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Medicare Settlement 101 [PODCAST]

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The Hospital Finance Podcast

In this episode, we’re pleased to welcome back BESLER’s Reimbursement Manager, Andrew Kinnaman. In this episode, Andrew will discuss Medicare Settlement 101.

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Highlights of this episode include:

  • Important data when working on settlement
  • Medicare Payment Summary and Statistical Report
  • Most common errors
  • Key factors and best practices

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Reimbursement Manager, Andrew Kinnaman. In this episode, Andrew will discuss Medicare Settlement 101. Thank you for joining us today, Andrew.

Andrew Kinnaman: Well, thank you for the invitation back. I’m looking forward to it.

Kelly: As am I. Well, let’s get to it today. What is the most important data to have when working on settlement?

Andrew: Well, Kelly, to respond to that question, it is really necessary to define what the cost preparer is attempting to complete. Each individual facility has its own settlement requirements. A teaching hospital would require different settlement data than an organ acquisition facility and that in turn would be completely different than a critical access hospital. So, purposes of our discussion, I’d like to limit the scope to the Medicare Cost Report Worksheet E series. For all Medicare facilities, the Medicare Payment Summary and Statistical Report for the cost report period would be essential. This is commonly known as the PSR. The PSR should cover the entire cost report period with applicable service period splits. I would also stress that any correspondence from the MAC available. This could include things such as lump sum, rate notices, bi-weekly pass-through payments, and any other notifications or calculations of rates or payment items necessary to file the cost report.

Other critical items could depend on your individual facility and what areas of services you provide or what areas of reimbursement is of concern to your facility. That includes the summary resident FTE report, any resident FTE cap adjustment support, GME, IME affiliation agreements, if you have any. If we go into the solid organ data for Worksheet D-4, you would need solid organ accounts and also charges and that flows over to Worksheet E Part A, even though it’s a Worksheet D-4 form. We also would look at things like schedule of protested amounts. If there’s areas that you are taking a negative impact that you want to be able to keep for appeals, the protested items would be wanting to be one thing that you want done. There are certainly other critical items, but that should be considered specific to your own individual facility.

Kelly: Those are some great tips. Thank you. And you brought up the point of having a Medicare Payment Summary and Statistical Report. When should a provider consider obtaining this report?

Andrew: I do this in the general principles that the consideration is when do you anticipate the completion of the report that you’re working on? I would always consider pulling the PS&R about 30 days before the report is due or to be completed for any internal or external review. Medicare claims, Kelly, are typically paid in a quick turnaround. So many facilities will not see a significant difference in a PS&R run, say at 90 days after your fiscal year versus 120 days. So, it really becomes more of a factor of your own timing for completing the report and how much time it will take you to be able to incorporate this data and review it prior to any submission or internal, external review.

Kelly: Okay, that makes a lot of sense. And Andrew, I know you’ve been in this industry for a number of years. What would you say are the most common errors and issues surrounding the completion of Medicare settlement?

Andrew: Great question. I would respond with three general areas that primary lend themselves to errors. At first and most probably frequent is key-in errors. This is probably the most obvious but also the most likely to have large ramifications for both possible current year and possibly subsequent years. A wrong data entry, either a wrong digit, transpose a digit or inputting something that should be entered can easily impact the bottom line of a hospital. Let’s take, for example, if we’re inputting the cost report, a lump sum adjustment due to the Medicare program of $100,000 versus the actual amount of a million dollars, that will greatly impact the receivable reported on the cost report by some $900,000. But since we’ve inputted the 100,000 but it was really a million dollars, what happens is– let’s assume that the tentative settlement after we submit the cost report with that error in it, that the MAC uses the correct information and then requests back the $900,000. You have gone from a receivable of $900,000 to owing back the Medicare program $900,000, all due to a typo.

Now, what do I mean by the subsequent years? When I first started this, I said that there was the current year and possibly subsequent years. If I incorrectly stated an amount in my wage index and that amount is never corrected– now, there are certain audits and there is time to make those adjustments, but if it’s never caught, then my future payments may be impacted because the wage index is a factor in subsequent payments under the IPPS system. Second, I would say instructions and interpretation errors. These errors are primary in omission or misinterpretation of the instructions or use of the data in the settlement. And this can be an issue like a wrong calculation of the hospital-specific payment or the nursing allied health managed care payments, which are inputs on the settlement. Also falling in this bucket is misinterpretation of the instructions like prior year intern-to-bed ratio, prior year penultimate allowable FTE count. The cost report instructions provide instructions for the calculation and input of these amounts and other settlement inputs. Wrongly interpreting these instructions could lead to incorrect amounts being calculated and input to the cost report.

Third, and finally, I call this source and documentation errors, and I do usually a series of questions of this. What is the source of my documentation and are they adequate and verifiable? If I don’t have all lump sums and biweekly payments, are my interest payments calculated correctly? Do I have appropriate logs for bad debts, DSH days, and calculated DSH percentage FTE residents? If an organ acquisition, the number of solid organs and charges for Worksheet D-4? Are applicable factors been verified for hospital-specific payments or the nursing allied health education management care payment calculations. So, there’s a number of interpretations and sources that we’re going to be using to fill out a settlement, not just the payment summary report which we talked about earlier. So, my key is know the data and follow instructions. Those are what are going to be the key to a successful cost report preparation.

Kelly: Those are some great tips. What are some of the key factors and best practices you utilize for preparing a Medicare settlement?

Andrew: I tend to focus on systems-verifiable data sources and then the actual review itself. So, excluding the inputs from the PSR and payment information that we talked about before, there are a few areas that I tend to focus on and pay particular attention to when reviewing, only because they have a major impact on what my settlement will actually be. And I’m talking about a current year cost report at this point. So, I always tend, if I’m a teaching hospital, to really spend time on GME, IME on the Worksheet E Part A and E-4. Always important if you’re a disproportionate-share hospital is reviewing your inputs and calculations of the disproportionate share and the uncompensated care adjustment. More specific to individual hospitals are if you have hospital-specific payments for sole community hospitals and Medicare-dependent hospitals, those take factors outside of the PSR and rates that have been established in previous years, and you need to calculate those before you put them on the cost report, so those always take a little more attention and review.

And then of course, I’ve mentioned a couple of times the nursing allied health education managed care payments, which is an outside calculation using factors that are published so that takes some time and review to make sure you pull those numbers in correctly and bad debts. So, I also tend to pay a particular attention to review responses on Worksheet S-2 Part I. Now, a lot of people think that’s pretty simple. You create your new cost report, those answers are done for you as you create the new cost report in, say, a cost report system. So, they kind of pre-populate, but sometimes people don’t look at those and review them. And many of the responses on this workspace have a direct impact on other worksheets within the cost report software.

I’ll give you an example. How you respond to the DSH input on Worksheet S-2 Part I will have an impact on Worksheet S-3 Part I Census, Worksheet E Part A miscalculation, and Worksheet L Capital. Identifying that you are a critical access hospital or have a solid organ program prompt the system to open key workspaces that need to be completed. So those answers open up different versions and different worksheets for the cost report that need to be done. So again, knowing your data, knowing what information you have to process your settlement is very important. Now, these are by no means all the issues identified for individual facility, but each facility could have other different reimbursement critical issues.

Kelly: That’s a lot of great information. And I noticed in your response that you emphasize key factors. Can you explain that more?

Andrew: Sure. Your last question, we talked about systems-verifiable data sources and review. I particularly are concerned about the system or methodology being used. So, my question is do you have a system in place that helps you capture and input the data correctly into the cost report? Now, for here, us in Besler, we have our proprietary software cost reporting tool that I can bring in the PSR data and map the required PSR data to the appropriate Medicare cost report settlement worksheet inputs. So we have that system that actually does that for us. Whether it’s the charges, payment information, census, or other required data, this is a system that helps me to ensure that the required data is identified and appropriately mapped. Now, if you utilize a system like this or some other proven methodology, this is an important part of properly reporting the settlement data on your cost report.

Now, I also discussed the verifiable data and sources. I am including the fact that I have all required documents at the time of the preparation for every number I either input or use a system to populate that I have auditable support. Very important that, as you go forward – audits may happen two or three years from now – that you have access to that or whoever may replace you, or if there are new people there, they have the ability to support those audits in the future. That any calculations I make for inputs to the settlement, I have sources included as part of my work papers. It is very important that the data be accessible and maintained in such a way that future individuals can find and use these sources to support audits or use of the data in other work that is related to the hospital.

Finally, I said review. Errors happen, but being able to have the adequate time and work paper support to review what has been completed and input is the greatest key factor to me. Having time to review what has been completed is good planning and is usually a good practice versus slamming it all together to meet a critical deadline, which is usually not a very good practice because that lends itself to errors and mistakes. I want time to compare to prior year to see if I have variants which are flagged. I can go back and determine if the variance is warranted or if I truly have an error. Stepping away and then completing the review at a later time of your inputs and calculations on work papers is always a good practice.

I can tell you in my career here, there’s times where you may have keyed in a number, looked at it again, thought it was correct, walked away and missed that maybe you transposed a number because sometimes, unfortunately, we see what we keyed in, not what it should have been. So, to me, time to review is critical, in my opinion, and being in a critical spot and deadline and working very diligently to get something done in a time crunch can always lend to more errors. So, these and a lot of other discussions we’re going to talk about, so I’d certainly invite anyone who listens to this one to come and join us in the latest webinar, Medicare Settlement 101, for a much further in-depth of this. And I certainly appreciate the time of being with you today, Kelly. Thank you.

Kelly: Well, thank you, Andrew. We really appreciate you sharing all your knowledge with us. It was a lot of really great information.

Andrew: Thank you.

Kelly: And as Andrew mentioned, you can learn more in our upcoming webinar, Medicare Settlement 101, that he’s presenting on Wednesday, October 26, at 1:00 PM Eastern time. Learn more Thank you all for joining us for this episode of the Hospital Finance Podcast. Until next time.

[music] This concludes today’s episode of the Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit The Hospital Finance Podcast is a production of BESLER, SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.


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