MACs Getting Tougher on Cost Report Reopenings:

What It Means for Your Hospital

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The annual Medicare cost report is one of the most important regulatory filings in healthcare. Mandated for all hospitals participating in the Medicare program, the cost report gathers key provider information such as: facility characteristics and data on cost and charges by cost center (in total and for Medicare), Medicare settlements and financial statements. Information from the cost report drives a wide range of Medicare reimbursement programs, including Medicare Bad Debt, Medicare Disproportionate Share, Indirect and Direct Medical Education and 340B program qualification.

Given the broad and complex range of data required and its importance to hospital finances, CMS offers hospitals multiple opportunities to ensure they submit accurate information on the cost report. Hospitals can submit new information by either amending or reopening a previously submitted cost report. The regulations regarding amending and reopening cost reports can be found in CMS Publication 15-1, Chapter 29, Section 2931.

How Amendments and Reopenings Work

Amendments are submitted prior to finalization of a cost report (i.e., issuance of a Notice of Program Reimbursement, or NPR) and are allowed under the following circumstances:

  1. To correct material errors detected subsequent to the filing of the original cost report
  2. To comply with the health insurance policies or regulations, or
  3. To reflect the settlement of a contested liability

Procedurally, an amendment is a letter sent to a hospital’s Medicare Administrative Contractor (MAC) that includes line item detail and support regarding the information the hospital wants to update. Hospitals must also submit a revised electronic cost report. It is at the MAC’s discretion to accept or deny amendment requests.

In our experience, most MACs accept amended information if it is submitted before an audit starts. Some MACs accept amended information if an audit is in progress but not yet completed, but very few MACs accept amended information after an audit has been completed. In these cases, MACs instruct the provider to request a reopening after the NPR has been issued.

A reopening changes the status of a cost report from finalized to open. Once a cost report is reopened, a hospital may submit new information. Reopening requests must be submitted no later than three years after the NPR for the cost report has been issued. Reopening requests are also submitted to MACs and, similar to amendments, the decision as to whether or not to accept a reopening request is at the discretion of the MAC.

Changes in the MACs’ Approach to Reopenings: “New and Material”

As one of the leading providers of cost report analytic services, Healthcare Payment Specialists (HPS) has worked with hundreds of hospitals across each MAC region to amend and reopen cost reports for the purpose of supplying new information to increase provider reimbursement, primarily in the areas of Medicare Bad Debt and Medicare Disproportionate Share. Based on our recent experience, as well as discussions with the MACs, it is clear that MACs are becoming more stringent in the criteria they use to evaluate reopening requests.

We noted a change in their approach early in 2016. Several clients had reopening requests denied by the same MAC. When describing its rationale for denying these requests, the MAC cited the need for hospitals to provide “new and material” information to grant a reopening. As there are no stated guidelines for “new and material,” this standard provided the MAC with broad discretion to deny the reopening requests. Since these initial denials by this single MAC, we have seen this standard adopted by several other MACs.

What This Means for Hospitals

A broadening adoption of this standard across MACs has limiting consequences for hospitals seeking to increase their reimbursement through a reopening by making the process more complicated and more likely to fail. For example, as it relates to Medicare Bad Debt, several MACs informed us that they will not allow reopenings in categories where a hospital has previously filed for Medicare Bad Debt (e.g., Crossover, Self-Pay, Indigent) and is seeking to increase reimbursement in that category. However, they will allow reopening requests if a hospital did not file for Medicare Bad Debt in a given category and wants to add bad debts in those categories. It is likely that other forms of tightening requirements will also become apparent over time.

This changing environment offers the following implications for hospitals:

  1. As the option of reopening becomes more difficult, hospitals must place greater emphasis on ensuring the accuracy and optimization of their initial filings.
  2. While reopenings are becoming more difficult, it does not appear that this level of scrutiny is being applied to amendments. With that in mind, hospitals that have open cost reports should quickly evaluate whether or not they want to have those fiscal years reviewed for amendment prior to having the audits for these years begin.

What You Can Do to Prepare

As MACs continue to raise the bar on allowing hospitals multiple opportunities to edit their cost report information, the pressure to get the information right the first time around is also increasing. With our market-leading STINGRAY™ cost report platform, HPS has helped hospitals across the country improve the quality of their cost report submissions in several areas, including Medicare Bad Debt, Medicare Disproportionate Share and Worksheet S-10. Our services have received the prestigious HFMA Peer Reviewed Designation.

Click here to contact us to learn more about how HPS can help your hospital.

Healthcare Payment Specialists

Healthcare Payment Specialists

Founded in 2002, Healthcare Payment Specialists (HPS) provides technology enabled solutions for health care eligibility, government reimbursement and compliance to hospitals and healthcare systems across the country. Using its STINGRAY software platform, HPS delivers solutions on a software-as-a-service (SaaS) basis or through outsourced service engagements.
Healthcare Payment Specialists