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The CMS Releases New Medicare Cost Report Form for Home Health Agencies – 1728-20

10/06/2020 Dave Macke

The Centers for Medicare and Medicaid Services (“CMS”) originally issued a proposed rule on April 16, 2019, to change the Medicare cost report form set for home health agencies.  A second notice with a comment period was issued on February 24, 2020.  This form set was known as the CMS Form 1728-19.  Over the past several months, many CMS initiatives were slowed due to the COVID-19 pandemic.  Finally, on October 2, 2020, CMS issued Transmittal #1 for Provider Reimbursement Manual 15-1, Chapter 47 which is the forms and instructions for CMS Form 1728-20 – the new home health Medicare Cost Report Form.

The forms were originally intended to be effective for cost reporting periods beginning on or after July 1, 2019, and ending on or after June 30, 2020.  With this new release on October 2, 2020, the new cost report forms are effective for cost reporting periods beginning on or after January 1, 2020, and ending on or after December 31, 2020.

CMS did make some changes from the forms that were issued earlier this year, but the basic framework is very similar.  It is important to note that there is some information required that may not be readily available for home health agencies, although CMS believes that it is available.

The following is a summary of the most significant changes.

Worksheet S-2, Part I

Home Health Agencies will be required to indicate whether they have received allocations from a home office and will need to report general information about the home office.  Home offices with a home office provider number are required to file a CMS Form 287-05, which is also required to be filed with the individual cost reports of all providers in the group.

Worksheet S-3, Part I – Census Statistics

This worksheet has been modified to separately report the number of visits and patients for Medicaid services.  Previously, Medicaid was included with “Other” patients.  Now, census counts for visits and patients will be separate for Medicare, Medicaid and Other patients.  It should be noted, all visits reported in this section are based on date of service in the cost report period, including Medicare visits / patients, not episode end date.  Utilization data for completed episodes in the period continues to be reported on Worksheet S-3, Part IV in the cost report period ended and generally comes from the PS&R report.  CMS has also clarified the instructions to state that Medicare Managed Care and Medicaid Managed Care visits and patients are to be reported as “Other” in columns 5 and 6.

In addition, the number of visits and patients are now segregated for the following disciplines.  Skilled Nursing Care statistics will be separately reported for RN’s and LPN’s, Physical Therapy and Physical Therapy Assistants, and Occupational Therapy and Certified Occupational Therapy Assistants.  Non like-kind services are still to be reported as “All Other” services on line 10. Non like-kind services are those visits for non-Medicare patients that do not meet Medicare eligibility criteria.

Worksheet S-3, Part II – Full time Equivalents (FTE’s)

FTE’s are defined as total paid hours for the entire year divided by 2,080 (52 weeks times 40 hours per week).  This worksheet reports FTE’s by Occupational Category and separate for Staff (W-2 employees) versus contract labor.  Additional categories have been added for Nursing Supervisors, RNs, LPNs, and Therapists and Therapy Assistants for PT and OT.  Many agencies have not properly reported FTE’s in the past.  This is not an employee head count but “full time equivalents”.  For example, 7,840 total paid hours for the year divided by 2,080 would be 3.77 FTE’s.

There is also a new Occupational Wage Data Worksheet (S-3, Part V).  See below.

Worksheet S-3, Part IV – PPS Activity Data

This worksheet captures data associated with episodes / periods of care that end during the current cost reporting period.  As this cost reporting period crosses over the 60-day / 30-day payment model, there will be data in the 2020 cost report that reflects both payment types.  There is no separation of 60-day from 30-day payment data per CMS response.  This is a one-time conversion issue.

Worksheet S-3, Part V – Occupational Wage Data

This worksheet is an attempt by the CMS to get specific wage and benefit data for each of the direct care cost centers.  Wages and benefits will be separately reported for Nursing Supervisors, RN’s, and LPN’s.  In addition, Physical Therapy Supervisors, Physical Therapists, Physical Therapy Assistants, Occupational Therapy Supervisors, Occupational Therapists, Occupational Therapy Assistants, Speech-Language Pathology Supervisor, Speech-Language Pathologists and Other Medical Staff.  The same categories apply to any applicable contract labor costs.   It is very important to separate direct salary cost for W-2 wage employees from outside contract labor on your financial statements by these individual categories.  Medical Social Workers and Home Health Aides are not separately identified.  The instructions for “Other Medical Staff” state direct care expenditures for clinicians not previously identified.

With the detailed reporting of wages and contract labor, the CMS is also requesting total paid hours for each of these categories.  The purpose of this Worksheet is to compute an average hourly wage for each occupational category.  A significant problem here is that time records may not be readily available.   Some patient visits are paid on a “per visit” basis and may not have actual paid hours to report.  The CMS believes that all agencies have accurate records for total paid hours.

Home Health Agencies should review their financial statement account detail (chart of accounts), payroll reporting systems and accounts payable invoices from outside contractors to ensure they will have all of the required level of detail.

Worksheet A – Trial Balance of Expenses

This is the worksheet where total expenses from the agency are reported from the Trial Balance of the Financial Statements of the Agency.  There are numerous new cost centers created, mainly to match up to the new level of detail for visit reporting and occupational wage data.  The CMS believes that agencies are already separately reporting these direct care costs on their financial statements, which may not be completely accurate.

Line 5 – Telecommunications Technology –  This was proposed to be called Remote Patient Monitoring.  Regardless of the name, the definition of the cost center is essentially the same.  – Enter allowable administrative costs related to remote patient monitoring as described in 42 CFR 409.46 (e).  This overhead cost center is allocated on Worksheet B stepdown based on accumulated cost.  This cost center does not include Telehealth (line 47).

Line 7 – Nursing Administration – Enter the cost of overall management and direction of the nursing services.  This overhead cost center is allocated based on direct nursing hours for staffed supervised.  Do not enter the cost of direct nursing services which are included in the direct care cost centers.  A staff person that functions in a nursing management role and also provides hands on patient care should have their salary cost split accordingly on this worksheet.

Line 8 – Medical Records – Enter the direct cost of medical records including the medical record library.  This does not include the costs of the general library and / or medical library which are reported in the administrative and general cost center.

Lines 16 and 17 – Skilled Nursing Care – Separate cost for RN and LPN.

Lines 18 and 19 – Physical Therapy – Separate cost for Therapists and Therapy Assistants.

Lines 20 and 21 – Occupational Therapy – Separate cost for Therapists and Therapy Assistants.

Line 25 – Medical Supplies Charged to Patients – the name of this cost center was previously called Medical Supplies.  It is meant to just include the cost of billable medical supplies (non-routine) but some agencies have recorded the cost of both billable and non-billable medical supplies in this cost center.  The name and instructions have been changed to reflect that this is for the cost of billable medical supplies only.  The cost of non-billable medical supplies are reported in the Administration and General cost center.

Line 26 – Drugs – This cost center is for the direct cost for pneumococcal, influenza, hepatitis B, and osteoporosis drugs vaccines.  This does not include the cost of vaccine administration.  This cost center is subject to cost settlement on the cost report, subject to lower of cost or charge.

Line 27 – Cost of Administering Vaccines – Includes costs for administering pneumococcal, influenza, hepatitis B and osteoporosis drugs vaccines.  Vaccine Administration services are reimbursed under the outpatient prospective payment system (OPPS) fee schedule.

Line 29 – Disposable Devices – Cost of disposable devices i.e., negative pressure wound therapy (NPWT) devices.

Line 47 – Telehealth – Direct costs associated with telehealth.  Telecommunication technology is considered remote patient monitoring and is not a telehealth service.

Line 48 – Advertising – Costs associated with nonallowable community education, business development, marketing and advertising.  In the CMS response to comments, it was stated that if the costs associated with nonallowable advertising are insignificant to warrant establishing a non-reimbursable cost center, then the direct costs may be removed from the cost report on Worksheet A-8, line 11.

Line 49 – Fundraising – Costs associated with nonallowable fundraising.

Worksheet A-6 – Reclassification of Expenses – formerly known as Worksheet A-4.

Worksheet A-8 – Adjustments to of Expenses – formerly known as Worksheet A-5.

Worksheet A-8-1 – Related Organization / Home Office Costs – formerly known as Worksheet A-6.

In the responses from the CMS to comments, the CMS provided clarification as to when a formal home office provider number is necessary versus a related party transaction.  Generally speaking, a home office is needed when there is a chain organization consisting of two or more facilities which are owned, leased or controlled by one organization.  A home office is usually physically and organizationally separate, easily identifiable from the facilities it serves, and provides centralized services to the chain components.  This worksheet will relate to the question on Worksheet S-2, Part I, line 16.

Worksheet B-1 – Cost Allocation Statistical Bases

With new overhead cost centers, new cost allocation statistics will be needed for the overhead cost stepdown.  On the original proposal, the statistical basis for Telecommunication Technology and Medical Records was “Time Spent”.  That basis would be hard for agencies to quantify.  Based on industry comments, CMS has changed the allocation bases to “Accumulated Costs” which are automatically generated by the cost report.

Worksheet C

Previously the Vaccine Administration cost center ended at Worksheet B.  This cost center will now flow to Worksheet C and will require that charges (billed revenue) be reported for total, all patients and Medicare patients, which will show up on the PS&R report.

Worksheet F – Balance Sheet

This worksheet has been modified that all balances are reported in one column.  The additional columns for Specific Purpose Fund, Endowment Fund and Plant Fund, have been eliminated.

Worksheet F-1 – Statement of Revenue and Expenses

Gross patient revenues and contractual allowances and discounts are now required to be separately identified as Medicare, Medicaid and Other, consistent with the reporting of patient visits on Worksheet S-3.  Medicare and Medicaid Managed Care must be reported as “Other”.  Bad Debts should be included with Contractual Allowances and Discounts and not as an expense item.

Line 31.50 has been created to separately report the aggregate revenue received for COVID-19 Public Health Emergency (PHE) funding including both Provider Relief Funds (PRF) and Small Business Association (SBA) Loan Forgiveness amounts.

Worksheet A-7 and Worksheet F-2

These worksheets have been deleted.  Worksheet A-7 was the capital asset summary and Worksheet F-2 was the Fund Balance / Equity balance rollover from the prior year.

Worksheet O Series – HHA Based Hospice costs

There are some differences in the reporting of expenses on Worksheet A and Worksheet O for the reporting of Hospice overhead costs for a HHA Based Hospice.  For the most part, the Worksheet O series follows the freestanding Hospice Cost Report form set, CMS Form 1984-14, and by level of care.  The CMS has added line 43, Drugs Charged to Patients, as a direct expense to be consistent with a change made previously to the freestanding hospice cost report form.


These cost report forms reflect new detailed information that was not previously required.  We recommend that all agencies review the forms and instructions to determine what is needed for proper completion of the Medicare cost report, especially Worksheet S-3, Part V – Occupational Wage Data.

Review and Modify the financial statement chart of accounts for detailed tracking.

Payroll reporting systems for proper tracking and recording of hours and dollars, including non like kind services.

Accounts payable for outside contract services and other detail.  Make sure that your vendors are providing you the detailed information and invoices are being properly recorded on the trial balance.

Review your billing system for detailed breakdown of patient visit statistics.

The CMS has posted the new forms and instructions on the CMS website in the Transmittal Section.

For any questions related to this issue or healthcare reimbursement in general, contact Dave Macke, VonLehman’s reimbursement specialist, at dmacke@vlcpa.com or 800.887.0437.

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