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Medicare Cost Reporting

Medicare Cost Reporting. HomeTown Health University Module Two Introduction to the Cost Report. Presented by: Draffin & Tucker, LLP. What is a cost report?. A cost report is a lengthy report that provides information regarding the revenues and expenses of the provider for its fiscal year.

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Medicare Cost Reporting

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  1. Medicare Cost Reporting HomeTown Health University Module Two Introduction to the Cost Report Presented by: Draffin & Tucker, LLP

  2. What is a cost report? • A cost report is a lengthy report that provides information regarding the revenues and expenses of the provider for its fiscal year. • Amount and types of expenses • Amount and types of revenues • Statistical measures (Patient Days, Discharges, # of Employees, etc.)

  3. What is a cost report? • All hospitals and nursing homes are required to file cost reports. • The cost report impacts reimbursement in different ways: • PPS & OPPS hospitals and SNFs • Information is used to set future rates • Year end settlements – DSH, Bad Debts • Critical Access Hospitals • Information directly impacts cost-based inpatient and outpatient payments

  4. Cost Based • Cost based does not mean that all costs and expenses of the provider are paid by Medicare and Medicaid. • There are some types of expenses that Medicare and Medicaid do not consider as patient related and are therefore not covered. Examples are: • Self-administered drugs • Advertising • Interest expense to the extent of interest income

  5. CAH Cost Based • CAH Medicare (inpatient and outpatient) and Medicaid outpatient payments are based on a portion of the facility’s allowable costs. • Allowable costs are determined from the annual cost reports.

  6. CAH Cost Based • Medicare and Medicaid will consider for reimbursement only their share of the allowable expenses. • Medicare IP and OP • Medicare Portion of Total Days • Medicare Portion of Total Charges • Medicaid IP – DRG Based • Medicaid OP – Cost and CMO

  7. Cost Based • For example: • If Medicare utilization (based on days or charges) is 40%, then Medicare will pay 40% of the allowable costs of operation. • For every allowable $1 spent, Medicare will cover $ .40.

  8. Cost Based • Therefore, based upon a facility’s payer mix, care should be taken when making spending decisions. • Is there adequate payer resources to cover the cost of care that will not be paid by Medicare? • Remember, if Medicare utilization is 40%, who will pay the remaining 60% of every dollar spent?

  9. Medicaid • Medicaid inpatient services in a CAH are paid on a fixed DRG basis for the aged, blind and disabled population. Outpatient services for this same patient population are paid based on the cost report. • The remaining Medicaid population is now under CMOs and are paid similar to commercial insurance. There is no cost report impact.

  10. What about other payers? • Commercial payers are paid based upon the individual payer contracts. • The remaining population of self-pay accounts are typically paid at a much lower rate than costs. No cost report impact

  11. The Cost Report A Walk-Through

  12. All Patients Program Patients

  13. S Series Worksheets

  14. Certification by Provider

  15. Worksheet S-3-I • Purpose • This worksheet collects statistical data regarding beds, days, FTE’s and discharges.

  16. Worksheet S-3-1

  17. Information regarding compensation to hospital employees and related hours worked by employees are reported in Worksheets S-3 Parts II and III. These worksheets are completed only by PPS hospitals. The information is used to compute an average hourly wage. This information is used to adjust PPS inpatient and outpatient payments.

  18. A Series Worksheets The A series of worksheets provides information to CMS regarding the annual costs of operating the hospital. These are several worksheets in the cost report that are used in reporting this information.

  19. Worksheet A • Purpose • To group all facility costs into CMS approved cost centers. • To identify and adjust off any non-allowable costs.

  20. Worksheet A reports operating costs from the hospital’s financial records.

  21. Worksheet A-6 • Purpose • To reclassify costs to the appropriate cost center. In some instances, costs may be recorded in one departmental account but related to other departments, or cost centers.

  22. For example: On the general ledger, the hospital may charge the Operating Room department for supplies it uses. However, these are be billed to Medicare as medical supplies rather than operating room charges. Therefore, the supply costs must be “reclassified” from the OR to the Medical Supplies cost center on the cost report. This reclassification is reported on Worksheet A-6.

  23. Worksheet A-6 • Examples of Common A-6’s • Depreciation expense • Interest expense • Rents and leases • “Floating nurses”

  24. Worksheet A-8 • Purpose • To exclude cost not related to patient care (offsets) or include additional patient care related costs (add backs).

  25. Medicare and Medicaid will only pay for costs that are considered as “patient care related”. There are certain costs incurred by a provider that may not meet this definition. Therefore, these costs must be “adjusted off” the cost report. These costs are generally subtracted from the direct operating costs reported on Worksheet A. The detail of these non-allowable costs are reported on Worksheet A-8.

  26. Worksheet A-8 • Common revenue offsets • Interest income (to the extent of interest expense) • Rebates on the purchase of supplies • Meals sold to employees and guest • Rental income • Vending machine revenue • Sale of medical records

  27. Worksheet A-8 • Common expense offsets • Advertising expenses • Physician recruitment • Luxury patient care items such as patient telephones and televisions • ER physician billing cost

  28. Worksheet A-8details the adjustments to expenses, generally for non-allowable costs. Examples include: Interest income Cafeteria income Rebates Non-patient drug sales AdvertisingThese costs must be removed from operating costs that were reported on Worksheet A.

  29. Providers must also identify on A-8-1, any costs that were incurred due to transactions with parties that are related to the provider: i.e. Home office, management companies, etc. Medicare will only reimburse what it costs the related party to provide the service. If the related party charged the provider more, this will be offset.

  30. Many hospitals either employ or contract with physicians to perform administrative functions and/or patient care services. The payments made to these physicians must be reported on Worksheet A-8-2. This worksheet is used to determine what portion of payments to physicians will be offset as non-allowable costs for Medicare and Medicaid reimbursement.

  31. The summary of all Reclassifications and Adjustments are reported on Worksheet A.Reclassifications must net out to zero. When Worksheet A is completed, Column 7 will include only the expenses that Medicare considers as allowable. The net expenses from column 7 will be transferred to Worksheet B.

  32. Medicare Cost Reporting Module Two: Introduction to the Cost Report If you have any questions regarding this course, please contact: Jeff Askey, CPA Draffin & Tucker, LLP P.O. Box 6 Albany, Georgia 31702 (229) 883-7878 JAskey@draffin-tucker.com

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