Cost Reporting: The Basics
Operator: Good day, ladies and gentlemen,
and welcome to today's Office of Rural Health Policy/National Association
of Rural Health Clinics Technical Assistance Conference Call, entitled
"Cost Reporting: The Basics." Today's conference is being recorded.
At this time for opening remarks and introductions
I would like to turn the conference over to Mr. (Bill Finerfrock);
please go ahead, sir.
Bill Finerfrock: Thank you everyone
for participating in today's call. I'd like to welcome you to today's
presentation.
Before beginning, I just would like to take a
moment to draw attention to the situation down in the Gulf States
region. And if there are individuals who are on this call who are
interested in trying to help out, we are in the process of getting
information on how folks can direct assistance, if they want to
provide it. If you'd like to get in touch with me through e-mail
at info@narhc.org, we'll be happy to forward along to you any information
we get. We'll also put it out on the list serve as we get information.
Today's call is on cost reporting, the basics. Our speaker is (Jeff
Bramschreiber). (Jeff) is a certified public accountant and a partner
at (WIPFLI ULLRICH BERTELSON) in Green Bay, Wisconsin, where he
directs the medical practice segment of the (Ripley) healthcare
practice. Jeff specializes in healthcare consulting for RHC's, medical
groups and hospitals. He's provided guidance to the HRC community
for over 13 years on topics such as initial application certification,
reimbursement, billing and cost reporting for both independent and
provided based clinics.
Today's program is scheduled to last one hour.
The first 45 minutes will consist of (Jeff's) presentation. The
last 15 minutes will be dedicated to question-and-answers. This
series is sponsored by the Health Resources and Services Administration
Federal Office Rural Health Policy in Conjunction with the National
Association of Rural Health Clinics. We really appreciate the support
of ORHP, and everybody's participation in today's call. And (Jeff)
we look forward to it, and the floor is yours.
Jeff Bramschreiber: Thank you very
much, (Bill). And thank you for inviting me to participate in today's
call. I'm going to assume that everyone has had an opportunity to
access the presentation materials. And I will proceed through the
presentation slide by slide. The first slide regarding the overview
of the presentation is we've - I've broken down the presentation
into eight smaller parts. I will proceed through the presentation
relatively quickly, and then wrap up, again, with 15 minutes worth
of questions.
The presentation will address in general basic
cost reporting theory, an overview of the cost report process. And
we'll touch on what I think are some of the more critical topics
related to the cost report preparation and reimbursement. The rural
health clinic program is somewhat unique to the Medicare reimbursement
structure in that rural health clinics are entitled to receive cost
based reimbursement for both professional services of practitioners,
practitioners, being physicians, mid level providers, as well as
the technical aspects of the facility or facility component of the
services that the render.
And in many other programs, the professional
component is not necessarily based on a cost reimbursement system,
but under the real health clinic program, cost based reimbursement
is available for both professional and as well as facility type
services, up to the reasonable caps in many instances or there are
safe guards in place, for the - under the reimbursement program
to limit reimbursement in instances, where volumes may be lower
than expected under the program. But basically it's a cost based
system, up to maximum reimbursement for some providers. And it is
an opportunity to improve reimbursement for the delivery of primary
healthcare services in rural and under serve markets.
The slide - the third slide, slide number three,
we talk about, essentially, there are two different types of rural
health clinics from a reimbursement perspective. We have independent
rural health clinics, as well as provider based rural health clinics.
Independent rural health clinics can be owned by physicians, mid
level practitioners, hospitals, et cetera. The independent rural
health clinics submit their claims to one of five regional fiscal
intermediaries. I've identified (River Bend) as a fiscal intermediary
in a four state region around Wisconsin, and including Wisconsin,
so Illinois, Michigan, Minnesota and Wisconsin. All of the independent
rural health clinics submit their claims to the (River Bend) fiscal
intermediary.
The second type of rural health clinics, the
provider based rural health clinics are essentially owned and operated
as departments of a hospital, home health agency, or skilled nursing
facility. In most instances, and probably 99 percent of the instances
that I'm familiar with, the provider based rural health clinics
are owned and operated by a hospital.
The difference between the provider-based rural
health clinics and the independent rural health clinics, from a
claim submission standpoint, is that provider based rural health
clinics, submit their claims to the fiscal intermediary of the hospital,
which may be different than the fiscal intermediary that independent
RHC's submit their claims to. So when you look at the differences
from a claims processing standpoint, between independent, and the
provider base, the provider base RHC's are all submitting their
claims to the same fiscal intermediary of their owned and operated
hospital or home health agency or skilled nursing facility.
We did have a question regarding the ownership
of independence, and provider based rural health clinics. And if
you noticed on the slide, you'll see that a hospital can own either
an independent or a provider based rural health clinic. And that
is largely left up to the structure of that clinic. If the clinic
is structured in such a way as to meet the provider based requirements,
and is owned and operated as department of the hospital, the hospital
can claim or can arrange or organize that clinic as a provider based
department or as a provider base rural health clinic.
The - there is a difference in reimbursement
between provider based RHCs, and independent RHCs for small hospitals,
those less than 50 beds, as well as critical access hospitals. The
provider base rural health clinics for small hospitals, and critical
access hospitals are not held to the same cost base limitations
as an independent RHC or as a provider based rural health clinic,
owned and operated by a larger hospital greater than 50 beds. So
there -for any small hospital, there is typically a reimbursement
advantage to be organized as a provider based rural health clinic,
as opposed to an independent. However, it is possible for a hospital
to own one or the other or in fact, own both types of rural health
clinics.
Slide number four; I'd like to talk a bit about
the theory on cost reporting for rural health clinics. The - in
practice when the rural health clinic cost report is prepared, the
starting point is to start with a financial report from the clinic
itself, if that's a provider base or a hospital base rural health
clinic, that financial report is often a departmental summary or
a responsibility report for that department of the hospital. If
it's an independent rural health clinic, typically, a physician
owned practice will - our starting point will be the financial statements,
the income and expense report of that practice, which is usually
prepared by the clinic itself, or their accountant.
So once we've identified the source of the information,
we start with the total cost of operating that rural health clinic.
And then, we need to separate those costs between what we're showing
here, as a pool of costs, considered direct costs, clinic direct
costs, as well as indirect costs. And the separation of costs between
direct costs, and indirect costs is critical to preparing the cost
report. The direct cost typically costs such as the healthcare staff
cost, meaning salaries and benefits relate to providers of services,
nurses, as well as technicians, and other direct costs associated
with the delivery of the healthcare services, such as direct supply,
(med surg) supplies is a direct cost.
Depreciation on medical equipment would be considered
as direct cost, as well as the liability insurance, malpractice
insurance, related to those practitioners. All of those costs are
considered direct costs, and need to be separated from other - the
other indirect costs, which are typically costs, as such as facility
overhead, (rent) utilities, et cetera, administrative and general
costs, costs related to the billing office, for instance and other
costs incurred by the clinic, that are not necessarily directly
related to the patient care.
The separation clinic direct and indirect cost
is important, because the direct cost pool has to be further segregated
between rural health clinic services on the right hand side of the
diagram, and none rural health clinic services on the left hand
side. The rural health clinic services, a direct cost associated
with rural health clinic services, are typically costs associated
with the care delivered in the clinic itself, care delivered in
a nursing home setting, or skilled nursing facility, as well as
the care delivered in patient's home. Those rural health clinic
services, and the costs associated with that are segregated from
non rural health clinic services, such as services delivered in
a hospital in patient setting, or services delivered in a hospital
outpatient department, as well as other non rural health clinic
services, such as lab services, and X-ray services.
So when we've - just backing up, when we have
our pool of direct costs, our salary of our staff, as well as supplies
directly related to the care, we can then separate those costs between
rural health clinic costs, costs associated with the delivery of
rural health clinic services, and costs associated with the delivery
of non rural health clinic services.
The allocation of those indirect costs, the billing,
the facility overhead, the administrative and general costs, follow
that split between our rural health clinic direct costs, and our
non rural health clinic direct costs. As an example, if we have
a - the direct cost associated with a nursing individual, a nurse
in our clinic, who may be involved in providing lab services, which
are non rural health clinic costs, as well as providing patient
care services that are considered rural health clinic services.
We may need to split those costs, of that nurse, between the RHC
component, and the non RHC component.
The total cost that we allocate between the rural
health clinic services and non rural health clinic services are
used in the basis of allocating the indirect costs, the billing
costs, the facility costs, as well. So if we're allocating, for
example, this nurse 70 percent of her time to RHC services, then
she - that 70 percent of her time will drop a 70 percent allocation
of indirect costs into the RHC services as well and leaving 30 percent
of her time and her cost to draw 30 percent overhead into the non
rural health clinic services. If we don't properly account for that
split between direct RHC and direct non RHC costs, we also then
influence the allocation of indirect costs.
So for example, if really only 50 percent of
her time was really allocated to RHC services on the cost report,
and it should have been 70 percent, we've under allocated cost to
the rural heath clinic program, both on the indirect, meaning her
time, as well as the indirect because of the allocation of indirect
costs. So it's critical that number one, we separate direct costs,
from indirect costs. And number two, that we separate the direct
costs, between rural health clinic services, and non rural health
clinic services.
If we flip the slide to slide number five, and
only deal with then, the rural health clinic cost side of that diagram,
the right hand side, we've identified the direct cost of the rural
health plan services. We then will receive an allocation of indirect
costs related to those RHC services. So we then have a total pool
of RHC service costs which are used in computing the rural health
clinic reimbursement rate.
And on the next slide, I've got just a basic
diagram of the rural health clinic reimbursement rate, which essentially
is our total rural health clinic allowable costs, divided by the
total rural health clinic visits. The remaining portions of our
discussion we'll talk about each of those two components what are
allowable costs, and also, then what are allowable visits that are
used at arriving at our reimbursement rate. But when it is all said
and done, basics in terms of the cost reporting principal. It's
simply cost divided by visits. And items that effect the reimbursement
rate then, are increases, for example, in allowable costs, will
drive up our reimbursement rate. As well as increases in rural health
clinic visits, the denominator in that calculation will lower the
reimbursement rate.
As visits go up relative to cost, the cost per
visit comes down. And that can negatively impact the reimbursement
rate for Medicare rural health clinics. As well as the opposite
is true, as allowable costs, perhaps go down, that may then lower
- that will lower your reimbursement rate. However, if the visits
go down or are decreased at a greater rate than allowable cost,
it can increase the reimbursement rate. But when it's all said and
done, we always come back to the basic formula cost divided by visits.
If we flip the slide - move forward to slide
number seven on the payment rate calculation. We've illustrated
the rural health clinic maximum reimbursement rates, which are used
for limiting costs for all independent rural health clinics, as
well as all provider rural health clinics that are part of a larger
hospital greater than 50 beds. So both of those provider types,
the independents, as well as the provider base with hospitals greater
than 50 beds, are subject to these maximum reimbursement rates.
As you see back in 2000, the maximum rate was $61.85. That's risen
anywhere between two and three percent per year, over the last several
years, up to our current reimbursement rate for calendar year 2005
is $70.78 per visit.
You'll note that the increase, as well, are relatively
nominal in the two to three percent range. If you compare those
percentage increases with the Medicare physician fee schedule, you'd
see that the reimbursement increases for the rural health clinic
program has actually exceeded the increases for Medicare payment
for physician services, outside of the rural health clinic setting.
In 2005, the reimbursement increase under the physician fee scheduled
was one-and-a-half percent, as well as a one-and-a-half percent
in 2004. The expectation, at least, initially is that the 2006 reimbursement
for physician services may actually decrease for 2006. So the rural
health clinic program, while the increases have not been substantial,
has at least outpaced the standard increases, for other physician
services reimbursement.
The next section I'd like to talk about is the
allowable costs for rural health clinics. And if you go back again,
think in terms of our formula calculation being cost divided by
visit. We're going to focus attention on what is included in that
- in the numerator of that calculation. What are considered allowable
costs? Well allowable costs on slide number nine, are defined in
code section under 42 CFR, section 413, and they're further explained
in the provider reimbursement manual or publication 15. But essentially
allowable costs are costs actually incurred by the clinic, which
are reasonable and necessary to the proper - to the delivery of
services.
The allowable cost, then, going back to that
statement, state that that those costs must be considered reasonable
in the eyes of Medicare. And they also need to be considered proper
in the eyes of Medicare as well. So costs that would not be considered
related to the patient - the efficient delivery of patient care
services, can be excluded or deducted from the cost report, upon
audit if Medicare deems that your costs are either not reasonable
or not necessary for the property delivery of care in your clinic.
Some comments about allowable costs, in general.
And this, I think, is fairly common knowledge for provider based
rural health clinics because most hospitals all ready record their
expenses on an accrual basis, meaning expenses are recorded in the
period that they are incurred, not necessarily when they are paid.
However, for most independent rural health clinics that are owned
and operated by physician practices it's often customer for physician
practices to record their income and expenses on a cash basis, which
is not consistent with Medicare cost reporting principles.
So just keep in mind, especially for the independent
rural health clinics that costs need to be recorded when the cost
is incurred, not necessarily when it's paid. And, in order for an
accrued cost, or a cost to be included in a cost report, it just
- it needs to be paid at least within 12 months after the end of
the year. So any expenses, for example, that are incurred in December,
and included in your cost report for your December year end, those
expenses, while they don't have to be paid in the month of December,
or even in the month of January, they just need to be paid prior
to the end of the next fiscal year, unless there are more restrictive
requirements that apply to specific types of costs.
For example, owner compensation, there is a more
restrictive requirement that states that the competition of owners
has to be paid within 75 days after year end, in order to be counted
as compensation on the previous year of cost reports. We've included
a couple of examples here, simply stating that it's fairly common
for many practices to record an expense in 2004, for example, such
as employee profit sharing contribution or a pension contribution,
even though the contribution may not be made until the due date
of the tax return which may be March or April of the following year.
So that's a fairly common expense, and a good
example of an expense that is typically counted in the cost report
for a particular year, but the expense is not actually paid or it's
not - the cash doesn't actually leave the clinic, until the subsequent
year. Often times, we do find that clinics forget about the accrual
requirement, and for example, if our costs are actually lower than
the maximum reimbursement rate, we often will ask to see invoices
that have been paid by the clinic in January and sometimes even
into a February just to make sure that we've identified all of the
expenses in the prior year.
And we often times find that expenses may not
be counted in the cost report, even though the expense was related
to that period, it simply was paid later on and often times forgotten.
So that is a common error that many independent rural health clinics
make, by not picking up those expenses that are maybe paid after
the end of the year, but really relate to items incurred during
the cost reporting period, for example, supplies ordered in the
month of December, or delivered in the month of December, not paid
for until the month of January. That item would be considered a
December expense.
So costs need to be included on an accrual basis.
Moving on to the next slide, slide 11, costs are not the same as
tax deductions. And again, this applies, probably more so to the
independent rural health clinics owned and operated by physician
practices because often times, they're accustomed to accounting
for certain things based on the tax requirements. Again, we've touched
on the accrual versus the cash basis, and the cost report needs
to be prepared on an accrual basis.
The slide number 12, or the next slide, we touch
on depreciation for equipment items. There is a difference between
tax depreciation and depreciation for Medicare cost reporting purposes.
For tax purposes, for example, practices may be allowed to write
off, under code sections 179, they may be allowed to write off significant
amounts of purchases in the year that they're purchased for tax
purposes. That's not the case for Medicare cost reporting purposes.
So from a preparation of a cost report, one would
need to adjust the depreciation from the - from a tax basis, to
what Medicare is looking for in terms of their depreciation which
is typically utilizing straight line depreciation over the SMA useful
life of the particular item. And we use the American Hospital Association
publishes a listing of equipment items, as well as the estimated
useful life of each of those items. So for tax purposes, you may
have purchased, for example, a piece of medical equipment that you
may depreciate over three years for tax purposes. But according
to the American Hospital Association, the useful life of that equipment
may be five years. And so therefore, we would have to use that five
year life, rather then the three year life for tax purposes.
So there's differences between tax and cost report
treatment for depreciation. On the next slide, slide number 13,
related parties, for example, under tax purposes, you can have a
clinic renting space from the separate, yet related, entity real
estate partnership, for example owned and operated by the clinic
owners. And for tax purposes, the rent is deducted on the clinic
side. And there are no adjustments that's perfectly allowed for
tax purposes. The Medicare, however, looks at those related party
transactions, as if they were - there was no separate entity involved.
So what Medicare looks at, is Medicare would look to the real estate
partnership, and only allow the costs associated with that space,
that are being incurred on the part of the real estate partnership.
So essentially, Medicare, when there are related
party transactions, Medicare will essentially collapse the two entities
into one, and say that we will only reimburse the cost, actually,
incurred by the other entity. It doesn't matter what is charged
back and forth between the two entities, we won't recognize that
amount. We will only recognize the cost incurred by the related
entity. And we've got an example on - well we'll touch on slide
14. So, some of the more common examples have to do with building
and equipment leases. I all ready used the real estate example.
Often times practices will set up related equipment companies as
well, in order to - in order to have payments back and forth to
the - an equipment partnership, for example. There also may be instances
of contract and employees as well as other purchase services, such
as cleaning services or billing services.
But again, if you flip the slide onto slide 14,
in the eyes of Medicare, those related parties essentially don't
exist. So where we've shown an example where the rural health clinic
may be paying $4,000 per month or $48,000 per year of rent to the
partnership for the building, when we look at the owner partnership
and the actual cost incurred, if we find that the actual cost related
to that building are only $35,000, then essentially Medicare will
disallow the - that difference, will disallow $13,000 of that $43,000
of rent. So that on the Medicare cost report, only the $35,000 will
be reflected on the cost report, and will reimbursed or allowable
for Medicare purposes.
Moving on to the next topic, provider compensation.
There are no reasonable compensation limits that have been set by
Medicare for rural health clinic cost report reimbursement purposes.
However, the compensation paid to your providers, needs to be reasonable,
and Medicare will look to compensation paid to similar providers
in your area. They may look at compensation surveys that have been
performed, either regionally or nationally. As well as they have
access to rural health clinic cost reports from other clinics in
your area. So as long as the compensation paid to your providers
is reasonable, we typically don't see any real significant problems
with provider compensation on cost reports. However, there are reasonable
standards that Medicare will look at, if they believe that the compensation
may be too high for the providers in your rural health clinic.
The - just recognize that the compensation for
your providers can be adjusted based on the hours worked, or based
on some productivity measurements. So, for example, if the providers
in your organization are working well over what's commonly considered
full time status for those providers, Medicare will recognize that
there would be an allowance - a higher allowance for compensation
for those practitioners, because of the time commitment, additional
time commitment that they've put in.
As well as the productivity of those providers,
either measured by visits or measured by charges, or relative value
units. The - there's recognition that providers who are highly productive
are generating or serving a large number of patient visits, also
may be higher than what you would find in other practices, so that
if you run into a situation where you may believe that your compensation
could be considered unreasonable just based on the fact that it's
one physician, or one mid level practitioner. If you take into account,
the fact that they may bee seeing more patients, generating, more
volume or working extra hours, that compensation - the reasonable
compensation calculations can be adjusted for those factors as well.
Moving on to the next slide. The one example
for provider compensation, for corporations, for instance is that
the often times, corporations have a compensation system that includes,
not only a base salary arrangement, but also some type of a productivity
bonus amount that is commonly paid either on or around the year
end, or sometimes not paid until after year end. It's perfectly
legitimate for that compensation bonus based on a productivity measurement,
for example, even if it's not paid during that year, but it needs
to be paid within 75 days after the end of the year. It's perfectly
fine for that compensation to be paid - or to be counted in that
cost report, even though the compensation wasn't actually paid until
after the end of the year.
So we've concluded our section on allowable costs,
and we've talked about some of the more common topics that are brought
up under the concept of Medicare allowable costs for rural health
clinics. What I'd like to do now is talk a bit about what are some
of the costs that are considered non rural health clinic costs,
and will be accounted for on the rural health clinic cost report.
So if we move on to the next section, under costs,
other than rural health clinic, some of the more common non rural
health clinic services, and their costs would not be considered
rural health clinic costs relate to diagnostic radiology services,
any radiology performed in the clinic is not considered a rural
health clinic service. And the costs related to the radiology services,
would not be considered RHC costs. Any costs related to hospital
patients, whether they be in patients, out patients, emergency room
patients, those costs would not be considered rural health clinic
because they are not rural health clinic.
Costs related to lab services, again, not rural
health clinic health clinic costs. Costs related to duties around
medical directorships, for example. It's fairly common that a rural
health clinic physician, might be the medical director of a nursing
home. And the costs related to their time associated with those
responsibilities would not be considered allowable real health clinic
costs, because those would be considered an administrative cost
for that nursing home, and the compensation related to that service
should be considered a non rural health clinic cost as well.
If we move on and target - and talk more specifically
about laboratory services. It should become knowledge for rural
health clinic that laboratory services are no longer considered
rural health clinic services. There was a time when the cost of
lab services were part of the rural health clinic cost report. That
has been changed since January of 2001, the laboratory services
are no longer considered rural health clinic services, therefore,
the costs related to those services are no longer considered rural
health clinic costs, as well.
So if you move on to the slide number 21 just
to comment on the cost related to drawing the blood or the (vena)
puncture, that service is also considered a laboratory service.
It's not a rural health clinic service, therefore costs associated
with nursing time or technician time around the drawing of blood
for lab work, would not be considered a rural health clinic cost,
and needs to be separated from the RHC costs for cost report purposes.
The next slide, slide 22, laboratory services,
some of the - just mentioning some of the more common direct costs
associated with the lab. If you have a laboratory technician, the
salaries and benefits related to your lab techs, would be carved
out of your rural health clinic costs or be considered non rural
health clinic costs. As well as nursing salaries and benefits related
to the (vena) punctures. Lab supplies such as reagent costs, and
other lab supplies would be considered not RHC direct costs, as
well as deprecation on the laboratory equipment and any lab fees
associated with licensure or certification for your laboratory.
Bill Finerfrock: (Jeff), just to
give you a heads up, we have about 10 minutes before we're scheduled
to go to questions.
Jeff Bramschreiber: OK. The - just
- I would like to skip over some of the examples the - related to
the non RHC services. But I'd like to move into the next section
on co mingling, because this has been a fairly hot topic in the
rural health clinic world. And how do we handle the costs to non
RHC services that might be delivered within the four walls of our
rural health clinic?
The most common example is rural health clinics
may rent out some of their space to visiting specialists, for example
in order to see their patients. Medicare had provided some guidance
in the proposed - or the final rule in December of 2003. The - that
rule has since been retracted, but I think the guidance that they
provided is still valid in that the Medicare's concern is that we
don't have costs associated with non rural health clinic services
being part of our rural health clinic cost report. And so therefore,
they want us to have, if at all possible, separate space, separate
hours of operation. And most importantly we do not want to commingle
our rural health clinic staff with the non RHC.
So probably the biggest concern is that we don't
have rural health clinic providers moving between a rural health
clinic and a non rural health clinic throughout the day. And as
long as we've got a separation of costs, and we make sure that we've
got a rational basis for allocating those costs, apart from our
rural health clinic, we shouldn't have a problem. And in fact, Medicare
stated, that they do not want to discourage the multi use rural
health clinic, but they just want to make sure that we're not included
costs associated with other practitioners or non rural health clinic
within our rural health clinic cost report.
I would like to then proceed beyond the commingling
section, and talk a bit about rural health clinic visits. Because,
again, going back to our computation of the actual cost per visit
or the reimbursement rate, it's cost divided by visit. So we're
going to talk a little bit about the denominator in that equation,
our rural health clinic visits.
On slide 29, we've got rural health clinic visits
to find most rural health clinics should realize that a visit is
defined as a face to face encounter between the patient and a practitioner
whether that's a mid level provider, or a physician. The - if there
is no face to face encounter, with either of those two provider
types, then there's not a billable encounter, and there's not a
visit on our cost report.
The total visits moving on to the next slide,
slide 20, the total visits in the denominator should include all
of the visits that occur during the hours of operation in the clinic,
as well as any home visits, and nursing home visits. We should not
include in our rural health clinic cost report, any visits related
to hospital visits, whether they're in patient or out patient. Or
any visits that are nurse only visits or that don't meet the face
to face requirements.
The next slide is our - just the suggestion that
our method of counting those visits should be clearly defined and
documented within your rural health clinic. We suggest that you
actually prepare a written policy and procedure for counting the
visits, since that's a critical component of your cost report, we
want to be assured that the visit count is accurate, and is being
properly reported on your cost report.
The actual visits moving to the next slide, reported
on the cost report is the actual - it's the greater of your actual
visits or what are considered the minimum visits as applied by the
productivity standards that Medicare uses. The - keep in mind that
a higher visit count will actually lower your cost per visit. And
the productivity standards are actually a penalty that's imposed
for low productivity. The standards that apply through the cost
report are that for every full time equivalent physician, we need
to have at least 4,200 visits annually.
And the standard for mid level practitioners
is half that, or 2100 visits for every mid level full time equivalent.
If you do not meet those productivity standards, again, Medicare
will use in our cost per visit calculation, the greater of their
standard or your actual. So if this - if you're actually below the
standards, you will in essence be reimbursed at a rate that's below
your actual cost per visit, because of the effect of increasing
the denominator in the equation.
We've included an example of utilizing the rural
health clinic visits, and the productivity standards on the next
slide. I would prefer to skip now into the physician provider, and
the full time equivalent calculation, because that is a key component
of the cost report, and does affect the productivity standards.
It's essential on your cost report, that you accurately report the
full time equivalents, in order to properly apply the productivity
standards.
The full time equivalent is considered by Medicare
either the actual hours, as computed based on the actual hours,
your clinic considers to be full time, or a minimum of 1600 hours
per year. It is possible that you could count your full time equivalents
differently than simply dividing actual hours work by the standard
2080 hours per year that's considered standard for a full time equivalent.
If your organization requires your physicians, or your providers
to actually work more than the 2080 hours it may be possible to
utilize that higher standard in determining your full time equivalents.
Just keep in mind that the full time equivalents
-if your full time equivalents go up, so do your productivity standards.
So often times, when rural health clinics are impacted by the productivity
standards, it's a function of how they're counting those full time
equivalents. And the full time equivalent number can be affected
by the hours worked, as well as the standard that is used within
your organization.
If you flip the slides to slide 37, we've shown
kind of a breakdown of a full time equivalent physician on a rural
health clinic cost report. Often times, one full time equivalent
does not relate to one practitioner. In most cases, a practitioner
is devoting time to some non rural health clinic activities, and
therefore, the full time equivalent on the cost report is actually
less than one. In our example, we had a point seven reported on
the rural health clinic cost report, and the remainder of that time
was related to administrative activities, hospital services as well
as the medical directorship. So in most cases, a provider in your
rural health clinic does not equal a full time equivalent on your
cost report.
The cost report forms themselves. Time simply
wouldn't allow to go through a completion of a cost report form,
but I would like to just touch on the components of the cost reporting
forms themselves. Keep in mind that the cost reports are different
for provider based than what they are for independent rural health
clinics. The provider based rural health clinic cost report is actually
a part of the hospital cost report. And it's a series of reports
that are schedule - or the M as in Mary series, there's an M1 through
M5 component on the hospital cost report. The independent cost report
is a separate cost report that has a series of schedules, work sheets,
AB, and work sheet C, to report, essentially, the same information
on both.
The cost report components are broken down to
a provider. There's a provider statistic component. There is a trial
balance of expenses in reclassification that identify the costs.
There are separate schedules that report flu (pneumecocal) vaccines
because those are reimbursed separately through the cost report.
There's a separate schedule that reports the visits and the productivity
standards. And then, finally, there is a schedule that reconciles
the cost related to the rural health clinic services, as well as
the reimbursement that's been paid throughout the year, by the Medicare
program.
And any difference is either paid in addition
to the rural health clinic or refunded by the rural health clinic.
So, for example, if the cost exceeded the reimbursement that had
been received throughout the year, then Medicare would make up that
difference, between what they had paid, and the allowable cost on
the cost report, or vice versa, if the costs were less than what
had been paid throughout the year, then the clinic will be required
to submit that difference back to the Medicare program.
Bill Finerfrock: (Jeff), we're pretty
much up on our time. If you could quickly wrap it up so we could
move to questions.
Jeff Bramschreiber: OK. I will just
to touch briefly on the flu and (pneumecocal) often times on a cost
report settlement that may the only cost settlement that's present
on the cost report. The calculation is fairly complicated. However,
it's based on a estimation of the cost, actually, to provide the
flu and (pneumecocal). There is no billing, separate billing for
flu and (pneumecocal) vaccines, and they're simply paid through
the cost report.
Bill Finerfrock: All right. Thank
you, (Jeff). We appreciate the presentation. It was a lot of information
to try and cover in 45 minutes, and we really appreciate the time
you've taken to help us out with this. The purpose of this call
series is to give an opportunity for folks to hear speakers on different
topics that they may not be able to get information on, and do it
through a convenient mechanism, and hopefully that has fulfilled
that for many of you here today.
The - as I said at the outset, these calls are
sponsored by the Office of Rural Health Policy and we want to thank
you for that. Operator, if you would please explain to individuals
how they can come online to ask their question, we'll open up the
phone lines for their questions.
Operator: Thank you. If you would
like to ask a question at this time, you may do so by pressing the
star key followed by the digit one on your touch-tone telephone.
A voice prompt on your phone line will indicate that your line is
open. We ask that you just please state your name before posing
your question. Once again, it is star one, please. And we'll pause
for just a moment.
Bill Finerfrock: And if you would
also in addition to your name, the clinic, or the region, the city
you're calling from - city and state you're calling from.
Operator: And we'll take our first
question.
John Hanson: Hi, this is (John Hanson).
I'm from the Washington State Department of Health. My question
relates back to the beginning, where you were talking about the
two different kinds of rural health clinics independent and provider
base. If a hospital owns a rural health clinic, what determines
whether it's an independent clinic or a provider based clinic?
Bill Finerfrock: (Jeff)?
Jeff Bramschreiber: Yes, thank you
for your question, (John). The determination is really whether or
not the clinic meets the provider based requirements, and is owned
and operated as any other department of that hospital.
Bill Finerfrock: There are very
specific criteria that are issued in a program memorandum that any
entity must meet in order to achieve provider based status. Rural
health clinics is only one type of entity that can get provider
based status. And those are independent of anything to do with RHC.
It has to do with the integration of the facility into the parent
organization, financially, clinically, et cetera, that it holds
itself at as the department of the parent entity. And that's a separate
determination that is made by the fiscal intermediary as to whether
or not the facility would quality for provider based status. But
it's a rather involved process we don't have time to go through
here, but there is a program memo that outlines all of the criteria
that must be met, in order for the facility to achieve provider
based status.
John Hanson: Can you direct me to
that memo?
Bill Finerfrock: I don't have it
off the top of my head, but I do have your e-mail (John), and we'll
get back to you with it.
John Hanson: Great. Thanks very
much.
Bill Finerfrock: Yes.
Operator: We'll now move on to our
next question.
Claudia Libel: Hi this is (Claudia
Libel) from a rural health center in Plainview, Vermont and I have
two questions. The first one is you mentioned that nursing home
and homes were a rural health center visit. However, I was told
by Medicare that because they're not in our clinic, that they're
not an RHC service. Therefore, I've been billing Medicare out of
((inaudible)) under my non RHC provider number for all nursing home
and home visits.
Bill Finerfrock: (Jeff)?
Jeff Bramschreiber: The rural health
clinic program has fairly specifically included the services rendered
within a nursing home as well as a patient's home as rural health
clinic services. So I'm going to defer this to (Bill). I don't know
if you're aware of any other …
Bill Finerfrock: The only basis
on which they could make that determination if they concluded or
made an opinion that the patients in question were not really patients
of the RHC. If these individuals of the RHC, then visits to the
home or to the nursing home would be RHC visits. Said, unless they
made a determination that somehow they don't believe that these
individuals were truly patients of the RHC. But - if so they had
been going to the RHC, have actually been in there. You have a file,
active file on the patients, and now subsequent or, you know, home
bound or need to be seen at home rather than being able to get to
the RHC or have now left their home are on a nursing home, as long
as they are established patients of the RHC, those would be RHC
visits.
Claudia Libel: So I should change
the way I do things, then, obviously because they are actual patients…
Bill Finerfrock: Yes, as long as
they are patients of the RHC, and you can show that they have been
patients, they've been in to see - they've been into the clinic
within the four walls, you maintain active records on them, then
those would be RHC visits.
Claudia Libel: OK.
Bill Finerfrock: Those are specifically
referenced in the RHC manual as RHC visits as well.
Claudia Libel: Now I've been doing
this for the last two years, I don't have to go back and reverse
all of these, do it?
Bill Finerfrock: Unless you felt
that you wanted to if - for financial reasons. But it would go back
- this was your fiscal intermediary?
Claudia Libel: Yes.
Bill Finerfrock: Who's your FI?
Claudia Libel: Out of Concord, New
Hampshire.
Bill Finerfrock: So you're a provider
based. You're an independent, you do the - OK.
Claudia Libel: Yes, we're independent.
Bill Finerfrock: Yes. I don't know
why your FI is telling you that, but they're wrong.
Claudia Libel: OK. All right.
Jeff Bramschreiber: The only other
comment I'd have though, is you need to make sure, then that your
cost report preparation follows how you're billing those services…
Claudia Libel: Well it does. I take
the costs related to when the providers are at the nursing home.
Jeff Bramschreiber: OK. So when
you switch that, you need to add those costs back in then.
Claudia Libel: Yes, I agree. My
second question is how you come to a fully time equivalent? I have
a physician, as an example, that I consider full time. He's paid
full time salary. And I take out - I would normally take out just
as a number to use, 10 percent of his time to do rounds at the hospital.
So I'm not - going to exclude all of his salary and benefits, related
to going to the hospital, 10 percent of his salary and benefits.
But Medicare, my intermediary also has me, I'll
take the 2080 hours, which we consider full time, and they have
me subtract any sick time he's taken, or any vacation time he's
taken, in order to come up with a percentage of his FTE, which is
far from being an FTE if they take, you know, say four weeks vacation
and a week of CME, and they happen to be out sick for a week during
the year. And so that decreases his FTE. And maybe it helps me,
maybe it doesn't, but is that the correct way of doing that? Or
is it FTE 90 percent, not say 75 percent after his vacation and
sick time?
Jeff Bramschreiber: I would think
his FTE is 90 percent.
Claudia Libel: Well that's what
I think too, but that's not the way - and I've been doing this since
'85, and so if I change - I'm in the process of working on our cost
report because our year ended July - June 30, if I change the way
that I think it should be done, obviously they're going to question
it since the last 20 years we've been doing it this way.
Bill Finerfrock: Yes, I don't know
what else to tell you, but, you know, I think (Jeff) - what (Jeff)
has said, I would agree with.
Claudia Libel: OK. All right, thank
you very much.
Jeff Bramschreiber: Yes.
Bill Finerfrock: Next question.
Operator: We'll now move one.
Sandy: Hi, this is (Sandy) at Mercy
Medical Center in Sioux City, Iowa. And my question is can a clinic
disadvantage themselves, from a reimbursement standpoint if the
charges are less than the cost? And the co insurance is billed to
the patient at 20 percent of charges. But the MCR calculates it
based on cost. So if our charges are lower than cost, are disadvantaging
ourselves?
Jeff Bramschreiber: If your charges
are lower than cost, you're theoretically leaving some money on
the table. However, if - you know, you still need to be cognizant
of what the market bears for the charge.
Sandy: Exactly, and that's…
Jeff Bramschreiber: And I'm not
sure you can avoid that from happening. Because often times, the
cost per visit is - can be higher than what the market would bear
for a comparable charge. And when that happens, there isn't, in
my opinion, there isn't a way to avoid not recovering the full reimbursement
rate.
Sandy: And there's nothing as far
as Medicare changing the rule, so that co-insurance is actually
whatever was billed to the patient?
Bill Finerfrock: Say that again.
Jeff Bramschreiber: Co insurance
is whatever was billed to the patient. Twenty …
Bill Finerfrock: Twenty percent
of whatever your charges are for that. The program is set up so
that the patient is held harmless through the reimbursement methodology.
So they would never pay any more out of pocket when they're seen
by an RHC, than what they would have paid, had they not been seen
in an RHC environment, which you wouldn't have I mean from a PR
standpoint, you don't want to create a situation where you have
a clinic that becomes an RHC, and suddenly the patients are paying
more out of pocket, to be seen in the RHC than they were prior to
the facility becoming an RHC.
Jeff Bramschreiber: Well actually,
(Bill), that does occur…
Bill Finerfrock: But it's not supposed
to.
Jeff Bramschreiber: Yes. Under this
traditional fee schedule payment system, the patient co insurance
is 20 percent of the fee schedule amount. Under RHC it's 20 percent
of the charge.
Bill Finerfrock: So you're a provider
base?
Sandy: Yes.
Bill Finerfrock: OK.
Jeff Bramschreiber: OK. But I guess
I don't believe that there's a good solution to maximizing that
co insurance amount, simply because your charge structure would
have to be higher than what the market typically would bear for
that service, in the situation described.
Bill Finerfrock: Right.
Sandy: Right.
Bill Finerfrock: OK. Next question.
Operator: We'll now move on to our
next question.
Gerard Baumsark: Hello. This is
(Gerard Baumsark) from Lovell, Wyoming, going back to the FTE if
you do a cost report for a four month period, instead of a 12 month
period, how would I adjust that?
Jeff Bramschreiber: If you're doing
a cost report for a four month period, you're basically reporting
for one third of the year, and so your calculation would be adjusted
- the FTEs would be reported downward by - down to a one third of
the year essentially. So if you had a - normally, what would have
been a one FTE provider for a full year, if you're reporting a four
month period, that would be shown on their cost report schedule,
as a 0.33 FTE provider for that period.
Gerard Baumsark: OK. Thank you.
Operator: Once again if you do have
a question, it's start one, please. And we'll now move on.
Jennifer: Hi, this is (Jennifer)
at Kewanee Hospital, in Kewanee, Illinois. We have a provider based
rural health clinic and I was wondering if you have seen where intermediaries
are requiring time studies to allocate that FTE for like say physician
rounds in the hospital?
Jeff Bramschreiber: The fiscal intermediaries,
yes, it's not uncommon that they will require a time study. The
difficulty, of course, is having physicians actually complete the
time studies. And there should be an attempt to have your providers
complete those time studies, so you've got a proper allocation basis
for removing costs, or reallocating the FTE's to non RHC services.
So yes, that is fairly copy, that fiscal intermediaries will require
a time study.
Jennifer: OK. That's how we're doing,
and that's what our FI has required. OK, thank you.
Bill Finerfrock: This is probably
going to have to be the last question, Operator.
Operator: OK. We'll take that.
Calvin Carin: Hello. My name is
(Calvin Carin) I'm calling from Madison Hospital in Idaho. I have
a question regarding what types of activities might be considered
clinical versus administrative hours for FTE computation.
Jeff Bramschreiber: Well the types
of activities that I most commonly see are considered administrative
would be time spent in business meetings of the rural health clinic,
for example. The physician or the provider may have administrative
responsibilities for - in the employee supervision area, you know,
reviewing employee handbooks or having human resource type responsibilities.
I think most of the time, though, the administrative component I
see removed has more to do with the general business direction of
the clinic, that's being performed by that provider.
Bill Finerfrock: (Jeff), what about
chart review, that if under state law, physicians are required to
review X percentage of charts for the PA or the Nurse Practitioner
as part of their supervisor collaborative responsibilities. Would
that be considered the administrative or clinical time?
Jeff Bramschreiber: Well, actually,
you can reallocate some of that time on the cost report, to the
physician supervision which is outside of the productivity standards.
So you could consider that to be - it's still considered to be health
care time, but for the productivity standards, that time can be
- it's - it can be removed from the FTE calculations.
Bill Finerfrock: OK.
Jeff Bramschreiber: And there's
a separate line on the cost report for that.
Bill Finerfrock: I think that's
going to have to do it for today's call. We appreciate everybody's
participation. A transcript of the call will be made available on
the ORHP site probably in a week or two. It generally takes about
a week or so to get the transcript back. We then ask the speaker
to review it for accuracy. Once that's been completed, we then post
it up on the OHRP Web site, and we'll send an announcement of its
availability out to the list serve. The next call will be in about
a month. We have not yet finalized the topic, but we'll send out
an announcement about that in the next couple of different weeks.
I want to thank (Jeff) for his time today. He
did a great job in the presentation. If there are some follow up
questions you'd like to submit to me at info@nararhc.org, we will
try to get those answered and again post those up on the list serve.
I want to thank the Office of Rural Health Policy again for their
support for this initiative, and thank everyone for their participation.
Have a great day. Thank you.
Jeff Bramschreiber: Thank you.
Operator: That does conclude our
conference everyone. We thank you for your participation. Have a
great day.
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