The Significance of the Cost Report & Optimizing Transplant Program Reimbursement

1. The Significance of the Cost Report & Optimizing Transplant Program Reimbursement Alexsandra (Alex) Mullin Director of Reimbursement For the Health System UT Southwestern Medical Center And William (Bill) Vaughan Principal, Health Systems Concepts, Inc. TFCA Workshop October21st -23rd , 2009

2. The Cost Report Uses Cost Accounting • The cost report uses costs accounting methods adding direct and indirect allocated costs to determine the cost of each service. • The cost report uses different formulas to compute the cost for different service types. • By using the cost report you can determine the cost per organ and costs of transplants and post transplant care.

3. Sections of the Cost Report • Overhead & Indirect Costs - these are the costs for areas that support and manage hospital operations such as Admin & General, Billing, Accounting, Purchasing Dietary, Medical Records, Physical Plant • Do not generate patient care revenue and • are an integral to the success of hospital operations • Routine Nursing Areas - Patient Room & Board - Reimbursement is computed as a per diem • Ancillary Services - Additional Services needed for patient care - Reimbursement is computed by ratio of cost to charges (rcc) • Non- Reimburseable Services - services a hospital owns but not reimbursed as patient care under Part A - usually physician practices, office buildings, gift shops, etc.

4. What Information Goes Into the Cost Report? • All of the hospital’s revenue & expenses • Pertinent statistics that adequately allocate overhead and support services (square feet, patient day count, fte counts, etc.) • Analysis of how certain costs occur for accurate reclass to other sections of the cost report for proper representation • Analysis of certain costs for determination if they are allowable as patient care cost on the cost report • Medicare settlement information in the form of discharges, patient days, charges & organ counts to properly compute the cost of Medicare Services

5. Transplant Data That Goes in the Cost Report • Program Expenses • Employee Time Studies • Physician Time Studies • Statistics • Organ Counts aggregate & Medicare • Logs- transplant, evaluation, donor, harvests • Analysis of all of the above to ensure that Medicare organ costs are accurately computed on the cost report

6. Analysis and the Financial Coordinator • Love story or tragedy? • Without the participation of the financial coordinator and other analytical personnel, transplant costs are likely to be reflected incorrectly • The financial coordinator: • Works with the business office to make sure that patient benefits are tracked accurately so that the correct payors are billed as primary & secondary - results in the accurate listing of settlement data • Works with the transplant coordinator to determine evaluative services that resulted in treatment and become billable to the patient - results in the correct evaluation expenses that go into organ cost • Works with administrative and other financial personnel to ensure that accurate patient specific organ costs are borne by the program - results in the correct determination of organ specific cost for the cost report • Works with patient to ensure the patient understands their coverages and personal financial obligations involving their care - results in correct payments maintaining the viability of the program

7. Medicare Reimbursable Cost in the Organ Program • The room costs of a donor stay is computed by multiplying the total days of the donor/ pretransplant log by the per patient day cost (D-6 Part 1, columns 1 – 4, lines 1 - 7) • The costs of the different ancillary charges a pretransplant candidate and/or a donor incurs are computed by multiplying the charges for each ancillary service time its ratio of cost to charges (rcc) (D-6 Part 1, Columns 1-3, lines 8 - 35) • The cost of the Medicare organ is computed by multiplying the total organ cost on the cost report (which includes direct & indirect cost) times the Medicare ratio of useable organs. (D-6 Part III, Columns 1 – 2) divided by Medicare Organs.

8. Other Transplant Related Costs • The cost of the transplant stay itself is computed by multiplying the patient’s length of stay in each unit by each per unit per patient day cost and the cost of ancillary services performed during the stay are computed by multiplying each ancillary service types charges times its ratio of cost to charges as determined through the cost reporting process. (D-4 entire section) • The cost of post transplant services such as their clinic visit and other test or procedures that might be performed is computed by multiplying each ancillary service types charges times its ratio of cost to charges as determined through the cost reporting process.

9. How to Use the Cost Report to Provide Information to Hospital Management • Hospital management teams tend to use decision support systems to analyze procedure costs and make decisions about the profitability of services. • These are cost accounting systems that compute direct and indirect cost at the individual charge level and then aggregate the charges and translate it to procedural cost. • They are similar to Medicare cost reports in that they tend to describe and distribute indirect costs in the same way- support services are assigned to patient care areas based on statistics reflective of how the support is provided. • Where they are dissimilar is in their interpretation of a SAC charge. Many decision support systems and/or their operators cannot accommodate for the pre-transplant services that are performed in the hospital and are never billed to the patient. They also cannot accommodate for that fact that the organ program personnel tend to have their time split between pre & post transplant services. • Hospital administrations need to be made aware that when it comes to the cost of the organ, especially kidney, the cost report provides the most accurate answer.

10. Bridging the Gap Between Reimbursement & Decision Support • When it comes to determining the cost of the transplant itself and the cost of post transplant care the cost report and decision support systems should yield similar amounts if the cost report is used properly. • To estimate the approximate cost of a transplant you can use D-6 Part I to estimate the cost if you enter in the number of patient days in each unit and the ancillary charges in the different ancillary lines of the cost report. • You can use the same section of the cost report to estimate the cost of your live donors. • Use D-6 Part III to the obtain the cost of your organ by dividing line 53 by line 54 ( Total Cost divided by Total Useable Organs).

11. Analysis of a Transplant Case Cost • Sample Patient has a week stay for a kidney transplant. The charges the patient incurs are as follows: • ICU unit 1 day $3,000 • Med/Surg 6 days $6,600 • Surgery 3 hours $5,000 • Anesthesia 12units $3,300 • Recovery Room 3 units $3,000 • Radiology 2 units $1,750 • Lab 30 units $9,000 • Respiratory 14 units $4,550 • EKG 3 units $1,300 • Medical Supplies 50 units $5,600 • Drugs 70 units $5,000 • Dialysis 1 units $1,400 • SAC Charge 1 unit $35,000 • TOTAL CHARGES $84,500

12. Analysis of a Transplant Case Cost Cont’d

15. Model From Cost Report Information to Estimate Current Organ Cost

16. Questions?