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Hospice Cost Report Reform: Ready or Not?


Regardless of where a hospice may be located, its size, referral volume or available technology, best practices in the management and support of terminally ill patients are the same.  Cost report reform also applies equally to hospice organizations in every market throughout the nation, because the Centers for Medicare and Medicaid Services (CMS) has issued proposed new requirements to ensure that accurate and complete information is collected and reported regarding the clinical and financial activities that validate appropriate reimbursement for hospice care.

According to Lisa Lapin, Principal at Simione Healthcare Consultants, many providers in the hospice industry have not recognized the importance of filing an accurate cost report – even though CMS has confirmed that many hospice cost reports are unusable for analysis due to missing or unusual data.  “While there is currently no monetary settlement to penalize hospice providers for inaccurate cost reporting, CMS has issued a reformed hospice data collection  methodology to more closely understand resource consumption with the intent to reform hospice reimbursement.   In short, it will expand data collection efforts by CMS,” Lapin says.

While the overall objective is to collect better data to ensure that hospice payments are appropriate and adequate, providers may not realize that the frequent inaccuracies in prior cost reports were recognized, and could hurt the industry if they continue and lawmakers make decisions based on bad data. “The focus on ‘useful data’ is needed for effective payment reform,” explains Lapin, “and that includes claims data, cost report data, and quality data that is specified in great detail.”

Among the data points and cost categories on 17 different/revised worksheets are:

  • New general service cost centers
  • Expanded direct patient care cost centers
  • Expanded non-reimbursable cost centers
  • Services and resources provided per day by level of care
  • Costs associated with each level of care

In identifying strategies for reporting direct patient care costs, Lapin underscores that all direct costs must be broken out by level of care.  Smaller hospice agencies typically will have contracted inpatient costs, routine home care, and continuous home care.  Information can be captured by use of time studies and statistical methodologies, as well as coding of invoices upfront by accounts payable staff, and developing spreadsheets for tracking costs, says Lapin.

Additionally, inpatient costs will be tracked separately between contracted facility versus owned/leased facility, as well as costs for each of the various disciplines among the hospice team, medical supplies, transportation, outpatient services, and palliative therapy.

Another major aspect of cost reporting reform for hospice includes more detailed documentation of expenses to ensure that allowable vs. non-allowable (anything not related to patient care) expenses are clearly identified.

While hospices will face challenges implementing changes required for the new reporting, modifications to mandates (statistical allocation basis and the order of step down) of the hospice cost report are possible with prior approval from the agency’s MAC (Medicare Administrative Contractor) 90 days before the end of the cost reporting period. 

Lapin recommends that hospice organizations plan ahead and allow many months to decipher cost reporting reform with a qualified financial services firm that specializes in hospice cost reporting.  “Remember that the many issues and challenges resulting from system changes and more detailed categories for reporting will ultimately add up to greater knowledge of your business among staff, better use of the technology you have, and reimbursement that reflects the quality and quantity of the services you provide,” Lapin says.