Are your non-Medicare visits really Medicare “like kind”?
Posted on October 12, 2009 in Featured-writers
by Dave Macke, FHFMA
Have you checked your non-Medicare visits lately to determine if they are Medicare "like- kind"? Do you get worried when your cost report preparer asks you which visits are "like-kind" and "non like-kind"? Is the person preparing the cost report asking these questions? If these answers to these questions are "no" or you are "not sure", then you better review Medicare's policy on counting visits for the Medicare Cost Report.
Now that the home health industry is well into the Prospective Payment System (PPS), you might say that it don't matter anymore. There is no cost settlement from the cost report on Medicare visits so there is no financial impact to individual providers. Many agencies have collapsed services from non Medicare companies into the Medicare company that were previously separated for cost report reimbursement purposes to take advantage of cost efficiencies and economies of scale in operations. Agencies have also expanded into new service lines to take advantage of business opportunities and realize a "profit" without having the Medicare overhead costs shift to the non Medicare services on the cost report and reduce Medicare reimbursement.
The Medicare Cost Report determines the cost per visit for each discipline by dividing the total costs after the step-down of overhead costs by the number of total visits for all patients. This cost per visit is then multiplied by the number of Medicare visits to determine the Medicare cost. This calculation is down independently for each of the six covered disciplines: Skilled Nursing Care, Physical Therapy, Occupational Therapy, Speech Therapy, Medical Social Service and Home Health Aide. A separate calculation is done for non routine medical supplies. The cost per visit can be skewed dramatically by including or excluding non Medicare services in the average cost. Let's take a look.
In this example, the true cost of Medicare services is inflated due to the inclusion of non Medicare services that have a higher cost per visit. This could be due to a number of factors but the reason is that these visits have a higher direct cost per visit. One factor is that these visits are longer in time duration. While the true Medicare cost per visit was lower than the combined average, the cost report was computing a higher cost, thus overstating Medicare costs.
This issue became especially common in the mid 1990's. The Centers for Medicare and Medicaid Services (CMS), then HCFA, realized this and issued a Program Memorandum addressing "like-kind" services (PM AB-97-11.60, dated August 1997). CMS states that this PM "provides clarification regarding the inclusion of non-Medicare home health visits and associated costs in the calculation of the average cost per visit".
Furthermore, CMS states in the PM that "In preparing the Medicare cost report, providers must recognize only the costs associated with the "like-kind" visits as set forth in this PM in a reimbursable cost center. In determining whether non-Medicare home health visits and associated costs are included in the calculation of the average cost per visit, all Medicare eligibility criteria and coverage criteria must be met".
Following are the coverage criteria:
1) confined to the home
2) under the care of a physician
3) in need of intermittent skilled nursing services, physical therapy or speech therapy, or have a continuing need for occupational therapy
4) under a plan of care
5) the home health services must be furnished by, or under arrangements made by, a participating home health agency (HHA)
If the non Medicare visits meet these criteria, then the visits and associated costs should be combined on the cost report to determine the average cost. If these criteria are not met, then the visits and associated costs for these non-Medicare services should be separately reported in a non-reimbursable cost center. This ensures that the costs of services are comparable across insurers and Medicare is paying for its fair share for comparable home health services.
Many of these non like kind services may be under State Medicaid programs or Medicaid Waiver programs. Other examples are full time aide services, custodial care, personal care aide, homemaker, or home attendant services.
Now that the home health industry is well into PPS, the dramatic reimbursement impact of the cost report on individual providers has been removed. However, it is still very important to properly report visits and costs in the cost report and to comply with cost report rules. First of all, there are still all of the compliance issues associated with the Medicare Cost Report and the implications of the False Claims Act provisions. Secondly, as an industry, it is important to get the most correct and accurate costs for Medicare services. This is important to the management of the agency when analyzing the "profitability" of its operations and enables the agency to make well informed business decisions. Additionally, it is important that the CMS and the government have accurate information when looking at home health profitability as cost reports can form the basis for future payment rate adjustments. It is no secret that the Medicare Payment Advisory Commission (Med PAC) contends that the industry is realizing significant profit margins which the industry contends are false. The only real source of data is the Medicare Cost Report.
Since the issuance of this Program Memorandum in 1997, we have received clarification from CMS that stated that the primary purpose of the like kind principle is to insure that non-Medicare visits are of the same type as those that would be covered by Medicare for the purpose of computing the average cost per visit. Furthermore, CMS has indicated that if all other eligibility requirements are met and the non-Medicare visits are of similar labor intensity, similar duration, and the staff are similarly credentialed as required for Medicare visits, they will consider these non-Medicare visits to be like-kind with the exception of the homebound requirement.
What should agencies do now? Home Health Agencies should review all of their current services to determine which services are "like-kind" and which are "non like-kind". If "non like-kind" services exists, agencies should make sure that systems are in place to properly record the visit counts and that the costs are separately recorded in the financial records of the agency. All direct costs, including salaries and transportation costs should be separately accounted for in the trial balance of the agency. This should be done on an individual pay period basis using actual daily time records, not as year end adjustments. It is especially important when the caregiver is providing a mixture of services in the same day. All costs / time relating to the visits should be included with the appropriate visit including time in the home with the patient, indirect time in the office preparing for the visits and charting time, travel time and case conferences.
Copyright © 2009-2010 Dave Macke, FHFMA. All rights reserved.
Dave Macke, FHFMA, serves as the Director of Reimbursement Services servicing various healthcare clients such as home health agencies, hospices, hospitals, skilled nursing facilities, etc. He has over 30 years of healthcare experience and is a shareholder with VonLehman & Company in Ft. Mitchell, Kentucky. You can contact Dave at 859-331-3300 or email him at dmacke@vlcpa.com.
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