Transcript Slide 1

MedPac Report
 Rebasing
 Cost Report Update
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In 2008, 3.2M Medicare beneficiaries, 10,026
HHAs, $17B reimbursement
6.1M episodes
1.9 episodes per user
$5,337 avg. payment per user
21.6 visits per episode
www.medpac.gov
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Home Health access: very good
Growth in HHAs, increase of 476 in 2009
Abuse with outlier payments
Decrease in LUPA episodes: 15% in 2002, 10%
in 2008
Case mix increase in 2008: 2.4%
Cost per episode increase: 3.8%
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2008 Medicare margin for freestanding
providers: 17.4%
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Beneficiaries access to home health care is
very good
Number of HHAs continues to increase but at
a slower rate
Quality: improvement in functional measures
but unchanged in adverse events
Payments are more than adequate
Predicting margin of 13.7% in 2011
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What is Rebasing?
• Change prospective rates based on more
current cost data
– President
• Improve Medicare home health payments
to align to costs
– MedPAC
• Rebase rates for home health care services
to reflect the average cost of providing care
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Methods of Rebasing
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Provider specific vs. all providers
Ownership type vs. all ownership types
Provider type vs. all provider types
Regional vs. national
Phase-in vs. one-time adjustment
Ceiling/floor vs. no limits
Cost report methodology vs. IRS
standards
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Common Errors in Cost Report Preparation
Free-Standing and Hospital Based
• Improper accounting method
• Inaccurate visit counts
• Lack of understanding of like-kind visits
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Common Errors in Cost Report Preparation
Free-Standing and Hospital Based
• Inaccurate FTE calculations
• Improper use of the PS&R
• Missing data
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Common Errors in Cost Report Preparation
Free-Standing and Hospital Based
• Improper classification of direct costs
• Duplicating indirect cost allocations
• Proper reporting of non-reimbursable
cost centers such as Telehealth
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Common Errors in Cost Report Preparation
Free-Standing and Hospital Based
• Proper reporting of non-routine medical
supply costs and revenues
• FYI – there is a new worksheet in 2009
for reporting flu vaccines
• Failure to properly reclassify costs using
the Trial Balance or Worksheet A-4 Reclassifications
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Common Errors in Cost Report Preparation
Free-Standing and Hospital Based
• Lack of use or improper use of Worksheet A-5
- Adjustments
• Proper use of Worksheet A-6 - Related
Organization Costs and related organizational
costs issues
• Proper preparation and reconciliation of the F
series of worksheets relating to the Balance
Sheet, Income Statement and Reconciliation
of the Fund Balances
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Common Errors in Cost Report Preparation
Free-Standing and Hospital Based
• Failure to charge direct costs to the HHA
– just using the step-down method
• Benefit and other cost allocations that do
not relate to HHA operations
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Common Errors in Cost Report Preparation
Free-Standing and Hospital Based
• Medical supplies costs without the
revenue and the cost-to-charge ratio
• Need for direct costs to be in line with
free-standing agencies
– So that these costs can be included in
calculations for rebasing/reimbursement
rate setting
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The first person to register for the provider organization
must be the designated Security Official (SO). The SO is
ultimately responsible for all users in the organization.
The SO will:
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First register the organization in IACS
• Submit all required verification documentation, and
• If approved, will then be given the ability to approve
other users’ access to the PS&R system.
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Note: The SO can approve users, but CANNOT use the
specific application (PS&R). The SO will delegate PS&R
access to the “PS&R Users”.
If you require access to the PS&R system, DO NOT
register yourself as the SO.
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The registration process is time consuming
and confusing
The Security Official (SO) must first register and is
then supposed to get an email requesting IRS
documentation, CP575 or 147C letter. This step
seems to be the bottleneck.
The SO cannot access the PS&R System
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To get a copy of the IRS Form 147C, you can call the
IRS at 1-800-829-4933. The provider name on the
registration must match exactly to the name on the
IRS Form.
You should get an email from IACS, within a few days
of the Security Officer registering.
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NEED HELP ? ? ?
• Questions regarding IACS
Contact the IACS help desk, External User Services
(EUS) at 866-484-8049 or [email protected]
• If you have PS&R application specific questions,
Contact your Fiscal Intermediary/MAC
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The Medicare Cost Report is NOT just a
“compliance” requirement we must file each
year, but a valuable tool to assist in
budgeting, pricing, and “what if analysis”.
Find your Direct and Indirect cost per visit
Find your cost of non-routine medical
supplies
Find your Medicare margin!
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Some terms
1. Direct and indirect costs
2. Fixed and variable costs
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3.Incremental
costs
4.Fully absorbed costs
 How can we get these various types
of costs and use them in the business
decision making process?
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Worksheet B leads to Worksheet C which
calculates your cost per visit.
This is in the aggregate, and is not very
useful in making your contracting decisions,
yet.
It does not give you any of the various categories
of costs yet, but it is fully absorbed.
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Using the costs and visits in Worksheet C and
going back to Worksheet A -1, we can calculate
our direct and indirect costs per visit and the
makeup of those costs.
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WORKSHEET C
Total Costs
Total Visits
Cost Visit
Visits
Cost
Medicare
SN
PT
OT
ST
MSW
HHA
Total
12,235,590
2,574,391
540,014
117,230
178,179
1,186,129
16,831,533
68,775
27,387
5,484
681
342
36,784
139,453
$177.91
$94.00
$98.47
$172.14
$520.99
$32.25
42,276
19,761
3,889
391
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19,807
86,379
7,521,219
1,857,543
382,953
67,308
132,853
638,692
10,600,568
Medicaid
SN
PT
OT
ST
MSW
HHA
Total
12,235,590
2,574,391
540,014
117,230
178,179
1,186,129
16,831,533
68,775
27,387
5,484
681
342
36,784
139,453
$177.91
$94.00
$98.47
$172.14
$520.99
$32.25
7,137
1,589
337
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10,159
19,277
1,269,726
149,367
33,185
8,607
2,605
327,585
1,791,075
Managed Care
SN
PT
OT
ST
MSW
HHA
Total
12,235,590
2,574,391
540,014
117,230
178,179
1,186,129
16,831,533
68,775
27,387
5,484
681
342
36,784
139,453
$177.91
$94.00
$98.47
$172.14
$520.99
$32.25
19,362
6,037
1,258
240
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6,818
33,797
3,444,646
567,481
123,876
41,314
42,721
219,852
4,439,890
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Make sure you have all of your expenses
included
◦ Some expenses have traditionally been left out of
the cost report but need to be added back for this
purpose
 Marketing expenses
 Bad debt
 Interest expense
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Now we know what our direct and indirect
expenses are on a fully absorbed basis.
One would suggest your price for a nursing visit
should be $177.91 plus some margin for profit.
Now the art sets in.
How to Price our services.
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We have product lines, products, markets and
distribution channels.
Nursing is a product line and MCH nursing is
a product within the nursing product line.
Our payers are our distribution channels.
Our referrers are our markets.
Besides our cost per visit we need to know
our costs per hour of service.
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Our payers have different contracts and payment
methods
◦ Fee for service
◦ Episodic
◦ Capitation
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Our payers and referrers also have other sources
of our products – our competition.
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Using the total cost per discipline we came up with
way back in the cost report we can spread the
costs using the hours of service.
Simply divide the total costs per discipline by the
number of hours of service.
Then look at your various payers and visit types to
see how the cost pattern changes.
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How can you split the costs between payers or
even types of visits within payer
Looking at nursing only for now
◦ We did 68,775 visits and took 40,200 hours to do them
◦ That’s 40,200/68,775 or .5845 of an hour or 35 minutes
per visit
◦ Using 40,200 hours we get 2,412,000 minutes
◦ Our nursing costs were $12,235,590
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So $12,235,590/2,412,000 is $5.07 per minute.
Lets assume our managed care visits are 30
minutes long.
We did 19,362 managed care visits but our cost
on that basis was $2,944,960.
Our cost is not the $177.91 per visit but $152.10
per visit.
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In Summary:
• You should be very careful doing your cost report
with the various expenses being allocated properly.
• You should know your costs per visit and per hour
of service within discipline.
• You should calculate your costs for the services you
provide within each payer.
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Using both your per visit and per hour costs
you should calculate the cost of your
episodes.
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HHA, 1728-94, Transmittal 14 issued
1/28/2010.
Primary change was H1N1 vaccines, on W/S
RF-4; and W/S RF-3, line 14 is phasing out
the 62.5% “limit”, over 5 years.
HHA Transmittal 15 issued 2/22/2010, and
was “clean up” of T.14, with no new policy
changes.
HFS current version is 15.2.121.1.
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Questions and Other Topics
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