Overhead Costs: Unallowable and Questionable Costs Charged to Medicare by Hospital Corporation of America

GAO discussed the results of its review of the Hospital Corporation of America's (HCA) general and administrative expenses for its fiscal year ended December 31, 1991. GAO noted that: (1) $1.1 million of HCA general and administrative expenses were unallowable, questionable, or unsupported; (2) the majority of HCA expenses were unallowable in accordance with Medicare cost principles or questionable because the relationship between costs and patient care services was not clear; (3) there was insufficient documentation to determine the allowability of the costs; (4) the general nature of the Medicare cost principles was the primary reason HCA included unallowable and questionable costs in its Medicare report; (5) HCA excluded net costs of $431.7 million from its Medicare report, but allocated these costs to its hospitals, which increased health care costs at these facilities; and (6) Medicare cost principles do not contain guidance on the allowability of certain expenses and lack sufficient clarity to ensure consistent application by health care providers.