Blog, Reimbursement, The Hospital Finance Podcast®

Preparing for S-10 audits [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by BESLER’s DeLicia Pierce to discuss the process of preparing for worksheet S-10 audits for 2015 cost report data.

Learn how to listen to The Hospital Finance Podcast on your mobile device.

Highlights of this episode include:

  • The timeframe and directions CMS has given to MACs to perform their S-10 audits
  • What providers should be doing to prepare supporting documentation for these audits
  • How uninsured and insured patients are identified on the audits
  • Why sampling data to prepare for an audit is recommended
  • And more…

BESLER has extensive experience assisting providers with detailed reviews and refiling of their cost reports. BESLER’s S-10 Preparation and Review Service can prepare Worksheet S-10 for filings while identifying areas of opportunity and ensuring regulatory compliance.

Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast.

As you all know, Worksheet S-10 is an increasingly important part of hospital reimbursement. Recently, CMS has started the auditing process for 2015 data. To explain more about how that process will work, I’m joined today by DeLicia Pierce, the Director of our Reimbursement Services Team here at BESLER.

DeLicia, welcome back to the program.

DeLicia Pierce: Thanks, Mike. I appreciate you taking time out for me today.

Mike: Well, we appreciate you coming on.

Why don’t you start out… just talk to us about some of the recent activities happening around S-10.

DeLicia: So, one of the big—and it’s pretty big for the providers is that the MACs have started releasing letters to providers basically stating that they’re getting audited for the 2015 cost report and their S-10 data.

Now, with that being said, the MACs had been told by CMS to perform these audits. And basically, each MAC has been allocated 50 audits per the contractor. Well, with that being said, they haven’t increased the dollar amounts for funding for these audits. So they’re basically telling the MACs, “Do this under your initial funding. We’ve been giving you about 80 to 120 hours per audit to do this. And all the audits must be completed by January 2019.”

That’s a pretty short timeframe for the MACs to get these audits done. But then again, they have started sending out the letters.

And one of the strange things from the letters is that they’re not giving the providers much time to turn the data around, but it is big, it is real. Providers are starting to get notified. And they’re going to be audited.

Now, we don’t know the rationale behind how they picked what providers. But we do know that a lot of providers have already received their notification of the impending audits.

Mike: And DeLicia, have the MACs been given directions related to the S-10 audits yet?

DeLicia: Yeah. What they have done is, inside the letter that they provided the providers, the MACs have given some instructions on what they’re going to need. But the timing of these audits is really important.

They do know that they’re going to focus on certain lines on the S-10. We don’t completely understand. I don’t think anybody knows what they don’t know yet about what’s going on the MAC side or the provider side. One thing we do know is that some of the contractors, the MACs, are having to subcontract out to firms to do these audits because they just don’t have the bandwidth.

They definitely have put some thought into this. They kind of forewarned us that they were going to do this in the final rules. The final rules were published in August. And they have started releasing the letters.

Mike: We mentioned 2015 data in the opening. Is that the only year that’s covered in this round of audits or are there other years that they’re looking at?

DeLicia:  At this point, based off of the letters that they received or they sent out, yes, it’s only 2015. But that kind of foreshadows what’s going to happen in ’16. They’re going to do audits on those years as well. So it’s pretty important that while you’re getting prepared for your 2015 audit, you kind of get your 2016 data shored up so that you know you can provide that information to them once they request those audits.

But it looks like you have until after January 2019 for the 2016 audits. But right now, the focus is primarily on 2015.

Mike: And what’s the timing of the audits as it stands right now?

DeLicia: Well, what they’ve done is they’ve sent the audit letters out and they’ve given providers basically 14 days (two weeks) to turn around the data. If you didn’t resubmit your S-10 data, and you didn’t keep the detail behind it, you’re going to have to recreate it. And they’re giving you a fairly short timeframe to do that.

But then again, under the premise that they’ve told us multiple times they were going to do this, I think that’s what they’re using.

And they need the time. Not only are they already doing desk reviews for wage index, the MACs are still taking in cost reports as they’re getting filed, doing tentative settlements, and then now they have to do the 2015 S-10 audits. So I think that’s why they’re hoping to get all of the data in once they send the letter within 14 days.

Some providers are asking for extensions. And some have been granted. That being said, the more extensions they give, the more time crunch the MACs get into. So if you know you need an extension, you can ask, no guarantee that they’re going to give it to you.

Mike: Understood. So, let’s talk a little bit about what providers should be doing in the run-up to these audits. First, can you explain the fields that providers should include in their S-10 supporting documentation?

DeLicia: Oh, absolutely. What they did do is tell us the expectation of the fields that you need to include in your data—your claim type, your primary payer plan, secondary payer plan, hospital Medicare number (which is your CCN or P10), your patient identification number (which is your patient Medicare number or Medicaid number or whatever number that identifies that in your system), the patient’s date of birth, the patient’s social security number, the patient’s gender, patient name, admit date, discharge date, service indicator (which means hospital in-patient or outpatient).

What I would also make sure that I included is whether or not it’s rehab, psych, home health or SNF because you want to make sure that you don’t include things that shouldn’t be included.

They also want revenue code. And they’ve asked for revenue code total charges for the claim. My interpretation of that is your total charges. But when they go into the detail, and they look at revenue code, really, in theory, the charges based off each different revenue code should subtotal to your total charges. So that’s an interesting one that they’ve asked for.

They want the date of the charity write-off. They want all patient payments received or expected to be received. Some hospitals do the accrual basis, so you want to make sure that you get that information in there as well. They want third-party payments. They want patient charity contractual amounts by transaction code or adjustment code.

So really, you have an adjustment code or transaction code that tells you that you wrote the account off to charity. They want to make sure that you are doing that as well.

Other contractual amounts by transactions/adjustment code, insurance write-off, courtesy discounts, they’re looking for presumptive charity and other things when they’re requesting that information.

And then, they want the non-cover charges for days exceeding the length of stay for patients covered by Medicaid or other indigent programs.

So, one of the things that would make it easier for providers to be able to identify this is, when you’re running your reports, make sure you put either the geometric length of stay, the arithmetic length of stay based off of Medicaid’s APR-DRG tables, and then your actual patient length of stay to show that this is where you’re following out. As it relates to the expected length of stay, here’s what your geometric length of stay is.

That’s a field that we don’t typically provide to Medicare or Medicaid. But you want to pull that out of your data systems because it’ll help you understand and prove out your days that exceed the length of stay.

So, I would add that to your reports. That’s not something that, historically, we have done, but I would add that to your report.

Mike: Okay. Now, I’m going to ask you to tell us how uninsured is identified and then how insured is identified.

DeLicia: Okay. So the best way to do that—and they’ve given some instructions around that. They’ve said uninsured charity is full or partial charity write-off. So if your patient is zero insurance, and you probably either have them in self-pay or charity bucket as a payer, the full charges related to those, and if you have written a portion of it off to charity, make sure you identify that.

They also want non-covered services provided to Medicaid eligible patients and indigent care program patients written off to charity. So if you have some patients that they’re Medicaid eligible, but you don’t really have them in Medicaid because they either was not covered or non-medical necessity, you want to make sure that you identify those charges related to that.

When it comes to charity, charity for patients with coverage from any entity without a hospital contractual relationship, if you have charity care, and they have some kind of secondary coverage—let’s hypothetically say a high deductible plan, and it’s $5000, but they can’t. They meet your policies and procedures for charity because of income and they can’t pay that high deductible, that can be put into that category as charity as well.

And then, as you go into the insured, what they’re looking for is for insured patients who have deductible and co-insurance amounts under third-party coverage. It’s very similar to the Medicare bad debt. They’re looking for co-insurance and deductibles which is your patient liability that meet the criteria in your policies to be written off to charity.

So, they may have insurance, but if the patient portion, they can’t pay that, it’s considered insured charity. And you want to put those in those categories.

Do not include your Medicare patients that you have included as Medicare bad debt. Those should be excluded from those population. And those, we consider those crossover claims. Do not include those in that population.

And then, your non-cover charges for days exceeding the length of stay for the limit, make sure that you’re identifying that appropriately. You’re not going to get paid for them. So do they meet the criteria—they have insurance, but it’s going to be considered insured charity?

Mike: DeLicia, what more can providers do to prepare for these upcoming audits?

DeLicia: That’s an interesting question because, if you think about it, this is new. We don’t know what we don’t know. The MACs don’t know what they don’t know because this is a large population of patient information that they’re not used to working with.

So, to make your life easier and their life easier, you should definitely try to take the field listings that they’ve given you, pull that data in that format. And don’t limit it to those fields. If you think there are fields that need to be in there that will help the auditors as they go through this process, you need to make sure you do that as well.

You would also need to make sure that you are reconciling your data. The easiest thing to do for an auditor is go to the worksheet S-10, and make sure that those numbers are tying because that’s your balance sheet. Make sure that everything is ticking and tying.

And they’re going to look at your financial statements. They’re going to look at your trial balance. They’re going to look at everything related from a finance perspective. In total, everything should reconcile.

By category, on the S-10, it may not necessarily reconcile because S-10 has a totally different purpose, so to speak. And the fields that they’re really going to focus on are the charity care lines. They’re going to focus on your 20’s, 26’s—well, actually, 21, 22, 23, 25, 26. Those are the lines that they’re really going to focus on because they have bearing on the S-10. So you want to make sure that you have reports that support those numbers and reconcile back and forth because you don’t want to be caught with error rates on this data.

Now, we don’t know how that’s going to get applied. They’ve said that it’s not retrospective; it’s a prospective approach. So really, your 2019 S-10 numbers are not going to change.

We do think that it’s possible, if they get these audits completed, they could incorporate those into the 2020. And if you think about the way that they’ve done this, it’s a 3-year—currently, for 2019, it’s 2014, ’15 and ’16). Based off of what they’ve said in the final rules, they could potentially say, “We’re not going to look at ’14. We’re going to look at ’15 and ’16,” or they could say, “We’re going to take this, and we’re only going to look at ’16 or ’15.”

There is some latitude there for them to get to those numbers and make sure that they’re appropriate.

So, we really don’t know how it’s going to be applied. We don’t think that 2019 numbers are in jeopardy at this point. But I would make sure that you are definitely looking at your policies and procedures. You’re making sure that what patient accounting is doing is following those policies and procedures just to prepare for anything that’s coming up in the future.

Mike: DeLicia, should providers complete a sampling of their data to prepare for the audits?

DeLicia: I would highly suggest that providers do that. And the reason for it is, as we’re all experienced to the Medicare bad debt audits, they’ll do a sampling, and then if there’s an error in the sampling, they’ll ask for additional data. And if that error stands, they’re going to take that error percentage and extrapolate it to the total population.

So, you want to make sure that you’ve looked at it. You can’t look at every patient because—oh, my goodness—it’s just a lot of data. But you can do the sampling and do multiple, different samplings to see from a perspective of “Do I look okay from when I’m sampling?” That way, you kind of have an idea if there’s anything in the data that shouldn’t be.

And I’m pretty sure that most providers have already done some of this. But you want to do it again and again and again just to make sure.

And one of the things that I do know that they’re going to look at is they’re going to be trying to reconcile and pick up any large variances from current to prior year. You want to make sure that you do that as well. At least you’re prepared to answer the questions that there’s an operational change, if there’s a pair mix change, that has caused your numbers to change. What we do know is they allowed us to resubmit ’14 and ’15 and basically ’16.

If there are big variations from when you initially filed to when you resubmitted, you want to be able to explain, one, those variations, and if it is operational or you change the reporting to make it more accurate and more reflective of what you think is really happening. You want to do that.

So, I would highly recommend doing a trending. And I would start with ’14 and ’15—’14 for the trending analysis just to make sure that you see are you trending up, are you trending down or are you staying flat. And make sure that you’ve done the research to identify why there is variations because they will ask that.

It’s very similar to what they do from a wage index audit perspective. They look at variances and the answer to explain them. It’s better to explain them now when you’re closer to the data than it is to wait a couple of years when they ask you on next year audits.

So, you just want to make sure that you’re ready for those and you can document it. When it’s more fresh to you, you can document it and you can make those recommendations for any potential policy changes that you may need in the future.

Mike: And of course, BESLER can help your hospital with an S-10 review or a full S-10 preparation. So we invite you to head over to, visit our Reimbursement Services page. You can find out more details about it there or contact us directly from that page.

DeLicia, thanks so much for joining us today and helping us understand more about these recent S-10 audits.

DeLicia: Okay! Thanks Mike. Have a great weekend.


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