Medicare Pps Utilization Review Worksheet - PDF

Document Sample
Medicare Pps Utilization Review Worksheet - PDF Powered By Docstoc
					2008 Health Care Industry Conference

    Reimbursement Issues for Rural
             Hospitals
 Presented by
 Dan Larsen, CPA, Principal – LarsonAllen LLP,
 Austin, MN
 Trey Sturtevant, CPC, Principal – LarsonAllen
 LLP, Charlotte, NC

 June 20, 2008




                                                 1
Overview of Objectives
• Discuss Key Drivers that Cause Third Party Settlement
  Fluctuations
• Discuss “Hot Topic” Third Party Intermediary Audit
  Issues
• Share Ideas to Optimize Reimbursement Settlements
• Provide Examples of Third Party Settlement Tools to
  Avoid Year-End Management Surprises




                                                          2
Rural Hospital Provider Types
• Critical Access Hospitals (CAH)
  – Located more than 35 miles from other hospitals (or 15
    miles if located in mountainous terrain or areas with only
    secondary roads)
  – Provide 24 hour emergency care
  – Not more than 25 beds for acute care at any given time
  – Limited to average length of stay to 96 hours
• Prospective Payment System (PPS) Hospitals
  – Method of reimbursement in which payment is made based
    on a predetermined, fixed amount
  – May also have Sole Community or Medicare Dependent
    Status


                                                                 3
Rural Hospital Settlements
• CAHs
  – Medicare
     ◊ Inpatient and Outpatient settled at 101% of cost
  – North Carolina Medicaid
     ◊ Inpatient and Outpatient settled on a cost basis

• PPS Hospitals
  – Medicare
     ◊ Various potential settlements area
  – North Carolina Medicaid
     ◊ Outpatient settled on a cost basis




                                                          4
PPS Settlement Areas
• Transitional Corridor Payment (TOPs)
  – Purpose is to restore some of the decrease in the payment
    that a hospital may experience under the OPPS
  – Based on comparison of Pre-OPPS payment to OPPS
    payment, with the TOP amount equal to a percentage of the
    difference (90% for CY2007, 85% for CY2008)
  – Settled through cost report as TOPs are received on a
    monthly interim basis
  – Ended 12/31/2003 for urban hospitals > 100 beds
  – Ended 12/31/2005 for all urban and rural hospitals > 100
    beds and Sole Community Hospitals (SCHs)
  – Extended to 12/31/2008 for rural hospitals with no more than
    100 beds that are not SCHs


                                                                   5
PPS Settlement Areas

• Medicare Disproportionate Share (DSH)
  – An additional inpatient payment for hospitals that serve a
    disproportionate share of low income patients
  – Disproportionate Patient Percentage (DPP) = Supplemental
    Security Income (SSI) Ratio + Medicaid Ratio




                                                                 6
PPS Settlement Areas

• Medicare DSH (continued)
  – SSI Ratio
     ◊ Medicare SSI Days/Total Medicare Days
        • Medicare SSI Days = Entitled to Medicare Part A and SSI
        • Total Medicare Days = Entitled to Medicare Part A
     ◊ Computed by CMS annually
     ◊ FY 2006 SSI ratios currently under review
        • As of May 5, 2008, hospital may elect to use either its FY 2005 or
          FY 2006 SSI ratio
        • Once CMS completes review, cost report will be settled using the
          appropriate SSI ratios




                                                                               7
PPS Settlement Areas

• Medicare DSH (continued)
  – Medicaid Ratio (Medicaid Days/Total Patient Days)
     ◊ Medicaid Days
        • Total paid and unpaid Medicaid inpatient days for hospital
          services
            – Include nursery days (Medicaid eligible through 1 year of age
              if mother is eligible)
            – Exclude general assistance days
            – Exclude subprovider days
            – Exclude dual eligible days
            – Subtract Medicaid Labor and Delivery days (the total number
              of days mothers were in labor in delivery rather than OB at
              midnight census)
            – Exclude Title XIX observation bed days



                                                                              8
PPS Settlement Areas

• Medicare DSH (continued)
  – Total Days
     ◊ Total inpatient days for hospital services (all payers)
         • Exclude total subprovider days
         • Include total nursery days
         • Subtract total Labor and Delivery days (the total number of days
           mothers were in labor in delivery rather than OB at midnight
           census)
         • Subtract employee discount days
         • Subtract swing-bed days
         • Exclude total observation bed days




                                                                              9
PPS Settlement Areas
• Medicare DSH (continued)
  – Allowable DSH Percentage
     ◊ Formulas to establish the allowable DSH percentage are based on
       certain hospital-specific information, including:
         • Disproportionate Patient Percentage (DPP)
         • Geographic designation (urban or rural)
         • Number of beds
         • Status as a Rural Referral Center or Medicare Dependent Hospital
     ◊ The allowable DSH percentage is capped at 12% for hospitals except:
         • Urban hospitals with 100 or more beds
         • Rural hospitals with 500 or more beds
         • Rural Referral Centers
         • Medicare Dependent Hospitals (Effective for discharges on or after
           10/01/2006)
  – Allowable DSH percentage is multiplied by Federal Specific
    amount to arrive at the allowable DSH amount.

                                                                                10
PPS Settlement Areas
• Sole Community Hospital (SCH)
   – Eligible if located more than 35 miles from other like hospitals
       ◊ Lesser mileage requirements if isolated location, weather conditions,
         travel conditions, absence of other like hospitals, or historical
         designation requirements are met
   – Paid based on the greater of Federal PPS rate or the hospital specific
     rate from the hospital’s 1982, 1987 or 1996 cost report updated to the
     current period
   – A payment adjustment is possible for a SCH that experiences a decrease
     of more than 5% in its total inpatient discharges as compared to its
     immediately preceding cost reporting period




                                                                                 11
PPS Settlement Areas
• Medicare Dependent Hospital (MDH)
  – Non-SCH rural hospital with 100 or fewer beds
  – At least 60% of days or discharges are Medicare in its 1987 cost reporting
    year or in 2 of the last 3 most recent and settled audited cost reporting
    periods
  – Paid based on the greater of the Federal PPS rate or the hospital specific
    rate from the hospital’s 1982, 1987 or 2002 Medicare cost report updated
    to the current period. If the hospital specific rate amount is greater,
    payment is Federal PPS amount plus 50% of difference between Federal
    PPS amount and updated hospital specific amount.
      ◊ For discharges on or after October 1, 2006, the payment is changed to
        the Federal PPS amount plus 75% of the difference between Federal
        PPS amount and updated hospital specific amount.
  – 12% cap on DSH does not apply
  – A payment adjustment similar to SCHs is available for MDHs for volume
    decreases


                                                                                 12
Key PPS Settlement Drivers

• Accuracy of Days
    – Medicaid
    – Total
•   SSI %
•   Fully Account for All Interim Payments
•   Cost and Charge Alignment Is Still Important
•   Bad Debts




                                                   13
CAH Routine Cost Calculation
                              Inpatient Routine Services
 Worksheet A
  Direct Costs                                        Worksheet D-Series
(As Adjusted/Reclassed)                              Calculates Medicare Cost



 Worksheet B
Fully Allocated
     Costs                Cost Per Day                   Medicare Days                     Medicare
                          (Excluding NF Costs)
                                                 X   Provider Summary Report       =        Cost
                                                       (Inpatient and Swing Bed)

Worksheet S-3,I
  IP, Swing
   Bed, and
 Observation
  Bed Days                                                            Worksheet E Series
                                                           Compares Allowable Medicare Cost to
                                                             Interim Payments and Calculates
                                                                      the Settlement


                                                                                                      14
CAH Ancillary Cost Calculation
                          Inpatient and Outpatient Ancillary Services
 Worksheet A
  Direct Costs                                   Worksheet D-Series
(As Adjusted/Reclassed)                         Calculates Medicare Cost



 Worksheet B
Fully Allocated                Cost to
     Costs                                        Medicare Charges                 Medicare
                               Charge     X     Provider Summary Report    =        Cost
                                Ratio              (By Revenue Code)

 Worksheet C
     Charges

                                                              Worksheet E Series
                                                     Compares Allowable Medicare Routine,
                                                         Ancillary, and Capital Cost to
                                                       Interim Payments and Calculates
                                                                 the Settlement

                                                                                              15
Key CAH Settlement Drivers
•   Current year cost based settlements for Medicare and Medicaid can be
    impacted by a number of variables
    –   Volume                                     Increased Swing Bed Utilization
    –   Payer Mix                                  Medicare Advantage
    –   Expense Fluctuations
    –   Regulation Changes
    –   Pricing Changes
                                                  Routine vs. Billable Supplies
    –   Chargemaster Updates
    –   Interim Rate Changes                      Additional Procedures
    –   Lump Sum Adjustments
    –   New Service Lines                        Medicare and Medicaid Rate Changes
    –   Building Projects
         ◊ Square Footage Changes
         ◊ Expense Changes
    –   Statistical Changes
    –   Operational Decisions
    –   Prior Year Audit Adjustments               Outsourcing Laundry
    –   Cost Report Strategies                     Meals on Wheels
    –   Medicare Bad Debts                         New Service Lines




                                                                                      16
Third Party Intermediary Audits
• The Medicare Cost Report is subject to an annual
  review by the Fiscal Intermediary (FI).
  – The type of review completed by the FI (limited, full, field
    audit) is determined based on the amount of Medicare cost-
    based reimbursement, changes in operating cost-to-charge
    ratios, and other factors deemed necessary for review by
    the FI.
  – The CMS Uniform Desk Review (UDR) highlights all review
    steps to be completed by all FI’s in completing their review.




                                                                    17
Third Party Intermediary Audits
• Additional Documentation Review (ADR) Review (Part of the
  UDR)
   – Fiscal intermediaries may perform an ADR review of the cost report as an
     audit step. The ADR review examines changes between the current and
     prior year. If a cost, statistic, adjustment, etc. falls outside of a set dollar
     and/or percentage threshold, additional documentation and/or
     explanation may be required of a hospital. Items that a fiscal intermediary
     may examine include:
      ◊ Worksheet S-3 Data (Beds, Days, Discharges)
      ◊ Worksheet A Costs (Salaries, Other, Total)
      ◊ Worksheet A-6 Reclassifications
      ◊ Worksheet A-8 Adjustments
      ◊ Worksheet A-8-1 Costs to Related Organizations
      ◊ Worksheet A-8-2 Physician Costs
      ◊ Allocation Statistics
      ◊ Worksheet C Cost-to-Charge Ratios
      ◊ Medicare Utilization
      ◊ Other Areas as Deemed Necessary by the FI



                                                                                        18
Third Party Intermediary Audits
• Appeals:
  – FI issues a Notice of Program Reimbursement (NPR) after
    audit
  – Facilities have 180 days from the NPR date to appeal any
    determination determined in the NPR
  – Appeal must relate to an item or service the FI adjusted
    during audit
• Re-openings:
  – Facility and FI have 3 years from date of original NPR to
    request reopening
  – Generally granted for significant omissions and/or errors




                                                                19
"Hot Topic" Intermediary Audit Issues
• Common areas of concern from audits
   –   Bad Debts
   –   Excess Borrowing
   –   Medicare Advantage: Swing Bed Days
   –   Adequacy and Retention of Supporting Data
   –   Allowable Emergency Room Costs
         ◊ Availability and consistency of contracts, time studies, etc
   –   Square Footage
   –   Non-reimbursable Cost Centers
   –   Meal Counts
         ◊ Adequacy of documentation, carve out of observation meals
   –   Intercompany/Interdepartmental Transactions
   –   Related Party Costs
   –   Allowable versus Non-Allowable Advertising Costs
   –   Proper Identification of Nursery and Labor & Delivery Costs




                                                                          20
"Hot Topic" Intermediary Audit Issues
•   Basics of Medicare Bad Debts:
    – Composed of uncollected Medicare deductible and
      coinsurance amounts
    – HIM 15-I §308 sets forth the criteria for a Medicare bad debt
      to be allowable:
       ◊   The debt must be related to covered services and derived from
           deductible and coinsurance amounts.
       ◊   The provider must be able to establish that reasonable collection
           efforts were made.
       ◊   The debt was actually uncollectible when claimed as worthless.
       ◊   Sound business judgment established that there was no likelihood of
           recovery at any time in the future.




                                                                                 21
"Hot Topic" Intermediary Audit Issues
• Basics of Medicare Bad Debts:
  – Medicare recoveries of previously written off Medicare bad
    debts received in the current cost reporting period must be
    netted against Medicare bad debt claimed in the current cost
    reporting period regardless of when the Medicare bad debt
    was claimed.
  – Uncollected Medicare deductibles and coinsurance that
    cannot be claimed as a Medicare bad debt include:
     ◊ Bad debts arising from services paid under a fee schedule
     ◊ Bad debts arising from non-covered services including personal
       comfort items
  – Medicare reimburses:
     ◊ 70% of allowable bad debt amounts for PPS hospitals
     ◊ 100% of allowable bad debt amounts for CAH hospitals
  – CAHs cannot claim bad debts for service periods prior to the
    CAH certification date.
                                                                        22
"Hot Topic" Intermediary Audit Issues
• Medicare Bad Debts
  – Fiscal intermediaries require the following basic information
    to be submitted on a bad debt log in order to be claimed as
    Medicare bad debts:
     ◊   Patient’s Name
     ◊   Patient’s HIC Number
     ◊   Dates of Service
     ◊   Date of First Bill
     ◊   Remittance Advice Date
     ◊   Write-Off Date
     ◊   Deductible & Coinsurance Amount
     ◊   Beneficiary/Other Payers Payment Amounts
     ◊   Patient’s Medicaid Number
     ◊   Patient’s Indigence Status
          • Medicaid
          • Financial determination by the hospital



                                                                    23
"Hot Topic" Intermediary Audit Issues
• Medicare Bad Debts (continued)
  – If the fiscal intermediary tests bad debts as part of their audit,
    they may request the following documentation to support an
    individual bad debt (in most cases, the FI will select a sample
    and apply their findings against the entire population):
     ◊ UB-92
     ◊ Medicare RA
     ◊ Patient account notes/collection letters/billing statements in order to
         review:
           • Date of first bill
           • Collection efforts, including phone calls and personal contacts
           • Write-off date
           • Patient or other payer payments prior to or after write-off
     ◊   Medicaid RA or documentation determining indigency
     ◊   Other payer RA or documentation for non-payment or partial payment
     ◊   Non-Medicare bad debt documentation to ensure consistency among
         payers
     ◊   Other information as deemed necessary by the FI

                                                                                 24
"Hot Topic" Intermediary Audit Issues
• Medicare Bad Debts (continued)
  – Common areas where Medicare bad debt denials occur:
     ◊ Documentation, Documentation, Documentation
     ◊ Reasonable collection efforts:
         • The first bill must be issued on or shortly after the patient’s discharge
           or death.
             – The longer the span between discharge and first bill, the less
                likely collection will occur.
             – Ongoing collection efforts at regular intervals must be made
                during the period of first bill and write-off which include billing
                statements, phone calls, personal contact, etc.
             – More effort, including phone calls and personal contact,
                distinguish between a genuine and token effort.
         • Collection efforts must be similar for Medicare and non-Medicare
           patients. This includes consistency in the policy for turning over all
           bad debts to a collection agency.


                                                                                       25
  "Hot Topic" Intermediary Audit Issues
• Medicare Bad Debts (continued)
  – Reasonable collection efforts:
     ◊ Generally bad debts cannot be claimed if written off less than 120 days
       from date of first bill or last payment.
     ◊ Bad debts can be written off prior to 120 days and collection efforts are not
       required if it is an allowable dual eligible bad debt or the patient is indigent.
          • Must verify that no other party is legally responsible for the debt.
          • States can limit their cost sharing liability and not pay the
            deductible/coinsurance portion for dual eligible beneficiaries.
              – Must bill the state to determine the state’s liability.
              – Must bill the state to verify dual eligibility.
              – If state refuses payment due to cost sharing limitations, this
                constitutes a dual eligible bad debt.
          • Provider may determine a patient is indigent under HIM 15-I §312.
              – Provider must make indigence determination, not patient.
              – Examine patient’s total resources (assets, liabilities, income, and
                expenses).


                                                                                           26
"Hot Topic" Intermediary Audit Issues
• Common areas where Medicare bad debt denials
  occur:
  – Bad debt must really be worthless:
     ◊ If the bad debt is referred to a collection agency, the write-off date
       must be on or after the collection agency returns the bad debt as
       worthless.
        • If the collection agency charges a fee, the amount received in total by
           the collection agency must be netted against the deductible and
           coinsurance amount regardless of the amount received by the
           hospital. The collection agency fee may be included in the
           Administrative & General cost center.




                                                                                    27
"Hot Topic" Intermediary Audit Issues
• Excess Borrowing
  –   Common area of review in desk and field audits
  –   Funded depreciation
  –   Definition of excess cash reserves
  –   Related party borrowing
  –   Building loans
  –   Capital leases

  – Can become a significant factor in making future financing
    decisions during strategic capital planning




                                                                 28
"Hot Topic" Intermediary Audit Issues
• Medicare Advantage: Swing Bed Days
  – Recent CMS ruling on handling of Medicare Advantage
    Swing Bed days
  – Required to be filed as Swing Bed SNF days
     ◊ Reported only in the “Total” column
         • Becomes part of the denominator for cost per day
     ◊ Not reported in the Medicare column




                                                              29
"Hot Topic" Intermediary Audit Issues
• Others
  – Adequacy and Retention of Supporting Data
     ◊ Time Studies and Other Statistics
  – Allowable Emergency Room Costs
     ◊ Availability and consistency of contracts, time studies, etc
  – Square Footage
     ◊ Documentation and auditability
  – Non-reimbursable Cost Centers
     ◊ Foundations, Marketing Departments, Clinics, etc.
  – Meal Counts
     ◊ Adequacy of documentation,
     ◊ Carve out of observation meals




                                                                      30
"Hot Topic" Intermediary Audit Issues
• Others
  – Intercompany/Interdepartmental Transactions
     ◊ Clinic Lab Accounting
  – Related Party Costs
  – Allowable versus Non-Allowable Advertising Costs
  – Proper Identification of Nursery and Labor & Delivery Costs



  – WHAT ARE YOU SEEING?




                                                                  31
 Hot Topic Intermediary Audit Issues
• Keys to successfully surviving Medicare field audits
  – Be sure to have your Medicare “Expert” involved from the start
  – Review all adjustments proposed by Medicare
     ◊ Medicare auditors have changed previously made adjustments without
       specific notice
  – Argue all valid points possible
     ◊ Cost report will be base that is carried forward to future years
  – If an issue is noted, consider spelling out the adjustment to the
    auditor to assure that it is handled properly
  – Medicare auditors may request significant amounts of detail
    which can put strain on the organization
     ◊ Consider asking them to test a sample




                                                                            32
 Hot Topic Intermediary Audit Issues
• Keys to successfully surviving Medicare field audits
  – Consider proposing adjustments to optimize reimbursement if
    not already implemented
  – Don’t rule out a change in statistical basis
  – Be sure to manage Board expectations
     ◊ Medicare intermediaries will almost always propose adjustments to
       reduce cost based reimbursement
     ◊ Counter arguments may minimize these future adjustment, but there will
       likely always be some adjustments




                                                                                33
Ideas to Optimize Reimbursement
• Understand What's in Your Cost Report
  – "The Dollars are in the Details"

    ◊ Allow for proper review time before filing
       • Move up preparation timetable

    ◊ Consider
       • On-sight cost report reviews
       • Strategic planning sessions




                                                   34
 Ideas to Optimize Reimbursement
• Goal during Medicare cost report preparation is to optimize the
  overall facility reimbursement percentage
   – Must be representative of actual costs
   – Strategies need to hold up under Medicare scrutiny
• Strategic changes to operations can be utilized to enhance
  reimbursement
• Other changes need only to be performed at the Medicare cost
  report level




                                                                    35
 Ideas to Optimize Reimbursement
• Requires intimate knowledge of Medicare cost report at both the
  facility and cost report preparer level
   – Hundreds of numbers in the Medicare cost report that can significantly
     impact the settlement
   – On-site cost report review sessions are advisable to enhance
     communication
   – Need to invest in more internal cost report expertise than previously
     required under PPS, while continuing to use outside expertise
   – Requires Board members to understand making decisions in a “fully
     allocated cost” environment




                                                                              36
Understand the Cost Allocation Process
   The table below depicts a simplistic example of cost allocations
   within the Medicare cost report from the General Service Areas to
   other areas within the hospitals
   In this example, all General Service Area costs are allocated to reimbursable
    areas

                                                                                Total Gen
                                             Dept Costs Dept Costs Dept Costs     Costs
  General Service Areas
     Administrative & General                  120,000                          $   120,000
     Dietary                                               150,000                  150,000
     Housekeeping                                                     175,000       175,000

          Total General Service Area Costs                                      $   445,000

  Routine Service Areas
      Acute                                     40,000     150,000     58,333       248,333
      Radiology                                 40,000         -       58,333        98,333
      Laborartory                               40,000         -       58,333        98,333

          Total Allocated Costs                120,000     150,000    175,000       445,000

                                                                                              37
Understand the Cost Allocation Process (cont’d)
   In this example, $260K of costs previously allocated within the hospital, are now
    allocated to non-reimbursable areas, and Medicare will no longer “pay” for these costs
   This impacts the total amount of Medicare reimbursement, but is not necessarily “bad”
    from an overall profit level
   IF new revenue streams are large enough to cover the lost Medicare reimbursement, the
    net profit impact to an organization is $0

                                                                                               Total Gen
                                                         Dept Costs Dept Costs Dept Costs        Costs
              General Service Areas
                 Administrative & General                    120,000                           $   120,000
                 Dietary                                                 150,000                   150,000
                 Housekeeping                                                        175,000       175,000
                      Total General Service Area Costs                                         $   445,000

              Routine Service Areas
                  Acute                                  $    20,000 $    37,500 $    29,167   $    86,667
                  Radiology                                   20,000         -        29,167        49,167
                  Laborartory                                 20,000         -        29,167        49,167
                      Total Allocated to Routine Areas $      60,000 $    37,500 $    87,500   $   185,000
              Non-Reimbursable Areas
                  Assisted Living                        $    20,000 $    37,500 $    29,167   $    86,667
                  Independent Living                          20,000      37,500      29,167        86,667
                  Day Care                                    20,000      37,500      29,167        86,667
                      Total Allocated to
                      Non-Reimbursable Areas             $    60,000 $ 112,500 $      87,500   $   260,000
                      Total Allocated Costs              $ 120,000 $ 150,000 $ 175,000         $   445,000


                                                                                                             38
Cost Based Reimbursement Relationships
•   The following is a sample grid showing the amount of Medicare cost based
    reimbursement that a Sample Hospital will receive or lose for each additional
    dollar spent or dollar cut:
                                            Increase/(Decrease) in            Increase/(Decrease) in
                                             Reimbursement from                Reimbursement from
                                          Additional $1,000 Expenses      Additional $100,000 Expenses
                                          Added to Each Department          Added to Each Department
    3    New Cap Rel Csts-Bldg & Fixt   $                          391    $                     38,892
    4    New Cap Rel Csts-Mvble Equip   $                          316    $                     31,760
    5    Employee Benefits              $                          405    $                     40,235
    6    Administrative & General       $                          444    $                     44,208
    7    Maint and Repairs              $                          365    $                     36,653
    8    Operation of Plant             $                          365    $                     36,653
    9    Laundry and Linen Service      $                          697    $                     69,801
    10   Housekeeping                   $                          291    $                     29,317
    11   Dietary                        $                          288    $                     29,045
    12   Cafeteria                      $                          633    $                     63,109
    14   Nursing Administration         $                          785    $                     78,541
    17   Medical Records & Library      $                          575    $                     57,568
    20   Nonphysician anesthetist       $                          390    $                     39,384
    25   Adults & Pediatrics            $                          820    $                     82,404
    26   Intensive Care Unit            $                          892    $                     89,533
    33   Nursery                        $                          (78)   $                      (7,257)
    37   Operating Room                 $                          566    $                     56,979
    39   Delivery & Labor Room          $                          (78)   $                      (7,257)


                                                                                                           39
    Cost Based Reimbursement Relationships (Continued)
•   The following is a sample grid showing the the amount of Medicare cost based
    reimbursement that a Sample Hospital will receive or lose for each additional
    dollar spent or dollar cut:
                                                          Increase/(Decrease) in            Increase/(Decrease) in
                                                           Reimbursement from                Reimbursement from
                                                        Additional $1,000 Expenses      Additional $100,000 Expenses
                                                        Added to Each Department          Added to Each Department
        40     Anesthesiology                         $                          390    $                     39,384
        41     Radiology - Diagnostic                 $                          531    $                     53,569
        44     Laboratory                             $                          222    $                     22,608
        49     Respiratory Therapy                    $                          628    $                     63,177
        50     Physical Therapy                       $                          432    $                     43,590
        51     Occupational Therapy                   $                          949    $                     95,211
        52     Speech Pathology                       $                          709    $                     71,148
        53     EKG                                    $                          391    $                     39,489
        55     Medical Suppls                         $                          638    $                     64,190
        56     Drugs Charged                          $                          698    $                     70,144
        59     Cardiac Rehab                          $                          706    $                     70,946
        61     Emergency                              $                          389    $                     39,327
        65     Ambulance                              $                          (78)   $                      (7,257)
        68     Counseling                             $                          (78)   $                      (7,257)
        71     Home Health                            $                          (78)   $                      (7,257)
               All Other Non-Reimbursable Cost Center $                          (78)   $                      (7,257)

    •        Also need to consider Medicaid cost based reimbursement

                                                                                                                         40
    Analyze Medicare Utilization By Department

•   Analyzing Medicare utilization by department can identify alignment issues
TOTAL Comparison of MC Utilization   CY Total      CY MC Total   CY Total MC    PY Total    PY MC Total   PY Total MC
                                     Charges        Charges       Utilization   Charges      Charges       Utilization
37      Operating Room                 2,669,261       708,183            27%   2,899,721       867,035            30%
38      Recovery Room                  1,203,992       279,064            23%   1,201,148       316,186            26%
39      Delivery & Labor Room            599,076           977             0%     549,449           -               0%
40      Anesthesiology                 2,010,690       528,849            26%   2,084,611       580,180            28%
41      Radiology - Diagnostic         9,846,583     2,621,354            27%   9,071,092     3,224,457            36%
44      Laboratory                    10,082,080     3,116,722            31%   9,259,482     3,212,580            35%
50      Physical Therapy                 942,462       255,024            27%     867,241       218,934            25%
51      Occupational Theraphy            241,927        61,076            25%     219,654        44,409            20%
52      Speech Pathology                 102,503        12,979            13%      65,562        11,665            18%
53      Cardiology                       591,840       300,951            51%     608,166       333,726            55%
53.01   Cardiopulmonary                1,940,528       528,720            27%   1,819,644       691,070            38%
55      Medical Suppls Chrgd Pat       4,285,156     1,360,752            32%   5,263,133     2,144,025            41%
56      Drugs Charged to Patients      6,491,065     2,380,591            37%   6,456,518     2,919,131            45%
56.01   Chemo/IV Therapy                 350,022       101,675            29%     344,024       119,897            35%
59      Endoscopy                      1,035,912       341,213            33%     852,355       319,897            38%
59.01   Diabetic Education               140,708         4,820             3%     130,652        28,375            22%
60      Clinics                        3,357,148     1,006,059            30%   2,922,286       749,356            26%
60.01   OP Clinic                        661,003         3,280             0%     674,016       277,529            41%
61      Emergency                      1,931,441       471,843            24%   1,648,410       469,394            28%
62      Observation Beds                 673,374       146,616            22%     611,227       111,294            18%




            Can you see a potential misalignment above?

                                                                                                                         41
 Ideas to Optimize Reimbursement
• Cost Report Statistics
  – Statistics used for B-1 stats should be analyzed regularly to
    assure they reflect the most accurate and optimal structured
    cost step downs
  – Except for first CAH cost report, changes are required to be
    requested in writing to the intermediary 90 days prior to the
    end of cost report period
     ◊ Would be advisable to request changes for first CAH cost report as well




                                                                                 42
 Ideas to Optimize Reimbursement
• Square Footage
  – Documentation of square footage and usage
     ◊ Map with numbering system
     ◊ Grid showing primary use, square feet and Medicare line assignment
     ◊ Allows for scenarios to test the most reimbursable use of space
        • Most reimbursable use of space may not always equate to the best
          clinical use of space
        • Need to weigh both sides
  – Consider handling of off-site buildings
     ◊ Ambulance garages, Home Health, etc
     ◊ Direct identification versus one square footage bucket
  – Other square footage issues
     ◊ ER Ambulance drop off – ER vs. Ambulance space
     ◊ Dietary vs. Cafeteria space


                                                                             43
 Ideas to Optimize Reimbursement
• Square Footage (continued)
  – Building design can impact future reimbursement
     ◊ Potential Example – Remodel Adults and Peds wing into skilled nursing
      facility space and build new Adults and Peds wing
  – A square footage map and spreadsheet grid during the
    building design stage would assist in running the projected
    building project through the Medicare cost report to more
    accurately analyze cost based reimbursement
  – Multiple cost centers may be beneficial for multiple remodeling
    projects or additions




                                                                               44
 Ideas to Optimize Reimbursement
• Square Footage (continued)
  – Birthing Suites
     ◊ Space and other costs allocated between Labor & Delivery and Adults
       and Peds reimbursement
        • Downtime is also prorated based on actual usage
        • Based on August 1, 2003 Federal Register
     ◊ May not be the most optimally reimbursable use of space
        • Needs to be analyzed on a case by case basis
     ◊ Requires tracking of information during the year
        • Pre and post delivery time
        • Non-OB time
     ◊ Counting/non-counting of days is critical
        • Should be prorated based on usage
           – A four day stay prior with 25% of time pre-delivery, and 75% post
             delivery would be counted as 3 days



                                                                                 45
 Ideas to Optimize Reimbursement
• Nursing Administration
  – If allocated based on FTEs supervised, consider reassessing
    organizational chart to optimize reimbursement
     ◊ In one facility, having the Home Health director report directly to the
       administrator instead of the DON increased annual reimbursement by
       $11,000
     ◊ Still needs to make clinical sense
  – Be sure that clinics FTEs/hours used do not include physician
    FTEs




                                                                                 46
 Ideas to Optimize Reimbursement
• Time Studies
  – Be sure they meet Medicare’s criteria
  – Failure to comply could result in unnecessary removal or
    treatment of otherwise allowable costs as non-reimbursable
  – Time study must match expenses being allocated
    ◊ If directly identifying time using the payroll system, need to assess time
      studies to assure no duplication is occurring




                                                                                   47
 Ideas to Optimize Reimbursement
• Depreciation Policy
   – Medicare allows a $5,000 limit for facilities to expense versus capitalize
     equipment related items.
      ◊ Adoption of the highest possible Medicare limits into current facility policy
        would accelerate Medicare CAH cost based reimbursement payments
      ◊ The impact for 2003 of increasing the capitalization policy would have been
        the following
         • An increase in CAH Medicare reimbursement/cash flow
         • A reduction in the Operating Income
      ◊ Potential acceleration of depreciation is also available on reconditioned
        assets
      ◊ The impact of raising the depreciation policy limit could be viewed as similar
        to accelerating tax deductions
         • It reduces your current year net income, but provides better cash flow
           upfront.
            – Given the time value of money over time and the uncertainty of future
              reimbursement, it can be argued to be an overall benefit to the organization
      ◊ Proper componentization of building projects may also accelerate the rate at
        which depreciation could otherwise be claimed on the cost report
                                                                                             48
 Ideas to Optimize Reimbursement
• Chargemaster
  – Be sure to understand the importance of Chargemaster
    alignment to the PS&R
    ◊ PPS reimbursement emphasized CPT and HCPCS codes
    ◊ For CAH facilities, the Revenue Code holds more importance
       • (aka UB92 code or Insurance code)
    ◊ Common areas that can cause issues
       •   IV Administration versus IV Solutions
       •   Blood administration versus blood products
       •   Recovery performed on the floor
       •   Billable supplies
       •   Outpatient procedure/treatment rooms
    ◊ Be sure the billing department is not manually intervening on UB92s
      such that the Medicare PS&R is not reflective of the hospital’s financial
      information



                                                                                  49
     Prepare a PS&R Crosswalk

 •   Utilizing your revenue usage and CDM to verify PS&R alignment
Dept Description                  250     255          258         259           270        300
ANESTHESIA                                                                   77,567
CENTRAL SUPPLY                                                            1,739,605
CT SCAN
DAY HOSPITAL                                       188,008
EKG
EMERGENCY ROOM
INTREVENOUS THERAPY                                454,417
LABORATORY                                                                              162,398
NUCLEAR MEDICINE                        5,304
OCCUPATIONAL THERAPY
OPERATING ROOM
PHARMACY SERVICES           1,925,370              672,674     521,387         902          141
PHYSICAL THERAPY
RADIOLOGY                               3,322
RECOVERY ROOM
RENTAL INCOME
RESPIRATORY THERAPY           54,743                                       704,201       68,688
Grand Total                1980112.61   8626.3   1315099.78   521387.45   2522274.4    231226.42


  Can you see a potential misalignment issues?
  Potential missed charge capture opportunities?

                                                                                                   50
 Ideas to Optimize Reimbursement
• Administrative costs
  – Avoid duplication of directly identified costs and additional step
    down of A&G costs
     ◊ Especially to non-reimbursable cost centers
     ◊ For example, billing, receptionist, or other administrative costs directly
       aligned in a clinic, with additional hospital administrative costs being
       stepped down as well
     ◊ Telephone costs
     ◊ Can impact square footage alignment
        • Assignment to A&G – Line 6 versus Department




                                                                                    51
 Ideas to Optimize Reimbursement
• Understand what is in each general ledger account
  – In one example we have found, an account titled “Clinic –
    Salaries” was fully loaded with directly identified
    housekeeping, maintenance, administrative, and other
    expenses
     ◊ The reimbursement impact caused by the duplication of directly
       identifying these costs, as well as using B-1 statistic, was understating
       the facility’s cost based reimbursement
     ◊ Identifying this issue increased operational profitability by $100,000
       annually
     ◊ If carving out expenses internally, be sure to communicate this to the
       cost report preparer
     ◊ Also, consider using more general ledger accounts to make the
       expenses more easily identifiable
         • “Clinic – Housekeeping Salaries”
  – Cut off of expenses is key for stub period cost reports


                                                                                   52
 Ideas to Optimize Reimbursement
• Employee “Home” Departments
  – Emergency Room versus Adults and Peds example
  – Optimal reimbursement has nursing staff working on the Med
    Surg floor, and directly identifying time to the emergency room
    department when called
  – Could impact building design
     ◊ Needs to be clinically operational to “cover” ER with Med Surg floor
       nurses




                                                                              53
 Ideas to Optimize Reimbursement
• Rural Health Clinics
  – Physician FTEs used for utilization limit calculation
  – Avoid duplication of administrative and general or other
    overhead
  – Generally have a lower cost based utilization percentage than
    the hospital




                                                                    54
 Ideas to Optimize Reimbursement
• Non-reimbursable departments
  – Not necessarily a bad thing
  – Revenues need to cover fully allocated cost
  – Before removing, need to analyze impact on cost based
    reimbursement, fixed and variable expenses




                                                            55
Ideas to Optimize Reimbursement
• Advertising
  – Allowable versus non allowable
  – Physician recruitment




                                     56
Ideas to Optimize Reimbursement
• 5% MDH
  – For all PPS hospitals designated as MDH or SCH, watch for
    years with a 5% decline in discharges
     ◊ There could be an additional payment to be filed for
     ◊ Can be significant




                                                                57
Ideas to Optimize Reimbursement
• Emergency Room Coverage
  – Review contracts to assure credit for availability expense

  – Example of NP and PA used to cover Emergency Room
    and provide quality and utilization review role
     ◊ Minimizes cost
     ◊ Optimizes reimbursement
     ◊ Can improve patient care




                                                                 58
Third Party Settlement Estimates
• Third Party Settlement Estimates
  – Generally estimated settlements for cost based
    payers such as Medicare and Medicaid
     ◊ Can exist for other payers depending on contracts


  – Usually more complex to calculate than the
    allowance for bad debts or allowance for
    contractual adjustments



  – Failure to incorporate an accurate estimate can
    result in unwanted management surprises


                                                           59
Third Party Settlement Estimates
•   Current year cost based settlements for Medicare and Medicaid can be
    impacted by a number of variables
     – Volume                                       Increased Swing Bed Utilization
     – Payer Mix                                    Medicare Advantage
     – Expense Fluctuations
     – Regulation Changes
     – Pricing Changes                             Routine vs. Billable Supplies
     – Chargemaster Updates                        Additional Procedures
     – Interim Rate Changes
     – Lump Sum Adjustments
     – New Service Lines                          Medicare and Medicaid Rate Changes
     – Building Projects
         ◊ Square Footage Changes
         ◊ Expense Changes
     – Statistical Changes
     – Operational Decisions                        Outsourcing Laundry
     – Prior Year Audit Adjustments                 Meals on Wheels
     – Cost Report Strategies                       New Service Lines
     – Medicare Bad Debts

                                                                                       60
     Third Party Settlement Estimate Examples
      •      Generally begin with a summary of known and unknown outstanding liabilities
ACCOUNT # 215020 - THIRD PARTY SETTLMENTS - OTHER THAN PIP

                                                                                                                                                                      Related
                                                                        Current                                                                                      Contractual
                                                      Current Balance    Month       Adjustment                                                                      Adjustment
                   Description                          Per Books       Estimate      Required                            Comments/Support                            Account

 Estimated Blue Plus Payable                                 (20,275)     (25,275)         (5,000) Based on Estimate From Contract
                                                                                                                                                                       550031
 Impact of 2004 Final Cost Report Adjustments -
                                                             (15,000)     (15,000)            -      Based on Current Desk Audit Adjustments (Amount Not Yet Paid)
 Medicare                                                                                                                                                              550016
 Impact of 2004 Final Cost Report Adjustments -
                                                              (1,000)      (1,000)            -      Based on Medicare Desk Audit Adjustments Applied to Medicaid
 Medicaid                                                                                                                                                              550001
 Estimated Impact of 2004 Final Cost Report
                                                              (5,000)      (5,000)            -      Based on 2004 Adjustments Applied to 2005 Medicare Report
 Adjustments on 2005 As Filed Amount - Medicare
                                                                                                                                                                       550016
 Estimated Impact of 2004 Final Cost Report
                                                                (500)        (500)            -      Based on 2004 Adjustments Applied to 2005 Medicaid Report
 Adjustments on 2005 As Filed Amount - Medicaid
                                                                                                                                                                       550001
 Filed 6/30/2005 MCR, Amount Withheld from As
                                                              20,000       20,000             -      Medicare Withheld 5% Based on Prior Year Adjustments
 Filed Report
                                                                                                                                                                       550016
 Current Year to Dated Estimated
                                                              50,000       45,000          (5,000)
 Recevable/(Payable) to Medicare
                                                                                                                                                                       550016
 Current Year to Dated Estimated
 Recevable/(Payable) to Medicaid
                                                              15,000       12,500          (2,500)                Current year month to date cost                      550001
                                                                                                                  settlement estimate is the most
        Contingency for Items Not Specifically Know         (100,000)    (100,000)            -                      challenging to determine
           Total                                             (56,775)     (69,275)         (7,500)                                                               -




                                                                                                                                                                                61
Third Party Settlement Estimates
• One Method to Estimate Current Year Settlement




                                         Not Recommended !!!




                                                               62
Third Party Settlement Estimates
• Other Methods to Estimate Current Year Settlement
   –   Percentage of Profit Based on Medicare and Medicaid Utilization
   –   Utilization Based Models
   –   Complete Medicare Cost Report
   –   Interim Cost Report
   –   Modified Approach Incorporating Cost Report Elements
• Key is to find a balanced approach
   – Time Requirements
   – Information Availability
   – Management’s Desired Comfort Level
       ◊ Accuracy vs. Contingency




                                                                         63
 Third Party Settlement Estimates
• Percentage of Profit Based on Cost Based Medicare and
  Medicaid Utilization
  – Adjust third party settlement account based on monthly profit
    based on cost based utilization percentage
     ◊ For example: If cost based utilization percentage is 40% of all payers, and
       monthly profit before adjustment is $100,000, then reduce monthly profit
       by 40% by adjusting to contractual adjustments and third party settlement
       receivable/(payable)
  – Pros
     ◊ Extremely quick
  – Cons
     ◊ Lacks sophistication and accuracy
           • Does not capture interdepartmental changes
           • Does not capture impact of non cost based cost centers, new service
             lines, etc.
     ◊ Would not incorporate interim rate changes or lump sum adjustments
     ◊ Management’s desired comfort level would need to be extremely low
                                                                                     64
Third Party Settlement Estimates
• Utilization Based Models
   – Models built on percentage of Medicare utilization by department
      ◊ Summarized expenses by department are loaded into model, multiplied
        by cost based utilization percentage and compared to year-to-date
        interim payments
                                         Increase/(Decrease) Increase/(Decrease)       Total
   Table Based on $1,000
                                            in Medicare         in Medicaid        Reimbursement
    Change in Expense
                                          Reimbursement       Reimbursement         Percentage
   3      New Cap Rel Csts-Bldg & Fixt         $431                 $48                47.8%
   4      New Cap Rel Csts-Mvble Equip         $454                 $55                50.9%
   5      Employee Benefits                    $344                 $35                37.9%
   5.01   Business Office                      $382                 $39                42.2%
   6      Administrative & General             $321                 $34                35.5%
   8      Operation of Plant                   $324                 $35                35.9%
   8.01   Utilities                            $324                 $35                35.9%
   9      Laundry and Linen Service            $558                 $55                61.3%
   10     Housekeeping                         $526                 $54                58.1%
   11     Dietary                              $273                 $27                30.0%
   12     Cafeteria                            $327                 $34                36.2%
   14     Nursing Administration               $601                 $63                66.4%
   17     Medical Records & Library            $527                 $72                59.9%
   20     Nonphysician anesthetist             $445                $115                56.0%
   25     Adults & Pediatrics                  $752                 $68                81.9%
   33     Nursery                              ($40)               $447                40.6%
   37     Operating Room                       $572                 $48                62.0%
                                                                                                   65
Third Party Settlement Estimates
• Utilization Based Models (continued)
  – Pros
     ◊ Can be set up to be fairly efficient
     ◊ Utilization tables are helpful in operational decision making and can
       be used for budgeting
  – Cons
     ◊ Summarized departmental expenses may not line up with the
       Medicare cost report process
         • Need to be sensitive to reclasses and adjustments
     ◊ Doesn’t account for statistical changes or payer mix changes that
       could significantly impact settlement
     ◊ New service lines or volume fluctuations can impact accuracy




                                                                               66
Third Party Settlement Estimates
• Complete Medicare Cost Report
  – Complete full Medicare and Medicaid cost report each
    month including updating of:
     ◊ Trial balance
     ◊ Census days
     ◊ Current Medicare PS&R
     ◊ Statistics
     ◊ Reclasses and adjustments
  – Pros
     ◊ Most accurate
           • Would incorporate all sensitive variables
  – Cons
     ◊ Time consuming
     ◊ Expensive
     ◊ Requires on-site cost report expertise
           • Needs to be consistent with year end filing to be accurate

                                                                          67
Third Party Settlement Estimates
• Interim Cost Report
   – Complete Interim Medicare and Medicaid cost report 6 to 9 months into
     fiscal year including updating of:
       ◊ Trial balance
       ◊ Census days
       ◊ Current Medicare PS&R
       ◊ Statistics (Focus on major changes)
       ◊ Reclasses and adjustments (Focus on significant changes)
   – Pros
       ◊ Fairly accurate
          • Would incorporate sensitive variables
      ◊ Not as time consuming as a “full” monthly cost report
      ◊ Can be utilized to verify accuracy of other methods
   – Cons
      ◊ Timing of interim may not allow management to make timely
        adjustments to operations
      ◊ Provides mid year snapshot
          • Could provide mid year “surprise”
          • Seasonality of changes can impact year end settlement
                                                                             68
Third Party Settlement Estimates
• Modified Approach Incorporating Cost Report
  Elements
  – Work with internal or external cost report preparer to develop
    a settlement model which incorporates sensitive variables
    and balances accuracy and timeliness
  – Example of similar model provided:




                                                                     69
Third Party Settlement Estimates




                                   70
Third Party Settlement Estimates




                                   71
Third Party Settlement Estimates




                                   72
Third Party Settlement Estimates




                                   73
Third Party Settlement Estimates




                                   74
Third Party Settlement Estimates




                                   75
Third Party Settlement Estimates




                                   76
Third Party Settlement Estimates
• Modified Approach Incorporating Cost Report
  Elements
  – Pros
     ◊ Balanced approach between accuracy and time commitment
           • 1 to 2 hours per month
     ◊ Provides timely results for management
     ◊ Incorporates most key assumptions
     ◊ Consistent alignment with filed Medicare and Medicaid cost reports
           • Can be used to populate Medicare software for interim rate changes
     ◊ Can be incorporated into budgeting process
     ◊ Can be used to run scenarios related to strategic decisions
  – Cons
     ◊ Management still needs to be sensitive to variables that may impact
       settlements
         • Can be verified with interim cost report

                                                                                  77
Third Party Settlement Estimates
• Rates Changes/Lump Sum Adjustments
  – Medicare
     ◊ Updated rates generally based on last filed cost report
         • Monitor volumes monthly and consider seasonality
     ◊ Requests for rate changes, if significant
         • Work with intermediary
            – Provide updated volumes, expense changes, template or
              interim Medicare cost report calculations
         • Consider seasonality, monitor volumes monthly
     ◊ Lump Sum adjustments
         • Large cost report payable could result in large LSA
  – Other
     ◊ Medicare Advantage Issues
         • PIP facilities
         • Rates do not incorporate inflation on a timely basis

                                                                      78
Questions…
                     Dan Larsen
                      Principal
                  LarsonAllen LLP
              dlarsen@larsonallen.com
                    507/434-7055

                     Trey Sturtevant
                        Principal
                    LarsonAllen LLP
             jsturtevant@larsonallen.com
                      704/998-5230



                                           79

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:237
posted:1/20/2012
language:English
pages:79
Description: Medicare Pps Utilization Review Worksheet document sample