Today’s Agenda

1. North Carolina Community Health Center AssociationFinancial Management & Operations WorkshopNC Medicaid Cost ReportingMarch 2, 2011

2. Today’s Agenda • Introduction • Understanding the Medicare FQHC cost report • Understanding the North Carolina Medicaid cost report • Questions and discussion

3. Introduction

4. Introduction • Keys to preparing an accurate North Carolina Medicaid FQHC cost report include: • Understanding the purposes of the Medicare FQHC cost report and the proper completion of the forms • Understanding Medicare reasonable cost principles • Understanding how the North Carolina FQHC Medicaid forms work and the proper completion of those forms

5. Understanding the Medicare FQHC Cost Report

6. Purpose of the Medicare Cost Report • Determination of reimbursable cost per visit • Costs – Worksheet A series • Visits – Worksheet B series • Determination of Medicare program liability – Worksheet C series

7. Worksheet S • Facility location information • Medicare provider number information • Source of federal funds (if applicable) • Other information

8. Worksheet A

9. Trial Balance of Expenses • Facility health care staff costs (lines 1 – 11) • Provider salaries • Nurse salaries • Other health care staff salaries • Clinical psychologist • Clinical social worker • Other

10. Trial Balance of Expenses • Costs under agreement (lines 13 – 15) • Contract physician services • Other health care costs (lines 17 – 23) • Medical supplies • Depreciation - medical equipment • Malpractice insurance • Continuing medical education • Other

11. Trial Balance of Expenses • Facility overhead - facility costs (lines 26 – 36) • Rent • Depreciation on buildings & fixed equipment • Building insurance • Interest on mortgage • Utilities • Housekeeping and maintenance • Minor equipment • Other

12. Trial Balance of Expenses • Facility overhead - administrative costs (lines 38 – 48) • Office salaries • Office supplies • Legal & accounting • Depreciation on office equipment • Fringe benefits

13. Trial Balance of Expenses • Facility overhead - administrative costs (lines 38 – 48) • Telephone, postage & other related office expenses • Advertising (yellow pages versus recruitment versus promotional) • Other

14. Trial Balance of Expenses • Cost other than FQHC services (lines 51 – 56) • Pharmacy • Dental • Laboratory • Optometry • Other

15. Trial Balance of Expenses • Nonreimbursable costs (lines 58 – 60) • WIC • Non-FQHC approved activity • Other

16. Worksheet A-1

17. Reclassifications of Expenses • Purpose of worksheet • Align expenses into the correct cost center • Common examples • Fringe benefits • Depreciation • Insurance • Continuing medical education (CME)

18. Reclassifications of Expenses • Common examples • Inpatient hospital costs • Medical director costs

19. Worksheet A-2

20. Adjustments to Expenses • Purpose of worksheet • Adjust expenses as required under Medicare principles of reimbursement • Made on basis of cost (if available) or revenue received • Common examples • Promotional advertising • Contract laboratory

21. Adjustments to Expenses • Common examples • Offset of interest income to the extent of interest expense • Offset of miscellaneous income • Donated services (generally) • Indigent care/specialty referral expenses

22. Worksheet A-2-1

23. Related Organization Costs • Eliminates profit of related organizations - adjusts to cost (generally) • Related organization defined in Provider Reimbursement Manual - Part 1, Chapter 10 • Check Part 1 “No,” if worksheet does not apply

24. Worksheet B - Parts I & II Visits & Overhead Cost for FQHC Services

25. Worksheet B, Part I • Visits & productivity • Column 1 - recap of full time equivalent (FTE) personnel (only the “billers” to the program) • FTE calculation • Calculated by dividing productive hours by 2080

26. Worksheet B, Part 1 • FTE calculation • Productive hours defined as total paid hours minus: • Vacation • Sick leave • CME • Non-FQHC covered services • Administrative duties • Other

27. Worksheet B, Part 1 • Column 2 - recap of total visits • Definition of a visit • Accurate visit count is essential • Visits exclude • Nurse visits • Visits related to non-FQHC covered services (dental, non-FQHC approved sites, etc.) • Other program visits (WIC, etc.)

28. Worksheet B, Part 1 • Columns 3 - 5 - productivity standard calculation • Physician - 4,200 visit productivity standard • Mid-level providers - 2,100 visit productivity standard • Productivity standard does not apply to services of clinical psychologists and social workers • Productivity standard does not apply to services under agreement (unless such providers are used routinely at the health center – recent CMS change) • Calculation is cumulative, not line-item specific

29. Worksheet B, Part II • Determination of total allowable cost including the allocation of overhead • Overhead cost centers are allocated to FQHC services

30. Worksheet C • Worksheet C provides for the calculation of the Medicare cost report settlement amount • Paid and unpaid Medicare visits and related reimbursement (payment) • Use of PS&R summary • Medicare visits • Medical versus mental health

31. Determination ofMedicare Reimbursement • Determination of rate for FQHC services • Adjusted cost per visit • Total Allowable Cost • Total Adjusted Visits • Compare calculated total to maximum rate per visit (payment limit is calendar year specific) • 2010 rural limit - $108.81 • 2010 urban limit - $125.72 • Lesser of the two is allowed

32. Understanding the North Carolina Medicaid Cost Report

33. North Carolina Medicaid Cost Report • New forms are released each year by the State • Summary worksheet • Name, address and contact information • Provider numbers • Certification statement

34. North Carolina Medicaid Cost Report • Schedule DMA-1 – Cost of Medicaid Core Services • Schedule designed to extract information from the Medicare FQHC cost report • Lower of cost-per-visit or Medicare cap should be entered on schedule • Medicaid visits • Core services • Mental health

35. North Carolina Medicaid Cost Report • Schedule DMA-2 – Cost of Other Ambulatory Services • Medicaid services that are allowable, but unallowable for Medicare, are added to determine appropriate Medicaid reimbursement • Must have separate line number between 51 and 56 on the Medicare cost report • Examples – pharmacy, dental, health check services (formerly EPSDT), maternity care coordination, hospital, other • Percentage of overhead applied to direct costs

36. North Carolina Medicaid Cost Report • Schedule DMA-3 – Allocation of Overhead Cost • Overhead applied to each individual service line to determine total cost • Total encounters or unit of service (e.g. pharmacy scripts) to determine cost per encounter or cost per unit of service

37. North Carolina Medicaid Cost Report • Schedule DMA-4 – Determination of Medicaid Reimbursement • Cost per encounter from DMA-3 is multiplied time Medicaid encounters/units of service to determine Medicaid cost • Add influenza/pneumococcal cost from DMA-7 • Subtract interim payments from DMA-5 to determine Medicaid settlement • Addition of Medicaid reimbursable bad debts from DMA-6

38. North Carolina Medicaid Cost Report • Schedule DMA-5 – Summary of Medicaid Payments • Payment amount for each line of service recapped • State will provide payment data upon request – it is a good idea to request this before filing completed cost report

39. North Carolina Medicaid Cost Report • Schedule DMA-6 – Bad Debts (Medicaid) • Schedule DMA-7 – Schedule of Pneumococcal and Influenza Vaccines • Schedule DMA-8 – PPS Reconciliation Schedule • Greater of cost based or PPS paid

40. Questions and Discussion

41. Jeffrey Allen, CPA Partner jeallen@bkd.com 910 E. St. Louis St. Springfield, MO 65801-1190 Office: 417.865.8701 Fax: 417.865.0682 www.bkd.com

42. Thank You!