As we approach another major cost report due date, 6/30 year-ends are due on November 30, 2023, it is important to consider the impact that your initial Medicare cost report filing will have on subsequent reporting for Medicaid supplemental payments. Per federal guidelines, payments received by healthcare providers from Medicaid cannot exceed the calculated cost of providing services to Medicaid and uninsured patients. Any payments received in excess of the calculated costs must be recouped from the healthcare provider. The cost of providing services to Medicaid and uninsured patients is calculated by multiplying the charges associated with the provided services by the ratio of costs-to-charges for the provided services (i.e., cost-to-charge ratio). The most common mechanism for determining the cost-to-charge ratios is the Medicare cost report.
Typically, the Medicare cost report is filed five (5) months after the year-end and the corresponding Medicaid supplemental payment review, is not completed until the subsequent year. As a result, there can be a disconnect between the preparation of the Medicare cost report and the impact that it will have on the Medicaid supplemental payments – and for PPS hospitals, the cost-to-charge ratios may be an after-thought as the preparer scrambles to compile the extensive data required for Worksheet S-10 Uncompensated, Medicare Disproportionate Share Hospital (DSH), and Medicare bad debt reporting (we have all seen the new required templates included in Transmittal 18 published by CMS in December 2022).
What can hospitals do in their Medicare cost report filing to be better prepared for the subsequent Medicaid DSH Survey?
Similar to the allocation of charges to Medicare Part A and Part B patients (obtained from the PS&R Summary Report), it is important to compile the charges, by revenue code, for services provided to Medicaid and uninsured patients and assign to the appropriate cost center, using the same methodology used for Worksheet C total patient charges. After charges have been assigned, it is important to analyze the cost centers with significant allocated charges to determine whether the cost-to-charge ratio has been optimized. Start with the following:
- Review working trial balance groupings to ensure that departmental expenses and revenues are allocated consistently.
- Review reclassifications from one cost center to another on Worksheet A (expenses) and/or Worksheet C, a similar reclassification must be considered for the corresponding expenses and/or revenues.
- Review Worksheet B-1 statistics to determine whether the statistics are current and accurately capture the allocation of overhead costs – if it is determined that direct assignment, cost center fragmentation, or a change in statistical basis is needed, a request can be submitted for the subsequent year (written request must be submitted no later than 90 days prior to the end of the cost reporting period in which it is to apply).
Completing Steps #1-3 prior to the filing of the Medicare cost report will help ensure that you are receiving and retaining the optimal amount of Medicaid supplemental payments.
Jesse C. Parker, CPA is the Director of Reimbursement at The Rybar Group. He has been instrumental in obtaining additional Medicaid enhanced reimbursement for providers throughout the country.
Reach out to Jesse to learn more about the Medicaid programs and the related reimbursement opportunities. He can be reached at 989-387-1766 or via email at jparker@therybargroup.com.