What You Need to Know About Medicare in your Health System

February 10, 2020 | Article

Medicare and Medicaid cost reports are not just an exercise in compliance for health systems. Rather, they are an opportunity to enhance reimbursement.

However, in order to use your Medicare Cost Report efficiently, you need to remember the importance of several specific items. Here are a few things to consider when it comes to Medicare for your healthy system.

Remember the Importance of the Medicare Cost Report
The Medicare Cost Report is a complicated document you can’t avoid filling out. To help you spend less time on figuring this document out, we’ve put together our top five tips for filling out the Medicare Cost Report.

1. Exclude medical directors from A-8-2 as they are not subject to RCE limits.

Given the differing roles and responsibilities of today’s medical directors, the compensation paid for directorships can vary widely. For the Medicare Cost Report, Reasonable Compensation Equivalent (RCE) limits are not applicable to a medical director, chief of medical staff, or to the compensation of a physician employed in a capacity not requiring the services of a physician and can be excluded from disclosure on Worksheet A-8-2.

2. If your hospital’s internal report has Medicare HMO days, you should expect to have PS&R report 118.

Shadow billing, also known as “no pay” or “information only” claims, is an unofficial term that refers to the process that hospitals should follow when providing inpatient services to Medicare Managed Care patients. The claims should be submitted to the Medicare Administrative Contractor so you can receive credit for the patient days of service.

The patient days can then be used in calculation of reimbursement for Medical Education, Allied Health, Disproportionate Share or Uncompensated Care. The Provider Statistical and Reimbursement (PS&R) report 118 summarizes the Medicare Managed Care days.

We broke down how disproportionate share hospital Medicare payments can affect you.

3. Confirm and include all pass-through and lump-sum payments (Pub 15-2, §4031).

Medicare pays acute care hospitals for Part A and B services via submitted claims; inpatient is paid under Diagnosis Related Groups and outpatient is Ambulatory Payment Classifications. Some hospitals can receive added payments for things such as medical education, bad debts, allied education and more. Medicare will often make additional payments for these items on a periodic basis.

When completing the cost report, it is extremely important to identify the payments you have received on individual claims—these are on a PS&R report. You also need to include any additional payments you have received for other items. Overstating or understating one of these could have a significant impact on the due to/from settlement.

4. Confirm all S-2 questions are answered properly (Pub 15-2, §4004).

CMS routinely publishes regulations and notice changes.

One thing that may make it easier to stay current with the changes is a better understanding of your own facility. The cost report includes Worksheet S-2 that has various questions about your facility. If you can develop an understanding of these, it could help you know when a newly published regulation has a potential impact on your facility. 

5. Regularly assess your wage index.
In an age when reimbursement is becoming more challenging and there is ongoing pressure on the bottom line, health systems and hospitals need to pay attention to every area where revenue may be slipping through the cracks. Medicare’s wage index survey may be one of them.

The wage index is Medicare’s formula for determining payment based on cost of labor in a specific geographical area (the area where your hospital is located). Salaries, benefits, contract labor—are all comingled to determine your average hourly wage (AHW). Medicare compares the AHW to the national average. If your hospital is below the national average, you’ll be paid less than average. This is revenue that you may be able to recoup by assessing your wage index and trying to increase it.

Medicare groups hospitals into Core-Based Statistical Areas (CBSAs). Depending on your location, you may be one of many hospitals in your CBSA, or you may be the only one in it. If there are multiple hospitals in your CBSA, all of the facilities’ wages and hours will be used to determine the overall average for the CBSA. In this instance, ensuring that your AHW is reported accurately helps to impact the CBSA’s payment rate. Collaborating with the other facilities in your CBSA to take a holistic approach can also help to improve your reimbursement.

If you are the only facility in your CBSA, you have a higher chance of raising the rate and we strongly recommend that you evaluate your wage index every year.

Regularly evaluating your wage index can pay off in a big way and is one of the few ways a hospital can impact its future Medicare reimbursement.

Medicare reimbursements and compliance can be complex. Eide Bailly can help.

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