Accurate Cost Reporting Key for Hospice Reimbursement

As hospice providers await the U.S. Centers for Medicare & Medicaid Services (CMS) final rule that will indicate payment rates and regulatory requirements for 2020, experts are warning hospices to make sure that they are submitting accurate cost reports to the agency.

The U.S. Centers for Medicare & Medicaid Services (CMS) in late April released its annual proposed rule that outlines the agency’s regulatory priorities for hospice in the coming year, including payment rates. The rule called for a 2.7% cut in routine home care payments and a corresponding 2.7% increase in payments for continuous home care, general inpatient care, and inpatient respite care. CMS proposed the increases because the current reimbursement rates for those three levels of care tend to be less than the cost to hospices for providing those services.

According to the Affordable Care Act, Medicare payment increases must be budget neutral, requiring CMS to compensate for any increases with comparable cuts in other areas, leading to the proposed reductions for routine home care. If the rule becomes final, the per diem routine home care rate would fall to $195.65 per patient in FY 2020, down from the 2019 rate of $196.21. CMS will likely publish the final version of the rule before Aug. 1.

A key factor that CMS uses to calculate payment rates is cost report data. The agency requires most Medicare-certified health care organizations, including hospices, to submit these reports annually. The reports include information such as facility characteristics, utilization data, cost and charges by cost center, Medicare settlement data and financial statement data. CMS maintains the cost report data in the Healthcare Provider Cost Reporting Information System (HCRIS). For hospice the cost report template includes four worksheets, each corresponding to one of the levels of care.

“What they are trying to do is better match cost of care to payment rates, so I think when you look at it from that perspective there is more equity to it, because what you had before was routine home care was subsidizing [hospices’] inpatient costs, because you were losing money on inpatient care,” David Macke, director of reimbursement services for VonLehman CPA & Advisory Firm, told Hospice News.

With CMS including cost reports in its payment rate calculations, the quality and accuracy of a hospice’s cost report data can have a significant influence on how much they get paid. However, producing accurate reports has proved challenging for a significant number of hospices.

“It’s very common that a large percentage of cost reports cannot be used because of their obvious lack of accurate data. We have to have accurate cost reports and, looking at it from CMS’ side, all they have is what we give them, and what we give them impacts what we get back,” said Melinda Gaboury, CEO of Healthcare Provider Solutions, during a session at the National Association for Home Care and Hospice (NAHC) Financial Management Conference in Chicago. “We have to give them accurate cost reports.”

Due to the accuracy issues, industry observers have questioned the agency’s use of cost reports in calculating per diem payment rates. The National Hospice & Palliative Care Organization (NHPCO) raised concerns about this in its comments to CMS about the proposed rule, saying that the number of cost reports in the sample is too small and not sufficiently representative of the industry. NHPCO also recommended that the agency use two or more years of cost report data rather than a single year.

The organization is not alone in these concerns. NAHC and other stakeholders have expressed similar reservations.

“We are not too confident that the cost report data that they used was accurate enough to support significant changes to [hospice payment] rates, and we are not too confident that the sample of cost reports that they used was not large enough to support these changes,as well as not enough years of cost reports to validate that data,” Gaboury said.

Key factors in ensuring the accuracy of cost reporting includes ensuring that costs, including payroll costs, are allocated to the correct cost centers, or else the numbers the hospice sends to CMS will not reflect actual per diem costs.

“Some providers don’t see the direct benefit to them, but people should be as diligent as possible and treat cost reporting as a priority, because it does affect the future,” Macke told Hospice News. “We are now seeing the first effects of that from the first year of care-level cost reports. You want to try to be as accurate as possible because it affects future payments. If it’s not a pure one-to-one match, it could affect the overall per diem.”