RHC Cost Reporting Resources

This page contains various resources to help RHCs prepare the required annual Medicare cost reports.

As hard as it to believe; it is time to get ready to prepare the Medicare and Medicaid cost reports again. We wanted remind our clients about some of the data that is required to complete the Medicare cost report and some things that you can do now to increase your Medicare reimbursement rate. Here is a listing of the things to do before December 31, 2004 that could help your reimbursement.

On or around December 31, 2004 empty your bank account by paying all your bills and paying additional money as compensation to the owners. This will help you increase your Medicare cost per visit and decrease your corporate or individual taxes as well. Please note that in 2004 some IRS regulations and enforcement actions relate to the declaration of year-end bonuses by physicians. You should talk to your tax accountant; before paying any year-end bonuses to ensure that the bonus is not considered a dividend under IRS rules.

In you next corporate meeting declare a bonus for any excess funds collected in the first 75 days of 2005. This will help you document any bonus that may need to be paid to physician owners during this period. The Medicare rules for corporations are bonuses to owners must be paid within 75 days of year-end.

Prepare a CPT Frequency Report with all CPT codes listed for all payers by provider. We need an individual report for each physician, nurse practitioner, and physician assistant. This is extremely important for sole proprietors and partners; because, Riverbend has clarified that the value of physician compensation can only be claimed for the visits that the physician is able to document that services were actually rendered by the physician. This could have a dramatic impact on clinics that have claimed the physician compensation allowance for total visits in prior cost reports.

Write off any Medicare Bad Debts before year-end. Proposed Medicare rules published; but not finalized, will reduce Medicare bad debt reimbursement to 70% of actual cost over the next three years. Since the bad rules are not final as of this writing; it is in your best interest to go back to the time you were first a rural health clinic and write off any unpaid Medicare deductibles for rural health clinic services. You should review the Medicare bad debt regulations closely to determine that you have met the guidelines. It is imperative that you write the account off your accounting records by the 12/31/2004 deadline or you probably face reduced reimbursement in the future. You should begin working on your Medicare bad debt listing in Microsoft Excel as soon as possible due to the difficulty in obtaining adequate information to obtain reimbursement.

We are working on the 2004 Cost Report Workpaper Notebooks this month and will mail them in early December for our clients to accumulate the information to prepare the cost report. If you are preparing your own cost report; please be aware that there is a new Flash report on the Riverbend website related to preparation of the cost report and you should refer to this before submitting the cost report.

Because of the many changes to the cost reporting process this year; we are offering a seminar on cost reporting in December 2004. The two locations are Las Vegas and Kansas City. Please see the end of the newsletter for complete information related to the seminars.

This will be the first cost reporting season were electronic filing of RHC cost reports will be required. RHC cost reports filed for the period ending 12/31/2004 or after will have to be filed electronically beginning with the May 2005 cost report submissions. We have obtained software to complete the electronic exchange of information with Medicare and this should not be any problem for clients of Healthcare Business Specialists. We will simply add a computer disk to your cost report submission that you mail to Medicare. The same signature pages and signatures will be required at first by Medicare.

The procedures for filing will be revised and streamlined by Medicare over time and the amount paper filed with Medicare will eventually decrease. Just not this year. We will prepare the usual paper cost report submission, Workpaper file and 339 Questionnaire for Medicare. The Riverbend Cost Report personnel indicated that if they could have the influenza/pnuemococal logs and the Medicare Bad Debt listing in Microsoft Excel format; it would speed the processing of your cost report. This is not required; but, would help Medicare to quickly process your cost report. Riverbend does have free software on their website to prepare the cost report and prepare the electronic file. Just go to Riverbendgba.com and look in the Provider section (Audit and Reimbursement). We have included the actual hyperlink to the software below:

Click on a link to open the file, or to begin the download procedure. (If you have trouble initiating the download by clicking on the link, then right-click the link and choose Save Target As, Save File, Save Link As, etc.) The software must be decompressed, since it currently in zipped format.

The subject which has generated the most questions in recent weeks is related to the shortage of influenza shots and how it will affect the Medicare cost report. Unfortunately; we do not have any magic bullet answers on this one; except, the only cost report impact is that You will not have as large of a settlement at year-end as you have had in the past. Medicare cost report settlements typically are made up of three elements—rate settlement, bad debt settlement, and influenza and pneumococcal costs; with influenza and pneumococcal being the largest percentage of the settlement.

Influenza Mist is not considered a flu shot and should not be logged or included in your Influenza invoice total.

Medicare will allow more as a reasonable cost this year due to the high cost of influenza vaccine this year; but, be reasonable in purchasing the vaccine. Outrageous prices should be avoided and may not be allowable if the cost is unreasonable.

If your rural health clinic receives free injections from the local health department; go ahead and log the shots for the Medicare Cost Report. The cost report will account for the time spent by the nurses giving the shots and you will receive additional reimbursement on the cost report settlement. Also find out the cost of the shots; because under Medicare reimbursement rules, this cost can be claimed as an allowable cost.

On November 3, 2004, CMS announced the Physician Fee Schedule for 2005 which includes a 3.1% increase in the Medicare Economic Index

The 3.1% increase in the Medicare Economic Index (MEI) translates into 3.1% increase in the maximum allowable cost per visit for rural health clinics in 2005. An integral part of receiving the correct reimbursement on the cost report is to have the proper Medicare maximum allowable cost per visit in the cost report. The table has the maximum allowable cost from 2001 through 2005. Please note that in 2003 there are two different maximum c0st per visits. One for the period 1/1/2003 to 2/28/2003 of $66.46 and for the period 3/1/2003 through 12/31/2003 the maximum rate is $66.72. The reason for the two different caps was Congress was late in announcing the 2003 Part B fee schedule due to a last minute adjustment to correct the rate.

With the announcement of the 3.1% increase in the Medicare Economic Index for 2005; we can update our physician compensation tables to include 2005. Table 1 and Table 2 are to be used to compute allowable physician compensation for physician owners in rural health clinics. According to Section 902.1 of the CMS Cost Reporting manual; “The allowance of compensation for services of sole proprietors and partners is the amount determined to be the reasonable value of the services rendered regardless of whether there is any actual distribution of the profits of the business.” We use these tables to compute the allowable compensation for physician owners when preparing RHC cost reports.

Guideline for Reasonableness of Physician Owners Salary at Rural Health Clinics (Time)

This table can be used to determine the allowable compensation for physician administrative time in an RHC. In 1996, the Medicare Intermediary converted to a per visit method of computing allowable physician compensation; however, it does not account for administrative time that a physician owner may provide in the operation of a medical practice. The purpose of this table is to compute the allowable physician compensation related to that administrative time.

Guideline for Reasonableness of Physician Owners Salary at Rural Health Clinics (Visits)

In 1996 the Medicare RHC intermediary converted to a per visit method of computing allowable physician compensation. The purpose of this table is to determine the allowable cost per visit to be multiplied by the number of encounters that the physician/provider owner provided during the fiscal year.

[1] The 3.0% increase represents a 2.6% increase and a .4% increase for a total of 3.0% for the annual update. The table illustrates the increase over the prior year.

[2] The Salary is based upon 2,080 hours for a full time equivalent (FTE).

[3] Medicare Economic Index (MEI) is the % increase in the RHC Cost Cap annually.

[4] Cap represents the Medicare maximum allowable cost per visit for RHCs.