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Common Medicare Cost Report Problems for HHAs

2/18/19 – Dave Macke

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In recent years, cost report accuracy has declined. Many providers have placed a lower emphasis on the importance of the cost report since there is no direct settlement impact. However, Medicare Cost Reports still play a vital role for home health agencies. In recent years, the Medicare Payment Advisory Commission (MedPAC) reports Medicare profit margins of over 15% based on Medicare Cost Reports. MedPAC and CMS claim that home health agencies are making too much profit and payment rates should be cut. Accuracy and proper completion of the Medicare Cost Report is also a compliance issue, subject to False Claims Act provisions. PPS brought about a change in the payment methodology, not a change in Medicare reimbursement cost report rules.  Today, this is becoming more important with the advent of the new payment system called Patient Drive Grouping Model (PDGM).

The following is a listing of common cost report problems that has been observed in recent years.

  • Inaccurate Visit Statistics – There are actually two separate Medicare visit counts on the cost report – “date of service” and “completed episode” visits for crossover episodes. The PS&R groups the total visits based on the end date of the claim. 
  • Reporting time units instead of actual visits.
  • Cost and visit counts for “like kind” and “non like kind” services are not properly segregated.
  • Medicare episode counts are incorrect or missing from the cost report.
  • Missing total visits when costs are reported or vice versa for a specific cost center (e.g Skilled Nursing Care, etc.)
  • Improper Accounting Method – Cash Basis versus Accrual Basis.
  • Improper classification of “direct” and “indirect” expenses.  Costs not properly segregated on the trial balance and not in the right cost centers.
  • Missing data on total costs or Medicare payments.
  • Improper reporting of costs and charges for non-routine medical supplies.
  • Improper reporting of costs and charges for flu vaccine injections.
  • Adjustments made to the financial statements after the prior year cost report was filed when the tax return was extended.  
  • Failure to identify all related party transactions. Not applying the Section 1010 exception when applicable.
  • Failure to charge all direct and indirect costs to home health on stepdown for hospital-based agencies.
  • Allocation of overhead costs from Hospital to Home Health (HHA) that do not relate to HHA.

Don’t take anything for granted. Make sure that your Medicare cost report is properly prepared. Not only is the cost report a compliance document but can be a valuable benchmarking tool.  If you have any questions, please contact us.  

2020 PDGM Change is Coming