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Cost Report
The Far-reaching Impact of Your Hospital’s Cost Report

Guest blog by Chuck Green, Principal, Healthcare Reimbursement Partners


Ever-expanding in complexity, cost reports influence current and future reimbursement levels for your hospital. Think of a cost report as an annual report with numbers instead of words. Far-reaching in scope, mistakes can result in lost revenue that may profoundly affect your hospital’s sustainability and ability to effectively serve patients.


The Center for Medicare and Medicaid Services (CMS) requires Medicare certified hospitals and other Medicare reimbursable provider facilities to file cost reports annually that identify the costs and charges related to facility Medicare reimbursable activities. Acting as annual reconciliations, these financial reports disclose whether a facility has been underpaid or overpaid for reimbursable services.


Cost reports are filed with one of 12 third-party CMS-approved claims processors known as Medicare Administrative Contractors or MACS. It must be submitted 150 days after the hospital’s Medicare year concludes. Late and/or inaccurate filings can result in penalties.


Service Line Considerations


A cost report almost microscopically examines a facility’s service line and cost center charges throughout the care continuum. When compared with Medicare reimbursement, the hospital can determine a service line’s financial impact versus its community need and/or desirability.


From a business planning perspective, the cost report helps determine the financial consequence of offering a new service, continuing or expanding an existing one, or discontinuing one that is underused and/or unprofitable. Meanwhile, assigning a less profitable service to another hospital area allowing greater reimbursement may be a profitable option, whereas instituting an uncommonly large service increase could trigger a payment penalty.


Preparing an Accurate Report


The comprehensive patient treatment and financial data contained in the annual cost report, collected from multiple hospital-specific financial and operational reporting systems, must accurately mirror the hospital’s current performance. Cost reports are only as accurate as the information provided by each hospital’s system.


Who Should Prepare your Cost Report?


You may need expertise beyond your in-house financial team or CPA. Experienced consultants monitor ongoing changes in government reimbursement, keep your hospital on a timeline, assist with appeals and help ensure your hospital receives the most advantageous allowable Medicare reimbursement.


Example: In one instance, a cost report consultant enabled a hospital to recoup a $2 million MAC underpayment because he spotted a .02 percent rather than a .2 percent reimbursement calculation in the MAC’s compensation system.


Successful Steps to Gainful Cost Reporting


These pro-active, best-practices could help ensure a hassle-free and profitable process and gainful Medicare reimbursement.

  • Examine your systems. Are they programmed correctly? Do they receive complete and accurate information on a daily or regularly scheduled basis to prevent lost data or data pile-up resulting in data entry mistakes and potential lost reimbursement?
  • Convene an all-hands staff meeting to explain the importance of the cost report. Establish a service line suggestion box and ask employees for ideas to improve the data collection process. Consider offering an award for the best suggestion.
  • Conduct an information check list of cost report-related activities well in advance and compare to current system data reports. Establish new data collection categories and/or system enhancements or corrections as required.
  • Prepare an internal-use-only quarterly report that mirrors your annual cost report to avoid year-end surprises.
Tags: Compliance, Cost Report, Hospital Performance Improvement, Operational Improvement

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