Federal Watchdog: Medicare Billing Oversight Caught Only 8 of 234 Contractor Errors

The Department of Health and Human Services Office of Inspector General published a report on November 10, 2026 concluding that the Centers for Medicare and Medicaid Services does not have adequate oversight of the private firms that process Medicare hospital billing paperwork.

The OIG reviewed findings from six of its own earlier audits examining work by Medicare Administrative Contractors, the companies CMS pays to audit hospital cost reports and settle final Medicare payments with providers. Across those prior reviews, the OIG had found that the contractors needed to reopen and correct 234 cost reports because of errors the contractors themselves made during audits or desk reviews. Those corrections involved 31.6 million dollars in adjusted settlements: 23.3 million dollars in overpayments that had to be recovered from providers and 8.3 million dollars in underpayments that had to be paid out.

The core problem: CMS's own quality assurance process had identified only 8 of those 234 error-driven reopenings. The OIG noted that CMS does not currently track the number or types of cost report settlement errors occurring across its contractor network.

Hospital cost reports set the foundation for how much Medicare pays hospitals, skilled nursing facilities, home health agencies, and other institutional providers each year. Settlement errors can push payments in either direction, and overpayments represent losses to the Medicare program.

The OIG recommended that CMS strengthen its quality assurance oversight, require each contractor to submit annual reports on the numbers and types of errors it finds in final settlements, and direct contractors to build a formal quality review for any cost report that has undergone an audit or desk review. CMS agreed with all three recommendations.