The HHA Medicare Cost Report: Filing Requirements, Suggestions and Recommendations
Posted on March 10, 2009 in Featured-writers
by Tom Boyd
Introduction
While every Medicare certified Home Health Agency (HHA) must file a Medicare cost report, many providers do not know the "why" and "how" of filing. They often struggle to understand all the technical aspects associated with filing their cost report. Furthermore, many new providers only become aware of the cost report when it is time to hastily file it at the last moment in response to a government request sent with their PS&R.
The cost report is part of a package of documents to be filed with the Intermediary. The absence of any one of the pieces can cause a cost report to be rejected by the Intermediary, either immediately or upon failure to send in all the required documents within a short time.
Proper Cost Report Filing is Essential
The HHA cost report must be filed properly for the following five main reasons:
1. It is an annual requirement for every HHA. The failure to file correctly and completely can cause the Medicare program to suspend payments to the HHA. The Medicare program will then seek repayment of all monies paid to the HHA since the last fiscal period for which a cost report was filed.
2. The cost reimbursement era for Medicare home health ended on September 30, 2000. (The implementation of the Prospective Payment System was on October 1, 2000). However, the Medicare regulations did not change, and failure to comply can allow the government to file actions against the HHA.
3. In some states, the Medicare cost report is used or duplicated for the Medicaid program. The failure to follow the Medicare regulations can also be applicable to the Medicaid regulations and cause actions to be taken by Medicaid against the HHA.
4. The Medicare cost report includes data the CMS will again use to adjust the HHA prospective payment system (PPS) in the future just as they have for 2008. If incorrect data is filed, it can contribute to flawed payment adjustments industry wide.
5. The Medicare program reimburses costs associated with flu vaccines and covered osteoporosis drugs. A proper and complete cost report filing is needed to insure proper cost reimbursement.
Requirements - Medicare and Medicaid Cost Reimbursement
While cost reimbursement for Medicare Home Health ended on September 20, 2000 (PPS), it still exists in some state Medicaid programs. HHAs are presumed to know the requirements of CMS Pub. 15 parts 1 & 2, which include the following general cost disallowances:
• Alcohol
• Excessive owners compensation
• Marketing
• Owner automobiles
• Unnecessary costs
• Undocumented costs
• Excessive meeting costs
• Income taxes
• Penalties
• Excessive related organization costs
• Excessive payments to therapists
• Donations
• Interest on loans from owners
• Accelerated depreciation
• Excessive fringe benefits
Requirements - Technical
Beyond disallowances, there are many specific requirements defined in CMS pub. 15 parts 1 & 2, as outlined below:
1. Requirements: A diskette of the electronic cost report (ECR) is required utilizing a CMS-approved vendor with the current specification date submitted. A list of CMS approved ECR vendors is below:
• Health Financial Systems www.hfssoft.com
• KPMG www.us.kpmg.com/compumax
• Manis and Ryan wwwmanisandryan.com
• Optimizer Systems, Inc. www.optimizer.com
• Note - Although HHAs may use the free software supplied by CMS, there are certain downsides including the need to prepare the cost report manually and then input key numbers and data into the free software for submission. We do not recommend using the free software.
2. Requirement: An ECR that passes all Level 1 edits.
3. Requirement: A submitted print image file of the cost report except when using CMS free software.
4. Requirement: The certification page (Worksheet S) of the ECR file with an original signature of an officer (Administrator or Chief Financial Officer).
5. Requirement: An exact match of the encryption code, date and time for the print image displayed on the certification page to that of the print image file encryption code on the ECR, date and time except when using CMS free software.
6. Requirement: The settlement summary on the electronic certification page agrees with the settlement summary on the Medicare cost report produced from the electronic file.
7. Requirement: A completed, signed and submitted Form CMS-339 Exhibit 1, Provider Cost Report Reimbursement Questionnaire, with an original signature of an officer. Not all the questions of the Form CMS 339 need to be answered by the HHA.
8. Requirement: All required documentation per Form CMS-339.
9. Requirement: A copy of the working trial balance.
10. Requirement: Where applicable, the supporting documentation for reclassifications, adjustments, related organizations, and protested items.
11. Requirement: A copy of the CPA reviewed, complied, or audited financial statements if done.
12. Requirement: A copy of the Home Office Cost Statement (HOCS) where applicable.
13. Requirement: The expansion of services form with original signature of an officer.
While not required, it is additionally recommended the HHAs include the following supplemental documents in the submission package:
1. Recommended: A paper copy of the cost report.
2. Recommended: The grouping schedules of general ledger accounts.
Needless to say, the process of cost report filing is often easier said than done. Because of the inherent complexities associated with the cost report, a series of answers to frequently asked questions is offered below.
Frequently Asked Cost Report Questions
Q. Who has to file a HHA Medicare Cost Report?
A. A home health agency (HHA) that is Medicare Certified has to file an annual Medicare Cost report. The HHA can be provider-based or free standing. The HHA that is provider-based (usually hospital based) does not file a separate report but has their data included with that of the provider (usually hospital). The free standing or non-provider based HHA has to file its own Medicare cost report.
Q. How often is the HHA required to file a cost report?
A. The3 cost report must be filed for each fiscal period of the HHA. The cost report cannot cover a time period longer than 13 months nor less than one month. A cost report is also required when an HHA has closed or has a change of ownership.
Q. What type of cost report should be filed?
A. types of Cost Report t Filings
1. The NO Medicare business cost report. HHAs are required to submit to the Intermediary a statement which identifies their reporting period, states that no covered services were rendered during the reporting period to Medicare beneficiaries, and states that no claims for Medicare payment will be filed for this reporting period. The statement is signed by an authorized official of the HHA.
2. The low Medicare utilization cost report (LMU). The HHA, if having received under $100,000 in Medicare payments for the fiscal period services, may be allowed to file a LMU. The Intermediary has to give prior approval of the HHAs request for wavier of the ECR filing. Remember regardless if paid at the time of the cost report filing. Each intermediary has different requirements for a LMU filing.
3. The small HHA. This form of filing is obsolete while still in the regulations.
4. The regular cost report filing of the cost report form CMS-1728-94. If not covered by one of the above then a regular filing is made.
Q. When does the cost report need to be filed?
A. The cost report is due on or before the last day of the fifth month following the close of the cost reporting period. The cast report submission must be "postmarked" within five months of the end of the fiscal period. An extension of the due date is theoretically possible (and extremely rare) but was made available for those affected by Hurricane Katrina.
Q. My extension was denied and I will not make my due date - now what?
A. Your Medicare payments will be suspended. You may contact the Intermediary prior to the cost report due date and request a reduction in the rate of suspension. If the Intermediary receives a request for a reduction in the rate of suspension, and they believe the request should be approved, they will recommend to the Regional Office (RO) that your suspension rate should be reduced to 50% of your payments for the first 60 days the cost report is late.
Q. What happens if the cost report is filed late?
A. In the event you fail to timely file an acceptable cost report with all required information such as the CMS 339. Medicare payments will be suspended until a cost report is filed and determined to be acceptable. All payments made for the period are considered overpayments.
Q. What happens if the cost report is rejected by the Medicare Intermediary?
A. If the cost report is rejected, it is deemed unacceptable and treated as if it was never filed. Specifically, as is mentioned above, if an acceptable cost report is not submitted on time, a suspension of payments will be imposed. If the cost report is rejected prior to the cost report due date, then the suspension of payments will not occur until the cost report due date. Please note that this is a ONE TIME grace period which ends within 15 days (flawed disk), 30 days (other reasons) or upon the due date, the last if it occurs before the other two deadlines.
Q. The PS&R is the Intermediary's Provider Statistical & Reimbursement Report. The PS&R is a summary of Medicare claims for services of the fiscal period, and as of a date usually close to the run date of the PS&R. The provider must receive the PS&R on or before the 120th day after the fiscal year end. If the Intermediary is late mailing the PS&R, the provider will have 30 days from the date of receipt of the PS&R to file the cost report, even if it extends beyond the 5 month due date. The HHA has one of three choices in filing the cost report, using their data for the Medicare settlement data, using the data disclosed within the PS&R, or using a combination of the two data sources.
Recommendations
1. PREPARE: As stated by CMS, "The time required to complete this information collection is estimated to average 226 hours per response, including the time to review instructions, search existing data resources, gather the data needed and complete and review the information collection." Therefore, preparation is essential:
• Develop a plan, checklist and timeline
• Assign tasks
• Remember Medicare is on the accrual basis
• Know CMS regulations
• Document - everything is subject to the possible review by the Medicare and Medicaid auditors.
2. FILE EARLY. The cost report can be rejected for a number of reasons. A flawed ECR disk, for example, may have been caused unknowingly by Homeland Security. A rejected cost report resubmitted prior to the due date will avoid suspension of Medicare payments (assuming resubmission is accepted). A cost report rejected after the due date or resubmitted after the due date will still have Medicare payments suspended from the due date until acceptance by the Intermediary.
3. USE YOUR Medicare settlement data. You are not required to use the PS&R for filing the Medicare cost report. If your computer system has tabulated the information then go ahead and use it to file the cost report.
4. USE YOUR internal financial statements. You are NOT required to have a CPA review, compile, or audit your financial statements. You are required to send the complete CPA reviewed, complied or audited statements to the Intermediary with your cost report if they were done.
5. MAKE SURE your cost report is complete, with no missing worksheets. The worksheet A-4 and A-5 may be blank but send them anyway.
6. REMEMBER to provide the supporting documents for your reclassifications and adjustments.
7. MAKE SURE that all previous cost report audit adjustments (if applicable) are incorporated into this cost report. If you wish to protest the prior year adjustments, you must remove amounts from the cost report and add them to the protested line on the cost report. Also, include the details and computations of the program effect of protested items.
8. ENCLOSE THE CMS 339 with all applicable attachments. Staple the attachments to the CMS 339 and cross-reference each attachment to the specific question in the CMS 339. You must use the official version of the form, or one approved by CMS from your vendor. Do not submit typed or non-approved automated versions of the CMS 339.
9. SEND IN THE COST REPORT BY OVERNIGHT MAIL. This will ensure that it arrives and has been received. If using other than the United States Postal Service please allow additional time. The Intermediary is not allowed to accept a sending date other than a postmark date from the ISPS. For other than USPS they will use their receipt date for the date of your mailing.
10. ENSURE the certification page of your cost report, the ECR fingerprint certification page; the CMS 339 is signed with an original signature from an officer of your facility.
Copyright © 2009-2010 Boyd and Nicholas, Inc. All rights reserved.
A highly respected member of the home care community, Tom Boyd is a nationally recognized expert in the field of home health and Medicare reimbursement. Mr. Boyd is one of two principals at Boyd & Nicholas, a leading financial consulting firm serving home health and hospice organizations nationally. With expertise in cost report preparation, financial analysis, due diligence, accounting, and more, Mr. Boyd contributes his knowledge to industry conferences, associations and publications. Prior to founding Boyd & Nicholas, Mr.Boyd served as an intermediary auditor for more than eleven years and worked for another national consulting firm from 1989 to 1993. He has a BA in Management/Accounting from Sonoma State University and a MBA in Business Administration from St. Mary's College. He is a member of the HHFMA Workgroup, the Association of Certified Fraud Examiners and the U.S. Chess Federation.
For more on Boyd and Nicholas, Inc., go to www.boydandnicholas.com.
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