The Case for Cost Reports

Part Three | Can Medicare Cost Reports be Used Instead?

In Post 1 Are Medicaid Cost Reports Still Necessary?, and Post 2 Why Cost Reports Still Make Sense… Especially Now of our series, we looked at the evolution of the cost report, important issues governing our support of the cost report, and a robust list of factors that we assert means cost reports make sense. In this post, we provide a high-level view from the federal perspective, and how the Centers for Medicare & Medicaid Services (CMS) factors into this complex calculus.

In some situations, it may make sense to eliminate a specific Medicaid-specific cost report (state) and use a Medicare (federal) cost report instead. However, it is important that states consider the issues with using the Medicare cost reports prior to making a change. Medicare cost reports can be an issue for the following reasons:

  1. There may not be an equivalent Medicare cost report (e.g., ground emergency medical transportation cost reports).
  2. The Medicare cost report doesn’t typically include any Medicaid claims data or audited Medicaid data.
  3. Medicaid cost reports break out costs differently for some areas, such as services aimed at children, behavioral health, and labor and delivery.
  4. Medicaid cost reports may include cost categories that align with Medicaid rates, and those cost categories are not available in the Medicare cost reports.
  5. Medicaid cost reports may include Medicaid-specific rules when it comes to allowable costs, such as provider taxes, and the Medicare cost report will not include these differences.
  6. Medicare cost reports may not break out all federally qualified health centers or rural health clinics needed for a state to set rates.
  7. Medicare audits are limited and do not focus on costs and risks associated with Medicaid uses of the cost reports.

If a state does decide to change their current cost report collection and validation, they should ensure their rules, state plans, and waivers support the actions taken.

CMS Reliance on the Medicare Cost Report

The Medicare and Medicaid cost reports are both financial documents that participating providers submit to their respective agencies. However, as explained throughout this series, they serve slightly different requirements and often are structured differently.

Medicare cost reports are required for participating facilities, submitted to Medicare Administrative Contractors (MACs), and CMS relies on these for a variety of reasons that include, but are not limited to:

  1. MAC cost report settlements are typically not focused on costs. The settlement items typically relate to reviews of Medicare bad debts, Medicare disproportionate share, Medicare graduate medical education, sole community and Medicare dependent hospital payments, nursing and allied health, and Medicare organ accusation costs.
  2. MACs rely on the cost reports for future Medicare outlier payments and outlier payment reconciliations.
  3. CMS uses cost submitted cost reports for settlement estimates in CMS budgeting purposes.
  4. CMS relies on the data for estimated rate impacts with proposed and published rules as the Medicare cost report identifies total facility cost.
  5. CMS relies on audited Worksheet S-10 data for future Medicare uncompensated care payment distributions.
  6. Many agencies such as the Medicare Payment Advisory Commission and the Medicaid and Children’s Health Insurance Program Payment and Access Commission, or not-for-profit organizations such as RAND Corporation, use the published cost report data for payment studies or future payment recommendations.

Clearly, states considering cost reports and how and whether to use the cost report have much to weigh. In our next post, Myers and Stauffer Case Studies – Three Examples that Support the Case for Cost Reports, that brings together all the factors we have considered and puts them into a framework that clearly demonstrates the power and significance of cost reports to clients.

Why Myers and Stauffer

Purpose driven. Exclusive focus. Government Programs.

Established in 1977, Myers and Stauffer is a nationally based consulting and certified public accounting (CPA) firm. For more than 48 years, we have worked exclusively with local, state, and federal government health and human-services agencies to help them accomplish their most critical goals for the nation’s most fragile people.

We are here to answer any questions and help with any health and human-services needs your agency may be encountering. Contact a member of our team today.

Related Posts in Our Series

Explore the full scope of our Case For Cost Reports comprehensive series:

Authors

Bob Hicks, CPA

Member

bhicks@mslc.com

 Tami Bensky, CPA

Member

tbensky@mslc.com

 Tammy Martin, CPA

Member

tmartin@mslc.com
The Case for Program Integrity in Medicaid Managed Care | Supplementary Ins...The Case for Program Integrity in Medicaid Managed Care | Part Four