Starting a Rural Health Clinic - A How-To Manual

Chapter Six

Completing the RHC Cost Report

This chapter will discuss the rural health clinic cost report, the process for filing the cost report, and an example of a completed cost report. It is intended to provide you with an overall summary of the cost reporting process. By also providing you with definitions of terms and a sample of a cost report, we hope to give you a better understanding of how the process works.

We cannot emphasize enough the importance of getting expert advice. Expert advice should be from individuals with experience with cost reports and specifically with the CMS-222 (or Schedule M) Cost Report, as it relates to issues such as calculation of FTE, reassignment of costs, and the completion of an independent or provider-based RHC Cost Report.

While it is possible for individual practices without significant experience to complete the cost report, in many instances there are multiple errors that occur and this is often to the financial detriment of the clinic. In addition, it is important to acknowledge that the accuracy of the data provided can have a significant financial impact on the year-end cost report. We, therefore, recommend getting appropriate expert advice when attempting to complete a Medicare Cost Report.

Form 222, the Medicare RHC cost report, (schedule M of the hospital, nursing home or home health cost report), is a required form that is completed on an annual basis by all rural health clinics.

The cost report is a statement of costs and provider utilization that occurred during the time period covered by the cost report. The cost report is the means by which Medicare determines how much money is due to the provider, or due back from the provider, for RHC services rendered to Medicare beneficiaries during the cost reporting period. The cost report typically covers a twelve (12) month period of time and is due five (5) months from the date of the end of the fiscal year of the RHC.

There are exceptions to the twelve (12) month period covered by a cost report. The exceptions would be due to the sale of the RHC or a change in ownership of the RHC during the twelve (12) month period; leaving a shorter time period than twelve (12) months that would be covered by the cost report. If a clinic experiences a change of ownership or decides to discontinue operation as an RHC, a cost report is due 150 days from the date of ownership change or RHC termination.

On July 26, 2002, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule that, if adopted, would have required electronic submission of all RHC cost reports for cost reporting periods ending after December 31, 2002. As of the publication of this book, that rule has not be finalized. The proposed rule indicated that exceptions would be available for providers who can demonstrate that electronic submission would represent a hardship. However, no details of the exception process were provided. The authors anticipate the proposed rule will be finalized and electronic submission of RHC costs reports will be mandatory at some point.

The maximum time period that can be covered by a filed cost report is thirteen (13) months. There are no extensions to file cost reports except under special circumstances, such as a natural disaster (i.e. flood, earthquake, fire, etc.). The Fiscal Intermediary generally will grant this type of extension. You can find a listing of the Fiscal Intermediaries for the independent RHC community in Appendix F.

As has been previously noted, there are two types of RHC's - Independent and Provider-based. Each must file a cost report, but the cost report is different for each of the two types of RHC's.

All Rural Health Clinics are presumed to be independent unless the clinic requests designation as a provider-based facility. Whereas, an independent RHC can be owned by any type of entity authorized under State law to own a medical practice: physicians; physician assistants; nurse practitioners; certified nurse midwives; hospitals; skilled nursing facilities; home health agencies; for-profit corporations; not-for-profit corporations; or government entities; only those entities recognized by Medicare as a "provider" can own a provider-based RHC. Entities designated by Medicare as providers are: hospitals, skilled nursing facilities, and home health agencies. Although this chapter will focus on the filing of an independent RHC cost report, the provider-based RHC cost report is very similar. A provider-based cost report is filed as a part of the sponsoring provider's cost report. It is prepared on Schedule M.

The following chart contains the title and explanation of each worksheet contained in the RHC cost report and gives an overview of Form HCFA-222.

The following is information that needs to be gathered in order to complete a rural health clinic cost report.

1. Financial statements for the cost reporting period; to include the trial balance.
   
2. Total number of visits for the cost reporting period for each of the following health care providers (individual by name):
   
1. Physicians
2. PAs/NPs/CNMs
3. Any Other Health Care Providers (list on worksheet by name and title)
Total visits broken down by the following, per health care provider listed above (See Table 6-1 for a sample visit log worksheet).

1. Medicare Visits
2. Regular Medicaid Fee-For-Service Visits
3. Crossover Visits (Medicare Primary and Regular Medicaid Secondary)
4. Medicaid HMO (Qualified Health Plan) Visits per each HMO Crossover Visit (Medicare Primary and Medicaid HMO Secondary per each HMO)
5. Private Visits (workers' comp., commercial, self pay, sliding fee, etc.)

Table 6-1
Sample Visit Log Worksheet

3. The clinic's hours of operation per week.
   
4. Individual average hours worked per week for the following health care providers:
   1. Physicians
   2. PA/NP's
   3. Any Other Health Care Providers
      
5. Total average hours worked per week for each of the above health care providers (See Table 6-2 for a sample time log worksheet) broken down by the following:
   1. Administrative hours
   2. Patient Care hours
   3. Inpatient hours

Job titles and wages should be broken down for all employees of the RHC for the cost reporting period. Be specific for those employees related to a lab technician job description for actual hours worked as "lab tech" and other hours worked.

Please see #12 for detailed information related to "Lab Tech" wages and time.

Fringe Benefits and Employer related payroll taxes of each employee.

6. Total number of vaccines given for the following vaccinations for all insurances totaled together:
   1. Pneumovax
   2. Influenza
   Total number of above vaccines given - broken down by the following:
   1. Medicare vaccines given for Pneumo and Influenza listed separately.
   2. Medicaid vaccines given for Pneumo and Influenza listed separately.
   3. Vaccine logs for Medicare Pneumovax and Influenza vaccines to include Patients name, HIC Number, and Date of Injection to support the above Medicare vaccinations.
   4. Cost per dose of each vaccine.
      
7. Payments Received for the following:
   1. Medicare Payments
   2. Medicaid Straight or Regular FFS Payments
   3. Medicaid HMO Payments per each HMO
   4. Medicare Crossover Payments made by Medicare
   5. Medicaid Crossover Payments made by Medicare
   6. Medicaid Other Third Party Payments (i.e. primary insurance's, besides Medicare, that have paid when Medicaid is the secondary insurance)
   7. Medicare Beneficiary Deductible Received (Payments made by the Medicare Patient)
      
8. Any new assets purchased? If so, submit the following:
   1. Date Asset Purchased
   2. Description of Asset
   3. Cost of Asset
   4. Depreciation Schedule to match depreciated expenses in Financial Statement
      
9. Listing of Medicare Bad Debts with Medicare Patients, to include the following information:
   1. Beneficiary Name
   2. Beneficiary HIC Number
   3. Date(s) of Service
   4. Date of First Bill
   5. Medicare Paid Date
   6. Date of Write-Off
   7. Amount of Debt
   8. Medicare Deductible and Coinsurance amount
   9. Medicaid Payment Amount

   In order to be considered "allowable bad debt", debt must be written off during cost reporting period.

   NOTE: Reasonable collection efforts may be waived for Medicare indigent patients. A Medicare beneficiary who also qualifies for Medicaid may be considered indigent automatically. For other Medicare beneficiaries, the provider should apply its customary practices for determining indigency. Please refer to PRM Section 312 for the factors, which should be incorporated into the provider's indigency guidelines. The bad debt for an indigent patient may be written off and claimed upon discharge or upon the determination of indigency, whichever is later. If indigency is determined, please indicate Medicaid number of recipient, if applicable, to claim as bad debt to Medicare.

10. Copy of PSR from Medicare Fiscal Intermediary to compare clinic visit and payment information for the cost reporting period.
    
11. Listing of each Medicaid HMO (QHP) contracted with to include the following information:
    1. Name of Medicaid HMO (QHP)
    2. Address of Medicaid HMO (QHP)
    3. Contact and phone number of HMO (QHP)
    4. Provider Number of HMO (QHP)
    5. Total the number of members assigned per each HMO (QHP) for each month of the cost reporting period - these numbers are then added up to make one complete total for the entire year.
    6. Visits and Payments broken down per Medicaid HMO (QHP) by capitation payments and FFS payments.
       
12. Please Note: Information is needed for any "Lab Tech" personnel employed/contracted by the clinic not solely considered a lab tech and who provides services outside of lab tech services; please break hours down for the year based on description of job performed by lab tech duties vs. all other RHC duties (2 categories needed): Other duties include, but are not limited to; billing, administrative, nursing, medical assistant, etc. This is only needed for lab tech's that perform other job functions other than lab technician services, as any cost beginning January 1, 2001 related to lab tech services is a non-allowable RHC cost. See Program Memorandum A-00-30 in Appendix F. Please be advised that Program Memos are updated regularly so you should make sure that policies have not been changed since the publication of this manual.

For examples of Forms see the pdf version.