Mike Nichols, FHFMA, CPA, is a managing director of RSM McGradrey in Schaumburg IL.  Nichols took time out to talk about some of the implications and strategies of the cost reporting process, best practices related to the accumulation of information, and using the cost report as a management tool that can contribute to a facility's overall reimbursement environment.

Question:  How can hospitals influence reimbursement for paramedical education and outlier dertminations through the cost report?

Answer:  There is an opportunity for hospitals, if they report appropriate costs, to enhance their reimbursement.  The key to this is to allocate costs fully and appropriately to Medicare.

Question:  Can you identify one or two revisions made recently to the Medicare cost report and how these changes may affect how a hospital or other health care organization's cost reporting process?

Answer:  Cost reports are always changing.  Wholesale revisions are expected over the next year and hospitals may have to change processes based on what CMS is seeking.

They should review completed Medicare hospital cost reports for relevance, accuracy and compliance with applicable instructions to ensure correct payment.

When I prepare or review cost reports, I  rely on a  "top 10" list of items to check.  I  focus on that list and if I'm comfortable with those items, I'm comfortable that the cost report can influence the level of reimbursement.

Question:  How can providers develop and use benchmarking data from other facilities to enhance their own reimbursement position?

Answer:  Health care organizations should leverage their knowledge of hospital or health systems operations to determine the best source for accurate information and reconcile different sources for management accountability. It's covered in accompanying "Top 10" list, but basically they should use different sources of information to arrive at one source of truth.

Question:  How does the calculation of margin fit into this process?

Answer:  Understanding the organization's Medicare margin can be the key to success. Every organization should be analyzing and actively acting on the answers to the following key questions: 

  1. What is the hospital's Medicare margin?
  2. What mechanism does the hospital use to calculate its Medicare margin? How often is it updated? Could the reporting and use of this information be improved? Who is responsible for reporting the information, and who are the users of this information?
  3. What opportunities exist to (legally) improve the hospital's Medicare margin?
  4. How can the organization influence the key reimbursement drivers?
  5. Which "right questions" represent the most viable strategies to implement positive change? How can the plan be communicated and implemented?

Question:  What's the most important consideration when working on the cost reporting process?

Answer:  Insuring that accurate information is matched up appropriately to portray a hospital's reimbursement environment.


Mike Nichols, FHFMA, CPA, is a managing director, RSM McGladrey, Schaumburg, Ill. He is a consulting partner who is responsible for a variety of clients-hospital, home health agencies, and nursing homes among others. He focuses on regulatory reporting for reimbursement purposes and can be reached at (mike.nichols@rsmi.com).

Publication Date: Monday, February 22, 2010