Audit Process - Introduction

1. Audit Process - Introduction Jim Flowers DMA Audit Section November 9, 2006

2. Audit Process – Recent History • Common Audit Agreement – BCBS NC • Audits of Most Hospitals FY1997 • Audits extended to FY1998 and FY1999 • Hospital Outpatient Settlements • FY1997 – FY2001 • Work Terminated in 2003 with Last Tentative Settlement on FY2001

3. Audit Process – Recent History • Process of Outpatient Settlements • Reconciliation of those final settled by BCBS of NC up through FY1999 • Outstanding Settlements FY1997 – FY2002 • FY97-FY99–Clifton Gunderson LLP /Myers & Stauffer • FY00-FY02 – Myers & Stauffer • FY03 & Forward – Clifton Gunderson LLP

4. Audit Process – Recent History • Award of New Audit Contract to Clifton Gunderson LLP in 2004 • Significant change in scope from prior audit contracts • Encompassed cost report audits of numerous provider types including hospitals, long term care, FQHC / RHC and others • Five (5) Year Multi-Deliverables Contract

5. Audit Process – Recent History • Clifton Gunderson LLP Audit Contract – Hospital Related Deliverables Per Contract Year (Current) • 10 Full Scope Field Audits of Inpatient and Outpatient Services • 30 Desk Reviews of Inpatient Hospital Services • 125+ Hospital Outpatient Settlements • Full Scope Field Audits each year on all State Owned Institutions plus UNC Hospitals and PCMH (16)

6. Audit Process – Recent History • Hospital Audits Selection • Discretion of Intermediary (DMA) • 42 CFR 447.253(g) • Full Scope Field Audits intended to focus on 10 Largest Hospitals based on Medicaid Revenue and Utilization • Inpatient Desk Reviews intended to focus on high Medicaid Revenue and Utilization and Critical Access Hospitals • Hospital Outpatient Settlements – required by State Plan on all outpatient hospital services

7. Audit Process – Recent History • Hospital Audits Selection – To Date • Non-State Hospital Audits resumed from BCBS NC starting with 40 Hospitals FY2003 Cost Reports with Contract Year 1 (10 Field Audit and 30 Desk Reviews) • All FY2004 cost reports were not filed timely by providers so Contract Year 2 focused on an additional 40 hospitals (10 Field Audit and 30 Desk Reviews) on FY2003 Cost Reports • Contract Year 3 Audits were selected from FY2004 Cost Reports. Again – 40 Hospitals

8. Audit Process – Future • Hospital Audits Selection – Future • Contract Year 4 Audits will be selected from FY2005 Cost Reports • Currently unknown how finalization of Proposed Rule 50262 will change or increase audit requirements for Clifton Gunderson on FY2005 cost reports.

9. Audit Process – Future • Hospital Audits Selection – Future • Contract Year 5 Audits will be selected from FY2006 Cost Report • To comply with CMS Approved State Plan Amendment 05-015, DMA intends to modify the Contract to increase field audits from 10 to 70. • SPA 05-015 requires audits of all Public hospitals whose CPE is claimed in the DSH Program as well as audits of all Critical Access Hospitals.

10. Chuck Smith, CPA Senior Manager in Charge Raleigh Office Clifton Gunderson LLP