OIG Critical of CMS’ Oversight of Medicare Cost Reports
The Situation Report | April 7, 2025
The Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) has released a report indicating that Medicare Administrative Contractors (MACs) did not consistently comply with Medicare cost report oversight requirements.
This audit assessed whether individual MACs adhered to Medicare cost report oversight standards. The review covered contracts between the U.S. Centers for Medicare and Medicaid Services (CMS) and all 12 Part A/B MAC jurisdictions responsible for evaluating and settling provider cost reports.
Key findings from the OIG report include:
During the federal fiscal years (FFYs) 2019–2021, all 12 MAC jurisdictions failed to meet contract requirements for audit and reimbursement desk review and audit quality (AR-4) for at least one year within the audit period.
CMS identified a total of 287 audit-related deficiencies across all MAC jurisdictions, including:
- Failure to conduct proper cost report reviews.
- Inadequate assessment of graduate medical education (GME)and indirect medical education reimbursements.
- Errors in reviewing allocation, grouping, or reclassification of charges to cost centers.
- Incorrect calculations and reimbursements for nursing and allied health programs.
- Insufficient review of bad debts.
MAC officials from selected jurisdictions cited several contributing factors, including unclear CMS guidance, limited feedback on cost report reviews, inadequate training, and challenges related to staffing and workload.
The report does not specify the provider types included in the MAC cost report audits. However, certain providers, such as hospitals, skilled nursing facilities (SNFs), home health agencies (HHAs), and hospices are required to submit annual cost reports. Some areas examined in the OIG audit, such as GME, are clearly associated with hospital cost reports.
To enhance compliance and oversight, the OIG issued three recommendations to CMS, emphasizing the need for improved processes and additional training to ensure that MACs fulfill their cost report oversight obligations.