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Principles of Medicare Organ Acquisition [PODCAST]

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The Hospital Finance Podcast

In this episode, we’re joined once again by Jeff Wolf, Director of Reimbursement services at BESLER, to take a look at Organ Acquisition and the requirements that come up during the cost reporting process.

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Highlights of this episode include:

  • Types of solid organs that qualify for organ acquisition reimbursement
  • Various phases of organ transplantation
  • Key cost report worksheets that impact organ acquisition
  • What types of costs are a part of organ acquisition costs

Mike Passanante: Hi. This is Mike Passanante, and welcome back to the award-winning Hospital Finance Podcast. Today, I’m joined once again by our director of reimbursement services, Jeff Wolf, to take a look at organ acquisition and some of the requirements that come up during the cost reporting process. Jeff, welcome back to the show.

Jeff Wolf: Thank you very much. Pleasure to be here.

Mike: So, Jeff, why don’t you start out by just giving us the 50,000-foot view. What is organ acquisition reimbursement for solid organs?

Jeff: Well, for Medicare, the organ acquisition and transplant services are cost reimbursed, and what that means is that the necessary cost incurred by certified transplant centers in acquiring and preparing the potential donor and transplant recipient for the actual transplant itself. And those are the costs that will be considered reimbursable at a cost base for Medicare.

Mike: And Jeff, what are the type of solid organs that qualify for organ acquisition reimbursement?

Jeff: Well, the most common one is kidney, but you also have heart, liver, lung, pancreas, and intestines. Each of those organs will have a separate page on the cost report. It’s called Worksheet D-4, where you will be identifying the cost and the number of organs for each of those.

Mike: What are some examples of these costs?

Jeff: Well, when we talk about the costs that go into organ acquisition and organ transplant, there’s a few phases that we’ll go through. But starting when you identify a patient that is potentially a transplant patient, you’re going to have tissue typing, cross-matching. You’re going to have evaluations. You’re going to have registration fees for registering the patient with UNOS, which is the United Network of Organ Sharing. And then you’re also going to have some operating and inpatient ancillary services while you’re doing the transplant event. You’re going to have some surgeon fees for excising the organ. You’re going to have costs of acquiring an organ. If you get it from an OPO, you’re going to have costs engaged in pre-transplant activities from your staff. So salaries and benefits and that kind of thing. Overhead costs. All of those aspects of our cost reimbursement are going to be part of the services that we provide. But the biggest thing is to focus on the patients that we’re dealing with. It is the expense of managing those patients before the transplant and during the transplant process.

Mike: Jeff, can you describe the various phases of organ transplantation?

Jeff: Yeah. There’s really four phases. The first one is evaluation, and that’s where you’re identifying the patient that has a potential need of an organ transplant and you’re evaluating them to see do they qualify. Once you get to the point where you have identified the patient as they’re qualified, they go on the wait-list phase. And the wait-list phase is basically waiting for an organ to be available. And then you have the transplant event itself, and that’s from when they are admitted for the procedure to when they are discharged. And then you have the posttransplant phase. It’s the follow-up and just making sure that they’re progressing well and that the transplant proceeds according to plan.

Mike: What are some of the key cost report worksheets that impact organ acquisition?

Jeff: Well, there’s a lot of the cost report impacts organ acquisition. One of the things that you want to pay attention to is the cost report lines on Worksheet A, which is your direct expenses. The cost report lines would be everything from 112 through 118. Those are your transplant cost support lines. Those lines are going to have your salaries and your other expenses. You’re going to have some A6 reclassifications. They’re going to be specific to the transplant procedures. And remember, we’re only getting reimbursed for the acquisition and the transplant itself, not for the post. So you’re going to have some time studies are going to be required, and you’re going to be doing some re-classes of pre and posttransplant expenses. There could be some A8 adjustments that affect those departments. The same thing with related party and physician services. One unique aspect of the physician services on a A2 is that organ acquisition, the pre-services includes the physician activities. So those are not considered Part B and are not removed off the cost report. They need to be included in your organ acquisition cost report lines. And then you have all the overhead stepdown. So the B and the B-1. And then finally, the Worksheet D-4. And the D-4 is the culmination of the information that is in the rest of the cost report for those organ acquisition lines. And D-4, you’ll have a separate page for each organ. And those are going to be the places that you’re going to identify the direct plus indirect, and you’re going to identify the charges for services provided to patients.

Mike: Okay. Great explanation. Jeff, what types of costs are a part of organ acquisition costs?

Jeff: Well, really, there’s there’s two types. The direct and the indirect. The direct costs are those that are booked in your general ledger, you know, the salaries, the benefits, the other expenses. And those will primarily show up on Worksheet A plus your A6s and A8s. And remember, with the A6s and A8s you’re going to be making some adjustments and re-classing things around. But that direct expense is the salaries, benefits, and other expenses related to all of the transplant activities, the pre-transplant activities. The indirect costs are all of the overhead department that are going to be allocated down to the transplant centers for the pre-activities. And that’s going to include housekeeping, cafeteria, maintenance, all of those kinds of items.

Mike: Are all transplant department related expenses considered organ acquisition costs?

Jeff: No. And if you remember what I said, the pre-transplant is what is considered organ acquisition. So we talked about the four phases. The evaluation and the wait-list phase is all pre. And that applies to both the donor and the recipient. So all of those activities related to identifying, evaluating, maintaining the patient while they’re on the wait-list until the moment of the admit for the actual transplant itself is all considered pre. That’s the cost of acquiring or organ acquisition. Those expenses are going to be reimbursed through your D-4. The post, so there are activities that we perform after the transplant has been done. The follow-up on the patient. Those are all reimbursed under your regular outpatient PPS and that kind of reimbursement system. So those are not considered part of the organ acquisition. So you will have to split those costs on usually some sort of a time study.

Mike: And I think that’s going to lead into my next question because I want to know about the kinds of tools a hospital can utilize to identify and carve out the posttransplant-related costs from the organ acquisition costs.

Jeff: Right. And that’s where those time studies are going to come into play. The obvious one is for salaries. Every employee that works in the transplant center should fill out time studies to identify what portion of their time is spent on the first two phases, the evaluation and maintenance, versus time spent on the post-activities. And remember, the organ acquisition department, the staff that’s in that department, they will be following up with those transplant patients. So they will have both pre and post-expenses. You also need to have time studies for employees that work outside of the organ acquisition department that are still providing services for the pre-activities. So you could have social services providing pre-activities for these patients. You could have clinic personnel providing pre-activities for these patients. You need to make sure you identify those staff that are not booked into the actual transplant department that are providing pre-activities and services to those patients and bringing those costs in. And that’s what those A6s are going to be about. So time studies are going to be your primary focus for that.

Mike: And so that was for salaries. What about other costs?

Jeff: Well, with the other costs, I would actually separate that into three buckets. So the non-salary expenses, your supplies, your depreciation, all the other non-salary expenses that you have are going to fall into three buckets. And the first bucket is those expenses that are purely related to the acquisition of an organ. Most of that is going to fall into the actual OPO, or organ procurement organization. They charge for organs that they deliver to your facility for transplant. And those expenses, those invoices are purely 100% pre. And there could be other activities or other expenses that are purely for pre-transplant activities. You want to identify those and put those directly into the transplant pre-department if you like. Then you have those expenses that are 100% related to post activities. So there could be follow-ups or there could be questionnaires. It could be things that you do with those patients that you have direct expenses for. And you want to identify those as purely post. And then you have the stuff in the middle that is part of operating the transplant department, but you don’t have a way of separating those between pre and post. And what we generally do with those is we use the aggregate of the time studies for the staff to say overall the percentage of pre versus post is whatever it turns out to be, 50/50 or 60/40. And I would split all of those remaining non-salary expenses based on the average time study for the employees for that year.

Mike: So we talked about direct costs and indirect costs as a comprising organ acquisition cost. Is there anything else to consider beyond that?

Jeff: Yeah. When you have patients that you are doing the evaluation and wait-list for, or if you will have the donors that you are preparing and, of course, tissue typing, all that kind of stuff, you’re going to have procedures that are being performed by the lab, by radiology, or even by clinic services where you’re not going to be able to identify individual staff members and the like that are working on these patients. They’re just part of those departments providing care. And you’re going to have pseudo bills for those. We track all of that through the charge system, and it shows up in the patient accounting system as a bill. But because it’s a pre-transplant patient, we don’t actually send that bill to the insurance. We instead track that as charges or visits in days, and we track all of that, and we put that on D-4 as the charges related to evaluation and weight-list. And in some cases, for the pre, you’re going to have some inpatient day stays, and so you’re going to identify all of that and put it on D-4. And those will be applied against the cost of charge ratios for each of the departments, and it’ll generate a cost of treating those patients or doing those services as part of the pre-activities.

Mike: And once you’ve identified the total organ acquisition costs, how does Medicare determine their share of the costs?

Jeff: Well, once we’ve identified the total cost of treating or of doing the organ acquisition, all of that pre-cost, Medicare then looks at the total usable organs that were for the organ transplant and then looks at the Medicare organs that were actually transplanted. And that ratio creates a percent. So if 40% of the organs are Medicare organs, then you will get 40% of that cost reimbursed through the Medicare program. There are a few tricks that you need to be aware of with which organs you count. For the Medicare usable organs, it’s not just the number of transplant organs for Medicare patients with primary insurance of Medicare, but it also includes the number of organs you excised at the hospital and were sent to an OPO. Those organs that you sent to the OPO, they will be sent to a different transplant center for transplantation. But for your hospital, the one that did the excision, all of those are considered Medicare organs, regardless of what the patient’s payer type was when it gets transplanted. So that’s a unique twist in how you count those organs. And then when you take a look at the total organs you’re also looking at the number of organs that were transplanted and discharged during the fiscal year, as well as the number of organs that were excised and sent to the OPO. So it’s not just what you transplanted, but also what you excised and sent to an OPO.

Mike: And Jeff, I understand there’s some necessary revenue offsets that must be made to the Medicare organ acquisition costs. What are these offsets?

Jeff: Yeah. The primary one is the fact that when you excise an organ and you send it to an OPO, which is the organ procurement organization, and that organ procurement organization is in– it exists to identify patients at other transplant centers that need organs. And they’re getting an organ from your hospital and taking it over to the second hospital. They will give you a revenue for that organ because you’re going to get some recoupment of the costs of excising that organ of going through whether it’s cadaver or live donors. You’re going to get paid for those that you’re not using at your facility. So you need to reduce that Medicare reimbursement by the revenue that you get from the OPOs. On the other side, when you buy an organ from the OPO for a patient that you’re going to transplant, that is one of those direct expenses. So you have to pay attention because you get to count all of the excised organs. All of the OPO revenue will reduce your Medicare reimbursement. And when you are the receiving hospital, when you buy an organ from the OPO, you have to make sure that all of that is in your pre-cost because that’s a cost of acquiring the organ.

Mike: Jeff, great detail today. For those in our audience who’d like a deeper dive on organ acquisition, Jeff’s delivered a webinar on that topic, and you can head up to to our Insight section. Just click on Reimbursement, and you’ll see a recording of that webinar. Also, if you are handling transplants at your facility and organ acquisition costs are part of what you need to account for, Jeff’s reimbursement team does have an organ acquisition review service available to help ensure your compliance with the program. Jeff, thanks so much for joining us today on the podcast.

Jeff: Thanks very much. It was a pleasure.

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