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GPHA Board Report

Medicare Cost Reports: The 1040 Forms of Critical Access Hospitals

This is the time of year that Eldon Schumacher and the GPHA reimbursement staff are very busy. The majority of GPHA hospitals end their fiscal year in December. This requires the hospital business office staff and GPHA staff to close the books, usually in February and March. Then the Independent Auditors arrive to perform their procedures. In the lastpart of April and throughout May, Eldon and his staff finish the cost report. Cost reports are due at the end of the fifthmonth following the end of the fiscal year.

MCRs (Medicare Cost Reports) are the financial tool which becomes the official document filed with CMS (Center for Medicare and Medicaid Services) on an annual basis. CAH’s (Critical Access Hospitals), which also include their hospital‐based rural health clinics, are not the only healthcare providers to file a MCR with CMS. Other providers that file include PPS (Prospective Payment System) hospitals, stand‐alone RHC’s (rural health clinics), FQHC’s (federally qualified health centers), hospices that are Medicare certified, and SNFs (skilled nursing facilities). Critical Access Hospital MCRs are submitted to CMS for the purpose of settlement of costs relating to the health care services provided to Medicare beneficiaries.

MCRs contain information about costs, charges and statistical data associated with providing services to all patients, the portion of those costs and charges allocated to Medicare patients and the Medicare payments received. MCRs allocate costs to ancillary departments such as acute nursing, laboratory, emergency room, etc. General departments that do not charge patients such as administration, housekeeping, maintenance, etc. have their cost allocated to the ancillary departments through various statistics. There are also certain costs that CMS will not allow to be allocated to ancillary departments such as the cost of patient televisions, patient telephones and guest meals. While most of us admitted to the hospital would prefer to have a television and telephone in our room, CMS has designated these costs as non‐essential to patient care.

The MCR contains all the information about costs and interim payments received throughout the fiscal year. This document determines if CMS still owes the hospital more reimbursement for Medicare costs or if the hospital was overpaid and needs to pay back the overpayment to CMS. The hospital is required to pay back the overpayment when the MCR is filed with WPS (Wisconsin Physician Services) who is the fiscal intermediary representing CMS. If the hospital is owed reimbursement, the cost report settlement payment will usually arrive within 60 days after the MCR is filed. This system is similar to filing individual tax returns each year. If the taxpayer has underpaid his/her taxes, then they must pay the taxes with the filed tax return. If the taxpayer overpaid his/her taxes, the tax refund will be sent to them electronically or with a check. The cost reimbursement method of payment to CAH hospitals illustrates the importance of up‐to‐date charges and correct billing, coding and recording of costs. If these items are not correct, the hospital could be leaving reimbursement money on the table.

MCRs are used for other purposes too. MCRs allow management to review costs related to charges. If ancillary department charges are much higher than its costs and the ancillary department has high Medicare utilization, it might be better to lower the charges which would lower Medicare deductions and increase Medicare reimbursement. If charges are too low in an ancillary department where Medicare is less utilized, then raising the charges may be appropriate.

Trustees may not necessarily use the MCR in making decisions but it is important that hospital management use this document to make judgments regarding the operations of the hospital.

Posted by admin on May 1, 2014 in GPHA Hospitals, Our People, Reports.


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