4Understanding the Breakdown of the Cost Report and the TFC Role

Cost Center I: Understanding the Cost Report and the TFC Role

Alexsandra (Alex) MullinDirector of ReimbursementFor the Health SystemUT Southwestern Medical CenterAndWilliam (Bill) VaughanPrincipal, Health Systems Concepts, Inc.

TFCA Workshop October 21st - 23rd , 2009

*The cost report is the only mechanism to determine Medicare reimbursement for organs.Organ acquisition is reimbursed at cost.The managed care industry uses the data as a benchmark.Getting it right on the cost report gives everyone useful information in transplant

Why, Why, Why Must I Understand the Cost Report?

*Medicare Reimbursement of Transplant Services at Every Stage

StageDescriptionReimbursement

Phase IPre- Transplant Evaluation, Listing, Maintenance, OrganCost Based Phase IITransplantDRGPhase IIIPost Transplant & MonitoringAPC, Fee Schedule, DRG

*What Exactly Does Medicare Pay For at Cost?Program cost and time spent evaluating all patients referred to the center for transplantProgram cost and time listing, managing and maintaining patients on transplant waiting listAll ancillary testing and physician services needed to make an adequate decision on potential recipients and living donorsAll expenses necessary to obtain the organAll expenses necessary in harvesting organs at your facility regardless of whether or not one of your patients becomes the recipient

Does that Mean Carte Blanche Spending?Costs need to be reasonable and necessary in the delivery of patient care.Remaining competitive in the market dictates we must remain frugal about how we spend money.We must have policies and procedures in place that explain the need for the costs especially ancillary services testing.We must ensure that the cost is related to evaluation & management of the patient and the organ procurement during the pre-transplant phase.*

Whats Reasonable and Necessary in Pre-Acquisition Cost? Salary & Benefits for Pre-Transplant time/ servicesTissue Typing/ HLA costAll potential recipient evaluation & testing All living donor evaluation & testingProfessional meetings & membershipsSpace & office cost for pre-transplant servicesOPO Organ Acquisition CostsOPTN new patient registration feesSquare footage for pre-transplant spaceDonation related complications of a living donorCosts to administer the transplant programs according to licensing, certification and regulatory requirements*

Whats Not Allowed in Pre-transplant?*

ItemHow will it get covered?

Medical intervention for the donor or recipient during evaluationThis service is billable to patients payor following an pre-authorization processTravel & Housing for living donorThis is between the donor & recipientPost transplant care of recipientThis service is billable to patients payor following an pre-authorization process

Routine post transplant care of the living donorThis service is billable to patients payor following an pre-authorization process

Salary, benefits & program exp. involving post transplant activityThese costs are covered under the services billed for this activity.Marketing CostNot covered/not allowed at allRecipients DrugsBillable to payor until coverage runs out, then not covered/ not allowed at allWrite off of evaluation chargesThe evaluation charges are covered when their cost is computed in D 6 Part I of the cost report

What is a Cost Center?According to CMS PRM 15 2302.8, a cost center is: An organizational unit, generally a department or its subunit, having a common functional purpose for which direct and indirect costs are accumulated, allocated and apportioned.

Generally a cost center involves:Space where the service is provided.Involves staff dedicated to provide the service within that spaceIs a service which reports to hospital management and subject to facility policies. *

What Expenses Are In An Organ Cost Center?Salaries & Benefits of program personnelOPO costs and other organ direct costsHLA /Tissue TypingPurchase services expenses (such as physician evaluation, outside ancillary testing)Dues and other charges from UNOS for participating in the OPTNMedical Director ExpensesIncidental expenses involved in taking care of the patient such as office supplies, telephone, freight, equipment and/or space rentals, repairs & maintenance, staff education, etc.

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Organ acquisition is one of the very few services left that are reimbursed at cost on the Medicare cost report.The transplant programs involvement with a patient transcends through three different payment stages in the transplantation process.Special Analysis and cost redirection must occur in order to report pre-transplant and organ acquisition costs on the cost report.

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CMS Expectations of Hospital AccountingThe hospital has an accepted method for allocating cost correctly to the different areas of service within a transplant program. Time studies are the accepted method for cost allocation in the absence of dedicated personnel and services.Proper analysis of any amounts reported in the cost report as being pertinent to the providers operations and allowed under the Medicare program as a service related to the care of patients.Any information included in a Medicare cost report is subject to audit including non-ledger items such as statistics and the financials/ledger of anyone providing/ selling services to a Medicare Provider.*

Other Organ Acquisition ExpensesOther Ancillary Services, Donor Stays, HarvestsThese are not included in the organ cost center but they get added to the organ cost through a cost report analysis based on the charges for these services and the ratio of cost to charges of these different hospital areas. For the room & board the formula is based on the cost per patient day. (D-6 Parts I & II)

Indirect/ Overhead CostsThese costs are added to the direct expense of the organ cost center based on statistics that adequately demonstrate the use of the cost. (Example: Admin & general oversight, Cafeteria, Medical Records, Nursing Admin, etc. (D-6 Part III Line 51, w/organ direct expense)*

*Sample D-6 Part I Computation of Organ Acquisition Costs (Inpatient Routine and Ancillary ServicesKIDNEY Computation of Inpatient Routine Service Costs Applicable to Organ AcquisitionRoutineCr LocPer-DiemOrgan CostChargesD-1Cost D-1Acq Days (Col 3x4) 1. 2. 3. 4. 5.Adults & Pediatrics7,30038. 716.24107,162ICU1,80043.1,445.41 11,445Total9,100118,607

Computation of Ancillary Service Cost Applicable to Organ AcquisitionRatio ofOrgan Acq.Organ Acq.Cost/ChargesAnc ChargesAnc. Costs 1. 2.3. (Col 1x2)4. Operating Room37..538023 70,086 37,7085. Recovery Room38..625307 2,225 1,3916. Radiology Diagnostic41..146996 318,369 46,799..Total1,885,283378,509

Sample D-6 Part III Summary of Cost and Charges*

List of Transplant DRGs*

DRG NumberDescriptionDRG WeightUnadjusted Base Pymt1HEART TRANSPLANT OR IMPLANT OF HEART ASSIST SYSTEM W MCC24.8548 $ 139,618.61 2HEART TRANSPLANT OR IMPLANT OF HEART ASSIST SYSTEM W/O MCC11.754 $ 66,026.57 5LIVER TRANSPLANT W MCC OR INTESTINAL TRANSPLANT10.1358 $ 56,936.54 6LIVER TRANSPLANT W/O MCC4.7569 $ 26,721.27 7LUNG TRANSPLANT9.4543 $ 53,108.30 8SIMULTANEOUS PANCREAS/KIDNEY TRANSPLANT5.0615 $ 28,432.32 9BONE MARROW TRANSPLANT6.5419 $ 36,748.27 10PANCREAS TRANSPLANT4.2752 $ 24,015.38 652KIDNEY TRANSPLANT2.9736 $ 16,703.81

Questions?*