Home Health & Hospice Week

Note this big change to reporting drug costs.

Newly released hospice cost report revisions may mean more work for you, but should result in more accurate data that will be used for rate-setting and other purposes in the future.

In an April 13 transmittal, the Centers for Medicare & Medicaid Services lays out a series of changes that have been a long time coming, according to industry sources. Unlike with many Medicare requirement changes, the cost report revisions began with a group of CPAs and cost report preparers organized under the National Association for Home Care & Hospice asking CMS to improve the form, according to participants in the process.

"We didn't get everything we asked for, but we got a lot," says finance expert Dave Macke with VonLehman & Co. in Ft. Wright, Kentucky, who was involved in the process that began in June 2016.

"It was refreshing for CMS to listen to the industry's pleas for more guided compliance to the cost report completion," says Mark Sharp with BKD in Springfield, Missouri.

The problem: Hospices haven't put a lot of resources into submitting accurate cost reports, cost report experts say. There is no direct financial settlement tied to the report, and there is no incentive - or penalty - for hospices to put forth the effort to make sure their reports are as accurate as possible.

"As we complete the third year with the new freestanding hospice cost report, we see many hospices that have not adopted changes to their accounting and data collection systems to accommodate the filing requirements," observes industry veteran Tom Boyd with Simione Healthcare Consultants in Rohnert Park, California. "Complete compliance is a burden to many hospices, which often results in a lack of effort for partial compliance. The CMS estimate of 188 hours to collect the data and properly prepare the hospice cost report is not reality."

By the way: "Compliance with the home health agency-based hospice cost report 'O' series is more lacking, as these hospices are often smaller and function secondary to the HHA," Boyd adds.

While cost reports don't have an immediate financial impact for hospices, they can have tremendous influence for long-term reimbursement, Sharp points out. Expect to see CMS and/or Congress use cost report data to adjust Medicare payment rates.

The Medicare Payment Advisory Commission's annual report to Congress notes hospices' average profit margin, and that figure comes directly from cost report data, Macke highlights. That figure is often influential in helping lawmakers pinpoint areas for cuts.

Another likely use for cost report data is rebalancing pay rates among care levels, Macke expects. In Worksheet C of the report, hospices report their per diem costs by care level - Routine Home Care, Continuous Home Care, Inpatient Respite Care, and General Inpatient Care.

Reports from MedPAC and others already have shown that reported costs for RHC are lower than Medicare payment rates, while costs for the other care levels are higher. Don't be surprised to see CMS run with that information and lower Routine Home Care rates while raising those for GIP and CHC, Macke predicts.

Level 1 Edits Comprise Biggest Change

The solution: In order to get better, more accurate data, the industry group asked CMS to make some changes. And nearly two years later, the agency has come through, implementing these revisions for cost reports covering years ending Dec. 31, 2017 and later:

Level 1 Edits. Previously, CMS would accept cost reports that contained no reported costs in vital areas in which every hospice must have costs.

Now, at the industry's request, CMS has implemented Level 1 edits for a number of cost report lines (see box, p. 125, for affected lines). Medicare won't electronically accept reports that can't pass Level 1 edits.

"The intention of the new Level 1 edits is to force better compliance and quality of cost reports," Boyd says.

Initially, the edits and resulting requirement to fill out the affected lines may mean more work for hospices that haven't recorded their costs in such detail before, Sharp allows. But in the long run, hospices will benefit from the increased accuracy of the data reported.

Many hospices were previously "dumping" their costs into line 4 of Worksheet A - the category for "Administrative & General" costs, Macke notes. Or they lumped costs together into other lines. Now they'll need to separate those out more carefully into the other areas that require Level 1 edits.

For example: For line 13, "Volunteer Service Coordination," some hospices didn't report any costs, Macke relates. But every hospice is required to coordinate volunteers under Medicare. Instead, some providers would just report related costs under the category for the person doing the coordination - i.e., under the "Medical Social Services" line if the volunteer coordinator was a medical social worker spending part of her time on the task, Macke offers. Now hospices will have to separate out how much time the MSW spends on coordination and allocate the cost to line 13 accordingly.

Drug costs. In the old report's Worksheet A, hospices had line 14 in the "General Service Cost Center" section to record drug costs. Now they can also use a new line, 42.50 "Drugs Charged to Patients," in the "Direct Patient Care Service Cost Centers" section.

This change "is significant for many reasons, including reporting costs where they should be reported and providing an opportunity for improving the accuracy of the cost report itself," NAHC notes in its member newsletter.

General costs such as pharmacy consultant fees, pharmacist salaries, etc., will go into line 14, while the direct drug costs recorded on claims will go into the new 42.50.

Tip: If you track drug costs by level of care, put them into 42.50, Macke advises. If you don't track the costs by level of care, put them in line 14.

Durable Medical Equipment. "Transmittal 3 provides the ability to record DME costs, when appropriate, directly to inpatient respite care services (Worksheet A-3) and general inpatient costs (Worksheet A-4)," NAHC explains. "Previously, these costs could not be reported directly to these levels of care."

No Inpatient Care. For hospices that don't furnish any GIP or Inpatient Respite care, they can record costs for "Plant Operation & Maintenance" (line 5 of Worksheet A) and "Housekeeping" (line 7) under the A&G line (line 4), Macke explains.

"While not overly significant, it can simplify cost reports for smaller hospices without impacting the overall integrity of the cost report submission," NAHC notes.

Electronic signatures. CMS is implementing a new electronic signature option for cost reports for all provider types, not just hospices (see story, p. 126).

June 1 Is Cut-Off Date

The pharmacy changes, adding drugs charged to patients by level of care, "is a needed improvement," Boyd judges. "The other changes are minor fixes."

Watch out: Don't give in to the temptation to give the changes short shrift. Some hospices may "discover late the new requirements and have to hustle to comply, or choose to fudge the data simply to clear the edits," Boyd warns.

While Transmittal 3 and its changes are effective for cost report years ending Dec. 31, 2017 and later, hospices do have some wiggle room with implementing the new requirements.

Many cost reports for 2017 have already been submitted, NAHC notes. But CMS has told the trade group that any cost report created prior to June 1 using the old forms will be accepted, NAHC reports. After June 1, all cost reports must use the new form.

The catch: If you want to use the electronic signature option before June, you'll have to use the new form, CMS has also told NAHC.

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