Medicare Compliance & Reimbursement

Accounting for provider tax refunds is trickier than hospitals think. The HHS Office of Inspector General May 20 gave the final word on how provider tax refunds and expenses should -- and shouldn't -- be handled on hos-pitals'cost reports. Fifteen hospitals that received pool refunds from the Missouri Hospital Association will end up having to pay money back to the feds, according to a May 20 OIG audit report titled "Review of the Classification of Missouri Provider Tax Refunds on Hospitals'Medicare Cost Reports" (A-07-02-04006). The OIG says the pool refunds, which allowed some of the provider tax refund to be redistributed among hospitals negatively affected by the tax, were reported incorrectly as Medicaid revenue, instead of as a reduction of the tax expense. Total cost report errors found during the audit, including an unallowable scholarship fund and a poison control center claimed by four hospitals, rang up $8.4 million in Medicare overpayments, according to the audit. So why not claim the pool refunds as "charitable donations"? After all, hospital officials pointed out, that was the tack taken by several large accounting firms in the mid 1990's. The OIG says: Don't buy it. Even though the pool refund transactions are voluntary, the transfers are still conditional on a formal agreement set up by the Association and fall short of official standards for charitable contributions.

To read the report, go to http://oig.hhs.gov/oas/reports/region7/70204006.pdf. Lesson Learned: Fiscal intermediaries will be pressuring hospitals to play by the rules when claiming provider tax refunds on cost reports.