Home Health & Hospice Week

If you've been cutting corners on your Medicare cost report, you might as well hand lawand policymakers the ax to chop your payment rates. Due to errors, the Centers for Medicare & Medicaid Services can't use nearly one in four cost reports home health agencies submit for prospective payment system costing information, notes the National Association for Home Care & Hospice.

This is a major problem because legislators and policymakers at CMS, the Medicare Payment Advisory Commission, and other government entities rely on the cost reports to make critical payment decisions, NAHC stresses. "It is imperative that we as an industry report accurate data for use in the decision making process," the trade group urges.

Many of the cost report errors are "egregious," notes consultant Mark Sharp with BKD in Springfield, Mo. "In our national home health Medicare cost report database ... we have to purge nearly 1,800 cost reports due to incomplete data,"

Sharp tells Eli. That's more than 20 percent. Conclusions MedPAC draws from the faulty cost report data are particularly dangerous. The influential advisory body to Congress has recommended HHA cuts for years based on the information.

"This is a critical issue for our industry," NAHC says. "The cost report is the only source of cost, charge, profit, and visit information that government agencies have available" for HHAs.

With health care reform on the table and lawmakers looking for any place to raise funding for more universal health care coverage, the data problems take on even more significance.

"Incorrect reports could lead to cuts in federal funding and Medicare provider rates," warns the Connecticut Association for Home Care & Hospice.

"As health care reform continues to be discussed in Washington, it is important that agencies have proper data to share with the government." Make sure your agency isn't committing one of the most common cost report sins experts see:

• Missing data. Cost reports BKD bounces from its database are missing vital information such as home health visit data, episode data, and even cost data, says Sharp, who is serving on NAHC's Home Care and Hospice Financial Managers Association's Medicare Cost Report Task Force.

Missing cost data in particular is "outrageous," Sharp observes. It's "pretty unbelievable that the intermediaries don't deny such a submitted cost report."

But now that Medicare payment isn't tied directly to the cost report as it was under cost-based reimbursement prior to PPS, intermediaries don't seem to care about the documents. That's "a major part of this problem," Sharp believes. "There are no longer any teeth in requiring compliant, complete, and accurate cost reports."

That means HHAs must police themselves.

If they don't, it's their own Medicare rates -- not to mention reputations and credibility -- that suffer.

• Accounting method. Another big problem is that many HHAs don't understand that Medicare requires accrual accounting, says consultant Tom Boyd with Rohnert Park, Calif.-based Boyd & Nicholas. Many agencies operate on cash-basis accounting instead, says Boyd, chair of HHFMA's Medicare Cost Report Task Force.

Background: Under accrual accounting, providers record revenues and expenses when they incur them instead of when money is received.

• Supply costs. HHAs have been habitual under-reporters of supply costs, Sharp notes. When agencies leave supply costs, charges, and payments off their cost reports, those don't get factored into Medicare program costs.

In turn, that makes agencies' costs look artificially lower and profit margins look higher. And that's what leads law- and policymakers to sharpen their budget knives for the industry's pay rates.

• Salary mixing. Agencies often incorrectly group or record all salaries in one account, Boyd tells Eli. The cost report has six salary categories "at least," he notes: administrative and general, skilled nursing, physical therapy, speech therapy, occupational therapy, medical social work, and aide.

• Dropped costs. In the old cost-reimbursement days, HHAs went to a lot of trouble to figure out exactly what costs were due to the Medicare program.

That included things like time studies to figure out how much of a marketing staffer's salary was allowable due to education, discrete costing of capital costs based on square footage specifications, Sharp notes.

Medicare regulatory requirements such as the conditions of participation make costs for agencies in the program much higher, Sharp says. With discrete costing, for example, "this methodology makes sure these higher costs go to home health rather than being allocated equally to the other programs," he says. Unfortunately, now "agencies tend to not see the benefit for the additional efforts to maintain this level of costing."

Another factor: Low fees now charged by cost report preparers preclude inclusion of these higher-resource activities, Sharp adds. "The consultants that prepare the cost reports can't engage in these techniques and keep their fees within the reduced market rates."

• PS&R system. While the new Internetbased provider statistical and reimbursement (PS&R) reporting system has just come into place, Boyd expects it to shoot to the top of the list of cost report problems immediately. CMS recently unveiled the system that makes it HHAs' responsibility to download their own PS&R reports (see Eli's HCW, Vol. XVIII, No. 24, p. 191).

The system is overly complex and most agencies won't realize they have the new downloading requirement, Boyd maintains. Without autosending of the PS&R reports, some agencies will forget to file cost reports altogether.

On the other hand, the new system does replace one CMS has been using for more than 20 years, points out Caroline Ives with LarsonAllen in Minneapolis, Minn. "The PS&R redesign's use of more current technology should enable improved access and delivery," Ives says in a bulletin.

Home care executives should remember that when they sign off on the cost report, they are certifying that its content is accurate and complete, NAHC emphasizes. "Every filing of a cost report requires the signature of an HHA official certifying that the report is prepared in accordance with the law and the signer is responsible for its contents," the trade group says.

Coming soon: NAHC and HHFMA plan to issue educational materials helping agencies to make their cost reports more accurate. They also plan to develop a code of conduct for cost report preparers.