 appear to be questionable The MGH is a privately Incorporated non-proflt teaching hospital that receives funds for patient care from patients and from third-party insurers, both governmental and commercial The hospital also receives funds through Government research grants and private contrlbutlons and endowments. About 27 percent of MGH costs are related to research and other non-patient care activities MGH has about 1,070 beds For the fiscal year ended September 30, 1967, the hospital reported 367,874 lnpatlent days of which 108,021 or about 29 percent were for Medicare patients The cost statement submitted by MGH for the same period showed net costs applicable to Medicare patients of about $7 7 mllllon. The net effect of adlustments made by the Blue Cross audit staff together with the use of later statistical data resulted In increased costs of about $200,000 as follows 50T’i-i ANNIVERSARY 1 , Medxare costs clammed by Net _ Medicare costs hospital Increase 1 allowed' Medxare costs Inpatient $7,694,681 $ 9,285 $7,703,966 Outpatient 676,461 365,835 1,042,296 Total $8,371,142 $375,120 $7,?46,262 Less Net deductibles and co-insurance bxlled to Medxare patients 671,620 175,655 847,275 Net Medicare costs $7,699,522 $199,465 $7,898,987 %letaxls of the Blue Cross audit revlslons can be found In the Blue Cross audit report to the Blue Cross AssoclatLon, dated November 26, 1969 2The hospital protested certain of the Blue Cross dxsallowances. Each of the protests were upheld at either a local hearrng of the Provider Appeals Review Committee or by the Blue Cross Assoclatlon. Blue Cross has prepared an amended statement, and increased MGH's retiursement by about $64,000. Since the Medlcare program absorbs about 28 percent of MGH's costs allocable to patlent care, any overstatement of hospital patlent care costs or any underallocatlon of hospital lndxrect costs to non- patlent care actlvltles results In an increase In costs to the Medicare program. We found that total hospital patlent costs at MGH were over- stated and lndlrect expenses allocated to non-patlent care actlvltles were understated resulting m about $319,600 of questionable costs to the Medxare program as shown below. SCHEDULE OF QUESTIONABLE COSTS Dollar effect on reimbursable Item Medlcare costs 1. Unallowable research costs included In patient care costs $84,500 2 Certain employee health and welfare costs not allocated to non-patlent care actlvitles 34,000 -2- \- 3. Part B professional component portion of fringe benefit and overhead costs related to physlclans services not ellmlnated 41,800 4. Endowment income from restricted dona- tlons not deducted from costs 1,000 5. Income from Commonwealth of Massachusetts for alcoholism and VD cllnlcs not deducted from related costs 15,500 6. AdrmnlstratXve and general expenses allocated to non-patlent care actlv1ties understated 46,900 7. Allowance in lieu of specific recognit&on of other costs 3,900 8. Excessive reimbursement for professional servmes of hospital-based physlclans 92,000 Total $319,600 The MGH comptroller advised us that any increase Ln the total costs allocated to non-patlent care activltzes would be inequitable and as a result he would not agree with any of our flndlngs regardless of their ln&vLdual merit The comptroller also expressed doubt that retroactive ad]ustments of costs to the Medicare program could be made after a final settlement has been reached between the hospital and the fiscal intermediary. UNALLOWABLERESEARCHCOSTS INCLUDED IN PATIENT CARE COSTS Research salaries totaling $286,100 were improperly classified as patlent costs thereby Increasing Medlcare costs by $84,500 Hospitals are reimbursed for the cost of physlclans' services directly related to patlent care under the Supplementary Medical Insurance Benefits for the Aged (part B) portion of the Medzare program, and for research through Government programs other than Medicare. At MGH the physlclans who received compensation from the hospital prepared monthly effort reports lndlcating the time spent perfomng various functions Each doctor's salary was then allocated to these functions. -3- In fiscal year 1967 physiciansp salaries were allocated as follows Direct patient care $909,900 Research adrmnlstration $ 79,200 Research 206,900 286,100 Other hospital services. Teachrng 560,000 Department administration 416,400 976,400 Total $2,172,400 Although hospital costs allocated to the Hospital Insurance Benefits for the Aged (part A) portion of the Medicare program were reduced by $909,900 for patient care that was bllled separately on a fee for service basis under part B, we believe that the part A costs should also have been reduced by $286,100 for the time spent by hospital based physicians on hospital research activities. SSA's Principles of Reimbursement for Provider Costs dated May 1966 and succeeding manuals provide that research costs, over and above usual patient costs, are not allowable. The pertinent SSA reimbursement principal provides in part that. "Principle Costs incurred for research purposes, over and above usual patient care, are not includable as allowable costs l Comment There are numerous sources of financing for health- related research activities. Funds for this purpose are provided under many Federal programs and by other tax-supported agencies Also, many foundations, voluntary health agencies, and other private organizations, as well as individuals, sponsor or contribute to the support of medical and related research. Funds avarlable from such sources are generally ample to meet basic medical and hospital research needs A further consideration is that quality review should be assured as a condition of governmental support for research. Provisions for such review would introduce special difficulties rn the health insurance program. Where research is conducted in con-Junction with and as a part of the care of patients, the costs of usual patient care are allowable to the extent that such costs are not zby funds provided for the research." (underscoring supplied) -4- SSA reimbursement lnstructlons define usual patlent care as &&se Items and services (routine and ancillary) ordlnarlly furnished In the treatment of patients by hospitals under the supervlslon of physicians. According to the SSA lnstructlons, where research 1s conducted by a provider which does not involve patients, the research costs are not allowable. For research conducted with patients to be allowable, records must be malntalned ldentlfylng patients In the research prolects, patlent charges and other statlstlcal data necessary m the allocation and apportlonlng of costs. Records ldentlfylng research patients assoczated with the $286,100 of research costs were not mntalned, and such costs should not be included In allowable costs. CERTAIN EMPLOYEEHEALTH AND WELFARF, COSTS NOT ALLOCATED TO NON-PATIENT CARE:ACTIVITIES Because an equitable share of employee health and welfare costs were not allocated to non-patlent care actlvltles, the costs charged to the Me&care program appear to be overstated by about $34,000 Under the step down method of allocatrng costs, employee health and welfare costs are allocated to patlent care and non-patlent care actlvltles on the basis of salaries. We noted, with a few rmnor exceptions, that the salaries of non-patlent care actlvltles, however, were not Included m the base for allocating some of these costs -- personnel department, staff health cllnlc, related depreciation and adrmnlstratlve and general expenses. As a result, the costs allocated to patlent care were overstated by $122,500 and Medicare costs appear to be overstated, as shown below. Employee health and welfare costs not allocated to non-patlent care. Personnel Department $101,300 Staff Health Cllnlc 216,500 Depreclatlon 2,600 Applicable Adrmnlstratlve and General expense 145,500 Total $465,900 Percentage of gross salaries related to non-patient care 26.3% Employee related services costs allocable to non-patlent care actlvltles $122,500 Medicare percentage Overstatement of Me&care costs -5- PART B PROFESSIONAL COMPONENT PORTION OF FRINGE BENEFIT AND OVERHEADCOSTS RELATED TO PHYSICIANS SERVICES NOT ELIMINATED ~ Hospitals are reimbursed by part B of the Medicare program for tie patlent care given by hospital based physlclans. Therefore to determLne a reasonabLe amount to exclude from hospital costs reimbursable under part A for this patlent care that was billed separately, the costs of physlclan services related to IndlvAdual patlent care should be deducted from hospital costs. In calculating Lts professional fee schedule used for bllllng part B, the hospital included 8 percent factors for both fringe benefits and hospital overhead expenses. However, In computing the cost of physlclans' services to be deducted from hospLta1 costs neither the hospital nor the Blue Cross auditors considered fringe benefit costs or hospital overhead associated with the physLclan salaries. As a result, the hospital's allowable patlent costs were overstated by $145,600 of which $41,800 was charged to Medicare. The Provrder Reimbursement Manual, Section 2108, provides in part that. "The costs of the medlcal and surgical services furnished by the physician whrch are to be excluded from the pro- vider's allowable costs include the applicable portion of the physician's salary and related frlng benefits such as payroll taxes, vacation pay , meals, and other similar benef-its furnrshed by the provider at no cost to the physlclan." The Blue Cross audit staff bulletin on thus subgect (Bulletin No. 141, did not specifically state that fringe benefits related to part B salaries should be deducted from hospital costs. During our review at Mount Auburn Hospital a surular sltuatlon was found and brought to the attentxon of the Blue Cross Medlcare audit department and a supplement to the staff bulletin was zssued requiring that this be done. In OUT opinion, the hospital overhead associated with physlclans' salaries at M.G.H. should have been deducted from hospital costs because rt was included in the professional fees established for billing part B of the program. ENDOWMENTINCOME FROM RESTRICTED DONATIONS NOT PEDUCTED FROM COSTS SSA's Medicare regulations provide that endowment Income designated -6- 2 by a donor for p?ymg speclflc operating costs should be deducted from the particular operatmg cost or group of costs. ' The reason given for this cost prlnclple 1s as follows: "Donor-restrlcted funds which are desrgnated for paying certain hospital operatzng expenses should apply and serve to reduce these costs or group of costs and benefit all patients who use services covered by the donation. If such costs are not reduced, the provider would secure reim- bursement for the same expense twice, At would be reimbursed through the donor-restrIcted contributions as well as from patients and third-party payers lncludlng the tztle XVIII health Insurance program." As discussed below, we believe that durzng fiscal year 1967 Medicare costs were overstated by about $1,000 because income of $3,588 restricted by the donors of the Tralnlng School for Nurses Fund was not deducted from nursing school costs We also believe that the hospital and the Blue Cross auditors were rmstaken in their classlficatlon of income from the George Robert White Fund as unrestricted, Although the unrestricted classlflcation of this endowment income resulted m no increase In Medicare costs in 1967, Medicare costs have been overstated In other years as explained below. Tralnlng School for Nurses Fund The Training School for Nurses Fund was transferred to MGH by a 8 decree of the Massachusetts Supreme Judicial Court, which states in part. "It is ordered, ad-Judged and decreed that the plaintiff cor- poratlon do forthwith turn over all the funds In its hands to the Trustees of the Mass. Gen Hosp. in trust to hold and safely invest the same and to apply the net income and profits arlsrng from said fund to the lnstructlon and training of nurses for the sick and that the M.G H. be authorized and directed to receive said funds and hold the same on the trust aforesaid." The comptroller informed us that the fund had been supplemented by sundry other gifts, some of which may not have been restricted, thereby altering the restrlctlve nature of the fund. We do not belleve that the provlslons of the court decree can be changed because of these sundry gzLfts* -7- Comblung the funds received by the court decree-with another fund, the MGH Tralnlng School for Nurses Endowment Fynd, was con- sldered In 1949 but relected At that time the assistant treasurer wrote to the hospital Chief Accountant as follows. "I think the chief, If not the only, reason for combining the funds 1s that they are parallel In purpose and would avoid some confusion 15 there were only one fund. As far as I can see the only way to do It would be to have the Deed of Grft of the Endowment Fund amended by votes of the Trustees and the Assoclatlon. Such votes would necessarLly provide that the combined fund should be operated under the terms of the above Court Decree. In other words the dlsposltlon of the income would be solely In the hands of the Trustees and llmlted to the lnstructlon and training of nurses for the sLck.***" In our oplnlon the income from the Tralnlng School for Nurses Fund 1s restricted, and therefore should have been deducted from the nursing school costs. George Robert White Fund The George Robert White Fund was establ&shed by a gift In codlcll 2, dated December 31, 1928, to the will of Harriet J Bradbury, Mr. White's sister. The prlnclpal of the White Fund as of September 30, I.967 was $4,119,730, and the income LS about $330,000 a year. The donor provided that a permanent trust fund be established with the income used first for the maintenance and equipment of the George Robert White Bulldlng, and second, for the general purposes of the hospital. The hospital did not classify the income from the White Fund as restricted, in our oplnlon It should have been so classlfled. In 1967 equipment purchased for the White Bulldlng exceeded the endowment Income. However, in other years, the White Fund endowment income exceeded equipment costs, but the difference was not used to reduce hospital maintenance costs of the White Burldlng, as shown In the schedule below Endowment Equipment and Income Available Fiscal Year Income Construction Costs for Maintenance 1966 $307,600 $278,700 $ 28,900 1967 320,900 325,900 -O- 1968 337,400 199,200 138,200 1969 356,500 274,100 82,400 Amount available for maintenance $249,500 -8- Had the zncome In excess of equipment and construction costs been used to reduce mantenance expenses of the White Bulldlng, Medrcare costs would have been about $60,000 less during the above four years, assunung that the 1967 Medlcare rate of utlllzation of hospital faclllfles was representative of the utllizatlon over the entire four year period. Our oplnlon that the White Fund income should have been classified as a restrzcted endowment 1s supported by the terms of the donor's ~~11 and also by an lnterpretatlon of the will prepared by a law firm for the hospital. The will states in part that "The other half of all the rest and residue of my property I give to the Massachusetts General Hospital, a Massachusetts corporation an amount not less than One Million Five Hundred Thousand ($1,500,000) Dollars and not exceeding Two Million Five Hundred Thousand ($2,500,000) Dollars of this bequest to be used as soon after my death as the trustees of the hospital shall decide that a bulldlng of mayor importance to the hospital LS needed for the construction of such building, which shall be known as the George Robert White Memorial Building in memory of my late brother and the remainder of said one-half (l/2) of the rest and residue or all of It not so used for construction, to be held by said Massachusetts General Hospital as a permanent trust fund to be known as the George Robert White Fund, the income of which only shall be used first for the maintenance and equLpment of such building and second for the general purposes of the hospital." (Underscoring supplied) In 1939 the law flnn for the hospital made the following In- terpretatlon of the will. "The word 'maLntenance' is 'a large term whose meaning depends on the surrounding circumstances and the connection In which It LS applied,' 38 C.J. 338. As used in a ~~11 the mnter- pretatlon should be m harmony with the broad intent of the testator If that intent can be determined. This testatrrx clearly had m rend fust and foremost an important burldmg, fully equipped, and mantalned by her gift as 'one of the main bulldlngs of the Hospital' for 'use directly to the care of the sick.' Only as an alternative &d she give income to general purposes. If the bu&ldLng should be erected then general purposes were expressly said to be of second importance to her It seems to be a fair assumption that thus testatxlx &d not want the monument to her brother to be a drag on other hospital re$ources, but that she tid want it to be a contrlbutlon to the Hospital itself m further aid of xts work. -9- These considerations lead me to the view that the word 'maintenance' is not to be narrowly construed tocmean only the repairs and upkeep of the building structure itself, but that it may properly include at least the recurring expense for keeping the building ready for the use of srck people for which It was expressly intended, such as; repairs, care and cleaning, heat, light, and water.***" The Comptroller advised us that he considers the fund income to be unrestricted and the word "maintenance" to mean capital expeni- turres only. We believe that both the will and the law firm's in- terpretation indicate that the income from the fund is restricted for maintenance and equipment of the White Building. INCOME FROM COMMONWEALTH FOR ALCOHOLISM AND VENEREAL DISEASE CLINICS NOT DEDUCTED FROM RFLATED COSTS The Commonwealth of Massachusetts reimburses cooperating hospitals for the net costs of operating alcoholism clinics and venereal disease IV, D.) clinics. In fiscal year 1967, MGH received $22,900 and $63,100 respectively from the State for its alcoholism and V.D. clinics. The hospital did not reduce the cost of its outpatient clinics by these amounts, however , and as a result Medicare costs were over- stated about $15,500. The Blue Cross auditors advlsed us that it was an oversight on their part and that the income should have been used to reduce the operating costs of the clinics. ADMINISTRATIVE AND GENERAL EXPENSES ALLOCATED TO NON-PATIENT CARE ACTIVITIES UNDERSTATED MGH elected to use the step-down method of cost allocation in its statement of reimbursable costs Under this method Administrative and General (A&G) expenses are allocated to patient and non-patient activities based on departmental costs, including depreciation expense Non-patient departmental costs were understated by $2,598,700 because depreciation expense, research and other contract expenses were omitted, and also because certain credits were deducted. As a result, the A&G expenses allocated to non-patient activities were understated and Medicare costs were increased by $46,900. -lO- Depreclatlon of ma]or movable equipment ormtted _ Depreclatlon of ma]or movable equlpment totaling $733,000 was not included In non-patlent care costs, although this type of expense was included in patlent care costs. To be equitable and reasonable In allocating A&G expenses, deprecLatlon expenses should be treated consistently (Included m the base for both patlent care and non-patlent care or excluded from both). Had depreclatlon expense been treated consistently, addltlonal A&G expense would have been allocated to non-pat-lent care activities with a corresponding reduction In the amount allocated to patlent care. Research and certain contract expenses excluded For 1967 the non-patlent care cost base did not include research and other contract expenses of $787,000. We were not given any ]ustl- ficatLon for this ormsslon. An associate comptroller informed us that he believed s~rmlar costs were included In subsequent years Credits deducted from direct costs Certain credits, totaling about $1,078,700 were improperly deducted from non-patlent costs m computing the base for allocating A&G expenses. Based on our analysis of these credits for one month, we belleve they could be categorized as follows: 1. Uscellaneous revenue for professional services such as from laboratory tests - This revenue 1s similar to income from patlent care which 1s not deducted from pakent care costs m computing the base. To be consrstent comparable non-patient income should not be deducted from non-patlent costs. 2. Sundry gifts consldered by the hospital to be un- restricted - Comparable unrestricted gifts related to patlent care, such as funds from the Comnunlty Fund, were not deducted from patlent costs. 3. Research grant holding account balances - When re- search grants were received, MGH transferred amounts for lndlrect costs to a holding account. The holding account was reduced monthly during the lives of the grants. In computing the amount of non-patlent care costs for allocating A&G expenses, the balance 111.the hokkng account was deducted from non-patient care costs, resultxng Ln an understatement of the A&G base. -ll- ALLOWANCEIN LIEU OF SPECIFIC RECOGNITION OF- OTHER COSTS The amount charged to Medicare for the two percent allowance m lieu of speclflc recognltlon of other costs wz~ll be reduced by about $3,900 If all of the above questionable costs are resolved In favor of the Medzare program. EXCESSIVE REIMBURSEMENTFOR PROFESSIONAL SERVICES OF f HOSPITAL-BASED PHYSICIANS MGH professional fees for radlologlcal services were established at a level which we estimate ylelded about $316,000 In excess of related costs during fiscal year 1967 We estimate that the Medicare portion of this excess was about $92,000. As set forth In more detail below, the reason for the excessive reimbursement was that the fee schedule used to bill part B of the Medlcare program for radiology services was too high, and this should have been determlned at the tie the fee schedule was lnltlally approved by Blue Cross. Prior to Medicare almost all x-rays of service patients were read by house officers and x-rays of private patients were read by staff radiologists. House officers (residents and Interns) are not authorized to bill on a fee-for-service basis under part B, instead their salaries are reimbursed to the hospital under part A Following the lnceptlon of Medicare, staff radlologlsts began revlewlng house officers' reports and maklng second readings of service patlent x-ray films The hospital antlLlpated that income of $542,600 would be required to meet its professIona component expenses and that 33 l/3 percent of the charges of staff radiologists would yield thus amount. Howevex, no consideration was given to addltlonal revenue whzch would result from second readings by staff radlologlsts of non-Medicare service patlent x-rays. As shown below, although non-Medicare service patients accounted for 34 percent of the proJected radiology workload, MGH antlclpated that no professional componefit revenue would be generated from this work. -12- Percent of Gross Profe$sional Component Type of patlent Workload Revenue Percent Amount Private 47 $1,170,962 33 l/3 $390,321 Medicare service 19 456,862 33 l/3 152,287 Non-medlcare sernce 34 848,458 -O- loo $2,476,282 $54256008 In July 1966 the MGH Radlologlcal Associates was formed One of the purposes of thus organization was to expedite the collection and tistributlon of fees received for professional services rendered by Its members. During fiscal year 1967, the Radiological Associates gradually assumed the bllllng function, starting with private ambulatory patients. According to the Chief of Radiology a fee 1s charged when- ever a staff radlologlst makes a second reading of x-rays If the reading contributes to patlent care. During the first 3 months of fiscal year 1967, when the hospital was doing most of the billing, all patzents were charged for professional radlologlcal services without dlstlnctlon as to who performed the service - staff ratiologlst or house officer. Accordmngly, at the time that the professional component factor (33 l/3 percent) was subnutted to the lntermedlary for approval on November 29, 1966, there were lndzatlons that Lt was excessive because all patients were being billed. Section 405.485 of the Prlnclples of Reimbursement for Provider Costs and for Services by Hospital-Based Physlclans provides that "Once the portlon of a physlclan's compensation attributable to pro- fesslonal servLces to supplementary medical insurance beneflcLarles has been detemuned, a schedule of charges can be developed To be deemed reasonable the charges should be designed to yield In the aggregate, as nearly as may be possible, an amount equal to such portion of his compensation." After giving consideration to estLmated bad debts and collection costs we calcul.ate that the approved fee schedule yielded $754,000, whereas related expenses amounted to $438,000, a difference of $316,000. Hospital officials -ntaLn that their part B charges are reasonable as compared to prevailing charges m the area They also stated that cash receipts for radiology approximate actual expenses and that there -13- was no excessive reimbursement. In their calculation of Income, no conslderatlon,was given to cash collected by the hospital during the 3 months when the hospital did most of the bllllng, as contrasted to cash collected by the Radiological Associates, nor did they estimate the cash yield from outstanding receivables at year end, September 30, 1967. During the audit of MGH's fiscal 1967 Medlcare cost submissIon the Blue Cross auditors made no adlustment for the difference In radiology professional component Income and expenses The SSA principles of reimbursement makes no speclflc provlslon for retroactive adlustment at the time of audit and final settlement for part B payments made to a hospital for the professional component of the compensation paid by the hospital to Its hospital-based physlclans However, In a letter to us dated April 30, 1970, you indicate that Section C, Article IV, of the Agreement between the Blue Cross Assoclatlon and the Secretary of Health, Education, and Welfare, concerning the recovery of overpayments would apply to excessive part B payments to hospitals. LACK OF COORDINATION BETWEENHEW AND BLUE CROSS AUDIT STAFFS The HEW Regional Audit staff and the Blue Cross Medicare auditors are not coordlnatlng their audit effort or apprlslng each other of the results of their independent reviews. In large teaching hospitals, particularly, such coordlnatlon would be helpful because of the detailed reviews of research grants performed by the HEW audst staff. The Boston Regional Office of the HEW Audit Agency and the Blue Cross Medicare Audit staff performed independent audits of MGH's fiscal 1966 and 1967 costs. The HEW Audit Agency submitted their report on lndlrect cost rates for research grants for both years on March 7, 1969. Although the Blue Cross auditors began their review of both years one month later, on April 7, 1969, they did not ask for the HEW audit report or workpapers. The scope of both audits were dupllcatlve In certain respects For example, both included tests of lndlrect costs and verlflcations of the apportionment of IndIrect costs between patient care and research actLvltres. Also, both audit groups verlfled some of the same statlstAca1 data such as the square foot base used to allocate operation and malnten- ante of plant and housekeeping costs. We reviewed the audit adlustments made by the HEW Audit Agency in their report. Although the 1967 Medicare reimbursement would not have heen much different had these fIndings been considered by the Medicare auditors, there 1s no assurance that the result would he the same in other years or at other hospitals. We could not readily estimate the probable reductLon 111 audit effort had the Medicare auditors made use of the HEW audit work. -14- We note that the HEW publlcatlon, "Audit Program for Hospitals Under the Health Insurance for the Aged Act, Title XVIII," provides that the scope of the Medicare audit should be determlned In part by a review of audit reports prepared by the hospital staff, independent public accountants, or others. No mention LS made of HEW Audit Agency work. RECOMMENDATIONS Our overall recommendation 1s that you instruct the fiscal Inter- medlary to prepare a revised hospital statement of reimbursable cost giving conslderatlon to the questions raised by us In this report. In addltlon, we are making the following speclflc recommendations. 1. Because there are 32 hospitals recelvlng funds from the Commonwealth of Massachusetts for their V.D. and/or alcoholic clinics (See Appendix I), we recommend that the BHI assure Itself that appropriate adJustments are being made at these hospitals. It 1s estimated that the Commonwealth gives these hospitals about $420,000 a year for alcoholism cllnlcs. We could not readily deterrmne the amount given by the Commonwealth for V.D. clinics. 2. We understand that the Medicare part B fiscal lntermedlary 1s evaluating the reasonableness of MGH's radiology fee schedule, but that to this date no conclusions have been reached. We belleve that the special nature of the MGH Radlologlcal Associates should be considered In determlnlng whether the Radiological Associates 1s a separate entity. All the earnings of the lndlvldual members are assigned to the hospital. In return for which they receive salaries from the hospital The salary levels are governed by the fixed salary schedule of the Harvard Me&Cal School faculty, rather than by the amounts of fees earned Under these circumstances we recommend that a cost rather than a reasonable charge crlterlon be used 3n evaluating the fee schedule 3. We recoxmnmend that you advise SSA to notify Its lntermedlarles and the HEWAudit Agency of the need for close liason to assure that dupllcatlon of audit effort will be rmnlrmzed, and that the results of provider reviews ~~11 be exchanged. We would appreciate being advised at an early date of any action taken by you and Blue Cross. Copies of thus letter may be furnished to the Blue Cross Association and to the local Blue Cross Plan for that purpose. If we can be of any assistance to you please let us know. Sincerely yours, & Joseph Eder Regional Manager -15 - APPENDIX I Page 1 LISTING OF ALCOHOLISM AND VENEREAL DISEASE CLINICS IN HOSPITALS REIMBURSED BY THE COMMONWEALTH OF MASSACHUSETTS- Venereal Alcoholism Disease Clinxzs Clinics Beverly Beverly Hospital X Boston B&h Israel Hospital Boston Cz~ty Hospxtal The Boston Dispensary Massachusetts General Hospital Peter Bent Brigham Hospxtal New England Hospital UnlversIty Hospital X Washington Hospital Brockton Brockton Hospital X X Cambrldge CambrIdge City Hospital X X Mount Auburn Hospital X X Cape Cod Barnstable County Hospital X Fall Silver St, Annes Hospital X Fxtchburg Burbank Hospital X X Greenfleld Franklin County Public Hospital X Lawrence Lawrence General Hospital X -16- APPENDIX I Page 2 (Continued) LISTING OF ALCOHOLISM AND VENEF3AL DISEASE CLINICS IN HOSPITALS REIMBURSED BY THE COMMONWEALTH OF MASSAC@SETTS I / Venereal Alcoholism DLsease Cllnxcs Clinics Lowell Lowell General Hospital X St. Josephs Hospital Lynn Hospital New Bedford St. Luke's Hospital X Newton Newton-Wellesley Hospital North Adams Dlvx.lon of Plttsfleld General Hospital Plttsfleld Plttsfxeld General Hospital Berkshire Medxal Center Qulncy Qulncy CLty Hospital Salem Salem Hospital Springfield Sprlngfleld Munlclpal Hospital The Springfield Hospxtal X Waltham Waltham Hospxtal X Worcester St. Vincent HospI?ltal X -17- Worcester Cz.ty Hospatal X
Review of the Cost of Hospital Services Furnished to Medicare Patients at the Massachusetts General Hospital
Published by the Government Accountability Office on 1971-02-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)