EXECUTIVE SUMMARY:

Our objective was to determine whether the fiscal intermediary, TrailBlazer, calculated Medicare outlier payments to Foundation in accordance with Medicare reimbursement requirements.  TrailBlazer did not calculate Medicare outlier payments to Foundation in accordance with Medicare reimbursement requirements, using an incorrect cost-to-charge ratio in computing the outlier payments.  As a result, TrailBlazer overpaid Foundation approximately $1.4 million.  We recommended that TrailBlazer (1) recover from Foundation the improper outlier payments and (2) implement internal controls that ensure the correct cost-to-charge ratios are used for future outlier payments.  TrailBlazer agreed that an error was made in determining the cost-to-charge ratio used to compute outlier payments, but disagreed with the cost-to-charge ratio we used to compute the overpayment.  TrailBlazer also agreed that adequate internal controls were not in place to identify and correct the error in determining the cost-to-charge ratio for this provider.