The Double Edge Sword for Cost Report Reopening

by Phil C. Solomon on March 18, 2013

in Medicare - Medicaid

Cost Report Preparation Maximizes Reimbursement when Technology is Leveraged

Providers should seek specialty firms with deep domain experience to processing their cost reports to ensure they have maximized their reporting reimbursement.


Cost ReportUsing manual methods to reopen or to place the initial submission of a cost report could leave providers with fewer reimbursement dollars than allowed. Advanced technology solutions help guard against the “Double Edge Sword” aspect of reopening a cost report. If a provider is relying on the intellectual capacity of a group of professionals to perform work in a manual mode, there is a significant chance that human error will occur.

When using the right technology, cost reports can be submitted with confidence, knowing that every base was covered during the preparation and initial submission. Unlike fully automated technology platforms, typical manual processes cannot quickly and accurately analyze all sources of data in a single database. The right technology eliminates missed revenue collection opportunities. Technology platforms add value when the entire Common Working File resides in one database, allowing for multiple regressions to be done simultaneously. This strategy identifies the greatest level of reimbursement. Similar to cost reporting are the challenges of identifying maximum revenue opportunities for DSH reporting. The right technology also pinpoints the greatest number of DSH days for reporting purposes.

Data mining platforms, which turns data into intelligence are only as good as the algorithms it uses for its analysis. Therefore, it is important for any cost reporting technology solution to be regression tested through a detailed diagnostic process.

There are many opportunities for identifying additional reimbursement when using the right tool. As reimbursement dollars are being squeezed in today’s healthcare environment, providers need to look for every possible revenue nugget they can find.

Learn more about the U.S. Court of Appeals for the D.C. Circuit decision below. ~ PCS

In a decision with potentially far-reaching implications, the U.S. Court of Appeals for the D.C. Circuit ruled last Tuesday that a hospital’s full-time equivalent (FTE) residency cap can be corrected, for purposes of itsapplication in “open” cost reporting periods, even if the cost reporting period in which the cap was established is outside of the three-year reopening window.  Kaiser Foundation Hospitals v. Sebelius, No. 12-0537 (D.C. Cir. March 5 2013) available here.  The court’s decision was based on its finding that under CMS’s regulations, a cost reporting period is only “reopened” if the amount of reimbursement for that period is modified.  See 42 C.F.R. §§ 405.1885(a), 405.1801(a).  The court reasoned that merely correcting predicate facts in that period that may affect payment in subsequent years does not constitute a reopening and is not subject to the three-year limitation on reopenings.

Providers, therefore, now have an opportunity to review prior-year determinations for errors that affect payments in subsequent years.  Examples include errors in calculating base year FTE caps (which was the issue in Kaiser), other “base year” determinations such as base year hospital-specific rates for SCHs and MDHs and TEFRA target amounts for PPS-exempt hospitals, prior-year FTE counts that affect the three-year rolling average, and prior-year intern and resident to bed ratios.

If a provider discovers such an error but the intermediary either cannot reopen the prior determination because the three-year reopening window has expired, or simply refuses to reopen the determination, the provider can nonetheless appeal to have the error corrected for cost reporting periods going forward. This is a two-edged sword, however, since CMS can also claim the authority to review “closed” cost reporting periods to correct errors affecting payment in “open” periods.  In addition, CMS has the authority to make such changes to any open cost reporting period, while providers only have guaranteed appeal rights going forward.  This decision, therefore, may force a reevaluation of the principle of administrative finality that may have been taken for granted until now.

Read the rest of the article on the Association of Corporate Counsel site

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