Hospital Links With Related Firms Can Conceal Unreasonable Costs and Increase Administrative Burden

GAO audited five hospitals in California and Nevada to identify non-arm's-length transactions and to determine the impact of these transactions on Medicare and Medicaid. At each hospital, GAO: (1) determined who owned or controlled the hospital; (2) reviewed the hospital's organizational structure; (3) identified non-arm's-length transactions between the related organizations; (4) analyzed non-arm's-length transactions to determine the impact on Medicare and Medicaid; (5) presented preliminary findings to the appropriate paying agents; and (6) reviewed the cost report adjustments made by the intermediary and the recovery of overpayments.