Cost Report 101 – It’s Not Just for Accountants

Cost Report 101 – It’sNot Just for Accountants

1970s 1980s 1990s1960s 2000s

1968 – Uniform Anatomical Gift Act(revised 2006)

1984 – NOTA (revised 1988 & 1990) Final rule 2000

1991 – Medicare coverage for liver

1972 – Medicare Benefits extended to ESRD patients

1987 – Medicare coverage for heart

2007 - Medicare conditions of coverage for participation for transplant centers

Cost Report 101:

History of Transplant Related Legislation

1999 – Medicare coverage for pancreas

1995 – Medicare coverage for lung

2001 – Medicare coverage for intestine

1956 – Social Security Act

CMS

• Conditions of Participation• Reimbursement

• DRG• Cost report• Physician

Cost Report 101:

What is the Medicare Cost Report and Why does it exist?

• It is how hospitals who serve Medicare beneficiaries report costs to CMS

• It exists so that my friend who is a Congressman and my nephew who is an accountant always have jobs

What is the Medicare Cost Report and Why does it exist?? (Real Answers)

• Established in 1965 with the Social Security Act• Intended to pay hospitals for the cost of providing services to Medicare beneficiaries

• Became less important when CMS adopted the PPS method of reimbursement

• All Medicare participating hospitals submit once a year (in general)

What is the Medicare Cost Report and Why does it exist??

• Establishes cost to charge ratio and wage index• Outlier payments• PPS geographic adjustments

• Enables hospitals to recover some costs (settlement):• Medicare Bad Debts• Critical Access Hospitals• GME• Disproportionate Share reimbursement• AND organ acquisition costs on the D 6 Worksheet• Medicare secondary payments

So what is this “pass-through” talk about ?

• Hospitals “pass-through” their costs to Medicare

• It also generally is meant that FULL COSTS are reimbursed

• It does not really work this way for transplant• Why? Because transplant costs are reimbursed by way of a Standard Acquisition Charge or SAC

What is a Standard Acquisition Charge (SAC)

• Not a charge representing the cost of a specific organ but a charge

that represents the AVERAGE cost associated with acquiring that type

of organ

• All-inclusive (direct & indirect)

• Includes physician services up to the admission to the hospital for

donation

• Medicare settles with the transplant hospital for its share of the costs5

Standard Acquisition Charge

All organ-specific acquisition costs

# of organs transplanted=

organ SAC for your institution

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This is a COST not a CHARGE

The actual charge on the patient’s bill is usually marked up (so this is a CHARGE not a COST)

WHAT? It is a called a charge but it is really a cost?

I am confused!

• Join the club….• Remember the Cost Report establishes the Cost to Charge Ratio – so the CHARGE is reduced to cost with the ratio

WAIT? Don’t OPOs have a SAC also??

• YES – and it works the same way

• You record the OPO SAC on your

cost report5

WAIT? What do I put on the Patient’s Bill? Isn’t that a SAC also?

• Well, yes but this SAC should be a charge

• Your full cost plus mark-up

• Medicare does not pay this but uses cost report to reimburse hospital

• Only relevant for “fee for services” or “discount off charges” payors

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So what kind of costs can I put on this cost report?

• Includes costs for acquisition of live donor and deceased donor organs

• Allowable transplant center organ acquisition costs include:• Salaries of staff• Rent associated with acquisition activities• Procurement related costs – the OPO SAC• Procurement related costs – your costs (transportation, etc)• Evaluation testing - facilities fee and professional fees• UNOS registration fees• Tissue typing, including by an independent laboratory• Costs associated with professional and patient education

(pre)

• Allocate costs correctly•Separate Cost Centers•Disease Management vs. Evaluation• Pre vs. Post transplant

• Assign Costs to Recipients• Reasonable Costs• Special Considerations

•Time studies•Physician reimbursement•Live Donors

Transplant 101:What’s MY Role?

How do the costs get to the Cost Report?

Cost Report

Immunology Testing

EVALUATION TESTING

OPO SACs

Acquisition Cost Center

What’s MY Role? Allocating Costs

Cost report

Professional fees

Procurement

Evaluation testing

Cardiac Catheterization

Disease Management

TB Treatment

Hepatitis C

treatment

Vascular Access

Care

Now WHERE

should this go?

Cost Report

Immunology Testing

EVALUATION TESTING

OPO SACs

What’s MY Role? Assigning Costs

UNOS Registry Fee

This belongs to

John Smith

What’s MY Role? Reasonable Cost• WHAT does that mean?• For costs incurred at your facility, it means full cost as determined by your cost report

• For costs that you pay others for on behalf of your recipient, it is whatever you paid

• Generally, this is interpreted as Medicare participating rate BUT not necessarily

• Key is consistency

Physician reimbursement:• Reasonable Cost

- Use hourly practice rate OR benchmark (AAMC)

• Must be for evaluation services only• Medical directors:

- Job description with evaluation duties- Must report actual hours – time studies

• Evaluation services:- Must be able to identify a specific service

given to a specific patient-Examples: Selection Committee, patient visits, consultation to RNs

• No provider services once recipient OR live donor enter hospital for transplant event

What’s MY Role? Reasonable Cost – Physician Payments

Accounts Payable – Payment policy

What’s MY Role? Reasonable Cost

• Time Studies

Name of PA:     Month: February 2006

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

    1 2 3 4

    Acquisition Acquisition Acquisition Acquisition

    Hours: 0 Hours: 0 Hours: 6 Hours:

    Non-Acquisition Non-Acquisition Non-Acquisition Non-Acquisition

    Vasc Access Hours: Vasc Access Hours: 5

Vasc Access Hours: 2 Vasc Access Hours:

    TX Recipient

Surgery Hours:

TX Recipient Surgery Hours:

TX Recipient Surgery Hours:

TX Recipient Surgery Hours:

    Non-TX Surgery Hours:

Non-TX Surgery Hours: 3

Non-TX Surgery Hours:

Non-TX Surgery Hours:

    Floor Coverage Hours:

Floor Coverage Hours:

Floor Coverage Hours:

Floor Coverage Hours:

What’s MY Role? Salaries

• Should I record costs that are related to recipients with commercial payors?

• Should payor mix be considered in overall cost report strategy?

• What about KPD? How does that work?

What’s MY Role: Management Strategies

• Should I record costs that are related to recipients with commercial payors?

• YES!!!!!• Medicare settles for their share of the acquisition costs

• So if you ONLY record Medicare recipients'’ costs what is going to happen?

What’s MY Role: Management Strategies

Little Pie BIG Pie

• Should payor mix be considered in overall cost report strategy?

What’s MY Role: Management Strategies

• Donor should not incur any hospital or physician costs

• All hospital and physician costs follow the recipient

• Payors generally follow CMS lead

What’s MY Role? Live Donors General Principles

• Donor Evaluation:• Facility Costs – recipient center cost report• Professional Fees – recipient center cost report

• Donor Hospitalization:• Facility costs - recipient center cost report• Professional fees – recipient Medicare part B• Live donor transportation and housing not allowable

• After Donation:• Routine follow-up• Complications must ALL be billed directly (NOT cost report)• Physician unchanged

What’s MY Role? Live Donor

Departmental charges

Standard Acquisition

Charge (SAC)

CMS preferred

Donor Costs Can Be Recorded

in 2 ways

What’s MY Role: Special Considerations in KPD

Standard Acquisition Charge – PDE

All live donor costs (donor only NO recipient costs)

# of live kidneys successfully donated=

live donor SAC for your institution

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What’s MY Role: Special Considerations in KPD

Differences in overhead could cause difficulties in PDE

How are “extra” costs treated ( i.e. recipient center requests additional tests in PDE)?

Isolating donor costs may represent new administrative processes for some centers (PDE)

Disadvantages of SAC

Maximizes CMS reimbursement

Provides for costs in pre-emptive,not yet on Medicare

Eliminates questions of when individual donor costs were incurred

Dilutes issues of multiple donorsfor a single recipient, etc…

Can be transparent between centers as soon as match is made (PDE)

What’s MY Role: Special Considerations in KPD

Advantages of SAC

Departmental Charges

• Itemized bill for costs associated with a specific donor for a specific recipient can be billed to the recipient transplant center

• Transplant centers must bill SAC to Medicare or third-party payors for organs acquired and transplanted

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What’s MY Role: Special Considerations in KPD

Departmental Charges

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SAMPLE INVOICE

Name: Sally Jones Patient ID #: 99999999

Address: Any town, USA 99999

Transplant donor evaluation and acquisition services for recipient:

Name: Lucky O’Malley HI #: 00000000

Address: Big Transplant Center, USA 99999

Tissue Typing

Chest X-ray

EKG

Chem 20

CBC

Operating room minutes, etc…

What’s MY Role: Special Considerations in KPD

May reduce reimbursementopportunities from Medicare

Adds complexity in determining when/which donor costs should be Included in PDE

Assigning overhead may represent new administrative processes for some centers (PDE)

Disadvantages of DC

Maximizes commercial Reimbursement

Allows for exact costing of the specific donor in PDE

What’s MY Role: Special Considerations in KPD

Advantages of DC

• Provider Reimbursement Manual 2771.A

• Medicare Claim Processing Manual Publication 100-04, Chapter 3, Section 90.1.1 – 90.1.3

• Program Memorandum 9-26-2003

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CMS Reference Documents

I Don’t Believe You – Who else can I talk to ?

QUESTIONS?

Cost Report 101: