Getting the Medicare Cost Report Right the First Time

Data analytics can help hospitals submit a complete and accurate Medicare cost report in the face of constant rule changes and an uptick in audits

Medicare cost reports

Submitting the Medicare cost report is a condition of participation for the federal healthcare program.

Hospitals must send expenditures, charges, and other financial information to Medicare to qualify for reimbursement. Medicare then uses the information to set prospective payment rates, as well as reimburse individual hospitals for their spending on uncompensated care, high-acuity and low-income patients, medical education, and other community benefits.

The Medicare cost report is vital for hospitals, especially those that rely on government payers for the bulk of their revenue.

However, reporting the financial information needed for Medicare participation has become a major challenge for hospitals each year, explains Joe Gumbert, Director of Client Development at TransUnion Healthcare.

“New requirements have come into play that are causing the initial cost report to be harder to produce,” he says. “One in particular that hospitals have to reconcile is the summary numbers they must record on their cost report in the initial filing.”

“That’s never been the case before. You used to be able to put a number on a cost report,” he adds. “Now you need evidence that ties to that number.”

Failing to comply with new Medicare cost reporting requirements results in the payer denying the cost report. In a worst-case scenario, Medicare stops reimbursing the hospital.

“There’s a cascading ramification that can significantly impact you if you don’t get the cost report right the first time,” Gumbert stresses.

Gathering supporting materials and maintaining evidence from the beginning is critical to ensure Medicare cost reporting goes smoothly.

“The best thing you could do is have evidence behind the decisions you make,” he advises hospitals. “You need to tie all detailed listings to the summary line and have proof for why that specific patient encounter was accounted for in a certain way — whether it be a charity or bad debt category, an uninsured or insured patient.”

“Keep all of that safe and secure because it might take years for Medicare or other government officials to audit your cost report,” he emphasizes.

Auditing by the federal government is on the rise. CMS recently started its initial audits of Worksheet S-10 after the agency updated the Medicare cost report component in 2017.

The federal agency now relies on Worksheet S-10 to determine a hospital’s uncompensated care and Disproportionate Share Hospital (DSH) payments. Hospitals must ensure data on the worksheet is accurate and complete to qualify for the payments.

Hospitals are also facing an uptick in Medicare Administrative Contractor (MAC) denials to reopen Medicare cost reports. Medicare allows hospitals to edit or correct their information in certain circumstances, such as if the hospital was underpaid for their charity care.

“Many Medicare Administrative Contractors are denying those requests, saying that hospitals need to have new and material information that they didn’t have when they first produced the cost report,” he states. “Well, that argument is lost more times than it’s won from the hospital side.”

Implementing a strong data and analytics foundation is key to providing the material information needed to defend Medicare cost reports during an audit. Analytics also help to identify and correct workflows so future Medicare cost reports are submitted correctly the first time.

“It’s not only about getting all of cost reporting issue right, but also having results that offer insight,” Gumbert highlights. For example, the solutions should be able to pinpoint workflows or business processes that do not align with Medicare regulations, causing report denials or inaccurate information going to Medicare.

“It’s about more than just a technology solution that gives you a number,” he stresses. “It should give you viewpoints and insight into things you might not have known about in the past.”

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