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Medicare Cost Reports: A Strategic Tool for Critical Access Hospitals

Critical Access Hospitals (CAHs) as a group face unique financial challenges. They tend to report lower operating margins than general acute care hospitals. Lower patient volumes, the health and socio-economic status of rural residents, and many other factors beyond the control of the hospital contribute to this. 

In order to maintain financial stability and continue providing quality services, it is important that CAHs examine the various reimbursement opportunities available to them. One such opportunity is the Medicare cost report. Often seen as just a required reporting mechanism, the cost report is actually a strategic tool that can be used to ensure that your facility is receiving the optimal reimbursement it is entitled to. 

Accurate tracking and reporting of charges, costs, and statistical allocations are crucial in determining the current year reimbursement and future interim payment rates. CAHs must be diligent in tracking charges and costs to allocate them properly and avoid leaving money on the table. Additionally, patients pay 20% coinsurance on outpatient billed charges, so it is important to avoid overcharging, as it could result in patients paying a large portion of the bills themselves.

Changes in budget and spending also have a significant impact on reimbursement. CAHs should model the reimbursement for any operational changes they are considering, taking into account the potential impact on future payment rates. However, this should not be the sole consideration, and CAHs should take into account other factors as well.

CAHs receive cost-based reimbursement for services rendered to Medicare beneficiaries. Many state Medicaid programs also reimburse on a cost basis with most Medicare Advantage Plans, piggybacking on traditional Medicare CAH interim payment rates. It is important that hospitals understand the cost-based reimbursement system and how it impacts their facility. Additionally, CAHs should ensure they are getting at least cost-based reimbursement on Medicare Managed Care contracts

Auditors are scrutinizing Medicare bad debts reported on the cost report, and CAHs must have an internal audit collection policy in place, with specific responsibilities outlined in agreements with collection agencies. 

Lastly, CAHs should not overlook the importance of reviewing their prior-year cost reports for amendment or reopening opportunities. Having a third-party review your data to assess for any additional revenue opportunities can lead to a financial win for your hospital. Often, these assessments are performed on a contingent basis, so the cost to your facility is minimal. It is also important to obtain copies of all papers from cost report preparers and keep them for at least five years for record-keeping purposes.

Ensuring the accuracy of your Medicare cost reporting is essential for CAHs as they work to maintain their financial stability. Be sure that your facility is taking the necessary steps, reviewing for proper tracking, reporting, and allocation of charges and costs, and that you take into account the impact of changes on reimbursement. By following these guidelines, CAHs can avoid leaving money on the table and ensure they receive the optimal reimbursement possible.
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Caren Puvalowski, CHFP is the Rural Healthcare Reimbursement Manager for The Rybar Group. She offers expertise in the area of Rural Hospital financial, accounting, revenue cycle and reimbursement experience. 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.  

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