Essential Medicare Cost Report Tips for Hospice Providers

CMS requires hospice providers to submit Medicare Cost Reports to their MAC each year. Failure to comply with cost reporting requirements can result in suspension of payments, interest penalties, or potentially the loss of Medicare certification.  The report is used by CMS to determine the costs associated with the provision of hospice services, which impacts future reimbursement rates. Here are some tips for preparing and using Medicare cost reports.

Understanding Medicare Cost Reports

The Hospice Cost Report is an annual financial document submitted electronically by hospices and other providers to CMS via their MAC each year. It details each hospice’s costs to deliver care during the previous year. This information allows the federal government to assess the adequacy of hospice reimbursement based on profit margins and cost to deliver care to Medicare patients, and to set future rates by analyzing costs across different geographic areas.

MACs submit the data they receive from hospice providers to CMS’s Healthcare Cost Report Information System (HCRIS). The cost report breaks down the revenues and expenses of hospice organizations into a standardized format for comparison purposes. Information contained in the report includes:

• Reimbursements received from government programs, including Medicare and Medicaid
• Types of facilities where patient care was provided
• Facility utilization
• Types of services provided, and expenses incurred—referred to as “cost centers”
• Other financial information

Financial Implications of an Inaccurate Cost Report

Inaccurate or incomplete data in the cost report can have significant consequences, including the delay or suspension of payments, financial penalties, and potential audits. Rejected reports must be resubmitted, and as many as 10 to 40 percent of initial submissions may be rejected. Underreporting expenses can have a negative impact on future reimbursement, while overreporting expenses can lead to overpayment and recovery proceedings by CMS. Falsification can result in fines or imprisonment, and the cost report contains an attestation from the Chief Financial Officer or Administrator as to its accuracy.

Filing for an Extension

MACs can grant an extension of the cost report deadline on a case-by-case basis where the hospice shows that circumstances beyond its control impact the ability to submit a timely report. Extension requests should be filed as early as possible—not right before the due date. There is no guarantee the MAC will approve the extension. Some common reasons providers use to request extensions include late availability of audited financial statements, complex financial situations from events such as mergers which may require extra time to integrate financial data in order to submit an accurate report, technical issues such as major system changes, or sudden staffing shortages such as turnover in key accounting personnel. When requesting an extension, providers need to clearly document the reasons and communicate them effectively to their MAC to improve the odds of approval.

Cost Report Requirements

Cost reports are typically due within five months of the cost reporting fiscal year. If filed early, hospice providers have a grace period to submit changes. Cost reports must be prepared using an accrual basis and must be submitted electronically through an approved software vendor.

Timing needs to be strategic, because an accurate report depends on the availability of audited financials and accurate Provider Statistical and Reimbursement report (PS&R) data. The Medicare PS&R report is compiled from claims, so hospice providers must wait long enough for claims to process to have a complete picture of unduplicated patient days, charges, and other PS&R data.

Essential Preparation Tips

The Hospice Medicare Cost Report requires meticulous, detail-oriented preparation. The strategies below can streamline the process.

• Gather financial records well in advance. Collect all relevant financial documents such as general ledger reports, payroll data, the Medicare PS&R and other statistical reports. This information will need to be cross-walked, allocated, and reconciled to financial statements—so start early.

• Understand report requirements. Before starting, read the user manual for the cost report forms, CMS guidance on allocation methods and allowable expenses, and other important information. Make sure you understand the information contained in each worksheet of the cost report.

• Maximize reimbursement. Be thorough to include all allowable costs. Maintain internal documentation supporting the expenses claimed on the cost report.

• Do data validation. Double check the report for common errors and provide reconciliations explaining any differences from the audited financial statements—even minor differences due to rounding.

• Stay up to date. Use webinars and other sources that focus on hospice billing and Medicare regulations to stay current on cost report requirements and best practices. The Healthcare Financial Management Association (HFMA), the National Hospice and Palliative Care Organization (NHPCO), and CMS offer good resources.

• Create or update any crosswalks from your chart of accounts to the Medicare cost centers in the report. Without accurate mapping, cost-to-charge ratios will be inaccurate.

• Keep backup worksheets and documents with allocations used in report preparation.

• Monitor report submission status. Once the cost report has been submitted, the MACs typically provide a cost report status tool to check on the status. Make sure the report is accepted.

Other Uses of Hospice Cost Reports

Since cost report data is public, hospice leaders can use other hospices’ cost report data for benchmarking, competitive intelligence, or for data to create pro forma financials for new hospice ventures. Cost reports give insights into other providers’ payer mix, expenses per patient day, and other information. Individual cost reports can be requested through the Freedom of Information Act (FOIA).

The Takeaway

Medicare compliance requires annual submission of accurate cost reports, which in turn impacts future reimbursement. Preparing a hospice Medicare cost report requires attention to detail and a strategic approach. The tips above can assist with accurate, timely submission. Cost reports can also provide valuable industry data and serve as an asset, not solely an obligation.  

More articles and information

Learn more about Hospice software with accounts receivable and financial reports,  payroll, clinical documentation, scheduling, and all the features and functionality needed to operate at peak efficiency, or browse our other Hospice centered blogs:

1. What are the key performance indicators for hospice agencies?
2. What are the top strategies to grow your hospice referrals?
3. What are the crucial skills for home health and hospice hiring?
4. Selecting the best caregiver for end-of-life care
5. Home care and hospice collaboration
6. Best financial practices for hospice care agencies
7. The keys to quality improvement in hospice agencies
8. Building strong partnerships with hospice stakeholders