Hospital Merger Increased Medicare and Medicaid Payments for Capital Costs.
GENERAL ACCOUNTING OFFICE WASHINGTON DC HUMAN RESOURCES DIV
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In 1981, the Hospital Corporation of America HCA acquired the assets 54 hospitals, 18 nursing homes, and other subsidiaries of Hospital Affiliates International, Inc., from INA Corporation. INA received 425 million in cash and 5.39 million shares of HCA stock valued at 190 million. In addition, HCA assumed long-term debt of about 270 million. During the first year after the acquisition, the overall costs of the acquired hospitals increased because of the acquisition by a net amount of about 55 million attributable to changes in interest, depreciation, and home office expenses. A portion of the increased costs was allocated to the Medicare and Medicaid programs. In accounting for cost items associated with the acquisition, HCA used a number of methods that GAO questions under Medicare reimbursement principles which are also generally used by Medicaid. These methods generally increased the amount claimed for reimbursement under Medicare and Medicaid.
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