Cost Reporting

1. Cost Reporting Presented by Bill Lubaway Paul Evers Lubaway, Masten & Co. Doug Horner St. Mary’s of Michigan 2012 Annual Insurance & Reimbursement Update Eastern Michigan Chapter HFMA March 22, 2012

2. Agenda • Overview • Who Cares? • Worksheets • Real Job Description • Audit Issues • Wrap Up

3. Who Cares? • CMS uses the information submitted by hospitals in the aggregate to set future payment rates & as a basis for market basket updates. • Hospital specific information impacts certain payment factors (wage index, outlier RCC). • Each year could potentially be used as a base year for a future change in payment regulations. • Medicaid & BCBSM use for rate setting.

4. Who Cares? Blues Care • The Blue Cross Full Cost Model -Currently rebasing 2013 based on 2010 • Piggybacks on the Medicare cost report • Uses Full Cost Method reimbursement principles as defined by Blue Cross • To calculate inpatient and outpatient rates

5. Cost Finding Objectives • Determine reimbursable cost • Establish full cost for rate setting • Provide management information such as profitability of services

6. Cost Finding Process • Gather revenue and expenses by department from general ledger and departmental statistical reports. • Make reclassifications to match expense to revenue. • Adjust to regulations vs. accounting differences, offset other revenue and eliminate non-allowable costs. • Allocate overhead cost centers to revenue producing departments. • Allocate cost to program.

7. Worksheet S-10

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9. Real Job Description includes • Bad debts • Wage Index-pension & contract labor issues • Medical Education • Disproportionate Share • Case Mix Index • Value Based Purchasing • Readmissions • Transfers • HIT

10. Case Mix Index

11. Case Mix Index

12. Audit Issue – Medicare sampling • Medicare uses one of the most punitive and harsh sampling methodologies. • There are 3 levels of errors that may be applied against a sample: • Most Likely Error • Upper Error Limit • Upper Error Limit plus the basic precision • The method used is based on auditor discretion. • It is important to receive the sampling error worksheets so you can determine how the adjustment was reached.

13. Stratified Sample

14. Random Listing

15. Calculation of Error

16. Karmanos Komen Race for the Cure May 26, 2012