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Review effect on cost reports: impact smaller than anticipated
1American Health Care Association, Washington, DC 20005.
Abstract:
Hospitals seeking Medicare payment are required to submit Medicare Cost Reports to their respective fiscal intermediaries, who in turn are required to desk review and sometimes audit the reports. The reviewed or audited report is considered more reliable than the originally submitted report and provides the basis for final Medicare payment. This study quantifies the impact of the review process, finding that, for the most part, the effect is quite small, usually less than 1 percent. Passthrough costs, however, were the exception to this rule. Capital and education passthrough costs, on a per discharge basis, were reduced about 6 percent.
Insights
Medicare Cost Reports undergo review for hospital payment, with most costs minimally affected. However, capital and education passthrough costs saw significant reductions of approximately 6% per discharge.
Area of Science:
- Healthcare finance
- Medicare reimbursement policy
- Hospital administrative processes
Background:
- Hospitals must submit Medicare Cost Reports for payment.
- Fiscal intermediaries review and audit these reports.
- Reviewed reports form the basis for final Medicare reimbursement.
Purpose of the Study:
- To quantify the financial impact of the Medicare Cost Report review process on hospitals.
- To identify specific cost categories most affected by reviews and audits.
Main Methods:
- Analysis of Medicare Cost Reports before and after desk review/audit.
- Calculation of cost changes on a per-discharge basis.
- Focus on overall cost reductions and specific passthrough costs.
Main Results:
- The overall impact of the review process on total costs is typically small, usually under 1%.
- Capital and education passthrough costs experienced a reduction of approximately 6% per discharge.
Conclusions:
- The Medicare Cost Report review process generally has a minor effect on overall hospital costs.
- Passthrough costs, particularly capital and education, are significantly reduced by the review and audit process.