Blog, Reimbursement, The Hospital Finance Podcast®

The Medicare cost report domino effect [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by Jeff Wolf, Director of Reimbursement Services at BESLER, to discuss the Medicare cost report domino effect.        

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Highlights of this episode include:

  • How the domino effect impacts a hospital’s reimbursement
  • What areas of the cost report are more prone to issues of downstream impact?
  • What to look for when identifying issues that have a domino effect.
  • Actions to take to ensure that you do not miss downstream impacts.
  • And more…

For more on this topic, click here to view a webinar presented by BESLER’s Jeff Wolf. Watch and learn about pitfalls associated with specific data mistakes so you can improve the accuracy of your cost report. 

Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. The Medicare cost report contains numerous data points that interact with each other. The effect of careful versus poor data manipulation can lead to a domino effect that can have a material impact on a hospital’s reimbursement. To talk with me about this domino effect, I’m joined by Jeff Wolf, who is the Director of Reimbursement Services here at BESLER. Jeff, welcome back to the show.

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

Mike: Jeff, what do you mean when we say the domino effect?

Jeff: Well, the domino effect is our term, if you like, for the fact that when one item changes and that falls, it hits another item and another item just like the dominoes that you see on those wonderful videos. A lot of people also call that the downstream impact. And so basically, what the domino effect is if you make a correction or a change or you do an analysis of an issue in one place, the result of that action is going to cause changes further down the line on your cost report, and you have to be cognizant of those interactions in order to make sure that you have a proper cost report at the end of the day.

Mike: Jeff, are there areas of the cost report that are more prone to these issues?

Jeff: Well, there’s a lot of areas where this can come into play. But the most significant, I think, by far, is your A-6s. All of the reclasses that we do, we are moving expenses away from where they were naturally grouped. What I mean by that is they were grouped by the department on a line of the cost report. The revenue, the expense, they’re all grouped consistently. But when we have an A-6 reclass, we’re taking a certain type of expense, and we’re moving it. We can use an example like medical supplies, and you can tell that when we move the medical supplies, it has a change of the cost to charge ratio. But it’s also going to change statistics in your B1 stats. It’s also going to cause you to have to move the revenue associated with that medical supply on your Worksheet C, and it’s going to have you make sure that you map the revenue for that medical supply as well to the correct location. So the fact that we made this one change on the reclass, at a minimum, has four impacts further down the line on the cost report.

Mike: How do you know that an issue will have a domino effect?

Jeff: That’s actually a great question. How do you know? The reality is that comes with some experience. But there are some key triggers that you can stop and look at. The first one that I would look at when I’m doing an A-6 reclass or even if I’m just looking at an issue that has to be dealt with is I ask myself, number one, “Is it patient treatment related?” or, “Is it administrative?” The patient treatment areas tend to have more impact downstream than the nonpatient treatment areas. But even administrative items can have the impact. So the second question I have is, “Is there a statistic? Is there a revenue? Is there another reclass or adjustment that will be impacted by this issue?” And that helps me stop and think about it. And I ask this on every reclass that I do, in my head, I stop and say, “Okay. What else is this going to cause?” And I actually create a list for that reclass. And when you’re looking at that, and I say I create my list, there are things that we can do to help improve that. And so you want to take note of those work papers that have the domino effect or the downstream impact and make sure that you’re treating those the same way each year and identifying the issue on hand across the board.

Mike: Are there any things you can do to make sure that you don’t miss these downstream impacts?

Jeff: Well, yeah. And that’s what I was just alluding to. There are things you can do. One of the things that we tend to recommend is deal with one issue. If it’s the issue of labor delivery, deal with that issue and identify all of the downstream impact that that is going to have. So you’re doing the labor delivery and that’s a case where you have patients that are being treated for labor delivery. They go into labor, they deliver a baby. So that’s the delivery part. They have room and board afterwards postpartum. And they have the actual nursery for the baby. And all of that expense is commingled, and we do a reclass for it. Well, as you’re doing that reclass in whatever statistic or whatever way you’re calculating the labor delivery reclass, at the end of the day, you’ve moved salaries. That should clue you to, “I have to now do the hours.” As soon as you do hours, that can affect FTE. So do the analysis for the FTEs. Do all of the analysis that are related to this issue. The issue is we’re moving expenses because of labor delivery and it’s going to have impact. Salaries are going to cause hours in FTEs. Other expenses are going to cause B1 statistic changes. They’re going to cause– the whole issue is going to cause revenue changes on worksheet C and it can even cause revenue changes on your settlement. It can even impact other things like patient days. So what you want to do is in one place, in one analysis. Do all of these impacts and have that one work paper be your guiding light. If you like, that will tell you, “Here’s all the places. This is going to have an impact.” Then when you get to those places and have an impact, you add a column and you’re just permanently in those work papers. There’s an extra column for the issue of labor delivery so that when you get to those, you know this goes here, whether you use a copy and a paste function, whether you use a VLOOKUP, or whether you use a work paper reference, either way, you want to be able to move those dollars down or those statistics down to that other work paper, and you want them to be the same numbers. So again, copying VLOOKUP or paper reference, whatever you use, or however you’re completing your work paper, you want to make sure that that information is there. And then lastly, there’s always a set of reclasses that we know have a lot of impact. And at the end of my cost report process, just before I’m ready to start uploading the data to HFS or Copymax, I go through a review and I say, “Here’s my reclass. And I have all these analyses of the downstream impact.” And I just check the B1 statistics, whether it’s square feet or salaries or nursing, admin hours, whatever, or worksheets C or the wage index, or my patient days, I look at those other work papers next to the C-section and make sure that I have the right numbers going there to the right place.

Mike: And Jeff just delivered a entire webinar on this topic. So if you’d like to learn about this in more depth, just head up to, click on the insights button and look for the reimbursement tab. And you can watch the video of that webinar there. Jeff Wolf, thanks so much for joining us today on The Hospital Finance Podcast.

Jeff: Thank you very much.

The Hospital Finance Podcast

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