Home Health & Hospice Week

Sixty-six percent of hospice cost reports in 2016 would fail new edits.

The recently announced expansion of Level 1 edits for hospice cost reports will be a big headache for the majority of hospices, but should result in better payment rates down the road.

So indicates the Centers for Medicare & Medicaid Services' proposed hospice payment rule for fiscal year 2019, which CMS released April 27.

CMS outlines its thinking about the Level 1 edits, reviewing some of the rationale it covered in its April 13 Transmittal No. 3 implementing the change. "These types of edits could force adherence to certain cost reporting principles and could lead to the reporting of higher-quality hospice cost data," notes the proposed rule scheduled for publication in the May 8 Federal Register.

Difference: While the rule maintains that "this 'Potential Level 1 Edit' approach is for discussion purposes only and may be considered for potential future use," the transmittal finalized the edits and set an implementation date of June 1 for cost reporting years ending Dec. 31, 2017 and later.

In preparation for the edits, CMS ran analysis on 2016 hospice cost reports and found nearly 66 percent of them would not have passed the new edits (see box, p. 133). The most problematic "essential" line item that will be required is line 5 (Plant Operations and Maintenance), with a whopping 45 percent of the 2016 reports missing data for that item.

The item most hospices complied with was line 4 (Administrative & General). Even that oftenoverused item has 0.29 percent of hospices not reporting any data for it, CMS's analysis uncovered.

CMS's research shows that the majority of hospice cost reports are not being done properly, says cost report expert Dave Macke with VonLehman & Co. in Ft. Wright, Kentucky, who was involved in the process of requesting CMS to implement the edits (see Eli's HCW, Vol. XXVII, No. 16).

CMS's findings are "unfortunately ... a reflection on the quality of cost report submissions," acknowledges The Health Group in Morgantown, West Virginia. The 66 percent figure "reflects the need to substantially increase the Level 1 edits to the cost report," the firm says in its newsletter.

"Given the high volume of cost reports that show zero costs on lines that are expected to be populated, it is evident that hospices may not be providing thorough and representative cost data currently," CMS says in the rule.

"We as an industry want better cost reports," and the edits will help achieve that goal, Macke says.

This data should serve as a "wake-up call to make sure the industry is very, very prepared" to report costs accurately going forward, says Judi Lund Person with the National Hospice & Palliative Care Organization.

Providers and their cost report preparers must be careful not to "just slop numbers in there," Macke cautions.

CMS makes very clear in the rule that it plans to use cost report data for future rate-setting purposes, including probably rebalancing between care level rates (see story, p. 130).

Cost report data is also picked up by the Medicare Payment Advisory Commission to figure profit margin figures and resulting payment recommendations to Congress, Macke points out. This year, MedPAC urged Congress to freeze hospice payment rates.

"As CMS moves to increase the use of cost data in future rate-setting, the hospice industry will be hard pressed to argue when hospices fail to give adequate attention to the reporting requirements of the cost report," The Health Group warns.

Part of the problem is that HHH Medicare Administrative Contractors aren't shouldering their share of the cost report work either, Macke contends. Because there is no direct settlement related to the reports, MACs aren't reviewing them properly and are just "rubber-stamping" the reports, he says.

But, it's ultimately up to hospices to police themselves and report quality data, Macke says.

Bottom line: Both rate-setting and policy decisions will hinge on this data, Lund Person stresses.

Note: See the new cost report form and instructions in Transmittal 3 online at www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R3P243.pdf.