Simione™ Healthcare Consultants


The Yes, But...that May Save You Money

An overview on the financial requirements of surveyors

How does the “yes, but...” apply to home health Medicare requirements? Several aspects of Medicare financial requirements for home health agencies (HHA) and hospices fall into the category of yes, but. These three items are often cited by accreditation organizations, state surveyors and consultants: 

1.       Medicare requirement for accrual basis of accounting

Provider Reimbursement Manual (CMS-Pub. 15-1) $2300. PRINCIPLE (excerpt) The cost data must be based on an approved method of cost findingand on the accrual basis of accounting. The Medicare cost report is to be filed using the accrual basis of accounting. Yes, but Medicare does not require that your internal financial records be on the accrual basis. Many organizations prefer cash basis accounting for its simplicity and for their tax returns. You may choose to have your internal financial statements on  the accrual basis but that  is your  decision  and  not a Medicare requirement. However, you do obtain better and more accurate information on the accrual basis of accounting.Providers who file cost reports need to convert their year-end financials from cash to accrual for the Medicare cost report. (If you want a more detailed explanation of Medicare and Accrual Basis Accounting with cited regulations and examples, including the recording of PPS revenues, please contact the Cost Reporting team at Simione Healthcare Consultants.) 

2.       Medicare requirement for operating budget

 ORGANIZATION, SERVICES, AND ADMINISTRATION 42 CFR 484.14 “Survey  procedures  for  the  application  of  conditions  of  participation  for  home  health  agencies interpretive guidelines. Annual operating budget. There is an annual operating budget that includes all anticipated income and expenses related to items that would, under generally accepted accounting principles, be considered income and expense items.” Surveyors often cite providers for not being in compliance with this requirement.Yes, but not once……..twice; 

  1. Generally accepted accounting principles (GAAP) has no format or template for an annual operating budget. The American Institute of Certified Public Accountants (AICPA) does not have a format or template for a budget and neither does Medicare.
  2. What kind of budget? There are more types of budgets than Henry the VIII had wives. An annual budget can be cash, fixed, variable, semi-variable, visit or day or episode based, seasonally adjusted, detailed monthly, detailed weekly, inflation adjusted, FIFO or LIFO. You can even have an annual budget based on 53 weeks as some Medicare providers do.

The key aspect here is ANNUAL, which does mean using and updating a budget. Don’t allow yourself to be cited for not having a proper annual budget, as “proper” clearly  is subject to discussion. However, you must HAVE an annual budget to have the discussion of the budget’s merit.

3.    Medicare requirement for Capital Expenditure Plan CMS-MANUALS Section 484.14(i)(2) Standard:

“(i)There is a capital expenditure plan for at least a 3-year period, including the operating budget year. The plan includes and identifies in detail the anticipated sources of financing for, and the objectives of, each anticipated expenditure of more than $600,000 for items that would, under generally accepted accounting principles, be considered capital items.”

Yes, but how many home health care business providers plan to spend more than $600,000 in a three-year period?

The key aspect here is to HAVE a capital expenditure plan, even if it states the plan is not to have one. The acknowledgement of the requirement is what many of the surveyors are looking for. The Cost Reporting team at Simione Healthcare Consultants can share ideas for a draft plan if you need help.

Yes, a Medicare-certified  provider needs to know  the  requirements for accrual accounting, budgeting and a capital expenditure plan. But, they should also be aware that knowing some of the details can save money and possible avoid a citation from a surveyor.

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.