Learn Why Accurate HHA Cost Reports Matter — Now More Than Ever

Posted on 17 May, 2019 |comments_icon 0|By Rebecca L. Johnson

Are lower payment rates due to the new hourly wage calculation on the horizon for home health agencies?

If you’re not paying close attention to cost reporting because you think it doesn’t matter, think again. Medicare’s proposal to rebalance hospice payment between care levels based on cost report data means that providers — including HHA providers — should take extra pains to complete their cost reports as accurately as possible.

The new cost report form and instructions will involve additional work for home health agencies. What’s more, this new form, which entails a new hourly wage calculation, could usher in lower payment rates.

In the April 16 Federal Register, the Centers for Medicare & Medicaid Services published a Paperwork Reduction Act notice for cost report revisions. “The Form CMS–1728–19 cost report is needed to determine a provider’s reasonable cost incurred in furnishing medical services to Medicare beneficiaries and reimbursement due to or from a provider,” CMS says in the notice.

Here’s the Rub with Cost Report Revisions

According to CMS, the “cost report is also used for annual rate setting and payment refinement activities, including developing a home health market basket.”

Take note, in other words, that the Medicare Payment Advisory Commission “uses the home health cost report data to calculate Medicare margins, to formulate recommendations to Congress … and to conduct additional analysis of the HHA PPS.”

The update is far from routine, says cost report expert Dave Macke with VonLehman & Co. in Ft. Wright, Kentucky. “This is going to catch a lot of people off guard,” he predicts.

Worksheet S-3 Part V collects new data, Macke points out. “This worksheet is an attempt to get specific wage and benefit data for each of the direct care cost centers. Wages and benefits will be separately reported for RNs, LPNs, Nursing Assistants/Aides. In addition, Physical Therapists, Physical Therapy Assistants, Physical Therapy Aides, Occupational Therapists, Occupa­tional Therapy Assistants, Occupational Therapy Aides, Speech-Language Pathologists, and Other Medical Staff,” he says.

“The same categories apply to any contract labor costs,” Macke adds. “It is very important to separate out direct cost for W-2 wages from contract labor on your financial statements.”

But Where’s the Paperwork Reduction?

Because of these changes, “the agency will need to accumulate additional statistics consistent with the reported costs, i.e. LPN visits and patients served, physical therapy assistant visits and patients served, and certified occupational therapy assistant visits and patients served,” says The Health Group in Morgantown, West Virginia.

Along “with the detailed reporting of wages and contract labor, CMS is also requesting total paid hours for each of these categories,” Macke says. “The purpose of this Worksheet is to compute an average hourly wage for each occupational category.”

Reporting total paid hours is going to be tricky for some agencies that haven’t been tracking the data carefully up until now, Macke suspects. And it may pose a significant challenge to agencies that pay per visit.

Today’s Data, Tomorrow’s Rates

Once CMS starts gathering the data to calculate hourly wages, you can expect the agency to start comparing HHA costs versus Medicare payment rates, Macke predicts. “And then CMS will start recalculating rates,” Macke believes.

If you think that’s a remote threat, just look at what CMS is doing in the hospice arena, Macke points out. In its newly proposed rule, CMS is rebalancing payment levels based on hospice cost report data.

The form revision includes additional changes, such as separate reporting of Medicaid versus other patients and separate reporting for aides on Worksheet S-3, Part I, the National Association for Home Care & Hospice says in its member newsletter.

On the plus side, telehealth has been added as a reimbursable cost center. You’ll also find remote patient monitoring as a general service cost center on Worksheet A.

Less Than Ideal Timing

CMS slates cost report changes to take effect in 2019, which will be tricky. We’re already four months into the year, after all. Macke expects — at least hopes — that CMS will change the date to 2020.

If CMS doesn’t change implementation, HHAs will need to “segregate the additional financial information and statistics retroactive to January 1, 2019,” The Health Group suggests.

In the meantime, you have until June 17 to comment on the changes, CMS says in the Federal Register notice.

Learn More

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Rebecca L. Johnson
Executive Editor, Newsletters

Rebecca has covered the ever-evolving home health and hospice markets for 20 years, starting about the time the Balanced Budget Act ushered in the devastating Interim Payment System. Under a myriad of payment and regulatory changes, Rebecca has helped home health agencies and hospices thrive and stay compliant. She has also covered markets ranging from internet banking to managed care to physicians. She is an expert on legislation, regulation, reimbursement, operations, business strategies, and more. Rebecca received her Bachelor of Science degree from University of Illinois Urbana-Champaign.

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