Medicare: Highlights of the Audit of a Provider's Cost Statement
by ALBERT A. CARDONE Principal, New York Office
Presented at a Technical Conference of The New York State Society
of Certified Public Accountants, New York—November 1967
THE Federal Health Insurance Program for the Aged, commonly called the medicare program, requires audits of the costs of services to beneficiaries. The audits may be performed by either qualified employees
of the intermediaries or independent audit firms engaged by the intermediaries. Intermediaries are organizations, such as Blue Cross plans and insurance companies, that act as agents for governmental agencies in dealing with the hospitals, extended-care facilities, and home health agencies that are the providers of services to beneficiaries of the medicare program. Beneficiaries are patients 65 years of age and over who are recipients of services under the medicare program.
The audit of the cost statement is clearly distinguishable from the conventional audit of the financial statements. Indeed, it is possible for different auditors to be engaged. The Department of Health, Education and Welfare (HEW) has issued guidelines for auditors participating in the examination of the cost of services, and the Social Security Administration
(SSA), in collaboration with the Audit Agency of HEW, has prepared an audit program containing minimum audit procedures to be considered.
Where an independent audit firm is engaged by an intermediary to examine a provider's cost statements (hereinafter such a firm will be referred to as the intermediary-auditor), there are several aspects of the intermediary-auditor's role and certain auditing standards with which he must comply that involve both the provider and the provider's auditor (provider-auditor).
Generally in these cases the co-operation of the provider, the provider-
auditor, and the intermediary-auditor is necessary for efficient audits of providers' medicare cost statements. Efficient audits may produce
advantages to the provider as well as to the medicare program, and they may also produce constructive suggestions as a by-product of the examination.