Audit Issues in the Cost Report - SoCal HFMA Report Education.pdf · Audit Issues in the Cost Report •DSH/SSI •Bad Debts •Wage Index •S-10 •IME/GME • Judi Berry – J

Audit Issues in the Cost Report

• DSH/SSI• Bad Debts• Wage Index• S-10• IME/GME

• Judi Berry – J Berry Consulting Services, [email protected], 949-631-5842• Foster Evans – HMS, [email protected], 714-992-1525

Presented by: Judi Berry (JBA) & Foster Evans (HMS) 1

mailto:[email protected]

mailto:[email protected]


Judi Berry – Preparing cost report


Foster Evans auditing the cost report

Audit IssuesDSH


There are two components to the DSH calculation.

1) SSI%2) Medi-Cal eligible days

Audit IssuesDSH• Cost Report Filing

•Use 2006 or 2007 SSI%•Estimate of Eligible Days•Explain in Cover Letter•Protested Amount in Cost Report

Accurate for both tentative settlement and payment by Medicare Managed Care Plans


Audit IssuesDSH• Cost Report AuditSubmit your eligible days 13 months following cost report year end. • PPS area of hospital• Rehab area of hospitalCompare all hospital patients, PPS or Rehab, with DHCS records. Exclude patients eligible for Medicare Part A, include patients with code 1, code 2, or code 3 with qualifying aid code.


Audit IssuesDSH• Cost Report Audit (continued)Matching hospital records to DHCS records.

Time consumingDifficult (different names, mother/baby)Complete listing to Medicare along with DHCS text

documentOut of State Claims

Consider outside firms with DSH speciality.• SSI% & Labor Room Days - CMS Ruling 1498-R



Audit IssuesDSH

SSI• Based on the Federal Fiscal Year in which the cost

report begins• All reports that use the SSI have been held back

from settlement based on CMS instruction until the SSI ratios are revised.

• When CMS releases revised SSI ratios, don’t expect the MAC to address any issues other than the SSI update

Audit IssuesDSH• Estimate of Eligible Days

• Not a Program Integrity Issue• Disclose in the cover letter• Estimate is based on reasonable assumptions• Not out of line with previous year(s)

• Include any expected differential as a protested amount• Protect reopening• Protect appeal rights


Audit IssuesDSH• Cost Report Audit

• Run the state verification immediately after the 13 months from the FYE• Auditors are allowing very short turnarounds

• Medicare Financial Manual (Pub 100-06) requires the contractor to allow 3 weeks for submission (Ch. 8, §20.3)

• State issues are delaying the verification• Auditors will not contact you if there will be no DSH review

• The only way to correct the days is to run the match and amend the report

• Either IPPS bed (DSH) or I/P Rehab (LIP)• Exclude patients with Part A eligibility using the state identification• Out of state claims

• Must be verified by the state covering the patient


Audit IssuesDSH• Code 1

• Labor and Delivery not at issue in the ninth circuit• One day stays-Inpatient Admission vs. Outpatient

• Code 2/3• Pregnancy related

• No delivery• Multiple births

• Emergency• Will require the provider to demonstrate admission was the result of an

emergency condition• Imminent threat to life, limb, bodily function• Not simply an admission where the initial contact was through the ER (i.e.,

under/uninsured patients using the ER as primary physician)


Audit IssuesBad DebtsTwo types of Medicare Bad Debts1) Regular2) Cross-Over

Regular Bad Debts not eligible for Medi-Cal• Deductible and Co-Insurance only – no profees, non-covered, or denied amounts• Separate logs for inpatient and outpatient


Audit IssuesBad Debts• Log must have: Name, HIC#, DOS, Indigent (y/n), date of first bill, write-off date, RA date, Ded and Co amt, recoveries, net bad debt. Instructions per CMS 339.• Not mentioned on current CMS 339, but must have date sent to collection agency and date returned from the collection agency. (If collection policy not changed since 8/1/1987, the above information may not be required.)• Must treat Medicare and non-Medicare accounts the same.


Audit IssuesBad DebtsCross-Over Bad Debts are Medicare deductible and co-insurance amounts billed to MCal. MCal will pay these amounts if the total Medicare payment is less than what MCal would have paid if they were the primary payor.

• Usually show up as “cut-back” amount, but not always.• Log must have name, DOS, HIC#, MCal ID#, Ded & Co-Ins amount, Medicare RA date, MCal payment, and bad debt amount.• MCal RA will not have the Medicare HIC#, so you must

research manually, or you can request the electronic detail for both Medicare and MCal, and match them electronically.


Audit IssuesBad Debts• For OP cross-overs, there may be therapy amounts and

payments for individuals who have not met their share of cost. These must be removed from the OP logs. Use Medicare detail claims for therapy, may use DSH eligible listing to determine share of cost.

• Be sure to include the cross-over bad debts for the Medicare Managed Care patients.

• Numerous outside firms that provide this service.


Audit IssuesBad Debts• Logs must have all the information included in the

template with the 339 Questionnaire• Listing can be rejected• Not required but may want to include payment information ($)• Medicare Managed Care

• CMS instructions are not allowable for cost reporting• If claimed for appeal rights include as separate listing

• CMS “Must Bill” Policy


Audit IssuesBad Debts• Crossover Bad Debts

• Share of Cost• Amount identified on the Warrant• “Embedded” 2%

• Result of EDS testimony in ‘97 case – Beverly Community Hospital• Can use the state match to identify potential SOC patients


Audit IssuesBad Debts• Non-Crossover Bad Debts

• Use of collection agency• If used, the agency must “return” the account before it can be claimed

as a bad debt• Notation that no longer actively pursuing will not be enough• Moratorium-Only applies to policies reviewed and accepted by the

intermediary as of 8/1/1987• Accounts not sent “blind” (insurer not identified) will be disallowed• Agency treatment of accounts for similar collection effort is subject to

validation


Audit IssuesBad Debts• Non-crossover Bad Debts (continued)

• 120 day “rule”• Auditors probably will not accept anything less based on CMS direction

• Indigency• Other Issues

• Skip• Patient deceased• Small balance write offs• CAH


Audit IssuesWage IndexTwo sources of information for wage index:1) Worksheet S-3, Part II 2) Occupational Mix Data

Worksheet S-3, Part II – filed as part of the cost report, but audited separately. Information submitted with the 12/31/2010 cost report will be used for the 2013 wage index.

Wage = 69% of DRG payments (in California)

Data will be used from the WTB, payroll records, home office, contracts, invoices, and physician time studies.


Audit IssuesWage IndexPayroll Information:• Match hours and dollars. CMS recommends using payroll report closest to cost report year end.• May determine average hourly rate using payroll report by department, use AHR to determine hours related to WTB salaries.• Total hours on line 1 must include both productive and non-productive hours. Include vacation, holiday, sick and PTO. Exclude shift differential, stand-by, bonus, etc. (pay for not actually working).


Audit IssuesWage IndexContact Labor• Patient Care Related (Acute PPS Only) – Line 9• Admin & General – Line 22.01 (may include the dollars and hours for legal and consulting fees in this line if you have the invoices with dollars and hours to support this). • Other not included in contract labor (Medical Records, Security, etc.)Need invoices or contracts with hours to claim. Need to exclude benefits and travel from hours and expense. New S V has additional form to show benefits for contracted services.


Audit IssuesWage Index• Housekeeping and Dietary under contract must be

included on lines 26.01 and 27.01. You will need to obtain this information from the vendors that supply these services.

• To assist in the analysis of contract labor you should keep the contract labor in a separate GL subcode.


Audit IssuesWage Index• Physician Part A and Part B dollars and hours may be

included if you have verifiable time studies to support the hours.

• Home Office Salary, Benefits, and hours should be shown in either line 7 (salary), or line 11 (other).


Audit IssuesWage Index• Benefits –• Use WTB as main source. Include all payroll related

benefits: FICA, 401K, Pension, Health Insurance (paid amount or cost of self-insurance), Dental, Life, Disability, FUT, SUI, Day Care, tuition, etc.

• Allocate benefits between Acute, SNF, Subprovider, Excluded Units, RHC, FQHC, etc.

• These amounts may be separated by department in the WTB or may be allocated based upon salaries. Be sure to use salaries after any reclassifications.


Audit IssuesWage Index• Compare to prior year before filing report.• Review data in CMS PUF file for any errors.• Respond to auditors questions, if they make an

adjustment because of lack of documentation, you will be explaining it in the next year as a variance.

• Occupational Mix due on July 1, 2011. No notice will be sent out to remind you.

• Submit the wage index information with all information in one file with tabs for registry, vendor listing of registry invoices, payroll hours, time studies, benefits, physician contracts, etc.


Audit IssuesWage Index• Contract Labor

• Must have contract• Contract must include access clause

• Invoice must identify hours

• Physician• Contract specifying administrative services• Time studies or records to support the hours

• Dietary/Housekeeping• All providers should have these, either salary or contract


Audit IssuesS-10• Charity and Uncompensated Care – S-10• Informational only, or so we thought.• Will be used to determine the EHR (Electronic Health

Records) compensation for 2011. • In OIG workplan for 2011.• New 2552-10 S-10. Revisions to Charity and Bad Debt

components.• Charity broken out between uninsured and insured

patients.• Bad Debts – may need to gross-up since the Medicare

allowable bad debts will be reduced from this amount.


Audit IssuesS-10• Source documents would include the general ledger,

charity log, analysis of transaction codes, Medi-Cal paid claims.

• Include all calculations where estimates were made, for example, the amount collected on Medi-Cal outpatient claims.


Audit IssuesS-10• Will probably not be part of the cost report audit• CMS will be contracting with a third party to

determine/administer HITECH payments so S-10 information may be audited by them

• Future uses of information?


Audit IssuesIME/GME• IME payment based on DRG Payments• I&R• Available beds• 3-year rolling average of FTEs and Available Bed %

• GME payment based on Per Resident Amount allocated based upon Medicare Utilization

• Be sure to include the Medicare Advantage amounts for IME and GME


Audit IssuesIME/GME• Items to be submitted with cost report:

• IRIS report – CMS, KPMG, and HFS• Rotation Schedule• Accreditation• Affiliation Agreements• CVs

• Hospital must incur entire cost.• Counting FTEs – IME/GME• Base Year Limits• Three Year Rolling Average

• Changes: Non-Provider Setting, Didactic & Research Time.


Audit IssuesIME/GME• Rotation Schedules

• Location Codes• Overlaps• All or substantially all cost

• Volunteer teaching physicians

• Initial Residency Period• Gaps between grad date and start of training year must be

explained• Simultaneous match for initial residency


Audit IssuesIME/GME• Caps

• 96 base year• Will only reconcile to the latest settled cost report• Subsequent revisions not incorporated into a cost report revision will not

be accepted• Affiliation agreements

• Must be applicable to the year under audit• Must be submitted to the MAC for approval prior to the start of the fiscal

year


Audit Issues• Questions?

• Additional information is supplied in the hand-outs.

• Happy Reading !


Documents

Audit Issues in the Cost Report - SoCal HFMA Report Education.pdf · Audit Issues in the Cost Report •DSH/SSI •Bad Debts •Wage Index •S-10 •IME/GME • Judi Berry – J