When healthcare services shifted to the Prospective Payment System (PPS), after Congress passed the Balanced Budget Act of 1997, many providers thought that their Medicare cost reports would lose their significance. This was not the case. In addition to still being a requirement, they are also used for establishing future reimbursement rates and for benchmarking. And they are still being examined closely by the Office of Inspector General (OIG).

Due to this close examination, it’s more important than ever to have controls in place to minimize the risk for your organization.

Controls to Assist with Medicare Cost Report Compliance

•        Are you incorporating the audit results from the prior year’s cost report for the current year? Making similar adjustments each year, over and over, will lead to red flags with the Fiscal Intermediary, which in turn can lead to further examination.
•        Are controls in place to ensure that bad debt settlement information on the cost report is in accordance with federal and state regulations? Facilities must be able to prove that the bad debt filed represents non-collectible deductibles and coinsurance for a Medicare-covered service, where “reasonable” collection efforts were utilized and that those collection efforts were consistent with other payers. The facility should be following collection policies and procedures with documentation to support the bad debt requirements. If controls are not in place, and documentation is not maintained, Medicare may disallow some or all of the bad debts claimed with the filed cost report. This could result in a significant amount of lost reimbursement.
•        Can the “allowable” costs claimed on the cost report be supported? One area that the OIG looks at is Marketing. Medicare guidelines specify that for marketing costs to be “allowable” they must be for informational purposes. They would not be allowed if for promotional purposes. Therefore, organizations must be able to prove the allowable costs with items such as newspaper want-ad notices and detailed invoices.

In addition, with the implementation of the Payroll-Based Journal (PBJ) reporting requirement on July 1, 2016, we may be seeing further scrutiny in the future with regard to the Medicare cost reports. Have controls in place to address all the issues relevant to your organization.