NAVIGATING

THE COST REPORT

Wendy L. Dukes, CHFP

Lean Six Sigma Green Belt

Director Reimbursement Services

SC HFMA Fall Institute

Charleston, SC

October 18, 2012

Common Analogy

Personal Tax Filing

Form 1040

Report Earnings via W-2 or 1099

Schedule A: Itemized Deductions

Schedule B: Interest and Ordinary Dividends

Schedule C: Profit or Loss from Business

Hospital Cost Report Filing

Form CMS-2552-10

Financial Statements

Worksheet S Series: Identification, Key Statistics & Settlement Summary

Worksheet A Series: Total Expenses &

Adjustments to meet CMS Reporting Requirements

Worksheet B Series: Based on various statistics, allocates Overhead Costs to Revenue-Producing Centers

Worksheet C: Calculates Cost-to-Charge Ratios (CCR)

Worksheet D: Calculates the Cost of Care Provided to Medicare & Medicaid Patients

Worksheet E: Calculates the Reimbursement Settlement for Care Provided to Medicare & Medicaid Patients

Worksheet G: Discloses Financial Statement

Worksheet H: Calculates the HHA Cost of Care Provided to Medicare & Medicaid Patients

Common Analogy

Personal Tax Filing

Preparers

Individuals

H&R Block, etc.

Tax Attorneys

Hospital Cost Report Filing

Preparers

Individuals

Reimbursement Analysts

Budget Analysts

CFO

Consulting Groups

CPA Firms

Cost Report: Fast Facts

Specific CMS forms based on Provider TYPE Home Office - facilitates allocation of corporate expenses to

business units (no claims submissions under this provider type)

Freestanding IRF, SNF, LTAC, and HHA must file

Freestanding ASC and Physician Practices do NOT file

Hospitals file CMS-2552-10 New version required for Fiscal Years beginning on or after

5/1/2010

Last significant format change was in 1996 (CMS-2552-96)

Cost Report: Fast Facts

Mandatory annual filing

Due within 5 months of entity's fiscal year end

Must be submitted as an encrypted electronic file

Must have an original signature of Authorized

Individual (as designated on CMS-855A)

If not filed, CMS stops payments

Cost Report: Basic Facts

Originally designed to make COST settlements

to providers. Interim payments were made on a per claim basis,

then the cost of rendering care was calculated through the Cost

Report and the difference was ‘settled’.

Despite Perspective Payment Systems (PPS), remains critical

source of data for CMS

Complexity of Cost Report (C/R) forms has grown substantially

C/R Data is used in conjunction with MedPAR Claims Data so

CMS can analyze, data mine and project program expenditures

Two Types of Settlements Tentative (Interim): at the point of original filing/submission

Final: issuance of Notice of Program Reimbursement (NPR)

MEDICARE Cost Report

Wage Index (Worksheet S-3)

Wage & Salary Data

Productive Hours

Benefit Costs

Grouped by MSA

Relative to National Data

DRG Calculation: FFY 2013

WI>1 = 68.8% Labor, 31.2% Non Labor WI<1 = 62% Labor, 38% Non Labor EXAMPLE

Labor $ 3,316.23 62% Non Labor $ 2,032.53 38%

Base DRG Rate $ 5,348.76

Labor $ 3,316.23 Wage Index x 0.8690

$ 2,881.80 Non Labor + $ 2,032.53

Wage Adjusted DRG Rate $ 4,914.33

APC Calculation: FFY 2013

EXAMPLE

Labor $ 42.922 60%

Non Labor $ 28.615 40%

Base APC Rate $ 71.537

Labor $ 42.922

Wage Index x 0.8690

$ 37.299

Non Labor + $ 28.615

Wage Adjusted APC Rate $ 65.914

MEDICARE Cost Report

Uncompensated Care (Worksheet S-10)

Programs MC & MA Undercompensated Cost

Charity

Uncompensated

Charges X CCR = Cost - Payments = NET Unreimbursed Cost

Prior years were based on when Charity was recognized in F/S

2011 was based on DOS, including estimated collections on A/R

Potential Uses: HIT

MC DSH

MA DSH

MEDICARE Cost Report

CCR & Cost Per Diems applied to Medicare Claims (Worksheets C and D-1)

Annual realignment of MS-DRG Weights

Annual realignment of APC Weights

Annual adjustment of Cost OUTLIER Thresholds

MEDICARE Cost Report

Medicare Disproportionate Share Hospital (DSH) (Worksheets S-3 and E, Part A)

MC DSH Percentage o Ratio of Total Medicaid Days to Total Days

MA FFS Days

MA MCO Days Includes Administrative Denials – days denied for no “Pre-authorization”

Excludes Medical Necessity Denials – days denied for “Level of Care”; should have been Observation or OP care

Other MA Eligible Days Eligible for Medicaid services but not paid

Excludes Dual Eligible MEDICARE/MEDICAID days

o SSI% published by CMS

Basis for HRSA/OPS determining 340B Eligibility

MC DSH Settlements (difference between interim (per claim) payments and final DSH% x total claim DRG payments)

MEDICARE Cost Report

Pass Through Cost Settlements (Biweekly Payments)

(Worksheets D-1, E-Series)

Indirect Medical Education (Paramedical Education Programs) Schools of Nursing

Pastoral CPE Programs

Direct Medical Education (Interns & Residents)

Allowable MC Bad Debts Reimbursed at 70% for C/R Periods ending during FFY 2013

Reimbursed at 65% for C/R Periods beginning during FFY 2013

Must meet very strict rules and process restrictions

Only hospital Deductible & Coinsurance Amounts

Must exclude Deductible & Coinsurance on FFS amounts

MEDICARE Cost Report

NEW Retrospective Settlements

HIT Incentive (EMR) Payments (Worksheet S-10)

Value-Based Purchasing (VBP)

Readmission Incentive/Penalties

SC MEDICAID COST REPORT

Annual SC DHHS Hospital Tax Assessment Total Allowable Costs per Worksheet B, column 27

Facility Total / Total SC Hospitals x $264m

Basis of Facility-Specific Adjustment Factors for Claim Payments

SC MEDICAID Cost Report

FFS Cost Settlements Claim Payments = Base Rates x Facility-Specific Adjustment Factor

100% Cost Reimbursement for DOS through April 7, 2011

97% Cost Reimbursement for DOS April 8 through July 7, 2011

93% Cost Reimbursement for DOS July 8, 2011 to date

OP Excludes Clinical Lab services paid on Fee Schedule

SC MA DSH Settlements Undercompensated Costs (MA MCO)

Uncompensated Costs (pure Self Pay)

TRICARE Cost Report

Retrospective reimbursement for Capital Costs

(Cost per Day x Tricare Days)

Must file TRICARE form with copies of relative Cost Report pages

COST REPORT Other Uses

Consultants Benchmarking: Premier & Crimson

CPAs

Attorneys

Policymakers MedPAC

Congress

OIG

DOJ

Watchdog Groups

Kaiser Family Foundation

Duke Endowment

AARP

Revenue Cycle Functions Impact on C/R

Accurate Claims Data: Payor Info, Charges and Payments MC, MA, Self Pay Claims

Revenue (UB) Codes Summary of MC = PS&R

Summary of MA = MARS

ICD-9 Codes MS-DRG Assignment

Medical Necessity

Program Payments MS-DRG, APC & FFS

Outliers

Pass Through Costs

MC Bad Debts & MC/MA Crossovers

MC & MA DSH

S-10 Charity & Uncompensated Care

HIT Incentives

For proper determination of Program Cost (i.e. MC or MA); PROGRAM Charges must be reported in same Cost Center as the Total Cost and Total Charges that make-up the CCR

Fully Allocated Allowable Costs / Gross Patient Revenue = CCR

CCR (by Cost Center) X Program Charges = Program Cost

How To Determine Program Cost

The CHALLENGE

Report:

Fully Allocated Allowable Costs

Total Gross Patient Charges

Total Program (MC/MA) Charges

ALL IN THE SAME COST CENTER

WHY IS THIS SO

CHALLENGING?

WHERE THE TWO WORLDS COLLIDE

COST REPORT PATIENT CLAIM

Groups departments into Cost Report COST CENTERS (C/C) for both Total Costs (expenses) and Gross Patient Charges (revenues)

Adjusts actual COSTS (expenses) to

MC ALLOWABLE Costs

Allocates OH Costs to Revenue-Producing Cost Centers

Routine: Fully Allocated Routine COSTS / Total Patient Days = Per Diem

Ancillary: Fully Allocated Deptl COSTS / Gross Deptl Revenues = Cost-Charge-Ratio (CCR)

Reports Charges by Revenue Code

(UB Code) and CPT/HCPCS Code

for Payment

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COST REPORT CROSSWALK - By Cost Center Line #

2552-10

CMS

Category

2552-10

CMS CC

Ln#

CMS LINE DESCRIPTION DEPT #

DEPARTMENT

DESCRIPTION

(General Ledger)

Per Diem or

CCR (Cost-

to-Charge

Ratio)

Overhead

1 CAPITAL RELATED COSTS-BUILDINGS &

FIXTURES

8

Overhead

2 CAPITAL RELATED COSTS-MOVABLE

EQUIPMENT

15

Overhead 4 EMPLOYEE BENEFITS 1

Overhead 5 ADMINISTRATIVE AND GENERAL 22

Overhead 7 OPERATION OF PLANT 4

Overhead 8 LAUNDRY AND LINEN SERVICE 1

Overhead 9 HOUSEKEEPING 1

Overhead 10 DIETARY 2

Overhead 13 NURSING ADMINISTRATION 2

Overhead 16 MEDICAL RECORDS & MED RECORDS LIBRARY 1

Overhead 23 PARAMEDICAL ED. PROGRAM (SPECIFY) 1 Per Diem

Routine

30 ADULTS AND PEDIATRICS (GENL ROUTINE

CARE)

18

Per Diem

Routine 31 INTENSIVE CARE UNIT 1 Per Diem

Routine 43 NURSERY 1 Per Diem

Ancillary 50 OPERATING ROOM 9 CCR

Ancillary 51 RECOVERY ROOM 1 CCR

Ancillary 52 LABOR ROOM AND DELIVERY ROOM 1 CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 4000 Radiology CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 4002 Rad. Ultrasound CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 4006 Rad. Mammography CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 4007 Interventional Imaging CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 5707 Nuclear Medicine CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 6306 SLD Radiology CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 6315 Imaging RN Admin CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 7 CCR

Ancillary 57 COMPUTED TOMOGRAPHY (CT) SCAN 1 CCR

COST REPORT CROSSWALK - By Cost Center Line #

2552-10

CMS

Category

2552-10 CMS

CC Ln# CMS LINE DESCRIPTION

DEPT

#

G/L

DEPARTMENT

DESCRIPTION

(General Ledger)

Per Diem or CCR

(Cost-to-Charge

Ratio)

Overhead 1 CAPITAL RELATED COSTS-BUILDINGS & FIXTURES 8

Overhead 2 CAPITAL RELATED COSTS-MOVABLE EQUIPMENT 15

Overhead 4 EMPLOYEE BENEFITS 1

Overhead 5 ADMINISTRATIVE AND GENERAL 22

Overhead 7 OPERATION OF PLANT 4

Overhead 8 LAUNDRY AND LINEN SERVICE 1

Overhead 9 HOUSEKEEPING 1

Overhead 10 DIETARY 2

Overhead 13 NURSING ADMINISTRATION 2

Overhead 16 MEDICAL RECORDS & MED RECORDS LIBRARY 1

Overhead 23 PARAMEDICAL ED. PROGRAM (SPECIFY) 1 Per Diem

Routine 30 ADULTS AND PEDIATRICS (GENL ROUTINE CARE) 18

Per Diem

Routine 31 INTENSIVE CARE UNIT 1 Per Diem

Routine 43 NURSERY 1 Per Diem

Ancillary 50 OPERATING ROOM 9 CCR

Ancillary 51 RECOVERY ROOM 1 CCR

Ancillary 52 LABOR ROOM AND DELIVERY ROOM 1 CCR

Ancillary 54 RADIOLOGY-DIAGNOSTIC 7 CCR

Ancillary 57 COMPUTED TOMOGRAPHY (CT) SCAN 1 CCR

Ancillary 58 MAGNETIC RESONANCE IMAGING (MRI) 2 CCR

Ancillary 59 CARDIAC CATHETERIZATION 1 CCR

Ancillary 60 LABORATORY 5 CCR

Ancillary 63 BLOOD STORING, PROCESSING, & TRANS. 1 CCR

Ancillary 65 RESPIRATORY THERAPY 2 CCR

Ancillary 66 PHYSICAL THERAPY 4 CCR

Ancillary 69 ELECTROCARDIOLOGY 3 CCR

Ancillary 72 IMPLANTABLE DEVICES CHARGED TO PATIENTS 1 CCR

Ancillary 73 DRUGS CHARGED TO PATIENTS 2 CCR

Ancillary 76 ADULTS AND PEDIATRICS (GENERAL ROUTINE CARE) 1

CCR

Ancillary 76.01 VASCULAR SERVICES 3 CCR

Ancillary 76.02 ONCOLOGY SERVICES 2 CCR

Ancillary 76.03 PURCHASED SERVICES 1 CCR

Ancillary 76.04 DIABETES TREATMENT CENTER 1 CCR

Ancillary 91 EMERGENCY 5 CCR

Non-Reimb 190 GIFT, FLOWER, COFFEE SHOP, & CANTEEN 3

Non-Reimb 194.02 NON-PATIENT CARE SERVICES 1

Excluded Non-op Non-op 2

Grand Count 137

INTERVENTIONAL IMAGING Charge Master (Sample)

FAC DEPT #

(G/L) CDM # CDM DESCRIPTION UB 04 HCPCS PS&R FIM PRICE

C 4007 70520 SZ LOCM 100-199MG/ML IODINE 1ML 0255 Q9965 Drugs Incident to Rad $ 5.00

C 4007 70522 SZ LOCM 200-299MG/ML IODINE 1ML 0255 Q9966 Drugs Incident to Rad $ 5.00

C 4007 70524 SZ LOCM 300-399MG/ML IODINE 1ML 0255 Q9967 Drugs Incident to Rad $ 5.00

C 4007 70360 SZ KYPHOPLASTY KIT EA ADDL FRACT 0270 - Supplies $ 5.00

C 4007 70362 SZ KYPHOPLASTY KIT 1ST FRACT 0270 - Supplies $ 65.00

C 4007 70004 SZ CATH BALLOON GRP 1 0272 C1725 Sterile Supplies $ 65.00

C 4007 70005 SZ CATH BALLOON GRP 2 0272 C1725 Sterile Supplies $ 65.00

C 4007 70006 SZ CATH BALLOON GRP 3 0272 C1725 Sterile Supplies $ 65.00

C 4007 70007 SZ CATH BALLOON GRP 4 0272 C1725 Sterile Supplies $ 250.00

C 4007 70031 SZ GUIDE WIRE GRP 1 0272 C1769 Sterile Supplies $ 250.00

C 4007 70032 SZ GUIDE WIRE GRP 2 0272 C1769 Sterile Supplies $ 250.00

C 4007 70033 SZ GUIDE WIRE GRP 3 0272 C1769 Sterile Supplies $ 250.00

C 4007 70040 SZ INTRODUCER SHEATH GROUP 1 0272 C1894 Sterile Supplies $ 250.00

C 4007 70041 SZ INTRODUCER SHEATH GROUP 2 0272 C1894 Sterile Supplies $ 250.00

C 4007 70042 SZ INTRODUCER SHEATH GROUP 3 0272 C1894 Sterile Supplies $ 250.00

C 4007 70048 SZ NEEDLE MICROPUNCTURE 0272 C1894 Sterile Supplies $ 250.00

C 4007 70065 SZ SNARE GROUP 1 0272 C1773 Sterile Supplies $ 250.00

C 4007 71198 SZ STENT VASCULAR COVERED/COATED 0278 C1876 Implants $ 650.00

C 4007 71276 SZ VASC CLOSURE DEV ANGIOSEAL 0278 C1760 Implants $ 650.00

C 4007 32146 SP PTA PERIPHERAL ART 0320 75962 Radiology - Diagnostic $ 1,700.00

C 4007 32148 SP PTA RENAL OR VISCERAL 0320 75966 Radiology - Diagnostic $ 1,700.00

C 4007 32150 SP PTA VENOUS 0320 75978 Radiology - Diagnostic $ 1,700.00

Dept # (G/L) maps to Cost Center

Charges group on claims by UB Code

CDM (Charge Description Master)

Link Between Claim and G/L?

In Closing…

The Cost Report is where the Financial Accounting

and Patient Accounting come together for what is

typically your larger payors: Medicare and

Medicaid. While cost settlements are somewhat a

thing of the past, the data filed annually on your

cost reports still directly influences both the current

and future reimbursement to the facility. Complete

and accurate data is essential to maximizing the

funding available to your facility.

KNOW YOUR DATA…Translate where necessary.

QUESTIONS?

Contact Information

Wendy Dukes

843.789.1726

Wendy.Dukes@RSFH.com