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Michigan Primary Care Association

Medicare FQHC Cost Report Training

Presented by: Michael B. Schnake, CPA, CGFM

August 23, 2012

Presentation PreludeIn order to remain financially viable, health

centers must consistently capture available revenues from services provided to all patients, including Medicare beneficiaries

Understanding and completing the Medicare FQHC cost report timely and accurately is important to maintaining Medicare program revenues and cash flow

Presentation PreludeBureau of Primary Health Care (BPHC) Key Health Center

Program Requirements includes expectation that health centers “maximize collections and reimbursement for costs”

Policy Information Notice (PIN) # 98-23 includedguidance noting “health centers must participate in favorable enhanced or cost-based reimbursement programs for which they are eligible”

HRSA Program Assistance Letter 2011-04: “Process for Becoming Eligible for Medicare Reimbursement under the FQHC Benefit”

Presentation PreludeHealth care reform legislation mandates a

transition from the current Medicare FQHC cost-based reimbursement system effective for cost reporting periods beginning on or after October 1, 2014

Medicare Prospective Payment System planning considerations

Presentation PreludeCMS Transmittal 10 dated November 2011 revises

the Medicare FQHC cost reporting form, Form CMS 222-92, for cost reporting periods that overlap or begin on or after January 1, 2011

More detail later in the slide show

CMS has revised the PS&R information that is available to health centers

Make sure you have current software for cost report filing (the Medicare program no longer provides a free software option)

Today’s AgendaWhy focus on Medicare?

Medicare FQHC enrollment considerations

Understanding the Medicare FQHC cost report

Walkthrough of Worksheet S

Today’s AgendaWalkthrough of Worksheet A

Walkthrough of Worksheet A-1

Walkthrough of Worksheet A-2

Walkthrough of Worksheet A-2-1

We’ve completed Worksheet A –where does this information go?

Today’s AgendaWalkthrough of Worksheet B, Parts

I & II

Walkthrough of Worksheet B-1

Walkthrough of Worksheet C, Parts I & II

Medicare FQHC Cost Reporting Mistakes – Top 10

Today’s AgendaMedicare Advantage Matters

Medicare Cost Report Potpourri

Final Thoughts

Why Focus on Medicare?

Environment Issues The Medicare program, while small as a percentage

of overall health center patient related revenues, is an important third-party payer of services (generally the second best payer after state Medicaid)

Payer mix goal for community health centers

Maintain and/or grow the percentage of Medicare beneficiaries served

Traditional Medicare beneficiaries and Medicare managed care plan beneficiaries

Reimbursement Issues –Medicare Parts A & B Medicare FQHC cost-based reimbursement is

applicable to FQHC-core services only Medicare FQHC reimbursement is based on

a per-visit rate subject to an upper payment limit (the “cost cap”) 2012 rural limit - $109.90 2012 urban limit - $126.98

Services provided by core service providers are paid based on a per-visit methodology

Reimbursement Issues –Medicare Parts A & B Medicare covered services outside of FQHC-core

services

Services such as laboratory; technical component of diagnostic tests such as radiology and EKG; and the technical component of many preventive services (such as pap smears and prostate cancer screenings)

Reimbursement made on the basis of applicable Medicare fee schedules without regard to the health center’s cost of providing such services

Reimbursement Issues –Medicare Parts A & B Medicare covered services outside of FQHC-

core services (continued) Important to compare health center charges

for covered services to the Medicare fee schedule amounts (charges should generally be set at or above the approved fee schedule amounts – annual review necessary)

Reimbursement Issues –Medicare Parts A & B Many services are not eligible for

reimbursement under Medicare Parts A & B

Dental

Pharmacy

Other

Reimbursement Issues –Medicare Parts A & B Medicare reimbursement for FQHC-core services

ultimately determined through submission of Medicare FQHC cost report Final Medicare program payment based on 80% of

defined Medicare cost determined from the cost report

Medicare beneficiary copayments are based on 20% of covered charges

No reconciliation process for services reimbursed based on a Medicare fee schedule

Common Myths of Medicare FQHC Cost Reporting & Reimbursement I followed the prior year cost report - it must be

right The cost report can’t be complex – there are not

too many pages I’m over the cost limits - it really doesn’t matter

how the cost report is prepared There is no need to challenge intermediary

proposed adjustments if the final settlement is not significantly changed

Medicare FQHC Enrollment

Considerations

FQHC Certification Issues Receiving Section 330 grant funding, Look-Alike

designation or approval of a BPHC change in scope to add a site

Establishes eligibility to enroll in Medicare as an FQHC

Does not initiate the Medicare FQHC enrollment application

FQHCs are considered “institutional providers”

FQHC Certification Issues Underlying issues of importance

Regulations require site-by-site certification

Medicare approval granted on a prospective basis

Failure to get it right will likely impact your health center negatively

FQHC Certification Issues Certification process involves the Centers for

Medicare & Medicaid Services (CMS) & intermediary/MAC

Provider enrollment application (CMS 855A)

New application fee per each enrollment application effective March 23, 2011

Calendar year 2012 fee of $523

FQHC Certification Issues Accurate & timely completion/submission

of CMS 855A should be a priority

Completion of CMS 855A can be very confusing - seek clarification of any uncertainties prior to submission

Proactive management of certification process a must for health center management

FQHC Certification Issues Common problems that have potential

significant negative financial implications Multiple sites utilizing one FQHC provider

number

Failure to decertify sites no longer in existence and/or utilized for health center activities

Word to the wise - get it right from the start

Current Issues Sites assigned to a MAC where “legacy” sites

remain with National Government Services (NGS)

MACs setting low initial interim rates

MACs requesting a cost report for an individual site (though the health center files a consolidated cost report)

Cash flow interruption while problem issues are resolved

Understanding the Medicare FQHC Cost

Report

Medicare FQHC Cost Report Keys to preparing an accurate Medicare FQHC

cost report include: Understanding the purposes of the Medicare

FQHC cost report Understanding Medicare reasonable cost

principles Maintenance of adequate tracking systems

within the health center’s financial reporting and practice management systems for proper data accumulation

Reimbursement Principles Application of Medicare Reasonable Cost

Principles Documented in 42 CFR part 413 Underlying principle Payments based on reasonable

costs must be necessary and related to the care of covered beneficiaries

Application of Medicare Reasonable Cost Principles Medicare Provider Reimbursement Manual

(CMS publication 15)

Provides guidelines & policies to implement Medicare regulations which set forth principles for determining the reasonable cost of provider services

Includes application of the prudent buyer principle as a means to investigate situations where costs seem excessive

Application of Medicare Reasonable Cost Principles Prudent buyer principle

A prudent & cost conscious buyer seeks to minimize cost

Amounts paid for costs incurred must be commercially reasonable

Provides intermediary discretion to exclude potentially excess cost (documentation is the key)

Purpose of the Medicare Cost Report Determination of reimbursable (Medicare allowable) cost

per visit Costs – concept of “cost buckets” (Worksheet A lines

noted) Direct reimbursable costs (lines 1 – 11, 13 – 15,

and 17 - 23) Direct nonreimbursable costs, including costs other

than FQHC (lines 51 – 56 and 58 - 60) Overhead costs

– Facility costs (lines 26 – 36)– Administrative costs (lines 38 – 48)

Visits

Purpose of the Medicare Cost Report Determination of Medicare program liability

Computed Medicare reimbursement less interim Medicare payments

Represents formal claim of reimbursement for FQHC services provided to Medicare beneficiaries during a cost reporting period

Generally filed on a consolidated basis (versus a site by site basis)

Example Assumptions Medicare allowed costs - $4,000,000 Total visits (as defined by Medicare) –

40,000 Computed cost per visit of $100 is less

than the cost limit What if visits were 25,000 and the

computed cost per visit was $160?

Walkthrough of Worksheet S

Overview of Worksheet S Worksheet is divided into three parts

Part I – Statistical data

Part II – Certification by officer or administrator

Part III – Statistical data for clinics filing under consolidated cost reporting

Walkthrough of Worksheet S Part I

Lines 1 – 4; Facility identifying information (name, address and provider number)

Line 5; type of provider (FQHC) and date certified

Line 6 – Source of federal funds

Walkthrough of Worksheet S Part I

Lines 7 & 8; physician information (not required to be completed now)

Lines 9 - 12; relevant if the facility operates as other than FQHC (line 9 requires an answer; lines 10 - 12 drive from the line 9 response)

Walkthrough of Worksheet S Part I

Line13; question regarding low or no Medicare utilization filing option

Line 14; question regarding consolidated filing option where health center organization has multiple FQHC approved sites (answer, if “yes”, drives completion of Part III)

Need to also indicate the number of sites included in the consolidated filing – excluding the main site

Walkthrough of Worksheet S Part II

Certification by officer or administrator – it is important for the person signing the cost report to read and understand the information being attested to

Compliance issue

Walkthrough of Worksheet S Part III

Complete a separate worksheet for each consolidated site that is in addition to the main site identified in Part I

Similar information as required for reporting in Part 1 (excluding the type of provider and source of federal funds)

Walkthrough of Worksheet A

Overview of Worksheet A Columns 1, 2, and 3 of Worksheet A report: Compensation costs Other costs Total costs

Total costs included in column 3 should reconcile with the audited financial statements Is general ledger detail sufficient for accurate

completion of Worksheet A (beyond column 3)?

Overview of Worksheet A Worksheet A, Column 4 provides a recap,

by cost center, of cost reclassification entries Total of column 4, line 62, should be

zero Worksheet A, Column 5 – Reclassified

Trial Balance Total of column 5, line 62 will equal

total of column 3, line 62

Overview of Worksheet AWorksheet A, Column 6, provides

a recap, by cost center, of cost adjustments entriesWorksheet A, Column 7 – Net

ExpensesColumn 7 expenses represent the

“beginning of the rest of the Medicare cost reporting story”

Trial Balance of Expenses Facility health care staff costs Provider and support staff salaries are

reported on lines 1 – 7, column 1 Line 8 – lab technician (lab costs are

reported on line 54) Line 1, column 2 (other costs) – report

contract physician costs, if any What about employee benefits?

Trial Balance of Expenses Costs under agreement (lines 13 – 15)

Contract physician services are reported on line 1, column 2 as discussed on the previous slide

Other contract provider costs (mid-level providers, etc.) are reported on lines 13 - 15

Trial Balance of Expenses Other health care costs (lines 17 – 23)

Medical supplies

Transportation – health care staff

Depreciation - medical equipment

Malpractice insurance

Continuing medical education

Minor medical equipment

Other

Trial Balance of Expenses Facility overhead - facility costs (lines 26 – 36)

Rent

Building insurance

Interest on mortgage

Utilities

Depreciation – buildings, fixtures & building equipment

Housekeeping and maintenance

Property taxes

Minor equipment

Other

Trial Balance of Expenses Facility overhead - administrative costs

(lines 38 – 48)

Office salaries, column 1

Depreciation – office equipment

Office supplies

Legal & accounting

Insurance (D & O, general liability, etc.)

Telephone

Trial Balance of Expenses Facility overhead - administrative costs

(lines 38 – 48)

Fringe benefits and payroll taxes

Miscellaneous (should not be significant)

Postage & other related office expenses

Travel and seminar

Trial Balance of Expenses Facility overhead - administrative costs

(lines 38 – 48)

Advertising costs

–Yellow pages

–Recruitment

–Promotional

Contract services

Dues and licenses

Trial Balance of Expenses Cost other than FQHC services

(lines 51 – 56) PharmacyDentalOptometry LaboratoryRadiology

Trial Balance of Expenses

Nonreimbursable costs (lines 58 – 60)

WIC

Non-FQHC approved activity

Other

Cost Classification Issues – Common Questions

Bad debt expense

Medical records and front office staff

Health education

Outreach activities

Reconciliation of reported costs to audited financial statements

Overview of Worksheet A - Questions

How do I get from Worksheet A, Column 3 to Worksheet A, Colum 7?What is the underlying Medicare

guidance that requires cost report reclassification and adjustments entries?What information should be

accumulated for this process?

Walkthrough of Worksheet A-1

Worksheet A-1 Purpose of worksheet

Provides for the reclassification of costs to effect proper cost allocation

Align costs into the correct cost center

Use where costs applicable to more than one cost center are recorded in the organization’s accounting records in one cost center

Worksheet A-1 Layout (format) of worksheet

Column for explanation of reclassification

Increase and decrease columns include

Reclassification entry code

Cost center identification (name and line number)

Amount by cost center name and line number

Worksheet A-1 Amounts entered on Worksheet A-1

must be equal in total for each reclassification entry (total cost center increases = total cost center decreases)

Summary totals by cost center transferred to Worksheet A, column 4

Total of column 4 should be zero

Reclassifications of Expenses Common examples

Fringe benefits

Depreciation

Insurance

Continuing medical education (CME)

Reclassifications of ExpensesCommon examples

Inpatient hospital costs

Medical director costs

Reclassifications of Expenses Fringe benefits costs

If fringe benefits costs are directly assigned within the organization’s accounting records, reclassification entry is not necessary

For combined (pooled) costs, reclassification entry needed to assign costs to cost centers with identified salary costs

Pro-ration method

Reclassifications of Expenses Depreciation costs

Medicare regulations require use of American Hospital Association (AHA) Depreciable Lives Guidelines for assets acquired on or after January 1, 1981

Straight-line methodology required

Costs must be reported for medical equipment; buildings & fixtures; building services equipment; office equipment; and, other (non-reimbursable cost centers, etc.)

Reclassifications of Expenses Insurance costs

For combined (pooled) costs, reclassification entry needed to assign costs to appropriate cost centers

Professional liability insurance – medical, dental, etc.

Property, plant & equipment insurance

General liability insurance

D&O insurance

Reclassifications of Expenses Continuing education costs

For combined (pooled) costs, reclassification entry needed to assign costs to appropriate cost centers

CME costs are reported on Worksheet A, line 21

Dental and other non-reimbursable cost center provider education costs are reported within the appropriate non-reimbursable cost center

General education costs are included within facility overhead – administrative overhead costs

Reclassifications of Expenses Inpatient hospital costs

For organization providers that perform work in a hospital setting, costs (salary and related fringe benefits costs) must be reported in a separate cost center (“costs other than FQHC services”)

Generally a reclassification of such costs must be made from health care services costs to the cost center line created within “costs other than FQHC services” for reporting of hospital costs

How is this reclassification amount calculated?

Reclassifications of Expenses Medical director costs

For organization providers that perform health care director services (medical, dental, etc.), such costs (salary and related fringe benefits costs) must be reported as a component of facility overhead – administrative overhead costs

Generally a reclassification entry is necessary

How is this reclassification amount calculated?

Reclassifications of Expenses Other possible cost reclassification issues

Salary costs

Costs of locations that are not approved as FQHC sites for the entire cost reporting period

Advertising costs

Pharmacy costs (costs of injectable drugs that are not self-administered)

Contract services costs (administrative versus medical versus non-reimbursable costs)

Other

Worksheet A-1 Points to remember when completing Worksheet A-1

Generally this worksheet will not be blank

No limit on the number of reclassification entries that can be reported

Consideration can be given to more detailed reporting in an organization’s accounting records to limit the number of reclassification entries needed

Cost center increases reported must equal cost center decreases reported

Walkthrough of Worksheet A-2

Worksheet A-2 Purpose of worksheet

Provides for the adjustment of costs which are required under the principles of Medicare reimbursement

Made on basis of cost (if available) or revenue received

Adjustments are generally made to reduce reported costs

Can have positive adjustments in certain fact circumstances

Worksheet A-2 Layout (format) of worksheet

Column for description of adjustment

Column to report basis of adjustment

Cost = A

Revenue = B

Amount of adjustment (cost decreases are shown as a negative number)

Worksheet A cost center impacted

Worksheet A-2 Summary totals by cost center

transferred to Worksheet A, column 6

Total of Worksheet A, column 6 should match the total adjustment amount reported on Worksheet A-2, line 12

Worksheet A-2 Types of items reported include

Adjustment (removal) of non-allowable costs from the cost report

Adjustment for revenues that constitute a recovery of costs through sales, charges, fees, etc.

Adjustment of expenses in accordance with the principles of Medicare reimbursement

Adjustments to Expenses Common examples – cost matters

Promotional advertising

Contract laboratory

Pharmacy cost of goods sold

Donated services (generally)

Adjustments to Expenses Common examples – cost matters

Indigent care/specialty referral expenses

Related party costs (see later slides)

Bad debt expense if reported on Worksheet A, column 2

Adjustments to Expenses Common examples – revenue matters

Offset of interest income to the extent of interest expense

Offset of miscellaneous income

Grants, gifts, and income from endowments are NOT required to be offset against expenses

Worksheet A-2 Points to remember when completing Worksheet

A-2

Generally this worksheet will not be blank

No limit on the number of adjustment entries that can be reported

Cost report preparer should have a solid understanding of Medicare reasonable cost principles, including application of the Provider Reimbursement Manual, in order to achieve appropriate reimbursement

Walkthrough of Worksheet A-2-1

Related Organization Costs Related organization defined in

Provider Reimbursement Manual -Part 1, Chapter 10

Relationship can be through common ownership or control

Worksheet A-2-1 Purpose of worksheet

Provides for the reporting of related organization costs incurred, if any

Related organization costs may include costs applicable to services, facilities and supplies furnished by the related organization

Worksheet A-2-1 Purpose of worksheet

Provides for the adjustment of related organization costs to the actual cost incurred by the related organization

Medicare reasonable cost principles require the elimination of related organization profit

In addition, allowable costs cannot exceed the cost of services, facilities or supplies that can be obtained from an unrelated party

Worksheet A-2-1 Layout (format) of worksheet

Worksheet includes Part I and Part II

Part I – Requires a “yes” or “no” answer as to whether any related organization costs are reported in the cost report

If “no”, do not complete Part II

Part II – Provides detail of related organization costs; type of relationship; total cost incurred; amount of cost includable in allowable cost; and, any required adjustment to total cost incurred

Worksheet A-2-1 Any required adjustment to related party cost

identified on Worksheet A-2-1 is reported on Worksheet A-2, line 6

Adjustment can be positive or negative (generally any such adjustment will reduce reported costs)

Does the organization’s audited financial statements report related party transactions?

Discussion of examples

Walkthrough of Worksheet B, Parts I & II

Visits and ProductivityOne of the most common problems in

Medicare FQHC cost reporting is the reporting of visits and health center productivity information – can have significant detrimental consequences

System issues

Lack of understanding of Medicare cost report definitions

Worksheet A Tie-In Upon completion of Worksheet A, column 7,

costs are located in the proper “cost buckets” for completion of remainder of the cost report Total allowable costs Adjusted cost per visit

Amounts reported on Worksheet A, column 7 flow to Worksheet B, Part II See later slides

Worksheet B, Part I Visits, for purposes of Medicare FQHC

cost reporting, have a specific definition

Face-to-face encounter between the patient and a defined provider (see next two slides)

Imperative to get the visit count correct (“scrubbed”) for accurate cost report completion

Worksheet B, Part I Visits & productivity information required to be

reported for:

Physicians (including contracted physicians providing services on a regular basis) – line 1

Physician assistants and nurse practitioners –lines 2 and 3

Visiting nurse – line 5

Clinical psychologist and clinical social worker –lines 6 and 7

Worksheet B, Part I Visits & productivity information required

to be reported for:

Medical nutrition therapist – line 7.1

Diabetes self management training –line 7.2

Physician services under agreement –line 9

Worksheet B, Part I Section 5114 of the Deficit Reduction Act of 2005

(DRA) expanded the FQHC definition of a face-to-face encounter to include encounters with qualified practitioners of outpatient Diabetes Self-Management Training (DSMT) services and Medical Nutrition Therapy (MNT) services

All relevant program requirements must be met for the provision of DSMT and MNT services

Applicable for Medicare beneficiaries with diabetes or renal disease

Worksheet B, Part I Column 1 - recap of full time equivalent

(FTE) personnel reported for each of the applicable staff positions in the health center

How are FTEs calculated?

Productive hours / 2,080

Worksheet B, Part I FTE calculation -

Productive hours defined as total paid hours minus:

Vacation

Sick leave

CME

Non-FQHC covered services

Administrative duties

Other

Example Assumptions

Full time physician – 2,080 hours paid (52 weeks X 40 hours per week)

Vacation of 80 hours

Holidays of 56 hours

CME of 16 hours

FTE would be reported as .93 (2,080 – 80 – 56 –16 = 1,928/2,080 = .93)

Worksheet B, Part I Column 2 - recap of total visits

actually furnished to patients by all personnel in the applicable staff positions during the cost reporting period

Remember the definition of an FQHC visit

Worksheet B, Part I Column 2 - recap of total visits

Visits exclude:

Nurse visits

Visits related to non-FQHC covered services (dental, non-FQHC approved sites, etc.)

Other program visits (WIC, etc.)

Worksheet B, Part I Columns 3 through 5 - productivity standard

calculation Physician - 4,200 visit productivity standard Includes contracted physicians providing

services on a regular basis Physician assistants and nurse practitioners -

2,100 visit productivity standard Calculation is cumulative, not line item specific Other defined providers – productivity standard

does not apply

Worksheet B, Part I Column 3 - productivity standard (pre-populated on

the cost reporting form) Column 4 – minimum visits (computed by

multiplying the number of FTE personnel reported in column 1 by the applicable productivity standard reported in column 3)

Column 5 – line 4 will report the greater of actual visits or

the cumulative productivity standard Lines 5, 6, 7, 7.1, 7.2 and 9 report actual visits

Worksheet B, Part I Information from column 5, lines 8 and

9 will carry forward to Worksheet C, Part 1, lines 4 and 5 for calculation of the health center’s adjusted cost per visitThis information is used in the

denominator of the adjusted cost per visit fraction

Example Staffing assumption Physician FTEs of 7.5 (x 4,200 visits =

productivity standard of 31,500 visits) Nurse practitioner FTEs of 2.5 (x 2,100 visits

= productivity standard of 5,250 visits) Combined productivity standard of 36,750

visits (31,500 + 5,250)

Denominator of cost per visit fraction is the greater of actual visits or 36,750

Worksheet B, Part II Determination of total allowable cost applicable to FQHC

services

Lines 10 and 11 carryover from Worksheet A, column 7, lines 25 and (lines 57 plus 61), respectively

Line 10 – cost of FQHC services

Line 11 – cost other than FQHC services, excluding overhead costs

Overhead cost centers (Worksheet A, column 7, line 50) are allocated to FQHC services on a pro-rata methodology

Questions – Worksheet B, Part I What is the best practice for properly

reporting the number of FTE personnel for computation of the Medicare productivity standard?

What is the potential impact of not meeting the cumulative Medicare productivity standard?

Should there be an analytical review of total visits accumulated for the cost report?

Worksheet B-1

Calculation of Vaccine Cost Pneumococcal, seasonal influenza & H1N1

shots are reimbursed through the Medicare FQHC cost report

Reimbursement of actual cost of Medicare shots without regard to the Medicare cost limits

Maintain vaccine logs

Total shots given

Medicare shots given

Calculation of Vaccine Cost Reimbursement includes

Staff time cost (line 3)

Worksheet B-1, line 2 – ratio of vaccine staff time to total health care staff time

Computation of line 2 ratios

–Normal standard is 5 minutes per shot

Calculation of Vaccine Cost Reimbursement includes

Medical supplies cost (line 4)

Invoice support is best practice

What about donated shots?

Allocable overhead cost (line 9)

Total vaccine cost reported on Worksheet B-1, line 10

Calculation of Vaccine Cost Total number of vaccines are reported on

line 11

Cost per vaccine injection is reported on line 12

Medicare shots reported on line 13 multiplied by the cost per injection reported on line 12 = Medicare vaccine cost reported on line 14

Calculation of Vaccine Cost Total vaccine cost reported on line 15

and total Medicare vaccine cost reported on line 16 will carry forward to Worksheet C, Part 1, lines 2 and 20, respectively

Worksheet C –“The Rest of the Story”

Worksheet C, Part I Part I includes nine lines of reported information

culminating in the reimbursement rate used to calculate Medicare covered cost Lines 1 through 6 carry forward from other cost report

worksheets (B, Parts 1 and 2, and B-1) Line 7 – adjusted cost per visit (line 3 divided by line

6) Line 8 – Medicare cost limits Calendar year specific – columns 1 and 2

Line 9 – Rate for Medicare covered visits Lesser of line 7 or line 8

Worksheet C, Part I Medicare FQHC reimbursement is based

on a per-visit rate subject to an upper payment limit (the “cost limit”) 2012 rural limit - $109.90 2012 urban limit - $126.98

What cost limit is used if my health center has both rural and urban locations?

Worksheet C, Part II Worksheet C, Part II provides for the determination of

total payment - includes lines 10 through 25

Lines 18.01 through 18.06 are new via Medicare transmittal 10 dated November 2011 (new lines effective for cost reporting periods that overlap or begin on or after January 1, 2011)

Includes columns 1 through 3

Columns 1 and 2 are for separate calendar year reporting purposes

All cost reporting periods will use columns 1 and 2 with the exception of calendar year cost reporting periods

Worksheet C, Part II Lines 11 and 12

Line 11 – Medicare covered visits, excluding mental health services

Line 12 – Medicare cost excluding cost for mental health visits (line 10 x line 11)

Lines 13 and 14

Line 13 – Medicare covered visits for mental health services

Line 14 – Medicare cost for mental health services (line 10 x line 13)

Why are mental health services visits reported separately (see next slide)?

Worksheet C, Part II Lines 15 includes a mental health services limit adjustment =

line 14 x applicable outpatient mental health treatment limitation percentage

Outpatient mental health treatment limitation is being phased out through December 31, 2013

January 1, 2012 - December 31, 2012 (75.00%)

January 1, 2013 – December 31, 2013 (81.25%)

January 1, 2014 – forward (100%) – at this point, Medicare payment for mental health services will be equivalent to Medicare payment for other Medicare covered services

Remember Medicare PPS is coming for cost reporting periods beginning on or after October 1, 2014

Worksheet C, Part II Line 16 reports total Medicare cost

(the sum of lines 12 and 15)

Line 17 (beneficiary deductible) does not apply to FQHC services and will always be zero

Line 18 reports Medicare cost excluding the cost of vaccinations reported on Worksheet B-1 (line 16 –line 17)

Worksheet C, Part II Lines 18.01 through 18.06 are new – added to the

cost reporting form in accordance with provisions of Section 4104 of the Affordable Care Act (ACA)

Used for cost reporting periods that overlap or begin on or after January 1, 2011

Eliminates coinsurance and deductible for preventive services effective for dates of service on or after January 1, 2011

Results in calculation of Medicare reimbursement at 100% of cost for preventive services (versus 80% of cost for other Medicare covered FQHC services)

Worksheet C, Part II Lines 18.01 reports total Medicare FQHC charges

(generally from intermediary/MAC records)

Line 18.02 reports total Medicare charges for FQHC covered preventive services

Health center claims submission/coding requirements changed for services on or after January 1, 2011 – basis for the amount reported on line 18.02

Line 18.03 = (Line 18.02/Line 18.01) x Line 18 x 100%

Line 18.04 = (Line 18 – Line 18.03) x 80%

Worksheet C, Part II Line 18.05

For cost reporting periods that overlap January 1, 2011, enter total program costs (line 18 x 80%) in column 1 and enter the sum of lines 18.03 and 18.04 in column 2

For cost reporting periods that begin on or after January 1, 2011, enter the sum of lines 18.03 and 18.04, in each column, as applicable

Line 18.06

Reports the amount of coinsurance applicable to FQHC covered services

This line is for informational/statistical information only and does not impact the cost report settlement calculation

My health center has already submitted a cost report for a cost reporting period ended after January 1, 2011 and we did not have the new forms – what now?

How does my health center identify Medicare preventive charges to use in completion of these new lines?

Will the intermediary/MAC PS&R reports capture preventive charges?

New Lines 18.01 through 18.06 - Questions

Worksheet C, Part II Line 19 reports reimbursable cost of FQHC services, other than

vaccines (Line 18 x 80%)

This line is not used for cost reporting periods that overlap or begin on or after January 1, 2011

Line 20 reports the Medicare cost of pneumococcal and influenza vaccines – amount carries forward from Worksheet B-1

Line 21 reports total reimbursable Medicare cost

For cost reporting periods ending before January 1, 2011, this line will report the sum of lines 19 and 20

For cost reporting periods that overlap or begin on or after January 1, 2011, this line will report the sum of lines 18.05 and 20

Worksheet C, Part II Line 22 reports total payments made to the health

center for covered Medicare FQHC services during the cost reporting period

Use of PS&R reports from the intermediary/MAC

What about unpaid claims that have not been adjudicated and are not included in the PS&R reports?

Line 23 reports the balance due to/from the Medicare program, excluding Medicare bad debts

This is not the “end of the story” quite yet

Worksheet C, Part II Line 24 reports total reimbursable Medicare bad debts,

net of bad debt recoveries

Reimbursable Medicare bad debts

Completion of Exhibit 5 of cost report questionnaire (Form 339)

• Uncollected Medicare co-payments related to paid Medicare FQHC covered services are potentially eligible for reimbursement

• Reasonable collection efforts must be documented

• Generally, write-off must occur no earlier than 120 days after the date the patient is first billed

CMS Proposed Rule – 7/11/2012 Proposed rule reduces the amount of Medicare bad

debts that will be reimbursed for future cost reporting periods (current reimbursement is at 100% of allowed Medicare bad debts – through cost reporting periods (CRPs) ending on or before September 30, 2012)

Proposed Medicare bad debt reimbursement for future CRPs as follows:

CRPs beginning on or after October 1, 2012 – 88%

CRPs beginning on or after October 1, 2013 – 76%

CRPs beginning on or after October 1, 2014 and subsequent – 65%

Worksheet C, Part II Line 24.01 reports reimbursable Medicare bad debts for dual-

eligible beneficiaries

This amount is reported for statistical purposes only

Line 24.02 – Tentative settlement

This line is for intermediary/MAC use only

Line 25 reports the total balance due/to from the Medicare program, including Medicare bad debts (and net of any interim settlement amount – upon finalization of the cost report)

Sum of lines 23 and 24 plus/minus line 24.02

What if the health center is owed money?

What if the health center owes money?

Cost Report Submission Cost report filing deadline

Due within 150 days following the end of the cost reporting period

No extensions allowed other than for acts of God (flood, hurricane, etc…)

Late filing results in 100% withhold of interim payments (though partial relief of withholding may be granted – check with intermediary/MAC)

Example Assumptions

Computed cost per visit of $100 (below the cost limits)

Medicare visits of 5,000

Reimbursable Medicare bad debts of $7,500

Medicare FQHC interim payments of $439,600 (based on the 2012 rural payment cost limit of $109.90/visit)

Amount due to the Medicare program of $32,100 ($400,000 + $7,500 - $439,600)

Medicare FQHC Cost Reporting Mistakes – Top 10

Top Ten Mistakes 10.No reclassifications and/or adjustments

reported to align costs properly

9. Not properly listing clinic locations which may affect per-visit payment limit(s)

8. No tracking & reporting of vaccines and/or Medicare Part B billing issues

Top Ten Mistakes 7. No reporting of Medicare bad debts

6. Lack of review of intermediary/MAC proposed adjustments during settlement process

5. FQHC provider number issues

Top Ten Mistakes 4. No reconciliation of expenses reported

on cost report with total expenses per the audited financial statements

3. Not reporting expenses correctly in the proper “buckets” Direct cost – reimbursable services Direct cost – non-reimbursable services Overhead costs

Top Ten Mistakes 2. Incorrect computation of FTEs

and related productivity standard

1. Inaccurate reporting of visits

Medicare Advantage Matters

Medicare Advantage Medicare Advantage Plan types Coordinated care plans (network plans) Private fee-for-service plans (generally are non-

network plans with services provided by “deemed” providers)

Medical savings account plans (non-network plans)

Examples of coordinated care plans – HMO, PPO, POS, SNP

Medicare Advantage CMS Medicare Managed Care

Directory can be obtained at the following CMS websitehttp://www.cms.hhs.gov/HealthPlansGenInf

o/01_overview.asp

Medicare Advantage Issues of importance - coordinated care plans FQHCs can be a contracting or non-contracting

provider - reimbursement issues are different Contracting – total reimbursement at 100% of

reasonable cost (subject to the per-visit limit); three parties to bill & collect from

Non-contracting – total reimbursement at 80% of reasonable costs plus 20% of actual charge less plan’s cost-sharing amount; two parties to bill & collect from

Medicare Advantage Issues of importance – private fee-for-

service plans

CMS has published an online “MA Payment Guide for Out-Of-Network Payments” applicable to both non-contracting providers of “network plans” & “deemed” providers

What is happening in practice today?

Medicare Advantage The Medicare FQHC cost report form has not

been revised by CMS to accommodate reporting of Medicare Advantage Plan activity No current estimate of when the cost

reporting form revisions will be completed No current extensions to file – CMS is willing

to exclude this activity from the cost report for now

Medicare Advantage Supplemental payments to FQHCs

Required only if the FQHC is contracting with a Medicare Advantage Plan

Applicable only to Medicare FQHC-core services

Generally referred to as Medicare “wrap-around” payments

Medicare Advantage “Wrap-around” payment example

Assume the following set of facts

FQHC actual cost of $100 per visit (below the urban “cost cap” of $127 per visit)

Medicare Advantage Plan estimated average payment of $70 per visit (including a beneficiary copayment of $20 per visit)

Based on the above, the interim “wrap-around” payment should be set at $30 per visit ($100 - $70)

Medicare Advantage What is the effect if the actual cost per visit is

$135?

Remember – the “wrap-around” payment is required to consider the beneficiary cost-sharing amount a FQHC could collect vs. the amount, if any, actually collected

Medicare Advantage Given that the “wrap-around” payment is

limited to Medicare FQHC-core services, a FQHC must analyze & evaluate “the rest of the story” Medicare non-FQHC services

Medicare non-covered services

Medicare Advantage Plan incentive payments

Medicare FQHC Reimbursement Potpourri

Medicare Cost Report Questionnaire In addition to the Medicare FQHC cost report,

FQHCs are also required to submit a Medicare Provider Cost Report Reimbursement Questionnaire (CMS Form 339) Failure to submit the Questionnaire will result

in a suspension of Medicare payments Many of the sections of the Questionnaire are

not applicable for FQHCs (see next two slides)

Medicare Cost Report Questionnaire Questions include the following broad categories: Provider Organization and Operations Financial Data and Reports Capital Related Cost (N/A for FQHCs) Interest Expense (N/A for FQHCs) Approved Educational Activities Purchased Services (N/A for FQHCs) Provider-Based Physicians (N/A for FQHCs)

Medicare Cost Report Questionnaire Questions include the following broad categories: Home Office Costs (N/A for FQHCs) Bad debts (including completion of Exhibit 5) Bed Complement (N/A for FQHCs) PS&R Data Seeking detail of information utilized for

completion of the cost report Wage Related Costs (N/A for FQHCs)

Cost Report Settlement Process The cost report settlement process involves:

Initial submission by the deadline (5 months following the end of a health center’s cost reporting period/fiscal year)

Acceptance of the cost report by the intermediary/MAC Interim (tentative) settlement Intermediary desk review or field audit Preliminary proposed adjustment report & related

communications – see next slide Final settlement through issuance of a Notice of

Program Reimbursement (NPR)

Cost Report Settlement Process Prior to cost report being finalized

Analyze all adjustments for validity

Question adjustments that do not seem correct, even if no reimbursement impact (precedent setting issue)

Maintain copy of finalized cost report document as part of permanent record

Process available to amend finalized cost report if material errors or omissions discovered subsequent to issuance of finalized cost report

Low Medicare Utilization Cost Report

The intermediary/MAC may authorize less than a full cost report where a provider has had a low utilization of covered services by Medicare beneficiaries in a cost reporting period

The threshold to file less than a full Medicare cost report is at the discretion of the intermediary/MAC

Medicare Credit Balance Report FQHCs are required to file a Medicare credit balance

report (CMS Form 838) on a quarterly basis (calendar year quarters) – even if no credit balances exist

Submission of the report must be made within 30 days following the end of the calendar quarter (January 30th, April 30th, July 30th & October 30th)

Failure to submit will result in a 100% suspension of Medicare payments

Establish a tickler list and make sure this report is timely filed

BPHC Scope of Project Considerations Important to remember that the FQHC reimbursement

benefit is applicable to a health center location that is part of the BPHC approved scope of project and that is certified to participate in the Medicare program as a FQHC (similar situation for state Medicaid programs also)

When considering site modifications (additions, moves, etc.), it is important to deal with the BPHC change in scope of project matters proactively

Failure to navigate this process correctly can have significant negative financial consequences for a health center organization

Final Thoughts

Conclusion Health center personnel must understand

and manage the Medicare FQHC reimbursement process proactively to have good outcomes Remember – only you look out for you

(each health center must consider its individual facts and circumstances to successfully navigate Medicare FQHC reimbursement issues/opportunities)

Thank You!We welcome your comments and questions

mschnake@bkd.com

BKD, LLP

417 865-8701