What happened to CMS Audit MTN 695838???
CMS, through its contractor PalmettoGBA, began an audit of Atrium in 2022 that focused on whether or not the hospital had been correctly reporting its 'domestic care' expenses (the cost of the care it rendered to its own employees) for the last 26 years.
Based on information provided to me by CMS in response to my FOIA requests concerning MTN 695838, the last document in the audit is dated 9/11/23 and is from the auditor to the CMS official.
It closes with this:
"Based on the ruling [PRRB 2007-D26 attached] the provider's claim of meeting the exception would be voided. If the determination holds, additional questions would be raised regarding the reimbursement impact of the information...Should Palmetto proceed under the context that the [sic] Atrium and MedCost are related and determine the extent to which health insurance costs are not properly reported?"
The auditor's email and the referenced PRRB ruling are attached.
In February of 2025 I asked Senator Tillis to find out for me what happened to this audit.
While he 'responded', he never answered my question: 'What happened to CMS audit MTN 695838?'
I then contacted my US House Representative Addison McDowell. In August of 2025 I received a voicemail from his staff. Here is a transcription of that voicemail:
"Hey Joe, This is Congressman McDowell's office calling. We're just following up on your correspondence regarding PRM 4005.2 ... appreciate you flagging that issue for us, something we're digging into here. We appreciate you sharing that. Does look like it's definitely some kind of irregular looking stuff there. I just wanted to let you know that's something the team is looking into and working on. I'm going to share that with the Congressman as well and we appreciate you reaching out to us with those concerns...We'll dig into it as much as we can..."
As of December 1, 2025 I have not received any update from Representative McDowell (I have, though, received several generic mailings letting me (his constituent) know that he is 'ready to serve' and that all I need do is contact him).
In April of 2025 I received this from CMS in response to a FOIA seeking documents related to MTN 695838 subsequent to the auditor's email to CMS dated 9/11/2023:
Refer to: Control Number 09102024C002
Our searching units have found and duplicated records responsive to your Freedom of Information Act (FOIA) request of 9/9/2024. Our initial review of the responsive documents has found that some of them are not of the type that can be directly released to you by our office. Therefore, we have forwarded them to the CMS Division of Freedom of Information for disclosure review.
This reply seems to confirm that as of 9/9/2024 there are documents related to MTN 695838 that post date Wood's email to Treitel of 9/11/23. As of December 1, 2025 I am still waiting on those documents.
Here's the status report as of December 1, 2025 on that FOIA request per the CMS website as to the status of MTN 695838:
Check the Status of Your FOIA Request
Control Number:09102024C002
Date Received:4/7/2025
Subject:NC - Atrium Health - 66
Status of the Request: Responsive records returned to the FOIA office for review and disclosure analysis
Projected Date of Response: Undetermined
Date of Response: Undetermined
Each month I submit FOIA requests to Atrium on this matter (since Atrium is subject to NC Public Records laws. My last response from Atrium was in July of this year. They stated that 'there were no documents responsive to my request'.
In February 2025 I received documents from Senator Ted Budd in response to my repeated requests to him to find out what happened to MTN 695838.
He provided me a copy of an OIG memorandum that describes itself as a 'closing Investigative Memorandum' on OIG letterhead.
In that memo it refers to an OAS [Office of Audit Services] report that was finalized in August of 2011.
Per the memo, that report calculated the financial impact to Medicare in the event a self-funded hospital was paying itself at a 'market rate' for domestic care as compared to 'cost'. Per the memo, the financial impact to Medicare over an eight year period was $20.5 million dollars.
The memo also states that in August of 2015 CMS determined that the hospital's relationship with its TPA qualified the hospital to meet the exception to the Related Party Rule. (Of note is that the date of this 'closing memorandum' is dated September 16, 2013; yet in the text body of the memorandum it refers to a CMS opinion issued in August of 2015!).
In August of 2025 I submitted a FOIA request to the OAS for that report (FOIA Request #25-0584).
As of December 1, 2025 I have not received any further information from OAS.
In January of 2022 I received a letter from then Senator Burr.
In it he states:
"With regard to your specific concerns, the Centers for Medicare and Medicaid Services (CMS) allows hospitals to include in their cost reports those costs applicable to services, facilities, and supplies furnished to the provider by organizations related to the provider by common ownership or control. Such costs may not exceed the price of comparable services, facilities, and supplies that could be purchased elsewhere. CMS provides exceptions from these rules in certain cases, such as if the supplying organization is a bona fide separate organization. In the cases of exceptions, the hospital may claim reimbursement for the charges in amounts equal to the cost of the hospital."
There are two key phrases in this odd paragraph: 1) "...those costs applicable to services...furnished to the provider by organizations related to the provider by common ownership or control..."; the second phrase is '...must not exceed...".
As to #1, the hospital provides the services to its own employees. Domestic care is not provided 'by organizations related to the provider by common ownership or control.'
As to #2, Senator Burr is supporting the concept that a hospital can charge its own employees a 'full market rate' for a chemo drug that it obtained via its 340B standing.
As stated above, in September of 2023 the CMS contracted auditor wrote this to CMS officials:
"Based on the ruling [PRRB 2007-D26 attached] the provider's claim of meeting the exception would be voided. If the determination holds, additional questions would be raised regarding the reimbursement impact of the information...Should Palmetto proceed under the context that the [sic] Atrium and MedCost are related and determine the extent to which health insurance costs are not properly reported?"
In July 2025 it was announced that Atrium had sold MedCost to a company called HPI.
How does one make sense of an audit that disappears into the ether?
As you may know, audits are formal processes that open and then close. I've never heard of one 'disappearing'.
My guess is that CMS, and perhaps the DOL, met with Atrium and informed them that if Atrium did not sell MedCost then CMS would bring an enforcement action.
Atrium then decided to sell MedCost and CMS gave them time to do it.
Ultimately, the 'hard cold fact' in all this is that when an employee of a self-funded hospital receives care from its employer/hospital the 'transaction' is between the self-funded hospital (as the medical provider) and the self-funded hospital (as the payer for the service rendered...and, of course, using the co-mingled employee contributions that are part of the trust fund).
The reason that Atrium's claim to meet the exception is 'voided' is because in order to meet the exception to the Related Party Rule the two entities involved in the 'transaction' have to be 'bona fide separate entities'.
Atrium (as the medical provider) and Atrium (as the self-funded purchaser of medical services for its employees) are not 'bona fide separate entities'.
While Atrium and MedCost may be 'bona fide separate entities', MedCost is not the provider of the medical service at the heart of this transaction. The medical provider is Atrium.
Put another way, if an Atrium employee had surgery at an Atrium facility and a question of malpractice arose, the employee could not sue MedCost. The employee would sue Atrium.