Cost Report 101 – It’s Not Just for Accountants

1970s 1980s 1990s1960s 2000s 1968 – Uniform Anatomical Gift Act (revised 2006) 1984 – NOTA (revised 1988 & 1990) Final rule – Medicare coverage for liver 1972 – Medicare Benefits extended to ESRD patients 1987 – Medicare coverage for heart Medicare conditions of coverage for participation for transplant centers Cost Report 101: History of Transplant Related Legislation 1999 – Medicare coverage for pancreas 1995 – Medicare coverage for lung 2001 – Medicare coverage for intestine 1956 – Social Security Act

CMS Conditions of Participation Reimbursement DRG Cost report Physician Cost Report 101:

What is the Medicare Cost Report and Why does it exist? It is how hospitals who serve Medicare beneficiaries report costs to CMS It exists so that my friend who is a Congressman and my nephew who is an accountant always have jobs

What is the Medicare Cost Report and Why does it exist?? ( Real Answers) Established in 1965 with the Social Security Act Intended to pay hospitals for the cost of providing services to Medicare beneficiaries Became less important when CMS adopted the PPS method of reimbursement All Medicare participating hospitals submit once a year (in general)

What is the Medicare Cost Report and Why does it exist?? Establishes cost to charge ratio and wage index Outlier payments PPS geographic adjustments Enables hospitals to recover some costs (settlement): Medicare Bad Debts Critical Access Hospitals GME Disproportionate Share reimbursement AND organ acquisition costs on the D 6 Worksheet Medicare secondary payments

So what is this “pass-through” talk about ? Hospitals “pass-through” their costs to Medicare It also generally is meant that FULL COSTS are reimbursed It does not really work this way for transplant Why? Because transplant costs are reimbursed by way of a Standard Acquisition Charge or SAC

What is a Standard Acquisition Charge (SAC) Not a charge representing the cost of a specific organ but a charge that represents the AVERAGE cost associated with acquiring that type of organ All-inclusive (direct & indirect) Includes physician services up to the admission to the hospital for donation Medicare settles with the transplant hospital for its share of the costs 5

Standard Acquisition Charge All organ-specific acquisition costs # of organs transplanted = organ SAC for your institution 6 This is a COST not a CHARGE The actual charge on the patient’s bill is usually marked up (so this is a CHARGE not a COST)

WHAT? It is a called a charge but it is really a cost? I am confused! Join the club…. Remember the Cost Report establishes the Cost to Charge Ratio – so the CHARGE is reduced to cost with the ratio

WAIT? Don’t OPOs have a SAC also?? YES – and it works the same way You record the OPO SAC on your cost report 5

WAIT? What do I put on the Patient’s Bill? Isn’t that a SAC also? Well, yes but this SAC should be a charge Your full cost plus mark-up Medicare does not pay this but uses cost report to reimburse hospital Only relevant for “fee for services” or “discount off charges” payors 5

So what kind of costs can I put on this cost report? Includes costs for acquisition of live donor and deceased donor organs Allowable transplant center organ acquisition costs include: Salaries of staff Rent associated with acquisition activities Procurement related costs – the OPO SAC Procurement related costs – your costs (transportation, etc) Evaluation testing - facilities fee and professional fees UNOS registration fees Tissue typing, including by an independent laboratory Costs associated with professional and patient education (pre)

Allocate costs correctly Separate Cost Centers Disease Management vs. Evaluation Pre vs. Post transplant Assign Costs to Recipients Reasonable Costs Special Considerations Time studies Physician reimbursement Live Donors Transplant 101: What’s MY Role?

How do the costs get to the Cost Report? Cost Report Immunology Testing EVALUATION TESTING OPO SACs Acquisition Cost Center

What’s MY Role? Allocating Costs Cost report Professional fees Procurement Evaluation testing Cardiac Catheterization Disease Management TB Treatment Hepatitis C treatment Vascular Access Care Now WHERE should this go?

Cost Report Immunology Testing EVALUATION TESTING OPO SACs What’s MY Role? Assigning Costs UNOS Registry Fee This belongs to John Smith

What’s MY Role? Reasonable Cost WHAT does that mean? For costs incurred at your facility, it means full cost as determined by your cost report For costs that you pay others for on behalf of your recipient, it is whatever you paid Generally, this is interpreted as Medicare participating rate BUT not necessarily Key is consistency

Physician reimbursement: Reasonable Cost - Use hourly practice rate OR benchmark (AAMC) Must be for evaluation services only Medical directors: - Job description with evaluation duties - Must report actual hours – time studies Evaluation services: - Must be able to identify a specific service given to a specific patient -Examples: Selection Committee, patient visits, consultation to RNs No provider services once recipient OR live donor enter hospital for transplant event What’s MY Role? Reasonable Cost – Physician Payments

Accounts Payable – Payment policy What’s MY Role? Reasonable Cost

Time Studies Name of PA: Month: February 2006 SundayMondayTuesdayWednesdayThursdayFridaySaturday 1234 Acquisition Hours: 0 Hours: 6Hours: Non-Acquisition Vasc Access Hours: Vasc Access Hours: 5 Vasc Access Hours: 2 Vasc Access Hours: TX Recipient Surgery Hours: Non-TX Surgery Hours: Non-TX Surgery Hours: 3 Non-TX Surgery Hours: Floor Coverage Hours: What’s MY Role? Salaries

Should I record costs that are related to recipients with commercial payors? Should payor mix be considered in overall cost report strategy? What about KPD? How does that work? What’s MY Role: Management Strategies

Should I record costs that are related to recipients with commercial payors? YES!!!!! Medicare settles for their share of the acquisition costs So if you ONLY record Medicare recipients'’ costs what is going to happen? What’s MY Role: Management Strategies Little PieBIG Pie

Should payor mix be considered in overall cost report strategy? What’s MY Role: Management Strategies

What’s MY Role? Live Donors General Principles

Donor Evaluation: Facility Costs – recipient center cost report Professional Fees – recipient center cost report Donor Hospitalization: Facility costs - recipient center cost report Professional fees – recipient Medicare part B Live donor transportation and housing not allowable After Donation: Routine follow-up Complications must ALL be billed directly (NOT cost report) Physician unchanged What’s MY Role? Live Donor

Departmental charges Standard Acquisition Charge (SAC) CMS preferred Donor Costs Can Be Recorded in 2 ways What’s MY Role: Special Considerations in KPD

Standard Acquisition Charge – PDE All live donor costs (donor only NO recipient costs) # of live kidneys successfully donated = live donor SAC for your institution 6 What’s MY Role: Special Considerations in KPD

 Differences in overhead could cause difficulties in PDE  How are “extra” costs treated ( i.e. recipient center requests additional tests in PDE)?  Isolating donor costs may represent new administrative processes for some centers (PDE) Disadvantages of SAC  Maximizes CMS reimbursement  Provides for costs in pre-emptive, not yet on Medicare  Eliminates questions of when individual donor costs were incurred  Dilutes issues of multiple donors for a single recipient, etc…  Can be transparent between centers as soon as match is made (PDE) What’s MY Role: Special Considerations in KPD Advantages of SAC

Departmental Charges Itemized bill for costs associated with a specific donor for a specific recipient can be billed to the recipient transplant center Transplant centers must bill SAC to Medicare or third-party payors for organs acquired and transplanted 9 What’s MY Role: Special Considerations in KPD

Departmental Charges 10 SAMPLE INVOICE Name: Sally JonesPatient ID #: Address: Any town, USA Transplant donor evaluation and acquisition services for recipient: Name: Lucky O’MalleyHI #: Address: Big Transplant Center, USA Tissue Typing Chest X-ray EKG Chem 20 CBC Operating room minutes, etc… What’s MY Role: Special Considerations in KPD

 May reduce reimbursement opportunities from Medicare  Adds complexity in determining when/which donor costs should be Included in PDE  Assigning overhead may represent new administrative processes for some centers (PDE) Disadvantages of DC  Maximizes commercial Reimbursement  Allows for exact costing of the specific donor in PDE What’s MY Role: Special Considerations in KPD Advantages of DC

Provider Reimbursement Manual 2771.A Medicare Claim Processing Manual Publication , Chapter 3, Section – Program Memorandum CMS Reference Documents I Don’t Believe You – Who else can I talk to ?

QUESTIONS? Cost Report 101 :