Simione Consultants: The Medicare HHA Cost Report LETS GET IT RIGHT!

Simione Consultants, LLC The Medicare HHA Cost ReportLETS GET IT RIGHT! www.simione.com 800-949-0388

2 Course Objectives Understand the Medicare Regulations Applicable to Cost Reporting Medicare Cost Report Filing Requirements Identify Sources of Information Needed to Complete the Cost Report Worksheets How to Use the Cost Report as a Management Tool

Regulations Costs and General Instructions CMS 15 - Provider Reimbursement Manual Parts 1 and 2 Part 1 Defines reasonable costs of providing services to Medicare patients Allowable versus non-allowable Requirement to file cost reports Allocation statistics used in cost determinations Provider rights in payment disputes Part 2 – General instructions on the cost report and their forms 3

Regulations Visits Medicare Benefit Policy Manual Chapter 7 Definitions of home health services covered by Medicare Billable Visits CMS 15 -1 and 15-2 Provider Reimbursement Manuals Regulations will be referred to throughout presentation 4

General Information General Information Who is required to file the cost report? All providers participating in the Medicare Program (CMS 15-1 Section 2413) Intent of Cost Report Information is submitted annually to CMS/RHHI for settlement of costs relating to health care services rendered to Medicare beneficiaries 5

General Information PPS eliminated the monetary settlement of costs but did not eliminate the requirement to file annual cost reports Who Files? Provider-based Hospital based, SNF (nursing home) based home health agencies Freestanding 6

General Information Types of Cost Reports Full cost report Low Utilization (CMS 15-1, Section 2414.4.B) Less than 10% Medicare utilization, or Less than $200,000 in Medicare payments No Medicare Utilization (CMS 15-1, Section 2414.4.A) No covered services were furnished during the reporting period and No Medicare claims will be filed for this reporting period 7

General Information Cost Report Periods (CMS 15-1, Section 2414) Annual reports cover a 12 consecutive month period of operations Providers may select any 12 month reporting period Recommend follow accounting period used in operations Cost report period can be from 1 to 13 months New or terminating providers (CMS 15-1, Section 2414.1 and 2414.2) Final cost report Change of ownership - partial cost report - Stock purchase - no - Asset purchase - yes 8

General Information Requirements to Change a Cost Reporting Period (CMS 15-1, Section 2414.3) Request to RHHI (or MAC) 120 days or more before the close of the reporting period which the change proposes to establish and must have good cause Chain Organization acquires a provider and wishes to change new provider to Chain Organization’s fiscal year end Government provider has to change fiscal year end as a result of legislative action 9

General Information Cost Report Filing Requirements Must be filed electronically Free CMS Software http://www.mutualmedicare.com/star/providers/ Approved vendor (Next Slide) CDs may now be submitted Cost Report Due Dates Later of 5 months after FYE or 30 days after a valid provider statistical and reimbursement (PS&R) report is sent to the provider Remember - postmark date - Post Office or overnight No postal meter date is accepted 10

General Information 11 Vendor Listing approved by CMS for HHA & Cost Report Software Health Financial Systems KPMG, LLP Optimizer Systems Progressive Provider Services

General Information Cost Reports - Little or No Settlement - Starting to see no adjustment settlements Still Very Important - Accurate cost data for CMS - Future rate setting - CMS is looking to rebase the PPS rates - critical role - Reimbursement rules have not changed - only payment methodology ,[object Object],12

Things to Consider: False Claims Act Financial Incentive for Whistleblowers Persons filing under the Act stand to receive a portion (usually about 15-25 percent) of any recovered damages Key Provision: Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim 13

Things to Consider: False Claims Act Knowing and knowingly is defined that a person, with respect to information: Has actual knowledge of the information; Acts in deliberate ignorance of the truth or falsity of the information; or Acts in reckless disregard of the truth or falsity of the information, No proof of specific intent to defraud is required 14

COST REPORT CERTIFICATION (WORKSHEETS) CERTIFICATION BY OFFICER OR ADMINISTRATOR OF PROVIDER(S) I HEREBY CERTIFY that I have read the above statement and that I have examined the accompanying electronically filed or manually submitted cost report and the Balance Sheet and Statement of Revenue and Expenses prepared by____________________________________________ (Provider Name(s)and Number(s)) for the cost reporting period beginning and ending and that to the best of my knowledge and belief, it is a true, correct and complete statement prepared from the books and records of the provider in accordance with applicable instructions, except as noted. I further certify that I am familiar with the laws and regulations regarding the provision of health care services and that the services identified in this cost report were provided in compliance with such laws and regulations. 15 Things to Consider: False Claims Act

Cost Report Filing Requirements For Full Acceptance of Cost Report Financial statements using the accrual basis of accounting Working trial balance Trial balance crosswalk Support for reclassifications, adjustments, and related party costs Signed Certification page Consider using blue ink CMS Form 339 Questionnaire 16

Cost Report Filing Requirements Filing a Low Utilization Cost Report Signed Certification page Waiver of Electronic Filing of Medicare Cost Report http://www.ngsmedicare.com/pdf/electronicwaiver_0308.pdf Balance Sheet and Income Statement Can use worksheets from the cost report F-series worksheets for the 1728-94 cost report 17

Cost Report Filing Requirements Filing a No Utilization Cost Report Signed Certification page Waiver of Electronic Filing of Medicare Cost Report Certification for Non-Medicare Utilization http://www.ngsmedicare.com/pdf/noutilizationcert_0308.pdf 18

Cost Report Filing Requirements Always Remember… Get it submitted on time It can always be amended it if there are inaccuracies Do not forget to send the payment if one is due If your cost report is not filed and accepted, it results in No Payment 19

Cost Report Filing Requirements Failure to file a timely and acceptable cost report results in all Medicare payments being suspended until an acceptable cost report is filed. (42 C.F.R. Section 405.371 [C]) 20

Cost Report Filing Requirements After the Filing Deadline is Met If not accepted – you will receive a letter to that effect Specify deadline for returning acceptable cost report or payments will be withheld Notice of Program Reimbursement (NPR) Quick turnaround by RHHI Include any monies that may be due Disagreements with Monies Due Appeals process - 180 days from date of NPR to file Re-opening Requests – 3 Years From NPR 21

Cost Report Terminology and Definitions Found in CMS15-1 Section 2302 Cost Center (Sect 2302.8) “An organizational unit, generally a department or its subunit, having a common functional purpose for which direct and indirect costs are accumulated, allocated and apportioned.” Home health agencies = services and programs 22

Cost Report Terminology and Definitions General Services (Sect 2302.9) These services benefit the agency as a whole Costs included in these cost centers are allocated to other cost centers in accordance with Medicare accepted statistical base Capital related costs Capital related – building and fixtures Capital related movable equipment Plant operation maintenance Transportation Administrative and General 23

Cost Report Terminology and Definitions Reimbursable Cost Centers Cost centers for services covered by Medicare Program Non-reimbursable Cost Centers Cost centers for services/programs NOT covered by Medicare Program Cost centers for material non-allowable costs/activities 24

Cost Report Terminology and Definitions Allowable Costs Costs to be either included or allocated to reimbursable cost centers. Defined by principles set forth by CMS 15-1 Provider Reimbursement Manual Non-allowable Costs Costs not related to patient care Gifts, donations, entertainment, fines and penalties Unallowable costs related to patient care Ambulance services, private duty care, dental services 25

Cost Report Terminology and Definitions Step Down Method (Sect 2306.1) Allocation of general service costs to reimbursable and non-reimbursable cost centers Home health agencies are required to use the Step Down Method (Sect 2308) Accumulated Cost Statistic Used to allocate the A&G cost center Direct service costs plus any allocated general service costs 26

Cost Report Terminology and Definitions CFR The Code of Federal Regulations (CFR) is the codification of the general and permanent rules published in the Federal Register by the Federal Government. Manuals CMS written guidelines and policies to implement Medicare regulations as set forth by the CFR http://www.CMS.hhs.gov/home/regsguidance.asp 27

Cost Report Data Compiled after year end closed Maintain dedicated cost report file Three main data sections: Statistical Financial Medicare 28

Cost Report Data Statistical Data: Visits Episodes Patient counts FTEs 29

Cost Report Data Visits (CMS 15-1 Section 2302.15) Accumulate all visits by service, type and by Payer Visit information maintained internally Service dates equal the period covered by the period reflected on the cost report Episodes By type of episode Episodes ended in the period covered 30

Cost Report Data Patient counts Duplicated Unduplicated Duplicated Patient counted every time admitted and readmitted during the cost report period Unduplicated Patient counted once regardless of times readmitted during the year 31

Cost Report Data FTEs Calculated based on annual hours paid divided by 2080 Staff Contract Staff FTEs Payroll Administrative positions Services 32

Cost Report Data Contract FTEs All reimbursable service costs reported in contract column on Worksheet A Need to develop FTEs based on hours or visits If hours are not available, then rule of thumb is 1 visit = 1 hour. (CMS 15-1 Section 1409.2) 33

Cost Report Data Statistical Support for Capital Related Cost Allocations Need to be auditable Building and building fixtures Square feet Equipment costs Square feet or equipment dollar value Transportation Mileage 34

Cost Report Data Square Feet Most commonly used Need to maintain floor plans Try to keep updated with position and department changes Weighted average if changes occurred during year Exclude all common space Hallways, rest rooms, kitchen 35

Cost Report Data Equipment Costs Not used often by providers Dollar value of equipment Need to identify where the equipment is located Mileage Maintained by cost center Payroll records 36

Cost Report Data Financial Data Financial statements Audited versus non-audited Requested on the Cost Report Filing Requirements Providers not required to have a financial audit Recommend using if available Statistical support for capital related and other cost allocations 37

Cost Report Data Financial Statements Requirement - Accrual Basis of Accounting (CMS 15-1, Section 2300) Revenue and expenditures for expense and asset items are recorded in the period in which they are earned and incurred, regardless of when they are paid and cash received. (CMS 15-1, Section 2302.1 38

Cost Report Data Financial Statements Working trial balance of expenses Cost report filing requirement Recommend the Chart of Accounts corresponds with cost report needs Saves people time in preparing data and Saves money if cost report preparation is outsourced General Ledger Driven by detail of working trial balance Need to identify non-allowable costs 39

Cost Report Data Statistical Support for Capital Related and Other Costs Allocations Cost report worksheets Capital related and plant operation costs Square feet of space(s) occupied Equipment dollar value Transportation Mileage Off cost report/internal allocations 40

Cost Report Data Square Feet Supportive and detailed floor plans Need to maintain separately for all locations Summarize by cost report cost centers Exclude common space Hallways, rest rooms, kitchens, stairways Floor plans need to be updated when changes occur - weighted average approach Equipment Dollar Value Identify where all equipment is located 41

Cost Report Data Mileage Maintain mileage information for all employees for cost report period Summarize by cost report cost centers Internal Allocations / A&G Cost Allocations Time studies for employee related allocations Fragmented A&G or unique cost centers 42

Cost Report Data Time Studies Allocation of salaries and related benefits Two methodologies Periodic Time Studies (CMS 15-1 Section 2313.2.E) Written plan submitted to RHHI 90 days before cost report period RHHI approval or denial within 60 days from receipt of request One week a month, every other week Detailed records must be maintained Continuous No approval required 43

Cost Report Data Fragmented A&G or Unique Cost Centers (CMS 15-1, Section 2313, 2313.1 and CMS 15-2, Section 3214) Written plan submitted to RHHI 90 days before cost report period RHHI approval or denial within 60 days from receipt of request Unique cost centers = reimbursable A&G, non-reimbursable A&G and shared A&G Dedicated costs must be separately identified in the provider's accounting system with any direct costs recorded on a regular ongoing basis throughout the accounting period, not exclusively reliant on period ending adjusting entries 44

Cost Report Data Medicare Provider Statistical & Reimbursement (PS&R) Information related to flu shots Number of shots Administrative cost of shots Cost of vaccines Charges – Medicare and other 45

Cost Report Data Important! CMS Documentation Requirements (CMS 15-1, section 2304) Adequacy of Cost Information Information developed by the provider and used on the cost report must be auditable Records should be maintained consistently from one period to another 46

Home Health Agency Cost Report (CMS Form 1728-94) Worksheet S – Certification page Signed by Administrator or Officer Worksheet S-2 - Identification information - Medicare Provider # (Legacy) - NPI Number (do not enter) - General questions 47

Home Health Agency Cost Report – Worksheet S-3 Pts I and II 48

Home Health Agency Cost Report Worksheet S-3 Part I Visit Data Definition per general instructions (CMS 15-2 Section 3205) A visit is an episode of personal contact with the beneficiary by staff of the HHA or others under arrangements with the HHA for the purpose of providing Medicare-type services Medicare type like kind visits All payer visits including free care Visits dates of service must reflect cost report reporting period reported 49

Home Health Agency Cost Report Patient visit statistics Number of visits and patients by discipline Separate for Medicare & other Medicare Advantage patients are considered as “Other /Non Medicare” for cost report purposes Non like kind services – line 7 Non like kind services Home health services that do not meet Medicare eligibility criteria 50

Home Health Agency Cost Report Eligibility Criteria Confined to home, or in an institution that is not classified as a hospital, skilled nursing facility or a nursing facility Under the care of a physician with a Plan of Care in place Skilled intermittent or part time services must be certified by a Physician SN, PT, OT, ST, MSW and HHA 51

Home Health Agency Cost Report How to Count Visits Only report “billable” visits Supervisory visits should not be included unless skill rendered at same time Not Home Not Found visits should not be included Can be more than one billable visit on the same day Count visits, not hours for all disciplines except home health aide Home health aide statistics need to include both visits and hours 52

Home Health Agency Cost Report – Worksheet S-3 Pts III and IV 53

Home Health Agency Cost Report CBSA Codes for Episodes PS&R Summary shows number of patient and visits by service per CBSA PPS Activity Data S – 3 Part IV Information taken from PS&R (CMS 15-2 Section 3205) Summary of PPS episodes completed during the cost reporting period May have been initiated in prior period Do not include if episode begun but not completed in current period Medicare visits and charges by discipline and episode type (Full w/o outlier, Full w/ outlier, LUPA and PEP) Number of Medicare episodes Medical supply charges 54

Home Health Agency Cost Report – Worksheet A 55

Home Health Agency Cost Report Worksheet A Categories (columns 1 to 5) Salaries Employee Benefits and Payroll Taxes Direct assignment or allocate based on salaries Transportation Mileage reimbursement Contracted Services Other Costs Chart of accounts should be in sufficient detail to facilitate crosswalk from trial balance to MCR 56

Home Health Agency Cost Report Worksheet A – Cost Centers General service cost centers / overhead costs (lines 1 to 5) Capital costs – bldg (rent, building insurance, etc) Capital costs – MME (equipment depreciation, etc) Plant operation & maintenance (utilities, repairs, cleaning, etc) Transportation Administrative & general Be sure to classify all overhead type costs together (like and non like kind) 57

Home Health Agency Cost Report Worksheet A – Cost Centers HHA reimbursable services / direct patient care (lines 6 to 11) Skilled nursing care Physical therapy Occupational therapy Speech therapy Medical social services Home health aide 58

Home Health Agency Cost Report HHA Reimbursable Services / Direct Patient Care (lines 11 to 14) Medical supplies Non routine/billable only Routine/non-billable supplies goes to A&G cost center or direct (if supported) Drugs Flu, pneumococcal and calcimar injections – vaccine supply cost only Drugs administration cost in line 13.20 DME 59

Home Health Agency Cost Report Medical supplies Routine (non billable) Not patient specific Non routine (billable) On Plan of Care Ordered by Physician Billable to payer Separate charge 60

Home Health Agency Cost Report HHA Non-reimbursable Services Non like kind Services Private duty (line 17) Homemaker (line 22) Other services (non like kind) (line 23) Telemedicine (line 23.20) Always Remember!! Column 6 = Financial statement expense total 61

Home Health Agency Cost Report – Worksheet A (cont) 62

Home Health Agency Cost Report Column 7 – Worksheet A-4 Reclassifications summarized Column 9 – Worksheet A-5 Medicare Adjustments summarized Column 10 flows to Worksheet B Column 0 63

Home Health Agency Cost Report – Worksheet A-4 Reclassifications 64

Home Health Agency Cost Report Worksheet A-4 -Reclassification of Expenses Move costs between cost centers Should do on the trial balance rather than this worksheet 65

Home Health Agency Cost Report – Worksheet A-5 66

Home Health Agency Cost Report Worksheet A – 5 Adjustments to expense include: Income offsets Interest income versus interest expense Not to exceed interest expense Miscellaneous income Vendor rebates and credits Non allowable expenses identified CMS 15-1 Home office costs 67

Medicare Cost Report Data Non Allowable Expenses Costs not related to patient care Costs must be reasonable and necessary Prudent buyer Non-allowable Expense Examples: Depreciation expense Depreciation method other than straight line method only AHA Useful Lives – 2008 edition 68

Medicare Cost Report Data Non-allowable Expense Examples: Leased vehicles Mid and high end luxury automobiles Company vehicle Compensation Reasonableness Supported by compensation surveys Board fees In line with other agencies in geographic area 69

Medicare Cost Report Data Non-allowable Expense Examples: Gifts or donations Entertainment Marketing / promotional giveaways Health fairs Fines and penalties Bad debts Loss on disposal of assets 70

Medicare Cost Report Data Non-allowable Expense Examples: Franchise fees Need to analyze what is covered Apply CMS 15-1 rules Credit card costs Collection agency costs Life insurance premiums Term insurance – employee benefit Key man 71

Medicare Cost Report Data Lobbying Costs Directly incurred Indirectly incurred NHPCO % NAHC% State Associations % VNAA % Etc. 72

Medicare Cost Report Data Non-allowable Expense Examples: Income taxes Property or franchise Membership dues – political / lobbying portion Political contributions and lobbying activities / contributions Country club dues Alcoholic beverages Costs of buying or selling a business Non compete agreements Goodwill amortization 73

Medicare Cost Report Data Non-reimbursable Activities Marketing Solicit new referral sources Sales focus Paid commissions Fund raising Mergers and acquisition Establishing Non-reimbursable Cost Center Versus Non-allowable Cost to A-5 Must be material amount 74

Home Health Agency Cost Report Worksheet A – 6 Costs from Related Organizations and Home Office Costs Report “amount charged” and “amount allowable” Identify related party by name and type of relationship Identify all related party costs even if qualify for Section 1010 Exception (amount charged = amount allowable) Compare to AFS footnotes 76

Home Health Agency Cost Report Related Party Transactions (CMS 15-1 Chapter 10) Related through common ownership or control Family relationships create relatedness Adjust cost report to “related party” costs Direct and indirect Interest on related party loans 77

Home Health Agency Cost Report Exceptions to Cost Conversion (CMS 15-1 Section 1010) Supplier – bona fide separate organization Substantial part of business with other non related entities -key Rule of thumb = Less than 10% of related party revenues for those services Commonly obtained from other organizations Charge is in line with open market If meets the 1010 exception criteria – no adjustment is necessary 78

Home Health Agency Cost Report How to Compute Related Party Costs? Medical supply sells to home health agency Common ownership and control Expense on home health books = revenue on medical supply company books from sales to home health agency HHA expenses represents 30% of total revenue of medical supply Chapter 10 = HHA should be 30% of “ALLOWABLE” expenses of medical supply company ALLOWABLE expenses = compliant to CMS 15-1 regulations CMS 15-1 = eliminate profit of medical supply company from costs of home health 79

Home Health Agency Cost Report Medical Supply Company - Revenue $300,000 - Expense $250,000 - Net Income $ 50,000 Home Health Agency (medical supply expense) - Amount charged $ 90,000 ,[object Object]

CMS 15-1 applies- Amount allowable ($250,000 * 30%) $ 75,000 - Cost report Worksheet A-6 adjustment ($ 15,000) 80

Home Health Agency Cost Report Home Office is defined as a chain organization “Consists of a group of two or more health care facilities or at least one health care facility and any other business entity owned, leased, or through any other device, controlled by one organization” Home offices usually furnish central management and administrative services such as centralized accounting, purchasing, personnel services, management direction and control, and other services 81

Home Health Agency Cost Report Home Office Costs are Subject to CMS 15-1 Rules Home Office Cost Allocation Methodologies Direct Direct assignment of costs Attributed to specific provider or non-provider entity Functional Costs that cannot be directly assigned Allocation must be made in a manner reasonably related to the services received (i.e., space occupancy based on square footage) 82

Home Health Agency Cost Report Home Office Cost Allocations Pooled Residual amount of costs (pool of costs) Least sophisticated and allocated based on the benefitting entities total costs CMS Form 287-05 Home Office Cost Statement Required to be submitted to Medicare Intermediary Home office accounting period can be different from the cost reporting period of a chain provider 83

Home Health Agency Cost Report Worksheet A-7 – Analysis of Changes in Capital Asset Balances Land, building, equipment, etc. Beginning balance Purchases Disposals & retirements Ending balance 85

Home Health Agency Cost Report – Worksheet B 86

Home Health Agency Cost Report – Worksheet B 87

Home Health Agency Cost Report – Worksheet B-1 88

Home Health Agency Cost Report Worksheet B & B-1 Allocation of overhead costs to patient care cost centers (Step down) Statistical bases (unit cost multiplier) Capital costs – Bldg – square footage Capital costs – MME – square footage or $ value Plant operation – square footage Transportation – mileage Administrative and General – accumulated costs 89

Home Health Agency Cost Report Multiple or Fragmented A&G Cost Centers Referred to as unique cost centers Allocation Order (1) A & G Shared Costs, (2) A & G Reimbursable Costs, and (3) A & G Non-reimbursable Costs. (CMS-Pub. 15-2-32, Transmittal No. 4, March 01, 1997) RHHI approval required 90 days prior to the beginning of the cost reporting period (CMS 15-1 Section 2307) 90

Home Health Agency Cost Report – Worksheet C PT I 91

Home Health Agency Cost Report – Worksheet C PT II 92

Home Health Agency Cost Report Worksheet C Computes cost per visit for each reimbursable service Costs are carried over from Worksheet B column 6 Medical supplies and drugs Total charges are input and used to determine unit cost multiplier Settlement on drugs 93

Home Health Agency Cost Report – Worksheet C PT III 94

Home Health Agency Cost Report Medicare Drugs - Vaccines / Injections These services are reimbursed through the Drugs cost center (line 13) Charges must be the same for all payers Cash versus accrual basis (gross up if not the same) Subject to lower of cost or charge No coinsurance amounts 95

Home Health Agency Cost Report – Worksheet D PT I 96

Home Health Agency Cost Report Lower of Cost or Charge Comparison with Drug Costs Column 2- enter pneumococcal, influenza and hepatitis vaccines charges Column 3- enter osteoporosis drug charges Lower of cost or charge is carried forward and included in Part II of this worksheet 97

Home Health Agency Cost Report – Worksheet D PT II 98

Home Health Agency Cost Report Medicare PPS Payments by Episode Type Information comes directly from PS&R report Medicare PPS payments by episode type (base payment and outlier portion) Lower of cost or charge comparison for drugs services on Worksheet C Computes Medicare settlement on drugs 99

Home Health Agency Cost Report – Worksheet D-1 100

Home Health Agency Cost Report Total Medicare Payments Payments for PPS comes from the PS&R report Include payments related to pneumococcal, influenza, hepatitis and osteoporosis drugs and administration Should be maintained internally PS&R shows what has been processed up to the date of the report 101

Home Health Agency Cost Report Worksheet F - Balance Sheet Worksheet F-1 - Income Statement Worksheet F-2 - Statement of Changes in Fund Balance – Must match internal or audited financial statements 102

Cost Report Requirement CMS Form 339 Required for acceptable cost report Sections that apply to home health - A. Provider organization and operation - B. Financial data and reports - E. Approved education activities - I. Medicare bad debts - J. Bed complement - K. PS&R data 103

Simione Consultants: The Medicare HHA Cost Report LETS GET IT RIGHT!

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