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{Breathe easy.}
Cost Reporting and 2015 IPPS Proposed Rule Update
Introduction
Chris Walski
•
Healthcare Consulting Manager
•
Healthcare Reimbursement
Consulting and Compliance
•
[email protected]
Learning Objectives
The following presentation will focus on cost reporting
updates and strategies focusing on PPS hospitals:
• General 2015 IPPS Proposed Rule Updates
• Cost Report Review Considerations and Related 2015 IPPS Proposed
Rule Updates
• Critical Access Hospitals
• Trial Balance Review and Mapping
• Hospital Wage Index
• Low Volume Adjustment
• Medicare Dependent Hospital
• Medical Education
• Disproportionate Share Hospital (DSH)
• Cost Reimbursed Cost Centers
• Medicare Bad Debt Reimbursement
• HIT Reimbursement
• Sequestration
• Potential Protested Items
• Analytics
• Other General Suggestions
• Other 2015 IPPS Proposed Rule Updates
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General 2015 IPPS Proposed
Rule Updates
3
Hospital Rate Update
Medicare IPPS
• Medicare updates rates based primarily on a standard “Market
Basket” update with other adjustments, such as adjustments
mandated by the Affordable Care Act and coding related adjustments
• The following illustrates historical and projected IPPS update
percentages for hospitals that report quality data and meet
meaningful use. The table excludes the impact of the 2% sequester
and Hospital Readmission Reductions.
Market Basket
Affordable Care Act Reductions
Market Basket
Productivity
Subtotal
Other Adjustments
2008 – 2009 Recoupment
Prospective Reduction
Cape Cod Decision
Documentation and Coding
Admission Guidance Offset &
Budget Neutrality Adjustment
Net Update
Actual
2012
3.00%
Actual
2013
2.60%
Actual
2014
2.50%
Proposed Estimated
2015
2016
2.70%
3.00%
Estimated
2017
3.00%
(0.10%)
(1.00%)
1.90%
(0.10%)
(0.70%)
1.80%
(0.30%)
(0.50%)
1.70%
(0.20%)
(0.40%)
2.10%
(0.20%)
(1.10%
1.70%
(0.20%)
(1.10%)
1.70%
(2.00%)
1.10%
2.90%
(1.90%)
-
-
-
-
-
-
-
(0.80%)
(0.80%)
(0.80%)
(0.80%)
-
-
(0.20%)
-
-
-
1.00%
2.80%
0.70%
1.30%
0.90%
0.90%
4
Hospital Rate Update
• Documentation and Coding Reduction:
• 0.8% reduction for coding & documentation is first of four
reductions required by the American Taxpayer Relief Act (ATRA)
of 2012
• ATRA required reductions made annually from 2014 to 2017 for a
total of $11 billion
• This authority allows CMS to retroactively recoup for increases in
IP payments that the agency believes occurred during FY 2008 –
2013 solely due to hospital coding improvements related to the
issuance of MS DRG’s on 10/1/2007
5
Cost Outlier Threshold &
Capital Rates
•
Final 2014 threshold:
$21,748
•
Proposed 2015 threshold:
$25,799
•
Represents a 18.6% increase in the cost outlier threshold,
resulting in less cases being eligible for outlier payments
•
Threshold is adjusted annually based on CMS’ projections
for total outlier payments so that total outliers payments
approximate 5.1 percent of total IPPS payments
• Proposed 2015 federal capital rate of $433.01,
up from the current $429.31
• 0.9 percent increase
6
MS-DRGs
• See Table 5 in final rule for file containing weights
MS-DRG
470 – Major Joint Replacement W/O MCC
871 – Septicemia W/O MV 96+ Hrs W MCC
392 – Esophagitis W/O MCC
292 – Heart Failure & Shock W CC
291 – Heart Failure & Shock W MCC
194 – Pneumonia W CC
690 – Kidney and Urinary Infection W/O MCC
683 – Renal Failure W CC
190 – COPD W MCC
193 – Simple Pneumonia & Pleurisy W MCC
Number of
Discharges
435,351
395,147
197,891
196,728
193,972
179,988
173,875
153,012
151,963
145,156
2014
Weight
2.1463
1.8527
0.7395
0.9938
1.5031
0.9771
0.7693
0.9655
1.1708
1.4550
2015
Percentage
Weight
Change
2.1223
-1.12%
1.8077
-2.43%
0.7377
-0.24%
0.9659
-2.81%
1.5103
0.48%
0.9568
-2.08%
0.7781
1.14%
0.9356
-3.10%
1.1741
0.28%
1.4481
-0.47%
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Cost Report Review
Considerations and Related
2015 IPPS Proposed Rule
Updates
8
Critical Access Hospitals
DISCLAIMER - The following presentation will focus on PPS hospitals. For
CAH hospitals, the majority of the cost report amounts, statistics and
allocations have a direct impact on reimbursement. All of these areas
should be reviewed for accuracy and to optimize hospital reimbursement.
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Trial Balance Review and
Mapping
•
Trial balance mapping is usually the first step in ensuring consistency
across the cost report
•
Proper mapping results in all cost center expenses are mapped
consistently with related revenue
Reviewer Notes:
• All departments (especially new departments) should be reviewed
for proper classification on the cost report as either provider based
or non-provider based.
• With any new departments, make sure that the B-1 statistics are
updated to ensure these departments are appropriately allocated
overhead.
• Consider mapping certain accounts to avoid unneeded A-6
reclassifications
• Preparers should have a clear understanding of the hospital’s
account structure so that expenses are consistently mapped with
the related revenue.
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Wage Index – 2015 Proposed Rule
Update
• Labor and Non-Labor Related Standard Rates
Full Update
Hospitals with a Wage Index
Greater than 1 (69.6% Labor
Share/30.4% Non-Labor Share)
Hospitals with a Wage Index
Equal to or Less than 1 (62%
Labor Share/38% Non-Labor
Share)
Reduced Update
Labor
Related
$3,737.71
Non-Labor
Related
$1,632.57
Labor
Related
$3,664.21
Non-Labor
Related
$1,600.46
$3,329.57
$2,040.71
$3,264.10
$2,000.57
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Wage Index – 2015 IPPS
Proposed Rule Update
•
CMS has revised the CBSA groupings. As a result, the urban and
rural designations for some hospitals will be effected.
•
This could have an effect on some hospitals reimbursement by
impacting:
• Wage index
• DSH
• GME
• Special Designations such as RRC, SCH, MDH, or CAH status
• CMS has proposed transition periods for some hospitals effected
(CAH and hospitals switching from urban to rural)
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Wage Index – 2015 IPPS
Proposed Rule Update
• The information below is from the 2015 Proposed Rule public use
file
13
Wage Index
•
No major changes to the cost report wage index forms.
•
Intermediaries have requested more supporting documentation than
they have in the past at the time of audit.
Reviewer Notes:
•
Supporting workpapers should be well organized and easy to
follow
•
List all contract labor by invoice and be prepared to provide
support
•
Review Defined Benefit Pension Plan calculation for compliance
with current regulations
•
Review the allocation of wage related costs. Consider
specifically allocating or allocating based on FTEs instead of
using gross salaries
14
Medicare Low Volume
Adjustment
• The ACA loosened the criteria for a hospital to be eligible to receive
a low volume add-on to their Medicare IP Reimbursement. This was
extended through March 31, 2015.
• Applies to hospitals with 1,600 or less total discharges. Total benefit
is up to 25% (hospitals with less than 200 discharges).
Reviewer Notes:
• Review manual workpapers or software worksheets
for proper split based the federal fiscal year
• Review add-on rates to ensure they agree to the final
rule supporting table
15
Medicare Low Volume
Adjustment – 2015 IPPS Proposed
Rule Update
• IPPS Proposed Rule Table 14
16
Medicare Dependent Hospital
Status
• The MDH program had been extended through March 31,
2015
Reviewer Notes:
• Review the hospital specific amount reported in the
cost report ensuring you are using an updated
hospital specific rate
17
Medical Education – 2015 IPPS
Proposed Rule Update
• The proposed rule changes how new hospitals establish new
programs and how rural hospitals are paid for new programs (Plante
& Moran currently researching)
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Medical Education
• Medicare reimburses hospitals for the direct cost of providing
medical education through Direct Graduate Medical Education
(DGME) and for the indirect costs of providing education through
Indirect Medical Education (IME) reimbursement.
Reviewer Notes:
• Medicare Advantage days should be properly reflected on
worksheet S-3 Part I. This may also entail reviewing the PS&R
Report Type 118 to be comfortable that all shadow billed
claims are reflected
• Review allowable I&R FTEs, I&R FTE Caps and Per Resident
Amounts
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Disproportionate Share – 2015
IPPS Proposed Rule Update
• CMS is required by the ACA to reduce hospital DSH payments
based on the expectation that there will be a smaller uninsured
population
• Based on the 2014 final rule and 2015 proposed rule:
• Hospitals will receive 25% of the DSH amount calculated under the
original methodology
• The remaining 75% under the original calculation will be pooled
with other hospitals receiving DSH. The total pool will be reduced
by the estimated reduction of uninsured (factor of .943 for 2014)
and then redistributed back out to the hospitals based on their
relative level of uncompensated care
• Under 2015 proposed rule, the Medicaid eligible plus Medicare SSI
days will be used to redistribute the pool consistent with the 2014
final rule
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Disproportionate Share – 2015
IPPS Proposed Rule Update
•
Distributing the uncompensated care payment pool:
Use low-income patient days as proxy
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Medicaid days and Medicare SSI days
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Numerators of current DSH % calculation
CMS may use cost report worksheet S-10 in future years
•
CMS cites unreliable data as hospitals still are not
consistent in reporting bad debt and charity care in
terms of hospitals costs (% of charges) vs. payment
from government or other payors.
Calculate uncompensated care payment factor
•
Hospital's low-income patient days relative to all DSH
hospital low-income patient days
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Disproportionate Share – 2015
IPPS Proposed Rule Update
•
IPPS Proposed Rule DSH Supplemental File
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Disproportionate Share – 2015
IPPS Proposed Rule Update
•
IPPS Proposed Rule Table 18
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Disproportionate Share – 2015
IPPS Proposed Rule Update
Illustration of the DSH Impact (Based on 2014 Final Rule
Data)
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Disproportionate Share
There are new lines on Worksheet E, Part A to report the
new elements of DSH reimbursement
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Disproportionate Share
Reviewer Notes:
• Review the cost report split between the traditional
methodology and the revised methodology
• Ensure the hospital is continuing to identify additional
Medicaid eligible days
• Review the data reflected on S-10 that it is accurate
as this will likely be used in the future for distribution
of the 75% pool
• Prepare the DSH worksheets for all PPS hospitals for
each year even for hospitals that have historically not
qualified
• Review the calculation for 340B Drug Program benefit
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Cost Based Reimbursed Cost
Centers
• In a PPS hospital, there may be cost centers that are cost based
reimbursed (such as RHC or FQHCs)
• Proper allocation of cost to these cost centers is important.
Reviewer Notes:
•
Review B-1 statistics to ensure the hospital is using the most
beneficial statistics to optimize reimbursement. This should be
reviewed ensuring the hospital is keeping in mind any potential
caps on reimbursement as well as the impact of changes on other
areas of reimbursement (such as Medicaid or commercial rate
setting)
•
Review the factors that feed into the calculation of reimbursement
to ensure they are proper
•
Consider the potential to consolidate separate cost centers (such
as separate RHCs) to increase reimbursement
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Medicare Bad Debt
Reimbursement
• Medicare bad debt reimbursement will continue to be reimbursed at 65
percent for PPS hospitals
• The intermediaries are very particular on the format of the bad debts that
are submitted.
Reviewer Notes:
•
Review the requirements for submitting bad debts and provide all
necessary fields before filing
•
Review the listing and ensure all bad debt that can be claimed is
captured.
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HIT Reimbursement
•
The rules are fairly complex regarding the cost report that is used for HIT
reimbursement.
•
Generally speaking, a hospital would follow these steps to determine
which cost report to use for the Year 1 payment:
• Determine the ending date of the attestation of the 90 day Stage 1
Period
• Determine in which federal fiscal year the date above falls
• Use the cost report that begins in the federal fiscal year above as the
Year 1 cost report period
• The calculation is based on an “Initial Amount” that is $2 million plus an
adjustment for hospitals with at least 1,150 discharges. The hospital
gets the “Medicare Share” of his amount times a transition factor.
• Ensure that the interim payments received are reflected on the proper
cost report to calculate an accurate settlement.
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HIT Reimbursement
•
Meaningful Use Timeline
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HIT Reimbursement
•
Initial Amount Table
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HIT Reimbursement
•
Transition Factor Table
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HIT Reimbursement
•
Cost Report Worksheet S-2, Part I
•
Cost Report Worksheet E-1, Part II
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HIT Reimbursement
Reviewer Notes:
• Ensure that Medicare and Medicare Advantage days are properly
reflected on S-3, Part I
• Review that the Charity Care gross charges on S-10 reflect the
gross patient responsible portion and not just the charity care
write-off
• Obtain copies of all related attestations and match with the
appropriate cost report period.
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Sequestration
•
2% cut was applied to Medicare payments beginning for dates of
service on/after April 1, 2013
•
The 2% reduction is after coinsurance and deductibles
•
This has been incorporated as an automatic calculation within
the cost report for most (but not all) settlement worksheets.
Reviewer Notes:
•
Review each settlement worksheet, including subunits to
ensure this is properly reflected
•
Since the PS&R amount is based on a per claim basis and
the automatic calculation within the cost report is based on
days, there will likely be at least a small settlement
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Potential Protested Items
• Medicare Disproportionate Share Reimbursement Issues
• Two Overnight Rule Related Rate Adjustment
o CMS clarified that generally when a physician expects a
beneficiary to require care that spans two midnights and admits a
beneficiary based on that expectation, payment under Medicare
Part A is appropriate. If less than two midnights, than payment
under Part A is generally inappropriate. CMS implemented a
0.2% reduction based on the expected additional expenditures
under this policy change.
• Sequestration Implementation
o Legislation indicates that the sequestration should be made
related to payments for services after April 1, 2013. The
implementation of the rule within the cost report is not based on
actual date of services, but is instead prorated based on days.
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Analytics
• Analytics can be powerful tools in the review process to ensure accuracy
and consistency
• Properly designed analytics should have the following elements
• Easy to update
• Compare current year data with multiple years
• Summarize only the key elements within the cost report
• Be tailored to include all significant elements of reimbursement
including subunits
• Analytics can also be used to compare hospital data to others in their peer
group.
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Analytics (Example)
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Other General Suggestions
•
Review the process of compiling information. Make sure that the most
efficient and accurate method is utilized
•
Analyze the templates used to document the support for amounts. Look
for ways to link data to improve consistency within the cost report and
reduce the likelihood for potential errors
•
When possible, have other people review the cost reports for accuracy
and potential areas to optimize reimbursement
•
Always keep in mind external impacts of the Medicare cost report such
as for Medicaid, Commercial payor rate setting, 340B, or other programs
under Medicare (Such as Low Volume Payment Adjustment).
•
The review of subsequent settlements and comparison to the filed cost
report is very important
•
Make sure to understand the drivers behind each type of reimbursement
to ensure the hospital is getting the most benefit they can under the
program
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Other 2015 IPPS Proposed Rule
Updates
40
Medicare Readmissions Update
• CMS has instituted an algorithm in an attempt to exclude planned
readmissions from the total readmission counts based on the type of
care, procedure, and illness.
• The 2015 proposed rule adds total hip/knee arthroplasty and chronic
obstructive pulmonary disease as new measures
• The maximum penalty for readmissions will increase from 2% in
2013 to 3% in 2014
• CMS expects 2,623 hospitals to experience payment reductions
totaling approximately $422 million
41
Readmissions Reduction Program
•
Established by the Affordable Care Act and designed to reduce
Medicare inpatient payments for acute care hospitals with higher than
the hospital national average readmission rates related to three medical
conditions. This program began on 10/1/2012
• Hospitals should start to get a feel for how this will impact their rate
going forward as there was some confusion in this area regarding
the initial projected impacts. Finance and quality departments need
to work together
•
Medicare maximum payment reduction increased from 1% in 2013, 2%
in 2014 and 3% in 2015
• Not necessarily a “fair” penalty because difficult to control patient’s
well being post discharge. However, hospitals are addressing this
via modifications to their continuum of care networks
•
Defines a readmission as a hospital admission within 30 days from the
date of discharge from the initial hospitalization
42
Value Based Purchasing Update
Medicare Value Based Purchasing (VBP) Program
• Reduction in DRG rate to fund the VBP pool will continue based on
the table below
• The program will consist of 17 total measures.
• The reductions below will create a pool of about $1.4 billion that will
be available for incentive payments
2013
2014
2015
2016
2017 and After
1.00%
1.25%
1.50%
1.75%
2.00%
43
Value Based Purchasing
Program
•
Program is self-funded by hospital “contribution”
• Contribution based on Medicare FFS payment*
•
•
•
•
1.0% reduction in FY 2013 (VBP ratio adjustment)
FY 2015 reduction increases to 1.5%
2.0% reduction for FY 2017 and beyond
VBP is budget-neutral from CMS’s standpoint
•
•
•
Redistributive
Best performers win, others break even or lose
VBP payments are netted against contributions
* Payment reductions exclude IME, DSH low-volume hospitals and outliers
44
Hospital Acquired Conditions
Hospital Acquired Conditions
• Penalties of up to a 1% reduction are set to be implemented for 2015
• Hospitals in the lowest quartile would be penalized the 1% payment
reduction.
• CMS estimates that 753 hospitals would experience a total of $330
million in payment reductions.
• These are conditions that patients acquire while receiving treatment
for a different condition in an acute care setting (i.e. infections). CMS
is concerned that hospitals are not doing enough to mitigate HAC’s
45
IPPS 2015 Proposed Rule Summary
System Component
Change
Update Factor
1.3% rate increase (net of all rate adjustments)
Wage Index
Redefined CBSAs – besides direct wage index implications, could impact
other programs or special designations
VBP
1.5% rate reduction with chance to earn back
Readmissions
Keep pace with national avg or subject to up to 3% reduction for FY 2015
Hospital Acquired
Conditions
Hospitals in lowest quartile will be penalized 1%
GME
Changes in new hospital establish programs and how rural hospitals are paid
for new programs
DSH
25% of old formula calculation; remaining 75% pooled for all DSH hospitals,
reduced by uninsured reduction factor and then redistributed to hospitals
based on low income patient days – Comparable to 2014 final rule
Low-Volume Adjustment
Loosened criteria through March 31, 2015
MDH (Medicare
Dependent Hospital)
Extended through March 31, 2015
LTCH
0.8% rate increase
46
Thank you!
47