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Summary: GAO gave an overview of certain problems concerning the auditing of nursing home chains participating in the Medicaid program. As chain organizations own or control a steadily increasing share of the hursing home business, the problems identified are likely to become more significant. GAO found that States were not effectively auditing Medicaid payments to nursing home chains and many reimbursements for nonallowable expenses were being approved including: (1) fees for headquarters' administrative services which were higher than the costs of the services; (2) interest on intracompany loan transactions; and (3) charges associated with property transactions with related organizations or persons. The Department of Health, Education, and Welfare (HEW) has agreed with the need for reforms and agreed to expand exisitng headquarters' audit capability by using the following ground rules: (1) the headquarters of chains with some or all members participating in Medicare but not Medicaid would continue to be audited by the designated Medicare intermediary and the resulting information would be shared with all affected Health Care Financing Administration components and intermediaries servicing members of the chain; and (2) the headquarters of chains with some or all members participating in Medicaid but not Medicare would be audited by organizations such as State audit agencies, certified public accounting firms, and Medicare intermediaries.
