A federal report found Dignity Health St. Joseph’s Hospital in Phoenix overstated its wages for 2019. This could have skewed Medicare payments to other local hospitals.

The Department of Health and Human Services Office of Inspector General reviewed St. Joseph’s because of its potential to significantly affect Medicare payments to many Arizona hospitals.

That potential comes from a federal law that uses area wage indexes to adjust Medicare payments for local labor costs. Dignity Health St. Joseph’s applied to be considered a rural hospital, according to the OIG, therefore having it contribute to a rural floor wage index, which determines Medicare payments.

The report found St. Joseph’s overstated its wages and costs by $12 million. That would have led to a domino effect worth $11 million of Medicare overpayments for more than 50 Arizona hospitals.

In a statement, Dignity Health said although it regrets the wage errors, they were not made intentionally, and, that the reporting issues were addressed.