Getting the Most from Your Cost Report

Getting the Most from Your Cost Report Joint Spring Conference HFMA May 18, 2017 Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Agenda Wage Index Disproportionate Share General Cost Report Items Provider Based Clinics E.H.R. Final year New Opportunities

Wage Index Data Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Wage Index Data Impact is real but often not understood or realized For each.01 to the St Louis CBSA average hourly wage it generates approximately $50 of reimbursement per discharge IL Hospitals in St. Louis CBSA lag behind MO hospitals Rural CBSAs not very aggressive in having wage index projects Impacts more than Inpatient OPPS Psych, Rehab, HHA, SNF and Hospice

Wage Index Data Hours to exclude On-call hours Bonus Shift Differentials Paid Time Off banks paid at termination Buy/Sell Back PTO/Vacation Hours related to capitalized salaries Leave of Absence or Family Medical Leave (unpaid) Disability (unpaid or paid through insurance company) Any unpaid hours Contract labor hours

Wage Index Data Hours to include Regular hours Overtime hours Severance Vacation/Holiday/PTO Bereavement Jury Duty (if paid) Military Duty (if paid)

Wage Index Data Salaries (most self populate but a few) CRNA Physicians RHC non-physicians Interns and Residents Home Office employees on Hospital Worksheet A Ensure all Worksheet A-6 Reclassifications are reflected in salaries and hours Reconcile all excluded area salaries and hours

Wage Index Data Non-reimbursable Cost Center (NRCC) verses an offset on Worksheet A-8 Offsets are not incorporated into wage index NRCCs are excluded from wage index data Strategy: Low rate per hour departments maybe more beneficial to be on a NRCC than in A&G or offset (e.g., Foundations) High rate per hour departments maybe more beneficial to offset than be on a NRCC (e.g., Marketing)

Wage Index Data Rural Health Clinics All physician and mid-levels are to be reported on line 4.0 and are excluded from wage index All other RHC employees are to be reported on line 4.01 and are excluded from wage index Reconcile salaries and hours to ensure all data matches and is excluded

Wage Index Data Physicians Only about 30% of all hospitals in 2014 reported any physician salaries as allowable costs Only about 67% of all hospitals in 2014 reported any contracted physician salaries as allowable costs Allowable costs should reconcile to A-8-2 except for excluded areas Every hospital should have either allowable salaried or contracted physician costs as you are required to have a medical director Physicians in non-clinical roles are 100% allowable (e.g., President/CEO)

Wage Index Data Wage Related Costs (Benefits) Choose the best allocation methodology for your hospital Can use more than one way to allocate FICA directly assigned Health Insurance FTEs Pension Salaries Salaries is the default used by MACs but often is the worse statistic to use to allocate Health Insurance costs is the same for the President/CEO as for a housekeeper.

Wage Index Data Wage Related Costs (Benefits) Retiree health care costs (actual not FASB 106 accrual) Pension plan administrative fees, investment fees, legal and accounting fees Annual physicals/x-rays/vaccinations for employees Day Care Center losses or allowances EAP (depends on services offered)

Wage Index Data Wage Related Costs (Benefits) Self Insured Health Costs are fully allowable at amounts paid into the fiduciary fund Not required to be adjusted to actual costs Hospital often controls what they pay themselves thus has some control over the costs of the benefit Is a wash on the bottom-line Should be in the range of your commercial/managed care contracts

Wage Index Data Contract Labor 88% of all hospitals reported some clinical contract labor in 2014 Includes all clinical cost centers except NRCCs and excluded areas 70% of all hospitals reported some A&G contract labor in 2014 Costs must be in a department grouped with A&G Contracted C Suite employees (e.g., CEO, CFO, COO) should be on line 11 not line 28

Wage Index Data Contract Labor Purchased Services Contract Labor Consulting Services Legal Services Accounting/Auditing Services Run a Vendor Listing and sort by size of payments and review potential vendors being overlooked All hospitals should have clinical and A&G contract labor

Wage Index Data Housekeeping and Dietary Must either report actual salary data and hours or Contract labor and hours No hours on invoices is no longer sufficient MAC will impute an amount for inclusion Not necessarily in your best interest for an imputed amount

Wage Index Data Cost Centers review for potential Reclassifications Pharmacy verses Drugs Charged to Patients Occupational Medicine/Health Nursing Admin Float Pools Nursing Managers Education Departments Ancillary Management Departments Radiology Management Clinic Management/Billing Departments

Wage Index Data Home Office Contract Labor Included on Home Office line only a portion is recognized Included on contract labor lines 100% is included Wage Related Costs (Benefits) Include with Home Office salaries and hours

Disproportionate Share - Medicare Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Disproportionate Share Now paid via two payments Empirically justified DSH (traditional payment 25%) Uncompensated Care Payment (payment 75%) Still must qualify by hitting the 15% of eligible days threshold to receive either payment Medicaid days to Total days SSI percentage Medicare Part A patients also receiving SSI benefits Traditional Medicare and Medicare Managed

Disproportionate Share Eligible Day Matching still important Patient Days to include if eligible Medicare Part B patients Babies with no Medicaid ID but mother is eligible Medicaid expansion 1115 waiver days Patient Days to exclude if eligible Title XXI S-CHIP days Illinois Healthy Women recipients Medicare Part A entitled (traditional and Managed) No Federal Matching Program (Dept of Corrections)

Disproportionate Share Be careful with certain patients Hospice patients All Kids can be Medicaid expansion or S-CHIP Spenddown accounts Split bill accounts (only partially eligible) Medicare Part A testing watch dates eligible Out of State Medicaid

Disproportionate Share Labor and Delivery Days Day the mother is in active labor/delivery but the baby does not come until the next day Generally a 1 or 2 day difference is a labor and delivery day Admission for non-active labor but patient goes into labor and delivers a baby is not a labor and delivery day. Normally anything above three days is not a labor and delivery day Must be documented by admission diagnosis Anti-partum admission normally Best to match all babies with a mother

Disproportionate Share Labor and Delivery Days Counted for DSH formula in eligibility and payment Not counted as patient day for cost finding and per diems Excluding L&D days from total helps outlier reimbursement Excluding L&D days helps CAHs actual per diems Baby border days are not L&D days Days an infant stays in the hospital after mother is discharged

General Cost Report Items Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Worksheet S-3 Data Bed Counts Labor and Delivery beds now count as beds Level II or higher Nursery beds count as beds Ancillary service department beds do not count (e.g., ER beds, recovery room beds, etc.) Distinct-Part Rehab or Psych beds do not count Observation Bed Days are converted and a fractional amount of beds are removed via the cost report on Worksheet E part A Have you reconciled your data with the IL Annual Bed Report or licensed beds with the State?

Worksheet S-3 Data Managed Medicare Days and Discharges Not shadow billing can have reimbursement impacts Impacts SSI ratio Impacts E.H.R. reimbursement Impacts I&R reimbursement Impacts paramed reimbursement By regulation this is a mandatory requirement

Worksheet S-3 Data Swing-Bed Days Only Medicare and Medicare Managed belong on line 5.0 days are included in the cost per diem Likewise outliers are impacted All other payers belong on line 6.0 Days are excluded from the cost per diem Carved out of costs at approximately $155 per day Days on both line 5 and 6 need to be reported on a calendar year basis on Worksheet D-1 Impacts proper carve out of SWB-NF costs

Self Insurance Reporting Days should be removed from total days and reported on lines 30-31 Included for DSH eligibility and Payment Excluded from cost finding and per diems Helps outlier reimbursement Charges should be removed from Worksheet C Amount reimbursed to yourself for care should be removed via Worksheet A-8

Self Insurance Reporting Discharges recommend leaving in total as does impact E.H.R. reimbursement formulas and no place to report separately RHC Visits should be excluded but need to pay attention if excluding would subject you to the minimum productivity tests

New Overpayment Compliance Law Cost Report Audit Adjustments If need to be applied retroactively new law puts burden on the provider not the MAC Law states six years lookback Closed NPRs? Law extended claims statue of limitations on re-openings Law did NOT extended the cost report statue of limitations on reopenings

Hospitalist Which cost center do you report them in? Adults & Pediatrics? NRCC Physicians providing both ER coverage and Hospitalist coverage are problematic Does time study account for both? Estimates will not be allowed per WPS

Worksheet S-10 Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Worksheet S-10 Current Issues with worksheet Dates of service verses write-off dates Should exclude all physician services RHCs appear to be treated differently based on Bad Debt amounts Issues with CAH Method II billing Courtesy Discounts/Allowances Prompt Pay Allowances

Worksheet S-10 Should you scrub your data? No guidance yet from CMS as to what to include or exclude Any consultant advising you to scrub is guessing as to what to exclude or include Premature as new CMS guidance will be forthcoming MACs need guidance and education Cannot audit charity and bad debt like Medicare bad debts No understanding of various products on the market Asset and/or income tests

Worksheet S-10 Presumptive Charity MACs have been cold or downright hostile toward Believe must have an application and signature No recognition or reasonableness of factors Big Data and public databases makes it easier Mobile Society Religious Objections Homeless situations No way of contacting patient bad address/phone etc.

Worksheet S-10 What is a Contractual verses Bad Debt or Charity Bankruptcy? Religious Write-offs for clergy? Litigation Cases? Deceased no Estate? Self Pay Only Discounts are a C/A per instructions But what if mandated by the State? Prompt Pay Discounts are a C/A per instructions

Capital Related Costs Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Capital Related Costs Must be reported Worksheet A lines 1 or 2. Worksheet A line 3 Worksheet B part II column 0 Drives annual Geographic Adjustment Factor (GAF) update For SCH/MDH not apart of Volume Decline Request

Capital Related Costs Includes the following items Depreciation and Amortization Leases/Rentals Interest Expense on borrowings for capital expenditures Property Insurance Property Taxes Borrowing Costs (discounts/premiums, etc.) Gain/Loss on Defeasance of debt or recall premiums

Capital Related Costs Excludes the following Interest expenses paid to Medicare Interest expense for operating needs (line of credit) Interest on SWAP agreements Gains/Losses on SWAP agreements

Rural Health Clinics Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Consolidating Multiple RHCs Instructions Use to State it was an Election Revised Instructions now demand that it be requested and approved by MAC Impacts Cost Report filing only Very Rare that it doesn t have a positive impact

Rural Health Clinics Total Costs on line 10 of Worksheet M drive Vaccine reimbursement Productivity Test on Worksheet M-2 Should include contract physicians Only non-reoccurring physicians are excluded Psychiatrist are physicians and should be on line 1.0 Psychologists are NOT physicians and should be on line 6.0

Rural Health Clinics Productivity Tests FTEs Exclude time not available in the clinic PTO/Holiday/Vacation/Sick Time Time spent in the hospital doing rounds/surgeries/procedures Continuing Medical Education Jury Duty, Bereavement, or Unpaid time away (e.g., FML, LOA)

Rural Health Clinics Preventive Visits No coinsurance to the beneficiary Still not utilized frequently by most clinics Chronic Care Management Non-reimbursable service per FQHC new form set Total Visits Exclude no show visits Exclude nurse only visits Include SNF/NH or SWB visits Include visits to patient home (must be home bound)

Rural Health Clinics Monitor Coinsurance per Claims verses Cost Report o Coinsurance when claim is adjudicated is 20% of charges o Coinsurance per cost report is calculated at 20% of costs The cost report actually ignores the coinsurance reported on the PS&R o When Cost per Visit exceeds Average charge per visit there will be lost reimbursement Cannot bill beneficiary for the difference

MO Medicaid and FRA Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

MO Medicaid Cost Reports Using Worksheet G-2 intelligently Feeds into MHA s annual survey to determine the tax base Report Non-taxable services separately Swing-bed Charges Physician Professional Charges Home Health/Hospice Ambulance RHCs CRNAs (even if you have the exemption)

MO Medicaid Cost Reports MO Medicaid Questionnaires Out of State Questionnaire Data feeds into FRA payment stream Managed Medicaid Questionnaire Data feeds into FRA payment stream FRA allocated separately? Does it better help your OP CCR or your RHCs? Impacts Medicare reimbursement too

MO Medicaid Cost Reports RHC Reporting Are all non-rhc charges removed from Worksheet C? Part B physician billing charges for non-rhc services?

Connecting Your Chargemaster with your Cost Report Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Chargemaster Connecting to your Cost Report Medicare Cost Report Crosswalk o In order to assure that all revenue codes are aligned with the appropriate cost center, a PS&R crosswalk should be developed, maintained, and verified each year as a step in preparing the Medicare cost report o Allocating Medicare PS&R totals based on your internal Medicare charges by department is no longer accepted by many MACs

Worksheet A Direct Costs (As Adjusted/Reclassed) Medicare Reimbursement Basics Ancillary Cost Calculation Inpatient and Outpatient Ancillary Services Worksheet D-Series Calculates Medicare Cost Worksheet B Fully Allocated Costs Cost to Charge Ratio Medicare Charges X Provider Summary Report = (By Insurance Code) Medicare Cost Worksheet C Charges Worksheet E Series Compares Medicare Cost to Interim Payments and Calculates the Settlement (CAHs)

Chargemaster Connecting to your Cost Report WS C Line Line Description Costs Charges Cost To Charge Ratio Medicare Charges Medicare Cost 55 MEDICAL SUPPLIES $ 100,000 $ 200,000 0.50000 $ 50,000 $ 25,000 61 EMERGENCY $ 150,000 $ 160,000 0.93750 $ 50,000 $ 46,875 ALIGNMENT WITH THE WRONG COST CENTER WILL IMPACT MEDICARE COST

Chargemaster Connecting to your Cost Report The impact of misalignment can be significant o Potential direct settlement impact for CAHs and some PPS facilities o SCH/MDH Hospital Specific Base Rates Volume Decline Request o Impacts PPS Rate Setting MS-DRG weighting Outliers MO Medicaid Outpatient CCR Medicaid DSH reconciliations

Chargemaster Connecting to your Cost Report Best Practice is to create a Pivot Table using the Revenue & Usage report and the Chargemaster o Provides solid audit trail o Can toggle to Medicare payer only to increase PS&R reclassification for accuracy o Can also use to reconcile patient days and visits

Chargemaster Alignment Best Practices Key Data Elements Required Department Number Department Name Charge Number Description Units Dollars Revenue Code Price 75.3022 UNIT 2 NURSING SVCS 30220004 OBSERVATION INITIAL HOUR 7,009 110,742.20 762 15.80 75.3022 UNIT 2 NURSING SVCS 30220105 SWING BED ROOM RATE 21 2,415.00 110 115.00 75.3022 UNIT 2 NURSING SVCS 30220135 BASIC ROOM RATE 1,472 559,360.00 110 380.00 75.3022 UNIT 2 NURSING SVCS 30220535 ORTHOTICS FITTING 1 2,322.43 761 0.00 75.3170 RESPIRATORY THERAPY 43600455 MDI/ TREATMENT 17 833.00 410 49.00 75.3170 RESPIRATORY THERAPY 43654152 OXYGEN PER HOUR 18,990 398,790.00 270 21.00 75.3170 RESPIRATORY THERAPY 43654153 OXYGEN INITIAL HOUR 760 59,280.00 From Revenue Usage Report 270 78.00 From CDM

Chargemaster Alignment Best Practices Pivot Table Approach Per PS&R crosswalk 25 56 41 Sum of Dollars REV CODE WS C Lines DEPT Number 110 250 255 25 UNIT 2 NURSING SVCS 75.3022 $561,775 49 RESPIRATORY THERAPY 75.3170 $42,627 37 OPERATING ROOM 75.3217 61 EMERGENCY ROOM 75.3231 55 CENTRAL SUPPLY 75.3251 56 INTREVENOUS THERAPY 75.3254 44 LABORATORY 75.4010 49 EKG 75.4031 41 RADIOLOGY 75.4040 $682 41 CT SCAN 75.4042 41 NUCLEAR MEDICINE 75.4061 $612 56 PHARMACY SERVICES 75.4070 $1,568,718 40 ANESTHESIA 75.4080 50 PHYSICAL THERAPY 75.4091 Grand Total 561775 1611345.4 1294.45 ok PS&R ok Reclass #1

Chargemaster Alignment Best Practices Reconciliation to Worksheet C WS C Line Line Description Total Per WS C Variance Total Per Revenue Usage 25 ADULTS & PEDIATRICS 935,030 1 935,031 37 OPERATING ROOM 688,376-688,376 40 ANESTHESIA 278,870 (2) 278,868 41 RADIOLOGY-DIAGNOSTIC 4,744,329 (3) 4,744,326 44 LABORATORY 4,055,058 1 4,055,059 49 RESPIRATORY THERAPY 1,482,404-1,482,404 50 PHYSICAL THERAPY 1,082,992-1,082,992 55 MEDICAL SUPPLIES CHARGED 986,480 (2) 986,478 56 DRUGS CHARGED 2,626,985 3 2,626,988 61 EMERGENCY 4,682,220 1 4,682,221 21,562,744 (1) 21,562,743

Common Case Study Misalignment Issues IV Administration/Infusions Service Generally under 260 revenue code These are Nursing Services Not IV Solutions. Where is the Cost? Where are the Charges? Realignment Can Take Several Forms

Common Case Study Misalignment Issues IV Administration/Infusions Service Example Revenue Code 260 Incorrectly Assigned to Medical Supply Cost Center

Common Case Study Misalignment Issues IV Administration/Infusions Service Example Impact Cost To Charge Ratio Outatient Medicare Charges Rev Code WS C Line Line Description Outatient Medicare Cost As Filed Alignment 260 55 MEDICAL SUPPLIES 0.61311 $ 173,502 $ 106,376 Corrected Alignment 260 61 EMERGENCY 0.983891 $ 173,502 $ 170,707 Resulted in Underpayment From Medicare Program of $ 64,331

Common Case Study Misalignment Issues Nursing Services o Are ancillary services being performed by your routine nursing staff for scheduled outpatient procedures? IV Infusion Blood Administration Recovery Room Services o Where are the costs and charges for these? o Sometimes Requires a B-2 Post Step Down Adjustment o Be sure you are billing compliantly

Common Case Study Misalignment Issues Provider Based Clinics o Professional Carve out is critical Need detailed proration of splits R&U may assign 100% to a 9XX code but CBO redirects a portion to 510 Make sure resulting utilization makes sense Watch for 100% professional line items (procedures) Watch out for ancillaries (drugs, supplies, etc.) Gross-Up on Worksheet C is generally required for most other payers o Don t assume just 510 revenue code needs to be aligned with line 90 Clinic What other ancillaries are in these numbers? Wound Care Med/Surg May need separate clinic system file to correctly align these.

Common Case Study Misalignment Issues Professional Revenue Codes on PS&R o Should not be on cost based PS&R reports (110 or 850) o Be sure to look into how these are being billed Method I verses Method II o Might indicate incorrect billing o CRNA exemptions should have a 964 revenue code on their IP and OP PS&Rs

Common Case Study Misalignment Issues Radiology Contrast o Potential Revenue Codes = 255, 343, 344, 636 o Revenue code 636 often gets combined with Pharmacy o Critical to understand where the costs and charges are being recorded IV Solutions o Revenue Code 258 o Are the charges in the Pharmacy or Medical Supply area? EKGs/Telemetry o Revenue Codes 731 and 732 o If in the routine nursing area this creates an issue with outpatient alignment

Other Thoughts Before Filing, Review Utilization By Department on Your Cost Report to Assure it Makes Sense TOTAL Comparison of MC CY Total CY MC Total CY Total MC PY Total MC Change in Charges Charges Utilization Utilization Utilization 37 Operating Room 2,014,174 498,597 25% 26% -1% 40 Anesthesiology 269,500 71,432 27% 27% -1% 41 Radiology 3,156,473 859,097 27% 27% 0% 44 Laboratory 3,530,095 1,288,528 37% 37% 0% 49 Resp Therapy 123,085 105,247 86% 66% 20% 50 Physical Therapy 640,196 250,031 39% 37% 2% 51 Occup Therapy 350,141 81,127 23% 22% 1% 52 Speech Pathology 10,066 6,715 67% 67% 0% 53 EKG 549,390 255,744 47% 48% -2% 55 Medical Supplies 846,860 233,259 28% 42% -14% 56 Pharmacy 1,994,203 582,117 29% 28% 1% 60 Clinic - - 0% 19% -19% 61 Emergency 979,662 299,036 31% 31% 0% 62 Observation Beds 53,696 6,242 12% 12% 0%

New Opportunities Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. 2015 CliftonLarsonAllen LLP

Cost Report Opportunities Ancillary services performed in inpatient units Typically see IV Therapy and/or Blood Admin Outpatient Recovery services in Med/Surg Carve out as an ancillary service and move costs via B-2 Grants May hurt inpatient but helps outpatient Reassigning the revenue code elsewhere could be construed as fraud or abuse Should not be included as a non-reimbursable cost center Do not net income against the expense within the WTB

Cost Report Opportunities Outpatient Meals NRCC or revenue offset? Marketing Departments Advertising/Promotional Items should be reclassified to A&G and allowable amounts allocated; non-allowable should be offset. CAHs revenue codes 762, 450, and 510 should not be on an inpatient claim NGS will deny the inclusion of these charges on the cost report at final settlement for inpatient and swing-bed

Cost Report Opportunities Splitting PT/OT/ST into separate departments WPS makes mandatory; other MACs have not followed Splitting Radiology, CT Scan, MRI, etc. into separate departments. Generally advantageous to CAHs Utilization of CT Scans and MRI tends to be lower for Medicare and have lower CCRs

E.H.R. Final Year CMS and the MACs have changed their position on when assets can be claimed Old was GAAP asset purchased and placed into service New just requires that the asset be purchased For CAHs with their final CR period ending in 2016 go ahead and request any assets purchased through your FYE.

E.H.R. Audit Issues AHA Useful Lives no impact but truly annoying Double check dates assets went into service Back-up description gets asset disallowed Managed Care days not billed Charity care issues Patient Responsibility = deductible/coinsurance Documentation

Kevin E. Wellen, CPA Director Kevin.Wellen@claconnect.com 314-925-4446 CLAconnect.com linkedin.com/company/ cliftonlarsonallen facebook.com/ cliftonlarsonallen twitter.com/claconnect 75