Cost Report Compliance Issues for Critical Access Hospitals

OIGOIG’’ss Compliance Compliance GuidanceGuidance

Model Compliance PlanModel Compliance PlanPublished February 23, 1998Published February 23, 1998Supplemental Guidance: January 31, 2005Supplemental Guidance: January 31, 2005

““FalseFalse”” or or ““FraudulentFraudulent”” Cost ReportsCost ReportsMentioned in original and supplemental Mentioned in original and supplemental guidance as a high risk areaguidance as a high risk area

Not just for Not just for CAHsCAHsGoal of cost reporting compliance:Goal of cost reporting compliance:

““ensure full compliance with applicable ensure full compliance with applicable statutes, regulations and program statutes, regulations and program requirements and private payor plans.requirements and private payor plans.””

Documentation of CostsDocumentation of CostsCosts claimed must be supported Costs claimed must be supported by by ““appropriate and accurate appropriate and accurate documentationdocumentation””

Provider Reimbursement Manual, Part I, Provider Reimbursement Manual, Part I, §§23042304Especially important for Especially important for CAHsCAHs, since , since reimbursement is costreimbursement is cost--basedbasedGeneral accounting and A/P policies and General accounting and A/P policies and procedures should cover thisprocedures should cover this●● Test to make sure theyTest to make sure they’’re workingre working

No good reason for No good reason for ““lack of lack of documentationdocumentation”” adjustments!adjustments!

Overhead Cost AllocationOverhead Cost Allocation““Allocations of costs to various cost centers Allocations of costs to various cost centers are accurately made and supportable by are accurately made and supportable by verifiable and auditable dataverifiable and auditable data””

Cost allocation statistics Cost allocation statistics –– Worksheet BWorksheet B--11PRMPRM--II, II, §§36173617Review and test documentationReview and test documentationGather statistics during the year to improve accuracyGather statistics during the year to improve accuracyAvoid Avoid ““rolling forwardrolling forward”” prior year statisticsprior year statisticsChanging statistic: File written request with FI 90 days Changing statistic: File written request with FI 90 days before end of C/R period (PRMbefore end of C/R period (PRM--II, II, §§2312)2312)

Overhead Cost Overhead Cost AllocationAllocation

Common Issues with Cost Allocation Common Issues with Cost Allocation StatisticsStatistics

Square feet: Often dated, incorrect and poorly Square feet: Often dated, incorrect and poorly documenteddocumentedTime studies: 1 week per month (PRMTime studies: 1 week per month (PRM--I, I, §§2313.2E)2313.2E)Dietary: Dietary: ●● Use Use ““equivalent mealsequivalent meals”” to allocate cost to cafeteriato allocate cost to cafeteria●● Be sure to allocate to user departments (A&G), and Be sure to allocate to user departments (A&G), and

to nonto non--reimbursable cost centersreimbursable cost centers

Allocate costs to nonAllocate costs to non--reimbursable cost reimbursable cost centers, where applicablecenters, where applicable

Unallowable CostsUnallowable CostsUnallowable costs must be removed Unallowable costs must be removed from the cost reportfrom the cost report

Become familiar with PRM, Part IBecome familiar with PRM, Part IWhere to look?Where to look?●● PRM, Part I, Chapters 1 PRM, Part I, Chapters 1 –– 2323●● CMS web siteCMS web site●● Case Law Case Law –– PRRB, Federal courtsPRRB, Federal courts●● Prior year cost reportsPrior year cost reports●● Prior year audit adjustmentsPrior year audit adjustments

Unallowable CostsUnallowable CostsAnalyze accounts containing both Analyze accounts containing both allowable and unallowable costsallowable and unallowable costs

Train staff to recognize nonTrain staff to recognize non--allowable allowable costscosts●● Department heads, Accounts Payable, Department heads, Accounts Payable,

AccountingAccounting

Separate G/L accounts to capture nonSeparate G/L accounts to capture non--allowable costsallowable costsAdvertising costs (PRMAdvertising costs (PRM--I, I, §§2136)2136)Document, document, document!Document, document, document!

Medicare Audit Medicare Audit AdjustmentsAdjustments

Hospitals are obligated to carry Hospitals are obligated to carry forward Fiscal Intermediary audit forward Fiscal Intermediary audit adjustments adjustments

If the adjustment applies to the current If the adjustment applies to the current yearyearDisclose treatment in cover letter Disclose treatment in cover letter Include prior yearsInclude prior years’’ adjustment report in adjustment report in current year current year workpapersworkpapersIf using If using ““protested itemsprotested items”” line, must submit line, must submit documentation when filing cost reportdocumentation when filing cost report

Related Party Related Party TransactionsTransactions

Disclose all related parties on CMS Disclose all related parties on CMS 339 and cost report339 and cost report

PRMPRM--I, I, §§10001000

C/R Worksheet AC/R Worksheet A--88--11Reduce related party expenses to related Reduce related party expenses to related partyparty’’s cost, unless the relationship s cost, unless the relationship qualifies for the exceptionqualifies for the exception●● PRMPRM--I, I, §§10101010

Disclosure required, even if there is no Disclosure required, even if there is no adjustmentadjustment

Medicare Bad DebtsMedicare Bad Debts““The hospitalThe hospital’’s procedures for s procedures for reporting of bad debts on the cost reporting of bad debts on the cost report are in accordance with report are in accordance with Federal statutes, regulations, Federal statutes, regulations, guidelines and policiesguidelines and policies””

PRMPRM--I, I, §§304 304 -- §§326326Annual Review: Annual Review: ●● Assure proper reporting of bad debts to Assure proper reporting of bad debts to

MedicareMedicare●● Review all Medicare bad debts claimed, to Review all Medicare bad debts claimed, to

ensure compliance with Medicare regulations ensure compliance with Medicare regulations

Medicare Bad DebtsMedicare Bad DebtsIssue for Issue for CAHsCAHs: FI can change bad : FI can change bad debt auditing requirements when your debt auditing requirements when your provider number changesprovider number changes

One FI now requires that Medicare bad One FI now requires that Medicare bad debt accounts are not claimed for debt accounts are not claimed for reimbursement until they are returned by reimbursement until they are returned by outside collection agency as uncollectibleoutside collection agency as uncollectible

Purchase DiscountsPurchase DiscountsPurchase discounts a vendor Purchase discounts a vendor participating in a GPO should be participating in a GPO should be disclosed and adjusted on the cost disclosed and adjusted on the cost reportreport

““Although there is a safe harbor for Although there is a safe harbor for payments made by a vendor to a payments made by a vendor to a GPOGPO……the safe harbor does not protect the the safe harbor does not protect the discount received by the individual or discount received by the individual or entity.entity.””

Home Office CostsHome Office Costs““Allocations from a hospital chainAllocations from a hospital chain’’s s home office cost statement to home office cost statement to individual hospital cost reports are individual hospital cost reports are accurately made and supportable by accurately made and supportable by verifiable and auditable dataverifiable and auditable data””

Report on Worksheet AReport on Worksheet A--88--11Must agree to home office cost reportMust agree to home office cost report

Cost Report ErrorsCost Report ErrorsProviders must promptly notify the Providers must promptly notify the FI, TRICARE, and/or Medicaid of FI, TRICARE, and/or Medicaid of errors discovered after the errors discovered after the submission of the cost reportsubmission of the cost report

Report on Worksheet AReport on Worksheet A--88--11Must agree to home office cost reportMust agree to home office cost report

ER Physician IssuesER Physician Issues

““On CallOn Call”” Costs Costs (42 CFR (42 CFR §§413.70)413.70)

On call costs are reimbursable, ifOn call costs are reimbursable, if●●Effective 1/1/2005, applies to MDs, Effective 1/1/2005, applies to MDs,

DOsDOs, physician assistants, nurse , physician assistants, nurse practitioners, and clinical nurse practitioners, and clinical nurse specialistsspecialists

●●Written contractWritten contract●● Immediately available by radio or phoneImmediately available by radio or phone●●OnOn--site within 30 minutes, 24/7site within 30 minutes, 24/7

►►§§485.618(d) 485.618(d)

ER Physician IssuesER Physician Issues

““On CallOn Call”” Costs Costs (42 CFR (42 CFR §§413.70)413.70)

On call costs are reimbursable, ifOn call costs are reimbursable, if●●Not providing services anywhere elseNot providing services anywhere else●●Not on call at another facilityNot on call at another facility

ER Physician IssuesER Physician Issues

Availability Cost Availability Cost (PRM(PRM--I, I, §§2109)2109)

Time spent waiting for next patientTime spent waiting for next patientMust be onMust be on--site, not on call!site, not on call!Allowable Part A costAllowable Part A costNo feasible alternative for coverageNo feasible alternative for coverage●●Must document that you tried!Must document that you tried!

ER Physician IssuesER Physician Issues

Availability Cost Availability Cost (PRM(PRM--I, I, §§2109)2109)

DocumentationDocumentation●●Copy of contract & allocation agreementCopy of contract & allocation agreement●●Permanent record of payments to Permanent record of payments to

physiciansphysicians●●Record of time physically on siteRecord of time physically on site●●Record of all patients seen, and related Record of all patients seen, and related

billsbills●●Schedule of physician chargesSchedule of physician charges

ER Physician IssuesER Physician Issues

Availability Cost Availability Cost (PRM(PRM--I, I, §§2109)2109)

CalculationCalculation●●See PRMSee PRM--I, I, §§2109.42109.4

►►Costs allocated based on Costs allocated based on professional charges (actual and professional charges (actual and imputed)imputed)

►►RCE Limits do not apply to RCE Limits do not apply to CAHsCAHs

●●Discuss method and Discuss method and documentation with your FIdocumentation with your FI