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RESIDENTIAL TREATMENT COST REPORTING

RESIDENTIAL TREATMENT COST REPORTING. Presented By: Steven Kohler, Senior Director Mary Cloney, Supervisor Matthew Rogers, Supervisor McBee Associates, Inc. Introduction to Cost Reports. Why Now? Integrated Children’s Service Initiative Conversion to Medical Assistance Funding

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RESIDENTIAL TREATMENT COST REPORTING

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  1. RESIDENTIAL TREATMENT COST REPORTING Presented By: Steven Kohler, Senior Director Mary Cloney, Supervisor Matthew Rogers, Supervisor McBee Associates, Inc.

  2. Introduction to Cost Reports • Why Now? • Integrated Children’s Service Initiative • Conversion to Medical Assistance Funding • Purpose of a Cost Report • Per Diem Rate Determination • OMAP Rates • Managed Care Funding Sources

  3. Cost Report Forms • Pennsylvania Joint Financial Schedule (JFS) • Report all of an entity’s costs • County Forms

  4. PA JFS Schedule A • 3800 Capacity vs. RTF Beds • Payer Classes • Total Bed Days Used • Occupancy Percentage • 85% minimum • Average Length of Stay

  5. PA JFS • Schedule B • The Columns • Relation to Service Areas • Relation to Cost Centers • Account Descriptions • Relation to your chart of accounts • Combination determine reimbursement

  6. PA JFS Columns • Column 2 – Total Expenses • Calculated Field • Columns 3 – Occupancy • Maintenance or facility costs • Can not be directly attributed to any other column • Examples on page 11 of Instructions • Allocated on Square Footage

  7. PA JFS Columns • Column 4 – General and Administrative • “Common or joint purpose” • Can not be directly attributed to Columns 8 or 11 • Examples on Page 11 of Instructions • Allocated on total expense less this column

  8. PA JFS Columns • Column 5 – Room & Board • Examples: Night Workers, Food, Laundry • All RTF Living Area Square Footage • All Living Area Occupancy Expense • Column 6 – Related Services • Expense used by both Column 7 and 8 that can not be individually attributed to either

  9. PA JFS Columns • Column 7 – Residential Mental Health Services • Directly associated with mental health services • Examples • Mental Health Workers • Medical Supplies (No prescription medication) • Religious Services

  10. PA JFS Columns • Column 7 (continued) • Professional vs. Provider Component • Professional – Not Allowable – Column 10 • Physicians • Dentists • Psychiatrists • Medication Management & Evaluations • Provider – Allowable – Column 7 • Psychiatrists • Consultations & Supervision • TIME STUDIES

  11. PA JFS Columns • Column 8 – Education • Approved Private Schools (APS) or Private Residential Rehabilitative Institute (PRRI) • All other education expense in column 11 • No APS or PRRI • All education expense in column 8 • Include: School salaries, supplies, square footage

  12. PA JFS Columns • Column 9 – Therapeutic Day Program • Only use if you have a separately funded Therapeutic Day Program or Partial Hospitalization Program supporting the RTF • Column 10 – Unallowable • Marketing/Fund Raising • Professional Component • Bad Debts • Personal Care Items

  13. PA JFS Columns • Column 11 – Other Programs • All other program not related to RTF • Only include program for this entity

  14. PA JFS Account Descriptions • Salaries and Wages • Time Studies • Professional and Senior Administrative Staff • Once each quarter for two weeks • Identify time in each program • Identify face-to-face time (professional) • Identify Administrative time • Tie to Exhibit 1 • Details individual salaries and wages

  15. PA JFS Account Descriptions • Fringe Benefits • Enter Total • Allocation Following Employee Salaries and Wages • Operating Expenses • Tie to internal chart of accounts • Home Office Costs Restricted to Column 4

  16. PA JFS Account Descriptions • Purchased Services • Administrative General • Accounting • Auditing • Data Processing • Payroll • Legal • Other expense classification vary with use

  17. PA JFS Account Descriptions • Buildings & Fixtures • If not attributed to one program must be Occupancy • Major Movable Equipment & Transportation/Vehicles • Classified according to use • Maintenance & Repair reported in Operating

  18. PA JFS Account Descriptions • Restricted Income • USDA – PDE Food Programs • Chapter 1 • Interest Income • Offset expense in appropriate column to determine Net Operating Expense

  19. PA JFS Account Descriptions • Allocations • Square Footage • Allocation of Occupancy Column • Related Service • Residential Mental Health 65% • Education 35%

  20. PA JFS Account Descriptions • Allocations (continued) • G & A • Expense allocation of net operating including occupancy less G&A • Per Diem Calculations • 85% Bed Day Minimum • 13% G&A limitation

  21. PA JFS • Supporting Schedules – Schedule C • Exhibit 1 – Salary & Wage Roster • Tie to Schedule B Column 2 Line 1 • Exhibit 2 – Loans & Interest • Tie to sum of Loans & Interest on Schedule B • Exhibit 3 – Depreciation • Each line should tie to corresponding line on Schedule B • Exhibit 4 – Transactions with Related Parties

  22. Filing Requirements • Filed to the Department of Public Welfare for RTF’s • Filed to Department of Education for APS’s and PRRI’s • 90 Days from June 30th • Can request extension • Include Program Description with first and when changes are made • Follow Checklist

  23. CMS Cost Accounting Model • The Medicare Cost Allocation Model • Has roots back to 1965, developed in part by the American Hospital Association (AHA) and exists today some 40 years later, virtually unchanged • Concepts include determining allowable cost; allocation of overhead; matching cost with revenue or days / visits; and apportioning the cost to the Medicare Program based upon the ratio of cost to charges / units times Medicare charges / units (RCCAC)

  24. CMS Cost Accounting Model • Allocation Methods • Occupancy – Indirect Facility • Square footage less Occupancy square footage • Administrative/General • Total expense less administrative expense

  25. Regulatory Authority • Where the Commonwealth or Pennsylvania does not provide specific regulatory authority to define allowable costs, the Medicare Regulations prevail. • Commonwealth of Pennsylvania regulations can be found in Instructions and 55 PA Code 6211 • CMS (Centers for Medicare and Medicaid Services) regulations and program instructions can be found at: • 42 CFR 413 – Principles of Cost Reimbursement • CMS Publication 15-1 – Provider Reimbursement Manual

  26. Recordkeeping Requirements • Accrual Basis of Accounting • Liquidation of Liabilities – 1 Year (few exceptions) • Cost Finding • Direct Cost Allocations • Indirect Cost Allocations • Home Office Cost • Direct Allocations • Functional Allocations • Pooled Allocations

  27. CMS Provider Reimbursement Manual CMS Website Reference: www.cms.hhs.gov/manuals/pub151/PUB_15_1.asp

  28. CMS – Provider Reimbursement Manual 15-1 (Relevant Chapters) • Chapter 1 - Depreciation • Chapter 2 - Interest Expense • Chapter 8 - Purchase Discounts and Allowances, and Refunds • Chapter 9 - Compensation of Owners • Chapter 10 - Cost to Related Organizations • Chapter 21 - Costs Related to Patient Care • Chapter 22 - Determination of Cost of Services • Chapter 23 - Adequate Cost Data and Cost Finding

  29. Allowable & Non-Allowable CostsCMS Standards • CMS Publication 15-1- Provider Reimbursement Manual – Chapter 21 – Costs Related to Patient Care • What is an allowable cost? • Must be reasonable and related to patient care - Section 2102.1 • What would be paid for an item by a prudent and cost conscious buyer – Section 2103

  30. Allowable & Non-Allowable CostsCMS Standards • CMS Publication 15-1- Provider Reimbursement Manual – Chapter 21 – Costs Related to Patient Care • What is a non-allowable cost? • Cost that are not related to patient care • Costs of gifts or donations – Section 2105.7 • Cost of entertainment – Section 2105.8 • Cost of employee personal use of motor vehicles – Section 2105.9 • Cost of fines or penalties – Section 2105.10 • Costs of patient phones / television – Section 2106 • Federal Income; State or Local Income Taxes – Section 2122.2 • Taxes for which exemption of taxes are available to the provider – Section 2122.2 • Special Assessments on land which represent capital improvements (e.g. sewers, water, and pavements) – Section 2122.2

  31. Allowable & Non-Allowable CostsCMS Standards • CMS Publication 15-1- Provider Reimbursement Manual – Chapter 21 – Costs Related to Patient Care • What is a non-allowable cost? • Certain advertising cost – Section 2136.2 • Political and lobbying cost – Section 2139

  32. Allowable & Non-Allowable CostsCMS Standards • Costs to Related Organizations - CMS Publication 15-1– Chapter 10 • Principle • Costs applicable to services, facilities, or supplies furnished to a provider by common ownership or control are includable in the allowable cost of the provider at the cost to the related organization. • Such costs must not exceed the price of comparable services, facilities, or supplies that could be purchased elsewhere.

  33. Allowable & Non-Allowable CostsCMS Standards • Related Organizations • Purpose • To avoid payment of a profit factor to the provider through the related organization • To avoid the payment of artificially inflated costs which may be generated from less than an arm’s-length bargaining

  34. Allowable & Non-Allowable CostsCMS Standards • Related Organizations • Definitions • Related to the provider means that the provider to a significant extent is associated or affiliated with, or has control of, or is controlled by, the organization furnishing the services, facilities, or supplies. • Common ownership exists when an individual or individuals possess significant ownership or equity in the provider and the institution or organization serving the provider. • Control exists where an individual or an organization has the power, directly or indirectly, to significantly influence or direct the actions or policies of an organization or institution.

  35. Allowable & Non-Allowable CostsCMS Standards • Related Organizations • Tests of Common Ownership and Control • If either common ownership or control are present, costs to the provider must be reflected as the costs of the supplier, with the reasonable cost provisions guiding. (e.g. must be less than or equal to market rates that a prudent buyer would pay)

  36. Allowable & Non-Allowable CostsCMS Standards • Related Organizations • Determination of a related organization’s cost • The related organization’s cost include all reasonable costs, direct and indirect, incurred in the furnishing of services, facilities, and supplies to the provider. The intent is to treat the costs incurred by the supplier as if they were incurred by the provider itself, subject to the allowable cost provisions. • Access to the books and records of the related party must be provided for.

  37. Allowable & Non-Allowable CostsCMS Standards • Related Organizations - Exceptions • The following criteria apply for an exception • The supplying corporation is a bona-fide separate organization • A substantial part of the supplying organization’s business activity is transacted with other organizations not related to the provider • The services, facilities, or supplies are those which are commonly obtained by providers from other organizations • Open market charging practices

  38. Allowable & Non-Allowable CostsCMS Standards • Interest Expense – Pub 15-1, Section 200 • Necessary • Incurred on a loan to satisfy a financial need • For a purpose related to patient care • Is reduced by investment income • Proper • Interest incurred at a rate not in excess of what a prudent borrower would pay • Interest paid to a lender not related to the provider (e.g. – Interest paid on loans from owner are not an allowable cost)

  39. Allowable & Non-Allowable CostsCMS Standards • Owners Compensation – Pub 15-1, Chapter 9 • Reasonable value of services rendered limited to the fair market value of such services on the open market • Applies to the actual compensation of all individuals performing services at the provider • Necessary – Had the owner not performed the services, the provider would have to employ another person to perform them. • Criteria for assessing reasonable compensation: • Survey of comparable size providers • Comparable services provided • Geographic location • Qualifications of the individual

  40. Reference Material • www.dpw.state.pa.us/omap/ • www.pacode.com • www.cms.gov • www.cms.hhs.gov/manuals/pub151/PUB_15_1.asp

  41. Question & Answer Session

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