Critical Access Hospital Reimbursement Myths and Facts

Critical Access Hospitals (CAHs) have a very important and challenging role in providing accessible healthcare to rural Americans. With the COVID Public Health Emergency officially ending, we are beginning to recognize a new normal. Accurately maximizing reimbursement is critical to maintaining services and hospital operations.

CAHs receive cost-based reimbursement with the Medicare cost report. Although this method has been a lifeline to several rural hospitals across the country, it has also led to some reimbursement misunderstandings. Below are a few of the many cost-based reimbursement myths.

MYTH: A year-end Medicare cost report payable is a bad sign.

FACT: It is important to have been planning for the payable and not be surprised.

Make sure you understand the “why” behind the payable. Is it explainable? A cost report payable could mean expenses were lower or volume was higher – both good operational reasons. Interim cost reports are crucial to being prepared and not surprised with a year-end payable for both a cash and income statement impact.

MYTH: As a CAH with 101% Medicare cost reimbursement, you won’t lose money on your Medicare patient services.

FACT: At 101% reimbursement, you will not break even financially.

Due to the 2% sequestration, your absolute best would be 98.98% approved Medicare cost reimbursement. There are also many essential costs that are not allowable, which further reduces the reimbursement.

MYTH: With the new provider-based Rural Health Clinic (RHC) payment rates, the M-series worksheet of the Medicare cost report is not as important as it was before 04/01/2021.

FACT: Your provider-based RHC reimbursement could still be impacted by several factors.

You will receive the lower of your cost report calculated rate or your approved cap. Accurately reporting your RHC provider FTEs, clinic visits, vaccine costs, and bad debts will ensure you are receiving the correct reimbursement.

MYTH: Medicare HMO companies reimburse the same as traditional Medicare.

FACT: Medicare HMO companies have their own contract language.

In some areas of the country, the Medicare HMO payor mix has exceeded the traditional Medicare payor mix. Medicare HMO companies pay claims generally based on your Medicare interim rate letter. Know who you are contracted with and what the contract terms are. Also, be aware of what patient services require pre-authorization.

MYTH: If we need to cut expenses, it doesn’t matter which department because the financial impact would be the same.

FACT: Depending on the service line, the bottom-line impact could be considerably different.

It is very important to model all operational changes to see the cost-based reimbursement impact. This should not be your only consideration. Remember to use the cost report as a strategic tool to review the impact on operational finances.

MYTH: Our charge structure doesn’t matter because we will receive the same reimbursement for Medicare patients regardless of our charges.

FACT: Your actual reimbursement for Medicare patients can be different based on your charge structure.

Generally, Medicare outpatients are responsible for 20% of billed charges. The higher your charges, the more the patients are responsible for paying. There are several important factors to consider when looking at your charge structure, including the reimbursement from other payors.

MYTH: Amending or reopening a cost report would subject us to an additional review and is not worth it.

FACT: Although it can take time, amending or reopening a cost report is an appropriate process when more accurate information is available.

With no new additional funding on the horizon, now is a good time to review prior year opportunities that could impact your current year reimbursement and carry forward to also impact future years. A third-party review of your cost report, usually performed on a contingent basis, can help assure your facility is receiving the optimal appropriate reimbursement.

As CAHs, ensuring the accuracy of your Medicare cost report and understanding your operational impact on your reimbursement is essential to maintaining accessible healthcare services to the nearly 20% of Americans that live in rural areas.

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Caren Puvalowski, CHFP is the Rural Healthcare Reimbursement Manager for The Rybar Group. She offers expertise in the areas of Rural Hospital finance, accounting, revenue cycle, and reimbursement services. Her hands-on experience working in a variety of roles in the finance departments of CAHs, including multiple years as a Chief Financial Officer, allows her to identify both present and future reimbursement and payment opportunities.

Reach out to Caren for more information regarding cost report and other reimbursement opportunities for CAH. She can be reached at 810-853-6185 or via email at cpuvalowski@therybargroup.com. 

Focusing exclusively in the healthcare arena, The Rybar Group brings in-depth industry knowledge to help clients create solutions designed to identify opportunities for revenue generation, isolate root causes for underperformance, accelerate cash in the door, and support long-term margin improvement. The Rybar Group does not dabble in reimbursement and revenue cycle solutions; we specialize in it.