HFMA Comments on CMS Form 2552-10: Proposed Changes to Hospital and Healthcare Complex Cost Reports

Introduction
Elimination of Worksheets
Incorporation of CMS Form 339 into the Cost Report
Comments on Specific Worksheets
Conclusion
About HFMA

 

August 31, 2009

Charlene Frizzera
Acting Administrator
Centers for Medicare & Medicaid Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W., Room 445-G
Washington, DC 20201

Dear Ms. Frizzera:

Introduction

The Healthcare Financial Management Association (HFMA) appreciates this opportunity to comment on the Centers for Medicare & Medicaid Services’ (CMS) Form 2552-10, published in the July 2, 2009 Federal Register.

In general, HFMA supports CMS’s efforts to improve the quality of data collected and eliminate reporting of outdated information, thus decreasing hospitals’ burden to complete the cost report. However, we are concerned that the proposed revisions are not as complete as they could be. Additionally, some of the changes will require hospitals to provide information that is either not available to them or not collected as a part of normal business activities.

Below, please find our detailed comments on CMS Form 2552-10.

Elimination of Worksheets No Longer Used for Medicare Reimbursement Purposes

CMS proposes to eliminate certain worksheets related to Medicaid reimbursement in various states from the cost report. Specifically, the agency would eliminate Worksheet C, Part II (capital), and Worksheet D-1, Title 19 (skilled-nursing facility limits), which flow to the Medicaid settlement page (Worksheet E-3, Part VII) that would be maintained. Unless a state Medicaid program matches the Medicare program exactly, Worksheet E-3, Part VII, would then be inaccurate. Therefore, hospitals in affected states would need to utilize two versions of the cost report software to prepare and submit their reports – one set for the CMS-approved version, and another set that would have to be created for the state-specific version.

For example, Florida uses Worksheet D-1, Title 19, to calculate observation bed per diems; it does not use Worksheet D-1, Title 18 (which is retained in the proposed cost report), to do so. In addition, New Hampshire, South Carolina, Texas and Vermont use Worksheet C, Part II, to reduce capital payments.

We are concerned that eliminating cost report worksheets that are no longer used for Medicare reimbursement purposes, but are still important for Medicaid reimbursement in various states, will cause unnecessary burden to both the hospitals and the states that have relied on the reporting and collection of this information for many years. HFMA is not requesting CMS to create new forms to meet each and every state’s Medicaid data collection needs, but the elimination of instructions and worksheets that already exist causes an unnecessary hardship that can be avoided. We urge CMS to examine how the states use the Medicare cost report for Medicaid reimbursement purposes and then retain those worksheets that the states use.

Incorporation of CMS Form 339 into the Cost Report

Hospitals must submit Form 339 (the Provider Cost Report Reimbursement Questionnaire) that is intended to ensure that the appropriate worksheets on the cost report are completed, as indicated by the responses to the questionnaire. This form also contains accompanying exhibits that are intended to provide supporting documentation of information contained in the cost report and could be used as part of the audit process.

CMS proposes to eliminate Form 339, but would still require hospitals to report most of the information that it contains. The agency does so by incorporating parts of Form 339 into a proposed new worksheet – Worksheet S-2, Part II – and by requiring the submission of additional schedules that are described only in the instructions and are not part of the cost report forms. These schedules mimic the current Form 339 exhibits and, per the instructions, are to be submitted either electronically or in hard copy.

By not including all of the schedules in the cost report forms, we believe this increases the opportunity for inconsistent data collection and cost report rejection. Therefore, HFMA suggests that either Worksheet S-2, Part II include all of the CMS Form 339 exhibits that a hospital is required to submit when filing a cost report or CMS eliminate Worksheet S-2, Part II and continue to require submission of CMS Form 339.

Comments on Specific Worksheets

CMS proposes to add lines 21 and 22 on Medicaid days to Worksheet S-2, Part I. However, the purpose of these lines is not explained in the accompanying instructions, and they do not flow to any other worksheets, such as Worksheet E, Part A, line 28, which captures Medicaid days that are used in the DSH calculation. HFMA suggests that CMS clarify the purpose of these data and their potential relationship to the DSH calculation.  In addition, in the proposed hospital cost report, the instructions for Worksheet S-2, Part I, lines 21 and 22 (Medicaid days), and Worksheet S-3, Columns 5-7 (as it relates to the reporting of Medicaid days), do not provide consistent definitions of Medicaid days. We urge CMS to provide a consistent definition of Medicaid days between these two worksheets.

Finally, as a result of moving data into different worksheets, two cross-reference errors are contained in Worksheet S-2, Part I, on the proposed Form 2552-10. First, line 37 should reference Worksheet E-4, not Worksheet E-3, Part IV. Second, line 38 should reference Worksheet D-5, not Worksheet D-4. CMS should correct these two errors.

Hospital Wage Index Information – Worksheet S-3, Part II.

CMS proposes to add an instruction to Worksheet S-3, Part II, line 28, which appears to represent a significant change in policy. Specifically, CMS proposes to clarify that home office contract labor cannot be added to contract administrative and general costs for the wage index. However, this new instruction unduly penalizes hospitals with home office costs, as they will not be able to claim legal, consulting and similar fees paid by the home office. In contrast, freestanding hospitals paying those costs can claim them directly for wage index purposes. By stating that home office contract labor cannot be added to contract administrative and general costs for the wage index, CMS would essentially force hospital systems to contract for administrative and general services at the individual hospital level if they wanted to claim the costs for wage index purposes. However, home offices can typically contract for these services at a lower rate than individual hospitals in a system, which saves money for the system and ultimately for the Medicare program. Therefore, HFMA requests that CMS remove this proposed new instruction from the cost report.

New Contract Labor and Benefit Cost Worksheet – Worksheet S-3, Part V.

CMS proposes to create a new worksheet – Worksheet S-3, Part V – that requires hospitals to report separately the amount of their contractor costs that are attributable to labor and the amount attributable to benefits. However, this information is not collected as part of hospitals’ normal business activities – hospitals pay contractors a flat rate and are not privy to what portion is attributable to labor and what portion is attributable to benefits. Contractors themselves are likely unable to accurately determine this division, making this information virtually impossible for hospitals to collect. Further, it does not affect the level of allowable costs being reported on the cost report, and the purpose of collecting it is otherwise unclear. Therefore, HFMA urges CMS to eliminate this proposed worksheet from the 2552-10 cost report.

Provider-based Rural Health Clinic/Federally Qualified Health Center Provider Statistical Data – Worksheet S-8.

The proposed Worksheet S-8 form and instructions are not consistent from lines 10 and forward. We recommend that CMS align the form and instructions for this worksheet.

Hospital Uncompensated Care Data – Worksheet S-10.

To improve the data it collects on hospital uncompensated care, CMS proposes major changes to the hospital uncompensated care worksheet, Worksheet S-10. In general, HFMA supports CMS’s proposed changes, which provide for a more logical worksheet. However, it is imperative that this worksheet accurately capture the level of uncompensated care that hospitals are providing, as well as ensure that the data are reported in a consistent manner. Therefore, we wish to make several specific recommendations to help CMS attain this objective.

On the existing cost report, CMS includes the unreimbursed costs of state and local indigent care programs, the Children’s Health Insurance Program (CHIP), and Medicaid in its determination of the hospital’s total uncompensated care cost. However, for the proposed S-10 Worksheet, these costs (in lines 8, 12 and 16) are not included as part of the total on line 30. CMS includes only the costs of charity care and non-Medicare bad-debt expense in its determination of the hospital’s total uncompensated care cost. HFMA is extremely concerned that CMS has removed the unreimbursed costs of state and local indigent care programs, CHIP, and Medicaid from the calculation of this worksheet. We urge CMS to add a line at the bottom of Worksheet S-10 that reflects the hospital’s total unreimbursed and uncompensated costs. This line should include all of the subtotal components of program unreimbursed costs (lines 8, 12 and 16), charity care costs (line 23) and bad-debt costs (line 29) that are determined throughout this worksheet.

Line 1 of Worksheet S-10 calculates a cost-to-charge ratio (CCR) that is then applied to charge data throughout the worksheet, including to charges for charity care (line 19) and non-Medicare bad debt (line 28), in order to reduce charges to cost. This CCR is based on data from Worksheet C and includes only Medicare-reimbursable costs. However, the CCR that is applied to charity care and non-Medicare bad-debt charges should include a hospital’s full costs, rather than only Medicare-reimbursable costs, as the vast majority of charity care is provided to non-Medicare patients, and non-Medicare bad debt is, by definition, never incurred for a Medicare beneficiary. Use of a CCR that does not include a hospital’s full costs understates the true costs of providing charity care and non-Medicare bad debt. Therefore, we urge CMS to add line 1.01 to Worksheet S-10, which would calculate a second CCR that includes a hospital’s full costs and would be applied to lines 19 and 28. We suggest this CCR be calculated as follows:

• Numerator: Total costs obtained from Worksheet A, Column 3, lines 1-98, less physician patient care costs obtained from Worksheet A-8, Line 10. We suggest CMS add a line to Worksheet A, Column 3, that calculates a subtotal of lines 1-98.
• Denominator: Total charges obtained from Worksheet C, Column 8, Line 200 (which already excludes physician patient care charges).

Lines 2 through 8 of the proposed Worksheet S-10 capture data on the unreimbursed costs of the Medicaid program. However, CMS proposes to allow hospitals to either include Medicaid DSH payments and other supplemental payments with the actual Medicaid patient payments on line 2, or to report them separately on line 5. We believe that all hospitals have the ability to separately track and account for this information. Therefore, to help ensure consistency and uniformity, HFMA recommends that CMS require Medicaid DSH and supplemental payments be reported separately on Worksheet S-10. In addition, CMS should clarify on the cost report form that Medicaid revenues should include managed care revenues. To accomplish this, we suggest that the Medicaid lines be modified as follows:

• Line 1: Cost to charge ratio.
• Line 2: Medicaid net revenues for patient services, including managed care net revenues. (Do not include payments reported on lines 3 and 4 below.)
• Line 3: Medicaid DSH payments.
• Line 4: Medicaid supplemental payments, not including DSH payments.
• Line 5: Total Medicaid net revenues (sum of lines 2-4).
• Line 6: Medicaid charges.
• Line 7: Medicaid costs (line 1 times line 6).
• Line 8: Difference between net revenues and costs for Medicaid services (line 5 minus line 7).

In addition, we recommend that the instructions for line 2, Medicaid net revenues, clarify that the line should include both inpatient and outpatient payments as indicated in the opening paragraph of the instructions.

As proposed by CMS, lines 8, 12 and 16 are identified as the “difference between revenues and costs” for Medicaid, CHIP, and state or local indigent care programs. We suggest CMS modify these lines to state they are the “difference between net revenues and costs.” This modification would make these lines consistent with line 2, clearly differentiate between payments (net revenues) and charges (gross revenues), and help ensure consistent reporting.

In the proposed cost report form, line 13 is for payments from “state or local indigent care programs.” However, the proposed instructions say this line is only for payments from “state or local government programs.” We suggest CMS specify in the instructions that this line is for payments from “state or local government indigent care programs” to ensure that the correct payments are included.

To help ensure consistent reporting, we recommend CMS state in the instructions that the government grants, appropriations and transfers that are reported on line 18 should not include those already reported on lines 2, 3 and 4 (under our recommended revised lines above), or 13. In addition, since the Federal Section 1011 program was not reauthorized, the reference to this program should be removed from the instructions to line 18.

Trial Balance of Expenses – Worksheet A.

CMS proposes to re-designate line 90 (other capital-related costs) as line 3. However, costs on this line are reclassified to lines 1 or 2 prior to flowing to Worksheet B. We recommend CMS eliminate line 3 and instead instruct hospitals to include these costs on lines 1 and 2, as appropriate.

Although CMS does not propose changes to the types of non-reimbursable cost centers that are listed beginning on line 190, HFMA recommends CMS update and possibly expand these cost centers to reflect the more current and common types of non-reimbursable costs that hospitals incur. We acknowledge that additional costs can be manually added as non-reimbursable cost centers, but it would be useful for CMS to incorporate the more common situations and/or those that cause the most confusion into the cost report. For example, marketing and fundraising are very common non-reimbursable costs, but are not listed.

In addition, in the fiscal year (FY) 2009 final inpatient PPS rule, CMS adopted a change to the cost report that would split the cost center of “Medical Supplies Charged to Patients” into two cost centers – one for relatively inexpensive medical supplies and another for more expensive devices (such as pacemakers and other implantable devices). While CMS finalized this change to the cost report in the FY 2009 final inpatient PPS rule, it only recently incorporated the change into the current version of the cost report – Form 2552-96. There was no opportunity to comment on this change, which now carries forward into the proposed Form 2552-10 on Worksheet A, lines 68 and 69. The instructions accompanying this change in both Form 2552-96 and Form 2552-10 make the assumption that the information for lines 68 and 69 is obtained from the statistical allocations performed on Worksheet B. We disagree with this assumption. Hospitals have reported to us that most of them would capture this information either by using specific hospital records (the general ledger) or accounting for these costs through a reclassification process using Worksheet A-6. HFMA urges CMS to modify the instructions for Worksheet A, lines 68 and 69, accordingly, not only to provide clarity to hospitals, but also to ensure that the auditors understand how the information is obtained.

When CMS adopted the change to split the “Medical Supplies Charged to Patients” cost center into two, the agency specified that revenue codes 0275 (pacemaker), 0276 (intraocular lens), 0278 (other implants) and 0624 (FDA investigational devices) should be reported in the “Implantable Devices Charged to Patients” cost center and all other supply revenue codes should be reported in the “Medical Supplies Charged to Patients” cost center. In the instructions regarding the split of the “Medical Supplies Charged to Patients” cost center into two that were put forth in Form 2552-96, CMS included a reference to the FY 2009 final inpatient PPS rule, which listed the specific revenue codes above. However, the proposed instructions for Form 2552-10 do not contain that reference. For consistency, HFMA urges CMS to detail the specific revenue codes that should be reported in line 68 and line 69 in the Form 2552-10 cost report instructions.

Reconciliation of Capital Cost Centers – Worksheet A-7.

HFMA recommends that the agency eliminate Worksheet A-7. This worksheet is complex, time consuming and no longer provides relevant data in the current reimbursement environment. However, if CMS is not willing to eliminate Worksheet A-7, it should again include Column 10 (which it had proposed to eliminate) in Worksheet A-6, because Worksheet A-7 uses the data in that column.

Adjustments to Expenses – Worksheet A-8.

CMS proposes to incorporate Worksheet A-8-4 into Worksheet A-8-3, but did not eliminate all references to Worksheet A-8-4 that are in Worksheet A-8. Therefore, HFMA recommends that CMS change all references to Worksheet A-8-4 that are contained in Worksheet A-8 (see lines 23, 24, 30 and 31) to reference Worksheet A-8-3.

Provider-based Physician Adjustments – Worksheet A-8-2.

HFMA recommends that the agency indicate on the Worksheet A-8-2 form, in Column 2, that the physician identifier should be an alphabetic code (as described in the instructions) to avoid any possibility that the physician might be identified on the worksheet itself.

Computation of Inpatient Operating Cost – Worksheet D-1.

Lines 28 through 37 of Worksheet D-1 calculate the “Private Room Differential Adjustment,” which CMS states is completed by PPS hospitals “for data purposes only.” CMS proposes to change the PPS hospital instructions for calculating the inpatient routine cost per diem in line 38 of this worksheet so that it equals the sum of lines 40 and 37 divided by the inpatient days on line 2, instead of the sum of lines 36 and 37 divided by inpatient days. However, the instructions for line 40 state that PPS providers should report zero on this line. Therefore, by using line 40 instead of 36 in the calculation of the inpatient routine cost per diem in line 38, CMS is understating program costs for PPS providers. This understatement is significant because the inpatient routine cost per diem in line 38 is used to determine Medicare allowable costs. These costs form the basis for calculating sole community hospital and Medicare-dependent hospital hospital-specific rates, flow into Medicaid calculations in different states, and are used by the CMS actuary and others, such as the Medicare Payment Advisory Commission (MedPAC,) to calculate Medicare payment adequacy levels. HFMA requests that CMS revert back to the prior instructions for line 38 – that this line equals the sum of lines 36 and 37 divided by the inpatient days reported on line 2. Alternatively, CMS could eliminate the requirement that PPS hospitals complete lines 28 through 37 and use routine costs on line 27 for the cost-per-diem computation on line 38.

Settlement Worksheets – Worksheet E-3 Series.

CMS proposes to change the Worksheet E-3 series so that settlements are differentiated by provider type, such as skilled-nursing facility, rehabilitation, long-term care hospital, etc., and also to streamline the series. HFMA supports CMS’s proposed revisions to the Worksheet E-3 series, which make the worksheets easier to follow. In addition, for those using the Healthcare Cost Report Information System, there will be less confusion as to which provider type is being referenced now that the different provider types no longer utilize the same worksheet.

Direct Graduate Medical Education (GME) & ESRD Outpatient Direct Medical Education Costs – Worksheet E-4.

CMS does not propose changes to Worksheet E-4. However, HFMA recommends that line 38 reference the new Worksheet D-4, rather than Worksheet D-6, as D-6 was renamed as D-4 in the proposed Form 2552-10.

Conclusion

We are at your service to help CMS gain a balanced perspective on this complex issue. If you have additional questions, you may reach me, or Richard Gundling, Vice President of HFMA’s Washington, DC, office, at (202) 296-2920. The Association and I look forward to working with you.

Sincerely,

Richard L. Clarke, DHA, FHFMA
President and Chief Executive Officer
Healthcare Financial Management Association

About HFMA

HFMA is the nation's leading membership organization for more than 35,000 healthcare financial management professionals. Our members are widely diverse, employed by hospitals, integrated delivery systems, managed care organizations, ambulatory and long-term care facilities, physician practices, accounting and consulting firms, and insurance companies. Members' positions include chief executive officer, chief financial officer, controller, patient accounts manager, accountant, and consultant.

HFMA is a nonpartisan professional practice organization. As part of its education, information, and professional development services, HFMA develops and promotes ethical, high-quality healthcare finance practices. HFMA works with a broad cross-section of stakeholders to improve the healthcare industry by identifying and bridging gaps in knowledge, best practices, and standards.

Posted September 1, 2009