M.S. Hall & Associates

1. M.S. Hall & Associates AREAS OF IMPORTANCE WITH YOUR COST REPORT PREPARATION April 10, 2019

2. Today • Walk through the cost reports to discuss areas that may cause errors or have reimbursable impacts. • Note the types of documentation that may be beneficial during preparation of the cost reports. • Open dialogue

3. Worksheet S-2/ Exhibit 1 • Facility name changes that were not filed on the 855a • Closed units with a Medicare number • Worksheets needed that are not opening in the software

4. Worksheet S-10 Uncompensated Care Costs • Purpose: Section 112(b) of the Balanced Budget Refinement Act (BBRA) requires that short-term acute care hospitals (§1886(d) of the Act) submit cost reports containing data on the cost incurred by the hospital for providing inpatient and outpatient hospital services for which the hospital is not compensated. • Uncompensated Care: Consists of charity care, non-Medicare bad debt, and non-reimbursable Medicare bad debt. Uncompensated care does not include courtesy allowances, or discounts given to patients that do not meet the hospital’s charity care policy, or discounts given to uninsured patients that do not meet the hospital's FAP, or bad debt reimbursed by Medicare. • Data Sources: • • Patient Detail files from EHR systems

5. Worksheet S-10 Uncompensated Care Costs • Lines 2 Through 8 – Unreimbursed Cost for Medicaid: • • Medicaid net revenue is “payments received or expected for title XIX covered services delivered during the cost reporting period” • • Covered services “except physician and other professional services” • • Medicaid is primary payer

6. Worksheet S-10 Uncompensated Care Costs • Lines 20 Through 23 – Calculation of Cost of Charity Care:

7. Worksheet S-10 Uncompensated Care Costs • Lines 20 Through 23 – Calculation of Cost of Charity Care:

8. Worksheet S-10 Uncompensated Care Costs • Lines 20 Through 23 – Calculation of Cost of Charity Care:

9. Worksheet S-10 Uncompensated Care Costs • LINE 26 – BAD DEBT EXPENSE FOR THE ENTIRE HOSPITAL COMPLEX: • • “Written off during this cost reporting period…regardless of date of service” net of recoveries • • “Include such bad debts for all services except physician and other professional services” • • Include amounts reported as Medicare bad debts in the cost report for all components • LINE 27 – MEDICARE REIMBURSABLE BAD DEBTS Also referred to as adjusted bad debts (at 65%) • LINE 27.01 – MEDICARE ALLOWABLE BAD DEBTS From cost report worksheets for all components – allowable bad debts. • LINE 30 – UNCOMPENSATED CARE COST (LINE 23 COLUMN 3 AND LINE 29) • LINE 31 – UNREIMBURSED AND UNCOMPENSATED CARE COST (LINE 30 + LINE 19)

10. Worksheet S-3 Part I / Exhibit 3 Available beds and bed days available Were there any closed units during the year? Is anyone monitoring the utilization of beds? Are you calculating based on the 3-month rule?

11. Bed Days Available • Counting individual beds - Ifa patient can be admitted to that bed within a 24-hour period. Even if a patient room is currently being utilized as a storage area and a bed is not currently in that particular room, the CMS position is that if the room can be converted to a patient room within 24 hours, then that bed (or 2 beds if a semi-private patient room area) should be included in the available bed count. • CMS utilizes a 3-month rule which would exclude beds in a unit in the current month if that unit did not provide any patient care in any of its beds for the preceding 3-month period.

12. WorksheetS-3 Part I / Exhibit 3 (continued) Review your total patient days How are you reconciling? Check for test patients Do not double count labor and delivery days Were these previously in your line 1? Medicare HMO days come from the PS&R 118 report Are you seeing that the 118 report is zero or not reconciling to your internals? Has your facility stopped shadow billing?

13. Wage Index Review Process Salary and Hours • Salary cost--The required source for costs on Worksheet A is the general ledger (see §4013 and 42 CFR 413.24(e)). Worksheet S-3, Part II (wage index) data are derived from Worksheet A; therefore, the proper source for costs for the wage index is also the general ledger. A hospital’s current year general ledger includes both costs that are paid during the current year and costs that are expensed in the current year but paid in the subsequent year (current year accruals). • Hours--The source for paid hours on Worksheet S-3, Part II is the provider’s payroll report. Hours are included on the payroll report in the period the associated expense is paid. Include on Worksheet S-3, Part II, the hours from the current year payroll report, including hours associated with costs expensed in the prior year but paid in the current year. The payroll report time period must cover the weeks that best match the provider’s cost reporting period. (Hours associated with costs expensed in the current year but not paid until the subsequent year (current year accrual) are not included on the current year payroll report and should not be included on the hospital’s current year Worksheet S-3, Part II.) Although this methodology does not provide a perfect match between paid costs and paid hours for a given year, it approximates a match between costs and hours. Contracted Labor • Ensure that professional fees and hours are supported on the contract and/or invoice. • Review accounts payable “drill down” information for identified wage index accounts. Determine if the expense is allowable for wage index reporting. • The minimum requirement for supporting documentation is the contract itself; • If the wage costs, hours, and non‐labor costs are not clearly specified in the contract, then other documentation is necessary, such as a representative sample of invoices or a signed declaration from the vendor in conjunction with a sample of invoices; • Contracts or invoices must specify professional fees apart from non‐labor fees (i.e., travel, meals, supplies).

14. Wage Index Review Process • Other Wage Related Costs • Must meet the “1% Test” • Each individual “other” wage related cost must exceed 1% of Worksheet S‐3, Part III, Line 3, Column 3 in order to be reported on Worksheet S‐3, Part II, Line 18. • Core Related Costs • 401(k) Employer Contributions • Tax Sheltered Annuity (TSA) Employer • Contributions • Qualified and Non‐Qualified Pension • Plan Cost • Prior Year Pension Service Cost • 401(k)/TSA Plan Administration Fees • Legal/Accounting/Management Fees – • Pension Plan

15. Medicare Occupational Mix Adjustment Know your Nursing Staff and Categories • RNs – direct patient health needs – patient contact, and supervise others that do patient care • LPNs – Care for patients that are ill, injured, or disabled • Surgical Technologists – assist in patient care operations under supervision of physicians (surgeons), RNs and other surgical positions. • Aides – nursing staff providing basic nursing care • Medical Assistants – perform more general or administrative functions - usually under the direct supervision of a physician • All Other – not involved with any type of patient care, mostly administrative

16. Geographic Reclassification Geographic Reclassification Criteria for an Individual Hospital per CFR §412.230 • The pre‐classified average hourly wage (AHW) of the desired CBSA is greater than the hospital's AHW and the Standardized amount in the desired CBSA is greater than the hospital's standardized CBSA; • The hospital may not be re‐designated to more than one area; • The distance from the hospital to the desired CBSA is no more than • 15 miles for urban hospitals or • 35 miles for rural hospitals OR at least 50% of the hospital's employee's reside in the target CBSA. • The hospital's 3 year AHW is • for Rural hospitals, at least 106% of its current location's 3 year AHW • for Urban hospitals at lease 108% of its current location's 3 year AHW (CBSA); • The hospital's 3 year AHW is • for Rural hospitals, at least 82% of the desired location's 3 year AHW • for Urban hospitals, at least 84% of the desired location's 3 year AHW (CBSA).

17. Worksheet A/ Exhibit 11 Expenses should agree to your Operating Expenses on the Audited Financial Statements Are you doing your reclasses offline and reporting directly on Worksheet A? Do you have cost centers with a negative balance? Where are you reporting your 340B expenses and how is it reported on your financials?

18. Worksheet A-6 / Exhibit 12 Split salaries of shared staff When reclassing salaries, identify the total FTE reclass to be used on any B-1 statistics utilizing FTEs Do you review your reclasses to see if they are still needed or are they just carried over from year to year?

19. Worksheet A-8 / Exhibit 14 • Did you receive a MLMIC payout? How is this handled on your AFS? Disclose in submission to the MAC your position on how you filed on the Cost Report • Interest income/investment income offsets net of expense Offset A&G interest expense prior to Capital interest expense how you filed on the Cost Report • Exhibit 26a/b is a useful reconciliation tool for the majority of the items reported on A-8/Exhibit 14

20. Worksheet A-8-1/Exhibit 16 • Do you have home office or related party costs. • How is this cost captured lab services, billing, salaries, capital costs

21. Related Org. & Home Office Defined The related organization's costs include all reasonable costs, direct and indirect, incurred in the furnishing of services, facilities, and supplies to the provider. The intent is to treat the costs incurred by the supplier as if they were incurred by the provider itself. Therefore, if a cost would be unallowable if incurred by the provider itself, it would be similarly unallowable to the related organization. • Related to the provider means that the provider to a significant extent is associated or affiliated with, or has control of, or is controlled by, the organization furnishing the services, facilities, or supplies. • Common ownership exists when an individual or individuals possess significant ownership or equity in the provider and the institution or organization serving the provider. • Control exists where an individual or an organization has the power, directly or indirectly, significantly to influence or direct the actions or policies of an organization or institution.

22. Worksheet A-8-2 Exhibit 17 To adjust the physician costs for time spent performing professional services. Sources: • Payroll Reports • General Ledger • Accounts Payable/Invoices • Physicians Contracts • Physician Time Studies (CMS-339 Exhibit 2) • RCE Limits from the Federal Register

23. Worksheet B-1 / Exhibit 19 • When was the last time you checked square footage? • Are you reporting stats net of reclasses and adjustments? • Does the basis still make sense? Basis changes must be made 90 days prior to the end of the cost reporting period • Are there areas where you can directly assign instead of allocate?

24. Worksheet C • Remove physician charges prior to input How are these captured/identified at your facility? • 340b facilities need to have both costs and charges in an allowable cost center • How are charges reported? Based solely on TB Allocated based on revenue codes How do these match • RCC’s of -0- and over 1 should be reviewed Did your Observation RCC calculate?

25. Worksheet D-1 • Have you input the rate for the Swing-Bed? Impacts Critical Access Hospital • Make sure your days agree with S-3 Part I

26. Worksheet D-3 & D Part V • Analyze your RCC vs Medicare charges Do they make sense? Are your Medicare charges allocated the same as overall expenses and charges? • 120/130/140 reports go to column 3 • 122/132/142 reports go to column 4

27. Worksheet E series • Make sure uncompensated care costs tie to the federal register. • Update SSI to the latest filed SSI (CMS.gov) Review SSI days from DUA request • Pass thru payments and retro settlements need to be included on E-1. • PIP payments from PS&R are not correct, need to request the year end summary (PIP and Pass Thru report) from the MAC.

28. Readmissions • Readmission Reduction Program • Section 3025 of the Affordable Care Act added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires CMS to reduce payments to IPPS hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. The regulations that implement this provision are in subpart I of 42 CFR part 412 (§412.150 through §412.154). • Inputted from PS&R on line 70.94 on E part A

29. Value Based Purchasing • Hospital Value-Based Purchasing • Hospital Value-Based Purchasing (VBP) is part of the Centers for Medicare & Medicaid Services’ (CMS’) long-standing effort to link Medicare’s payment system to a value-based system to improve healthcare quality, including the quality of care provided in the inpatient hospital setting.   • The program attaches value-based purchasing to the payment system that accounts for the largest share of Medicare spending, affecting payment for inpatient stays in over 3,500 hospitals across the country. • Participating hospitals are paid for inpatient acute care services based on the quality of care, not just quantity of the services they provide. Congress authorized Inpatient Hospital VBP in Section 3001(a) of the Affordable Care Act. The program uses the hospital quality data reporting infrastructure developed for the Hospital Inpatient Quality Reporting (IQR) Program, which was authorized by Section 501(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. • Inputted from PS&R on line 70.93 on E part A

30. Medicare Exhibits 4 & 5 • Both the Hospital Acquired Conditions and Low Volume Add-On are reported on a Federal year 10/1 – 9/30 • Verify agrees to the Federal Register • HAC should show up on the PS&R when applicable • Low Volume Add-On may not be on the PS&R when there are delays in approval from CMS This is not currently an issue

31. Low Volume Add-On • Section 50204 of the Bipartisan Budget Act of 2018 modified the definition of a low-volume hospital and methodology for calculating the payment adjustment for fiscal years (FYs) 2019 through 2022. To qualify, the hospital must have less than 3,800 total discharges (Medicare and non-Medicare discharges) and be located more than 15 road miles from the nearest subsection (d) hospital. • These payments get trued up on the Medicare cost report (exhibit 4).

32. Hospital Acquired Conditions • Hospital Acquired Conditions: • On February 8, 2006, the President signed the Deficit Reduction Act (DRA) of 2005. Section 5001(c) of DRA requires the Secretary to identify conditions that are: (a) high cost or high volume or both, (b) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis, and (c) could reasonably have been prevented through the application of evidence-based guidelines. Section 5001(c) provides that CMS can revise the list of conditions from time to time, as long as it contains at least two conditions. The statute is available in the Statute/Regulations/Program Instructions section, accessible through the navigation menu at left. • For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission. That is, the case would be paid as though the secondary diagnosis were not present. An example of how the HAC provision may affect an MS-DRG payment, beginning October 1, 2008, is presented below. • Calculation carries over to line 70.99 on E part A from Exhibit 5. S-2 question needs to be answered.

33. Medicare Bad Debts • Need to have proper documentation • Are they written off in your system? Before or after collections? Handling of Medicare is consistent with other payors • Don’t forget to report bad debts for other units (ESRD reported on I-5, not directly on E part B)

34. Direct Graduate Medical Education (DGME) • Did you obtain you Per Resident Amount from the MAC • Do you have new programs. • Have you reviewed the resident information, credentialing ,rotation schedules etc.

35. Indirect Graduate Medical Education (IME) • Do you have new programs. • Bed Days Available calculation • Have you reviewed the resident information, credentialing ,rotation schedules etc.

36. New Teaching Program • The Medicare program will grant your institution a five-year window to establish your permanent cap. During this five-year period, you will be paid based on your actual resident FTE count and will not be held to any limit on resident FTEs. Your five-year window will open when you first begin to train residents in your first new residency program. The window will close at the end of the fifth program year of your first new program, and your permanent cap will be effective on the first day of the hospital cost reporting period that coincides with or follows the start of the sixth program year of the first new program you started. • For example if a new Family Medicine program started 07/01/2015, the permanent cap for this program would be effective 07/01/2020.  The permanent cap is calculated by taking the highest number of FTEs in any program year during year 5, multiplied by the number of program years, limited to the number of approved slots. 

37. Rural Training Track • Rural Training Track (RTT) programs provide an opportunity for urban hospitals, rural hospitals, and nonhospital clinical settings to form partnerships to train residents to practice in rural areas. • Urban teaching hospitals may receive additional DGME and IME funding for the number of residents in an RTT program for the time those residents train at their institutions, up to what is known as the “RTT FTE limitation.” • If a rural teaching hospital is establishing a new RTT program with an urban teaching hospital, then the exception to the GME caps that allows rural hospitals to add new medical residency programs applies, and the rural teaching hospital’s cap will be increased to account for the new program.

38. Nursing Allied Health Nursing & Allied Health Education (NAHE) encompasses a hospital-run nursing school or ancillary service education program, such as anesthesia, pharmacy, radiology, etc. Where the education program is accredited and leads to issuance of a certificate/diploma. MACs have increased their focus on NAHE audits. MACs, are distributing a Questionnaire, which is hitting on every phrase in the regulation. High level, a provider must meet all of the following requirements: • Directly incur the training costs. • Have direct control of the program curriculum. • Control the administration of the program. • Employ the teaching staff. • Provide and control both classroom instruction and clinical training.

39. Outlier Reconciliation • Per 20.1.2.5 of the claims processing manual and also under 42 CFR 412.84(i)(4) "for discharges occurring on or after August 8, 2003 high cost Outlier payments may be reconciled upon cost report settlement to account for differences between the CCR used to pay the claim at its original submission by the provider and the CCR determined at final settlement of the cost reporting period during which the discharge occurred.“ • The outlier reconciliation is subject to the approval of the CMS central office, if the hospitals outlier claims meets the following criteria: • The actual CCR is found to be plus or minus 10 percentage points from the CCR used during that time period to make outlier payments, and • Total outlier payments in that cost reporting period excess $500,000. • If the hospital meets these thresholds then the hospital will be required to pay back the outliers with interest.

40. Organ Acquisition/Reimbursement • Medicare pays hospitals for transplant services based on the Organ Acquisition Costs reported on the hospital’s Medicare Cost Report. • Transplant is one of the few areas within a hospital that is reimbursed on costs through the Medicare. • Reimbursement - Costs (both direct and indirect) are multiplied by a ratio of Medicare Usable Organs to total Usable Organs.

41. NYS ICR Specific • Did you report dual eligible days on Exhibit 30? • Have you reported all capital items that be accounted for on Exhibits 40 and 44? How does this line up with your budgeted capital? Did your income offsets come through?

42. Workpaper Documentation • If you got hit by a bus tomorrow, could someone follow your work? • Note where the details came from • Limit hardcoding • Is the workpaper “the way it’s always been done” or have you made sure it’s accurate and applicable • Reduce input fields once confirmed your linking and equations work

43. Questions Jason Allen jason.allen@mshallassociates.com PartnerM.S. Hall & Associates, LLC315.478.0425 (Office) 315.264.2104 (Cell) Scott Rau scott.rau@mshallassociates.com PartnerM.S. Hall & Associates, LLC315.478.0425 (Office) 315.256.8379 (Cell)