Understanding financial reports in long-term care and effectively leveraging them for strategic decision-making are absolutely vital to the success of your organization. After all, as a leader in this field, one of your primary responsibilities is ensuring the financial health of your institution. So you’ll need to take advantage of the valuable resources at your disposal like Medicare cost reports.
Medicare cost reports provide a comprehensive overview of a facility’s financial operations and serve as invaluable tools for financial planning, management, and compliance. Still, they are complex documents packed with a wealth of data, which can be daunting to decipher and understand.
Without a proper understanding of these documents, you risk missing out on the crucial insights these reports offer, such as the volume of services provided to residents in your facility. And doing so would result in less informed strategic decisions, lower reimbursements, and a higher likelihood of compliance issues. So what are Medicare cost reports? That’s what this guide aims to answer.
Understanding the Cost Report, Medicare, and Medicare Cost Report’s 5 Key Components
Medicare cost reports play a critical role in the administration of the Medicare system in the United States. They are used to report expenses for eligible Medicare-reimbursable facilities, which include:
- Skilled Nursing Facilities (SNFs)
- Home Health Agencies (HHAs)
- Rural Health Clinics (RHCs)
- End Stage Renal Dialysis providers (ESRDs)
When it comes to a cost report, Medicare requires that each reimbursable facility completes and files its cost report annually. The Centers for Medicare and Medicaid Services (CMS) regulates the specific requirements for Medicare cost reports. Delays in filing these reports can adversely impact the facility’s Medicare reimbursement.
One should note that there are five key components of a Medicare cost report:
- Facility characteristics: Details on the type, size, and location of a facility help contextualize the data and ensure that each facility’s unique circumstances are accounted for during the reimbursement process. For instance, a rural hospital might incur different costs than a similar-sized hospital in an urban area, and these distinctions can impact the Medicare reimbursement calculation.
- Utilization data: This provides a measure of the volume and type of services provided by a facility. This data includes the number of patient days for an inpatient facility, like a skilled nursing facility, or the number of visits for an outpatient facility, like a home health agency. The utilization data is crucial in calculating the cost per unit of service, which determines the Medicare reimbursement amount.
- Cost and charges by cost center: Here, both the total cost and the cost specifically associated with Medicare for each cost center in the facility are documented. A cost center could be a department like pharmacy or radiology, or a service like nursing or dietary. This granular detail determines the exact costs associated with Medicare beneficiaries and helps to accurately calculate reimbursements.
- Medicare settlement data: This data reflects the net amount due to or from Medicare after reconciling the cost reported by the facility and the interim payments made by Medicare during the fiscal year. This figure, also known as the settlement, is essentially the difference between the amount Medicare has already paid the provider and the actual cost of care for Medicare beneficiaries as demonstrated in the cost report.
- Financial statement data: This final component provides a snapshot of the facility’s overall financial health. It includes the facility’s balance sheet, income statement, and statement of cash flows. These statements offer comprehensive financial details that go beyond Medicare-related costs and receipts, helping the CMS ensure the financial viability of the healthcare provider.
The role of technology in Medicare cost reporting
To facilitate the complex task of completing these cost reports, nursing homes and other similar facilities often rely on specialized long-term care cost report software. Such software must be CMS-compliant and regularly updated to remain compliant with the ever-changing regulations.
MACs are private healthcare insurers that have been awarded a geographic jurisdiction to process Medicare Part A and Part B (medical insurance) claims. MACs essentially act as the intermediary between healthcare providers and the federal Medicare program. They are responsible for accepting ECR files, auditing them for accuracy, and determining the proper reimbursement rates based on the information provided.
These ECR files, along with the signed signature page and supporting fiscal documentation, form the core of the cost report submission.
Further streamlining the process, the CMS has introduced an online portal for cost report filing, the Medicare Cost Reporting eFiling (MCReF) portal. While the CMS encourages online submission through the MCReF portal due to its efficiency and reliability, traditional mail-in submissions remain acceptable for those facilities that prefer or need to use this method.
It is worth noting that each type of Medicare-reimbursable facility has its specific cost report form. These forms are designed to measure different values depending on the type of care provided by the facility.
For instance, the home health agency cost report focuses on the cost per visit, reflecting the nature of home healthcare. While the skilled nursing facility cost report measures cost per patient day, in line with the continuous care provided in these facilities, and the hospice cost report measures cost per patient day per level of care, considering the varying intensity of care in hospice settings.
As shown above, understanding and effectively managing Medicare cost reports is a must for any Medicare-reimbursable facility. These reports not only satisfy regulatory requirements but also directly impact the financial health of the facility. In the next section, we will look at some tips for completing Medicare cost reports.
Contact us here if you are interested in a long-term care EHR that can significantly boost your reimbursement.
Medicare Cost Reporting Tips
As we previously mentioned, Medicare cost reporting is an annual activity that long-term care providers must perform, as it is required by the CMS. Therefore, to help with Medicare cost reports, there are a number of tips that facilities can follow as they go through their CMS cost report submission checklist. These tips include:
- Start by understanding the complexity of a Medicare cost report: Medicare cost reports are highly complex documents. They require significant data collection and analysis, so it’s understandable that many healthcare providers find them daunting. Be prepared to invest time and resources into understanding what is a cost report, the report’s intricacies, and the data requirements.
- Remember the exclusions and inclusions: There is wage and compensation data for specific roles that can be excluded from certain worksheets. For instance, medical directors and chiefs of medical staff compensation, which may vary significantly between practices, can be excluded from Worksheet A-8-2 since these roles are not subject to Reasonable Compensation Equivalent (RCE) limits. One of the things that must be included in their filings is the Provider Statistical & Reimbursement (PS&R) Report 118.
- Update the wage index: The Wage Index of a hospital impacts the hospital’s Medicare reimbursement, so it’s critical that Worksheet S-3, Part II is filled out accurately. This section includes information about clinical, patient care-related, executive, and administrative services and is a key factor in mitigating wage disparities across the U.S.
- Keep track of regulations: Completing Worksheet S-2 is another important step for providers to take. It provides an understanding of your facilities and operations and also helps you stay informed about the CMS’s latest regulations and notices. It is imperative to keep up to date with these changes to ensure you remain in compliance.
- Include all lump-sum payments: Don’t forget to include all lump-sum payments in the PS&R report. These payments, which might include elements like medical education, bad debts, and uncompensated care, could lead to additional payments from Medicare, thus improving your organization’s overall financial standing.
- Ensure timely and accurate submissions: Finally, make sure you submit your Medicare cost reports on time and that they are accurate and complete. There’s no real wiggle room, as the CMS doesn’t provide a late filing option. And late or incorrect submissions can have significant consequences, including financial penalties, interest charges, delayed or suspended provider payments, and a potential impact on future reimbursements.
Decoding Medicare Cost Reports
Decoding Medicare cost reports is no small task. These comprehensive financial documents hold a wealth of information about the operational efficiency, effectiveness, and overall financial health of your long-term care facility. From provider details to cost allocation to reimbursement calculations, every component serves as a piece of the puzzle to the broader financial landscape of your institution.
Still, while Medicare Cost Reporting might seem overwhelming, it is quite manageable with careful attention to detail, accurate data collection, and the right assistance. By sticking to this guide, you can ensure your facility is appropriately reimbursed for the crucial services it provides.
- Why an EHR Consultant Is Necessary for Every Long-Term Care Facility - September 20, 2023
- ICD 10 Hypertension Codes: Everything You Need to Know - September 14, 2023
- Senior Living Occupancy Rates on the Rise but Still Short of Pre-Pandemic Levels - September 14, 2023