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EXECUTIVE SUMMARY:
The objective of this review was to determine whether the termination and severance costs related to Medicare contract termination and claimed by United HealthCare were allowable, allocable, and reasonable in accordance with Medicare contract provisions and instructions, Federal regulations, and company policies. Through June 2002, United HealthCare claimed total contract termination costs of $10,806,497 ($8,554,948 for termination costs and $2,251,549 for severance costs). We found that $2,527,776 in termination costs and $366,234 in severance costs were unallowable. United HealthCare did not get CMS approval, but still claimed subcontract lease costs related to periods after the contract termination date. In addition, certain termination costs were not reasonable and therefore not allowable for reimbursement per the Federal Acquisition Regulations. We recommend financial adjustments for the $2,527,776 in termination costs and $366,234 in severance costs.