Simione™ Healthcare Consultants

Cost Reporting: Are You Getting What You Paid For?

By Thomas Boyd, MBA, CFE, Vice President of Reimbursable Services, Simione Healthcare Consultants

1. Are you getting what you paid for?

As a financial consultant to the home health industry since 1989, I continue to be amazed by the number of providers who are paying for the work of a CPA, but do not know what they are paying for, or think that they are paying for one thing while getting another. I have seen providers pay for a compiled statement, while thinking they were getting an audited statement. I have seen providers pay for “CPA” work that from all appearances and results was not done by a qualified CPA.

2.  Does the Medicare cost report require a CPA financial statement? 

Along with the Medicare cost report, providers are also required to submit:

  • Financial Statements
  • Working Trial Balance

Medicare does not say that you need to have a CPA financial statement; but if you do, then you need to supply it in its entirety when you submit the Medicare cost report.

The Medicare requirement is given in Provider Reimbursement Manual 15 Part II Section 1102.3

“Submit copies of financial statements that are compiled, reviewed or audited by the independent public accountant.  Where you do not engage public accountants for this type of service, submit a copy of the financial statements prepared by you…

Where financial statements are available, include the independent public accountant's opinion, the statements themselves, and the footnotes.”

The Form CMS 339, Provider Cost Reimbursement Questionnaire, required to be signed and filed with the Medicare cost report, asks if financial statements were prepared by a CPA.

Exhibit 1

B. Financial Data and Reports        

 1. During this cost reporting period, the financial statements are prepared by Certified Public Accountants or Public Accountants (submit complete copy or indicate available date) and are:

            a.  Audited          b.  Compiledand        c.  Reviewed

NOTE:  Where there is no affirmative response to the above described financial statements, attach a copy of the financial statements prepared and a description of the changes in accounting policies and practices, if not mentioned in those statements.”

This question gives three possible answers to a, b and c. The answers are Yes, No or N/A. You can mark NO to all three but it is untrue to mark YES to more than one.

 3.       What is a CPA financial statement?

Audited Financial Statements are the CPA's highest level of assurance services and the most expensive of the three. The CPA performs all of the steps indicated for compiled or reviewed statements, but also performs verification and substantiation procedures. The CPA's standard audit report states that an audit was performed in accordance with generally accepted auditing standards, and expresses an opinion that the financial statements fairly present the entity's financial position and results of operations.

Compiled Financial Statements represent the most basic level of service CPAs provide with respect to financial statements and is the least expensive of the three. The CPA must comply with certain basic requirements of professional standards, such as having a knowledge of the client's industry and applicable accounting principles, having a clear understanding as to the services to be provided, and reading the financial statements to determine whether there are any obvious departures from generally accepted accounting principles. A report on the financial statements is issued stating a compilation was performed in accordance with AICPA professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles.

Reviewed Statements require that the CPA perform inquiry and analytical procedures in addition to the procedures described above for a compilation. The CPA charge for this report is more than for a compiled, but less than that for an audit.  A report is issued stating that a review has been performed in accordance with AICPA professional standards, that a review is less in scope than an audit, and that the CPA did not become aware of any material modifications that should be made in order for the statements to be in conformity with generally accepted accounting principles.

4.       What is a CPA?

A CPA has passed the Uniform Certified Public Accountant Examinationand has met additional state education and experience requirements for certification as a CPA. In most U.S. states, only CPAs who are licensed are able to provide to the public attestation (including auditing) opinions onfinancial statements.

I have seen providers hire “CPAs” just because they said they were. More than that is needed. A CPA designation obtained from another country may not be valid in this country. A CPA licensed to practice in California (heaven) may not be able to practice in Alabama (censored) without obtaining reciprocity from the Alabama state CPA board (exceptions exist, varies by state).

A CPA is like an RN, CFE, CNA and others, in that the CPA must obtain annual professional education, must be licensed in his or her state, and should belong to professional organizations.

if you look at comprehensive profiles on corporate websites, you will find whether a CPA is a member of organizations such as the American Institute of Certified Public Accountants (AICPA) and various state societies for CPAs.  A CPA's hours of annual education are routinely obtained by attending conferences in health care, home care, financial management and other related disciplines. 

Before you hire caregivers, you might verify that they have a current license and can practice their profession in your state. You should do the same when hiring your CPA.

A highly qualified CPA can provide valued assistance with properly prepared financial statements and by being a consulting resource to management.   

I understand that you want to know what is required and find qualified people to do the work.  We'd like to help you with your cost reporting needs, and assist you with any other aspects of your business that may need additional assessment, solutions for improvement, and ongoing support.

About Thomas E. Boyd

Thomas E. Boyd was appointed as Vice President of Reimbursable Services at Simione Healthcare Consultants in 2014, following 20 years as principal of Boyd and Nicholas, Inc., THE COST REPORT PEOPLE®, which he co-founded with Thomas Nicholas in 1993. Tom has more than 30 years of Medicare reimbursement experience, including almost 12 years with one of the Medicare intermediaries for home health agencies, and has been a consultant to Medicare-certified home health agencies and hospices since 1989. 

Tom has spoken on home health financial and compliance issues before NAHC, NHPCO and more than 20 state and regional home health care associations. 

He holds a B.A. in management and accounting from Sonoma State University, and a MBA from St. Mary's College in California. He is a member of the HHFMA workgroup, the Association of Certified Fraud Examiners, and the U.S. Chess Federation.

Visit or contact Tom Boyd at[email protected].

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