How Prepare Your Hospice Revised Cost Reporting Requirements (Part 2) - National Association for...

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How to Prepare Your How to Prepare Your ppHospice for the Revised Hospice for the Revised

Cost Reporting Cost Reporting Requirements (Part 2)Requirements (Part 2)Requirements (Part 2)Requirements (Part 2)

Presenter: William T. Cuppett, CPA

1NAHC - October 20, 2014

Final Report ReleasedFinal Report Released• Effective for cost reporting periods beginning on or

after October 1, 2014 (freestanding providers only)after October 1, 2014 (freestanding providers only)• Facility (provider) based hospice cost reports

delayed pending design and comment period (will look like freestanding cost report)

• http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R1P243 htmlItems/R1P243.html


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Key Issues Key Issues –– Advance Advance PreparationPreparation

• Three components to the cost report:o General service costso Patient care costso Non-reimbursable costs

• Chart of Accounts:o General service costs and non-reimbursable costs; no requirements

regarding the composition of those costs except that salaries and wages must be segregated from non-salary and wage expenses

o Patient care costs:• Accounting records need to segregate costs by LOC (level of care) or• Accounting records need to segregate costs by LOC (level of care) or• Reclassifications of costs will be required in the accounting records or• Reclassifications of costs will be required in the cost report• Reclassifications will require the use of the best statistical information

available.

NAHC - October 20, 2014 3

General IssuesGeneral Issues• Room and board revenue and expenses are

separately reportedp y p• Form 339 (Provider Reimbursement Questionnaire)

eliminated – pertinent questions built into the cost report itself

• Expansion of statistics:o Pharmacy chargeso Square footage (detail will be needed)o Hours of patient care (allocation of nursing administration costs)o Contracted general inpatient and inpatient respite care dayso Dollar value of equipment (depreciation expense plus operating lease

expense) Definition?

• Most talked about: Level of Care reporting of patient care expenses


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Worksheet SummaryWorksheet Summary• Worksheet A – Summary of all costs, reclassifications,

and adjustmentsand adjustments• Worksheets A-1, A-2, A-3, A-4 (patient care service

costs by level of care)• Worksheet A-6 (reclassifications)• Worksheet A-8 (adjustments to costs)• Worksheets B and B-1 – allocation of general service

i icosts based on statistics• Worksheet C (new) – costs by payor source• Worksheets F Series (financial statements)


General Service Cost General Service Cost CentersCenters

• General Service Cost Centers expanded from 6 cost centers to 16 cost centers:centers to 16 cost centers:

Capital related ‐ building Nursing administrationCapital related - equipment Routine medical suppliesEmployee benefits Medical recordsAdministrative - general Staff transportationPlant operations &

i tVolunteer services

di timaintenance coordinationLaundry and linen services PharmacyHousekeeping Physician administrativeDietary Patient/residential care


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Patient Care Cost CentersPatient Care Cost CentersInpatient care ‐ contractedPhysician services Other counselingy gNurse practitioner Aide and homemakerRegistered nurse DME/OxygenLPN/LVN Patient transportationPhysical therapy Imaging servicesOccupational therapy Labs and diagnosticsSpeech therapy Medical supplies – non‐routineMedical social services Outpatient servicesSpiritual counseling Palliative radiation therapyDietary counseling Palliative chemotherapy


NonNon‐‐Reimbursable Cost Reimbursable Cost CentersCenters

Bereavement program Residential careVolunteer program Advertisingp g gFundraising Telehealth/telemonitoringHospice/Palliative fellows Thrift storePalliative care program Nursing facility room and boardOther physician services


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Sample for PlanningSample for PlanningREGISTERED NURSES

Salaries and Wages If not costed by LOC all

Salaries and Wages Continuous Care costs will be reported onSalaries and Wages ‐ Continuous Care costs will be reported on

Salaries and Wages ‐ Routine Home Care Worksheet A‐2 and

Salaries and Wages ‐ Inpatient Respite Care reclassified based on

Salaries and Wages ‐ General Inpatient Care applicable patient days,

General Supplies patient visits, or

Contracted RN time records.

Contracted RN ‐ Continuous Care

Contracted RN ‐ Routine Home Care

General supplies will be reclassifiedbased

Contracted RN ‐ Inpatient Respite Care on patient days regardless of ability top p p y g y

Contracted RN ‐ General Inpatient Care cost other costs by LOC.

Auto Allowances

Auto Allowances ‐ Continuous Care

Auto Allowances ‐ Routine Home Care

Auto Allowances ‐ Inpatient Respite Care

Auto Allowances ‐ General Inpatient Care


Planning for Patient Care Planning for Patient Care Service CostsService Costs

• 1. Allocated non-LOC expenses in the accounting records based on statistic to be determined orrecords based on statistic to be determined or

• 2. Reclassify non-LOC expenses on Worksheet A-6 of the cost report based on statistic to be determined

• Example – Nursing Home Team - inability to segregate respite care salaries and wages from routine home care in nursing homes (hospice will use respite care days/total of respite care and use respite care days/total of respite care and routine home care days in nursing homes to reclassify on the cost report)


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Reporting Inpatient/Residential Reporting Inpatient/Residential Facility CostsFacility Costs

• Hospice cannot track, or it would be cost prohibited to patient care costs by LOC at freestanding to patient care costs by LOC at freestanding inpatient facilities

• Staff and other costs of inpatient/residential facilities should be segregated in the accounting records.

• Initial reporting on Worksheet A-2 (general inpatient costs) or general service costs (Worksheet A)–reclassification of patient care costs on Worksheet reclassification of patient care costs on Worksheet A-6 based on in-facility days:

o Inpatiento Respite careo Routine


DME/OxygenDME/Oxygen• This cost center includes the costs of DME and

Oxygen furnished to patients. Instructions provide Oxygen furnished to patients. Instructions provide that DME/Oxygen is to be costed based on the LOC of the patient when the DME/Oxygen is delivered. If the LOC changes, these costs can be reported proportionally based on routine home care and continuous care days. Our recommendation is generally to report on Worksheet A-2 and make a reclassification to Worksheet A-1 based on in-home patient days.


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Sample Cost Report Sample Cost Report ReclassificationsReclassifications

• The Hospice records all DME/Oxygen costs to routine home care costs. To reclassify a portion of routine home care costs. To reclassify a portion of DME/Oxygen costs to continuous care.

o Routine home care days xxxxxxxo Continuous home care days xxxxxxx

• Total days xxxxxxxo Reclassification of applicable costs (A-1) xxxxxxx


Significant Level 1 EditsSignificant Level 1 Edits• If patient days are reported for any Level of Care

(“LOC”), costs must be reported on the applicable LOC ( ) p ppworksheet (A-1, A-2, A-3, and A-4) and vice versa.

• Costs are required to be reported on Worksheet A for Employee Benefits, Administrative and General, Plant Operation & Maintenance, Volunteer Services Coordination, Pharmacy, Registered Nurses, Aides and H k DME/O d L b d Di ti Homemakers, DME/Oxygen, and Labs and Diagnostics.

• If contracted inpatient costs are reported, contracted days must be reported and vice versa.


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Square Footage RecordsSquare Footage Records• Capital-related building, Plant Operation and

Maintenance, and Housekeeping costs are Maintenance, and Housekeeping costs are allocated on the basis of square footage (Capital-related equipment separately discussed)

o Using schematic or other source – prepare detailed list of square footageo Each building should be segregated in the accounting records and

square footage detail

• Sample follows


Square Footage DetailSquare Footage Detail

Room Dimensions Sq Feet Use Cost Center Cost Report

1 15 28 420 Conference Room Administration Administration

2 8 10 80 Physical Therapy Physical Therapy Nursing Admin.

3 8 10 80 ClergySpiritual Counseling Nursing Admin.

4 12 12 144 Volunteers Volunteer Coord. Volunteer Coord

5 12 10 120 Nursing Admin. Nursing Admin Nursing Admin.

6 12 15 180 AdministratorAdminstrative ‐Gen

Adminstrative ‐Gen


7 12 12 144Dir of Fundraising Fundraising Fundraising

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Patient Day StatisticsPatient Day Statistics• Days by LOC by payor source• In facility days by LOC• In-facility days by LOC• Contracted IP days• Contracted respite care days• Contracted routine home care days in nursing

facilities


CapitalCapital‐‐Related Movable Related Movable EquipmentEquipment

• CMS – “We are retaining the proposed statistical basis of dollar value to allocate costs for Movable Equipment on Worksheets B and B-1. While that statistical basis is the recommended basis of allocation, if a more accurate result is obtained by allocating costs on an alternative basis (i.e. square feet), the hospice must request approval in accordance with CMS Pub. 15-1, chapter 23, §2313.”§

• We are not aware of any hospices using “dollar value”

• Consider request to change to square footage


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Plant Operation and Plant Operation and MaintenanceMaintenance

• Plant operation and maintenance costs are allocated on the basis of square feet, which is fine.allocated on the basis of square feet, which is fine.

• Potential problem – Plant operation and maintenance costs are allocated after administrative-general costs. Administrative-general expenses will get no portion of Plant operation and maintenance expenses.

• Impact may be to over allocate expenses to non-• Impact may be to over allocate expenses to non-reimbursable programs.

• Decision – order of allocation change?


Volunteer Services Volunteer Services CoordinationCoordination

• Volunteer Services Coordination is allocated after Administrative and General Service costs

• These activities are allocated on the basis of direct volunteer hours. These are level of care hours. In-home hours will generally be treated as routine home care hours. Volunteer hour records are critical.

• Order of allocation – potential problem (more so for tax-exempts)

o Volunteer hours focus on administrative activities, aides/homemakers/fundraisingaides/homemakers/fundraising.

o Too much expense may get charged to fundraising as a result of when these costs are allocated.

• Options:o Order of allocation changeo Reclassification


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Tracking Volunteer HoursTracking Volunteer HoursVolunteer Hour Summaryy

Activity Hours

Administrative and GeneralLaundry and Linen ServiceHousekeepingDietaryNursing AdministrationMedical RecordsInpatient FacilityContracted Inpatient FacilityPatient Residence ‐ Patient SupportBereavementFundraisingFundraisingPalliative Care ProgramMarketing and AdvertisingThrift Store

Total


Volunteer Coordination Work Volunteer Coordination Work AroundAround

• Accumulate Volunteer Service Coordination costs on Worksheet A.on Worksheet A.

• Reclassify a portion of Volunteer Services Coordination costs to Administrative and General Service Costs based on volunteer hours. (salaries and other – why?) This is an enhancement to cost finding.

• Allow remaining costs to be subjected to the • Allow remaining costs to be subjected to the regular allocation process as the Administrative and General component has already been removed.


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Reclassification of Reclassification of Volunteer CoordinationVolunteer Coordination

Volunteer CoordinationSalaries and wages (Worksheet A, Column 1, Line 13) $ 80,000 Other (Worksheet A, Column 2, Line 13) $ 21,000 Total (Worksheet A, Column 3, Line 13) $101,000

Volunteer hoursAdministration 1,400 Other 2,900

4,300

Reclassification to Administration (Worksheet A‐6)( )Salaries $ 26,047 Other $ 14,163 Total $ 40,210


Volunteer Hours Volunteer Hours ––Inpatient Inpatient

• Volunteer hours provided in freestanding inpatient units need to be trackedunits need to be tracked

• These hours will be recomputed, unless tracked by level of care, based in in-facility days:

o Inpatiento Respiteo Routine home care


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RequestsRequests• Change in order of allocation – rules - 90 days

before the end of cost reporting year (where the before the end of cost reporting year (where the cost center would fall in the allocation process)

• Statistics – rule 90 days before the end of cost reporting year (change in the recommended statistic, i.e.square feet)

• Recommended – changes requested as soon as possible to be able to plan – MAC has 60 days to possible to be able to plan – MAC has 60 days to respond or change is automatically approved (sample letter).


Basis of AllocationBasis of Allocation• Medicare Administrative Contractor (“MAC”)

• ABC Hospice (“Hospice”), PTAN 01-001 is a Medicare-certified hospice and is required to submit Hospice Cost & Data reports on an annual basis The Hospice hereby requests in accordance Hospice Cost & Data reports on an annual basis. The Hospice hereby requests , in accordance with CMS Pub. 15-1, Chapter 23, Paragraph 2313 to change the base for allocating Capital Movable Equipment costs on Worksheet B-1 from “equipment dollar value” to square feet.

• The revised Hospice Cost & Data Report (CMS 1984-14) is effective for cost reporting years beginning on or after October 1, 2014. The recommended statistic for the allocation of Capital – Movable Equipment costs on Worksheet B-1 is “equipment dollar value”. The Hospice has not retained property and equipment records that would enable the Hospice to sufficiently accumulate and use “equipment dollar value” for purposes of causing an effective or accurate allocation of Capital – Movable Equipment costs on Worksheet B-1.

• The Hospice’s principal use of items of equipment is administrative and patient care related. Accordingly, ABC Hospice hereby requests the use of square feet on Worksheet B-1 as the statistical basis for the allocation of Capital-Movable equipment costs. Like other Medicare p q pproviders, i.e. home health agencies and hospitals, the use of square feet would cause these costs to be more appropriately allocated to reimbursable and non-reimbursable activities than poorly constructed records attempting to reflect “equipment dollar value”.

• This request for the alternative base for allocating Capital-Movable Equipment costs is requested for, and would be applicable to the cost reporting year beginning on January 1, 2015 and ending on December 31, 2015. The Hospice understands that upon approval the change will be effective for this year and subsequent years.


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Order of AllocationOrder of Allocation• Medicare Administrative Contractor (“MAC”)

• ABC Hospice (“Hospice”), PTAN 01-001 is a Medicare-certified hospice and is required to submit Hospice Cost & Data reports on an annual basis The Hospice hereby requests in accordance Hospice Cost & Data reports on an annual basis. The Hospice hereby requests , in accordance with CMS Pub. 15-1, Chapter 23, Paragraph 2313 to change the order in which cost centers are allocated on Worksheets B and B-1 on its Hospice Cost & Data Report effective for the cost reporting year beginning on January 1, 2015.

• The revised Hospice Cost & Data Report (CMS 1984-14) is effective for cost reporting years beginning on or after October 1, 2014. The cost center, Plant Operation and Maintenance, is allocated immediately after the allocation of Administrative and General Costs. This allocation of Plant Operation and Maintenance costs is made on square feet. The majority of Plant Operation and Maintenance costs relate to square footage used for administrative activities. Accordingly allocating Plant Operation and Maintenance costs subsequent to the allocation of Administrative and General costs would significantly distort the allocation of these facility related costs.

• The Hospice hereby requests that effective for cost report periods beginning on or after January 1, 2015 that Plant Operations and Maintenance costs be allocated immediately prior to the allocation of Administrative and General costs. This change in the order or allocation of costs on Worksheet B significantly enhances the quality of the financial information reported in the Hospice Cost & Data Report of ABC Hospice.


Allocation of Administration to Allocation of Administration to Contracted Inpatient CostsContracted Inpatient Costs

• When the hospice contracts for general inpatient or inpatient respite care, the amount of the inpatient respite care, the amount of the contracted payment is used to reduce the accumulated cost statistic on Worksheet B-1, column 4A, line 52 or 53.

• The impact is to reduce the amount of administrative-general costs that will be allocated to contracted general inpatient and respite care to contracted general inpatient and respite care costs (important – based on rate setting).


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Order of AllocationOrder of Allocation• Medicare Administrative Contractor (“MAC”)

• ABC Hospice (“Hospice”), PTAN 01-0001 is a Medicare-certified hospice and is required to submit Hospice Cost & Data reports on an annual basis The Hospice hereby requests in submit Hospice Cost & Data reports on an annual basis. The Hospice hereby requests , in accordance with CMS Pub. 15-1, Chapter 23, Paragraph 2313 to change the order in which cost centers are allocated on Worksheets B and B-1 on its Hospice Cost & Data Report effective for the cost reporting year beginning on January 1, 2015.

• The revised Hospice Cost & Data Report (CMS 1984-14) is effective for cost reporting years beginning on or after October 1, 2014. The cost center, Volunteer Services Coordination, is allocated after the allocation of Administrative and General Costs. This allocation of Volunteer Services Coordination costs is made on the basis of “volunteer hours”. A substantial portion of the volunteer hours are provided in support of administrative activities of the Hospice. Accordingly allocating Volunteer Services Coordination costs subsequent to the allocation of Administrative and General costs would significantly distort the allocation of these costs.

• The Hospice hereby requests that effective for cost report periods beginning on or after January p y q p p g g y1, 2015 that Volunteer Services Coordination costs be allocated immediately prior to the allocation of Administrative and General costs. This change in the order of allocation of costs on Worksheet B significantly enhances the quality of the financial information reported in the Hospice Cost & Data Report of ABC Hospice.


Pharmacy CostsPharmacy Costs• Pharmacy costs remain as a General Service Cost

Center rather than a Patient Service Cost CenterCenter rather than a Patient Service Cost Center• Pharmacy costs are allocated on the basis of

charges:o Routine home careo Continuous careo Inpatient respite careo General inpatient careo Non-reimbursable activities (palliative care)o Non reimbursable activities (palliative care)o Unrelated to terminal illness (non-reimbursable, can be removed as

expense adjustments)

• Do you have charges (standard charges by level of care? If so, you can use this statistic)


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Pharmacy CostsPharmacy Costs• Do you have a per-diem contract? If so, you can

use the contract to identify the cost by level of care use the contract to identify the cost by level of care (Patient Days). Costs can be substituted for charges (gross-up) or you can possibly reclassify these costs to Other Patient Care Services by LOC on Worksheet A-6 to A-1, A-2, A-3, and A-4

• Otherwise, you will need a new statistic


Pharmacy Statistical Basis Pharmacy Statistical Basis (All or Part)(All or Part)

• Medicare Administrative Contractor (“MAC”)

• ABC Hospice (“Hospice”), PTAN 01-0001 is a Medicare-certified hospice and is required to submit Hospice Cost & Data reports on an annual basis The Hospice hereby requests in submit Hospice Cost & Data reports on an annual basis. The Hospice hereby requests , in accordance with CMS Pub. 15-1, Chapter 23, Paragraph 2313 to change the base for allocating Pharmacy costs on Worksheet B-1 from “charges” to “patient days”.

• The revised Hospice Cost & Data Report (CMS 1984-14) is effective for cost reporting years beginning on or after October 1, 2014. The recommended statistic for the allocation of Pharmacy costs on Worksheet B-1 is “charges”. The Hospice has not established a charge structure encompassing all hospice pharmacy charges and charges for all payors. Accordingly the current charge structure and charge records are insufficient to enable the Hospice to sufficiently accumulate and use “charges” for purposes of causing an effective or accurate allocation of Pharmacy costs on Worksheet B-1.

• ABC Hospice hereby requests the use of patient days on Worksheet B-1 as the statistical basis for the allocation of Pharmacy costs. Many hospices incur pharmacy charges on a per-diem basis y y p p y g pand report their costs accordingly. The use of patient days would cause these costs to be more appropriately allocated than incomplete pharmacy charges and consistent with many providers being billed on a per-diem basis by pharmacy suppliers.

• This request for the alternative base for allocating Pharmacy costs is requested for, and would be applicable to the cost reporting year beginning on January 1, 2015 and ending on December 31, 2015. The Hospice understands that upon approval the change will be effective for the requested year and subsequent years.


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Nursing AdministrationNursing Administration• Supervised hours is the statistic to be used to

allocate Nursing Administration costs. These are allocate Nursing Administration costs. These are LOC hours.

• If hours can be accumulated for all disciplines by level of care, nothing else required.

• If not, supporting schedule can be developed:o Salaries and wages (A-1, A-2, A-3, A-4)o Average rate per-hour used to estimate hours, which then becomes the

statistic (Average rate from year-to-date payroll registers)


Conversion of Salaries to Conversion of Salaries to HoursHours

Salaries Salaries Salaries SalariesA‐1 A‐2 A‐3 A‐4

Registered Nurses $ 12,000 $850,000 $ 2,500 $ 35,000 Aides $ 1,000 $ 95,000 $ 1,000 $ 6,000

Wage RateRegistered Nurses $ 35 $ 35 $ 35 $ 35 Aides $ 13 $ 13 $ 13 $ 13

Computed HourspRegistered Nurses 343 24,286 71 1,000 Aides 77 7,308 77 462


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Correction Requested for Correction Requested for Housekeeping CostsHousekeeping Costs

• The Health Group, LLC requested CMS make a technical correction to the revised Hospice Cost & Data

t hi t h i l ti ld ll f Report. This technical correction would allow for Housekeeping costs to be allocated to Patient/Residential Services, which are subsequently allocated based on in-facility patient days. The final Cost Report currently requires Housekeeping costs to be allocated on the basis of square feet directly to Level of Care. Square feet are not available based on Level of Care. This represents a minor technical change Care. This represents a minor technical change involving opening up a field on the Cost Report which is currently unavailable.

• CMS has already indicated that they will be making this change in Transmittal #2.


Combining RequestsCombining Requests• If requests are combined can it be rejected in

total? Partially?total? Partially?• Recommendation:

o Request statistics separately – each request should stand on its own –remember requests must improve cost finding.

o Request change in order together. The order of allocation request should support each of the respective changes.

o Request at the earliest possible opportunity in order to be prepared at the beginning of your cost reporting year.


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Direct Assignment of Direct Assignment of General Service CostsGeneral Service Costs

• The costs of a general service cost center need to be allocated to the cost centers receiving service be allocated to the cost centers receiving service from that cost center.

• CMS Pub 15, Paragraph 2307 – Direct Assignment of General Service Costs

o Written request no later than 90 days prior to the beginning of the cost reporting period for which the change is to apply.


Direct Assignment of CostDirect Assignment of Cost• Statistics may not be used. All applicable costs

must be direct costed.must be direct costed.• Example, Salaries paid to housekeeping based on

time records maintained continuously.• Example, depreciation on equipment physically

present or used in each of the cost centers.• Example, laundry and linen costs based on invoices

identifying each benefitting cost centeridentifying each benefitting cost center.


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Direct Assignment to Direct Assignment to Provider ComponentsProvider Components

• The direct assignment of costs of a general service cost center by subdividing the cost center, i.e. two cost center by subdividing the cost center, i.e. two buildings of differing ages and depreciation.

• Additional general service cost centers or supporting worksheets.

• Where applicable – multiple facilities?• Where applicable – inexpensive non-reimbursable

facilities?facilities?


Multiple Inpatient UnitsMultiple Inpatient Units• Direct Assignment of Costs-Multiple Inpatient Units

o Request Additional General Service Cost Centers for Line 17:q• Inpatient Facility 1• Inpatient Facility 2• Inpatient Facility 3

o Allocation of costs would be based on in-facility days for each of the Inpatient Facilities


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Inherent Costing Inherent Costing ProblemsProblems

• Pharmacy costs may not include all pharmacy costs (pharmacy in hospice may be part of contract); care in th f dthe use of days

• Similar problems with DME, oxygen, and other ancillary services.

• You cannot direct cost any inpatient facility costs without being creative or requesting “direct assignment of costs”. Line 17 could be very helpful if opened on Worksheet A.

• Can you direct cost facility-related expenses to non-reimbursable cost centers? Yes and no; however, can improve cost finding especially for tax-exempts. Watch square footage if this is attempted.


RememberRemember• Chart of Accounts – review with cost report preparer

(others with other reporting responsibility).• Identify reclassifications of costs to be made (plan)• Request statistic changes (ASAP – but upon careful

consideration)• Request change in order of allocation (ASAP – but upon

careful consideration)• Direct Assignment of Costs (when, with careful

consideration) – some providers (September 30 year-) p (S p 30 yends are already late).

• File approvals or request (no approval received) with initial applicable cost report filing. Do not want a cost report rejection.


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