On September 2, 2025, OIG published the results of an audit that found obvious errors and/or inconsistencies with Medicare requirements in all 122 of the cost reports reviewed (i.e., cost reports for which Novitas had settled after only a desk review and later reopened to correct the final settlement amounts). The audit identified $5 million in overpayments and $4.4 million in underpayments to providers as a result of the errors. OIG recommended, and Novitas concurred, that further training and expanded procedures are necessary for Novitas desk reviewers and supervisors.
Novitas is a Medicare Advantage Contractor (MAC) that reviews cost reports submitted by healthcare providers to determine the final amount of Medicare reimbursement due to the providers for a specific cost reporting period. Cost reports include worksheets with information on facility characteristics, health care utilization, employee salary and wage data, facility costs and charges, and Medicare settlement data. The MAC performs a desk review of the cost report before issuing a Notice of Program Reimbursement (NPR) to the provider. The desk review entails an analysis by the MAC of the cost report to determine its accuracy and reasonableness and to determine whether the cost report requires an audit. Presuming the MAC determines that a full audit is unnecessary, it will issue an NPR after its desk review. The NPR shows whether the Medicare program owes payment to the provider or if the provider owes payment to the Medicare program. Novitas is the MAC for eleven states and the District of Columbia.
The purpose of OIG’s audit was to determine whether the cost reports, settled with only a desk review and later reopened for correction, contained obvious errors and/or were inconsistent with the law, regulations, or Medicare manual instructions. The audit also determined whether such errors/inconsistencies were caused by Novitas.
According to OIG, all 122 cost report reopenings contained obvious errors or were inconsistent with the law, regulations, or Medicare manual instructions, and those errors/inconsistencies were caused by Novitas. The report detailed eleven categories of errors, including settlement data omissions, misreported Health Information Technology for Economic and Clinical Health Act (HITECH) payments, duplicated bad debts, and incorrect Graduate Medical Education (GME) calculations. Errors included such things as using “an incorrect HITECH transition factor . . . for the HITECH settlement,” “an incorrect per-resident amount (PRA) for GME payments,” and an “incorrect Supplemental Security Income (SSI) percentage for DSH payments.”
The reopenings resulted in corrected settlements totaling $9.4 million, including $5 million in overpayments and $4.4 million in underpayments.
Novitas concurred with OIG’s recommendations that Novitas (1) develop and provide additional education to desk reviewers and supervisors regarding applicable criteria and review requirements; and (2) develop and implement enhanced and expanded procedures not limited to the additional training for which Novitas had already identified a need, so that supervisors are better qualified to detect incorrect adjustments.
Given the widespread errors found by OIG, providers would be wise to scrutinize and verify all audit adjustments and findings that their MACs make in the settlement of their NPRs.
The full text of OIG’s Audit A-06-24-05003, “Novitas Solutions, Inc., Reopened and Corrected Cost Report Final Settlements for Desk Reviews Only With Obvious Errors To Correct Payments Made to Medicare Providers,” is available here.
