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Leaving money on the table? Reimbursement opportunities for Skilled Nursing Facilities

11.04.21

Read this if you are a Skilled Nursing Facility (SNF) providing services to Medicare beneficiaries.

There are a few Skilled Nursing Facilities (SNF) reimbursement opportunities on the Medicare cost report. Two of them could reimburse providers for sizable expenses that the majority of SNFs experience every year: the Utilization Review (UR) and Medicare bad debts. 

Utilization Review: Medicare cost report opportunities

UR meetings historically focused on managing lengths of patient stay and reducing costs. The implementation of the SNF value-based purchasing program and the related incentive payment adjustment, which resulted in a reimbursement rate increase or reduction by up to 2%, led some facilities to increased physician or medical director involvement in the UR management in order to improve clinical outcomes. 

With the increase in physicians’ UR time, there frequently is a cost increase for SNFs. CMS Provider Reimbursement Manual – Part 1, Chapter 21, Section 2126.2, outlines the requirements for 100% reasonable Medicare program UR cost reimbursement.  The only mechanism for SNFs to get reimbursement for these costs is through the Medicare cost report. 

Why is this important? BerryDunn maintains a database of SNF Medicare cost report filings and analyzes the data annually, looking for trends and opportunities to help providers optimize available reimbursement. The cost report data shows that from 2016 to 2019 only 1.95% of rural SNFs and 2.82% of urban facilities claimed reimbursable Medicare UR costs. Of the facilities claiming UR costs, the median requested reimbursement was $9,000 or $2.07 per Medicare patient day. 


Figure 1 Source: HCRIS as filed full utilization SNF cost reports, 2017 - 2019

Optimize your reimbursement: Utilization Review checklist available

To support SNFs with reimbursement for these costs, BerryDunn’s healthcare consulting team has developed a checklist that provides insight on the Medicare cost report opportunities. Download the Utilization Review checklist.

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Read this if you are in the senior living industry.

The COVID-19 pandemic wreaked havoc on the country and created challenges across the labor force, and senior living facilities weren’t spared. For senior living, the pandemic contributed to the widening of the care cost shortfall- by decreasing the available workforce pool through voluntary resignations and a demand for higher wages. That situation has remained, and senior living facilities are faced with many challenges, including rising labor costs. Of note: 

  • Across the nation, contract nursing labor utilization continues to increase, with an average 35% increase in contract agency hours used per patient day from 2020 to 2021.1 
  • Occupancy has been declining nationwide, driven by both diminishing referrals (infection control concerns, reduction of elective procedures such as joint replacements, and hospital capacity limitations) and the ability of facilities to accept patients (suspension of admissions due to inadequate staffing).
  • Rising costs and diminishing occupancy have resulted in an average SNF $178.65 per patient day cost of care increase from 2020 to 2021.
  • Nationally, the US Bureau of Labor Statistics2 (BLS) reports nursing and residential care facility employment declined 5% from 2019 to 2020, and further 5.7% from 2020 to 2021. Competition for workers resulted in noticeable wage increases, 10.4% in 2020, and 5.6% in 2021 (Table 1). 

Table 1: Employment and wages, 2019 – 2021

The first quarter of 2022 reveals a continuing reduction of employment coupled with continuing wage increases in the industry. The first quarter of 2022 showed an 11.4% increase in average weekly wage for nursing and residential care facilities over that same period in 2021, and continuing decline in employment (Table 2). 

Table 2: Employment and wages, Q1 2022

COVID-19-related staff burnout, lack of childcare or school schedule disruptions, infection control requirements- such as mandatory masking or vaccinations- and other factors resulted in a rapid and significant reduction of clinical staff available for work. 

Additional factors, such as migration of clinical staff from facility-based employment to a temporary contract agency, may have also contributed to the reduction of workforce in clinical occupations. CMS SNF Provider Information3 data comparison between August 2021 and August 2022 shows that all US regions reported a decline in average case-mix adjusted direct care hours per patient day (Figure 3) within a year. On average, 7.89% reduction in total hours reported, or 0.32 hours of services less per patient day. It is important to note that utilization of unlicensed staff (nursing assistants) has not changed significantly (57.2% in 2021 and 57.7% in 2022), indicating that nationwide availability of both licensed (RN, LPN) and unlicensed staff has decreased. 

Table 3: Average case-mix adjusted direct care hours per patient day – August 2021 and August 2022 comparison

Our interviews with long-term care facilities across the US have revealed that a number of facilities had to suspend admissions for a period of time, or close a portion of the facility, due to limited or inadequate staffing levels. Due to the nature of services, it mostly affects short stay rehabilitation unit admissions. For the majority of facilities, short stay revenue sources (such as Medicare) are more favorable and normally more profitable than long-term stays. The decrease in census (Table 4) drives the per diem costs up, and the loss of short-stay revenue continues to negatively impact the bottom line. Additionally, with a significant reduction of short stay rehabilitation volume, some highly trained employees of the facilities (such as therapists, clinical directors, dieticians, and others) may be less utilized, and potentially harder to retain. 

Table 4: Average Medicare-certified facility occupancy, 2019 – 2021

The increased cost of labor is one of the major per diem cost increase drivers for senior living facilities. The tight labor market has led to higher labor costs, increased utilization of contract labor, as well as reductions or suspensions in admissions due to lack of staffing. 

Table 5: Average Medicare-certified facility direct care labor cost per patient day (wages, benefits, contract labor), 2019 – 2021

Table 6: Average Medicare-certified facility direct care contract wages, 2019 – 2021

Many states facilitate labor-related programs aimed at increasing labor pool and staff retention through innovative programs, as well as considering waivers related to staff certification and delegation of duties requirements. Due to timing, the job outlook could not be forecasted with the effects of the new initiatives, as there is no data yet available on effectiveness of these programs.

If you would like more information, or have questions about your specific situation, please contact our senior living and long-term care team. We’re here to help.

HCRIS as filed SNF Medicare (full utilization) cost reports, 2019 – 2021
Bureau of Labor Statistics, 2022
The Centers for Medicare & Medicaid Services, 2022

Article
Current senior living industry trends and challenges—spotlight on labor costs

Read this if you are subject to Medicaid DSH audits.

The Medicaid DSH program, created in 1981, provides funding to hospitals in the form of DSH payments. Federal law requires that state Medicaid programs make DSH payments to hospitals that serve a disproportionately high number of Medicaid beneficiaries and uninsured low-income patients, to help offset uncompensated care costs (UCC). With healthcare costs steadily outpacing income growth and inflation, these DSH payments serve as an important and sometimes necessary reimbursement mechanism. 

In most states, hospitals that receive Medicaid DSH payments are subject to an annual DSH audit, to determine the DSH UCC limit and to compare it against DSH payments received from the Medicaid state agencies. The DSH UCC limit uses information from the Medicare cost report, as well as Medicaid and uninsured patient detail, to calculate the UCC. 

Upon completion of the DSH audit, the Medicaid state agency or its contractor will compare the UCC to the DSH payments issued during the state fiscal year to determine if a hospital is in a shortfall, where DSH payments were less than the UCC, or a "longfall", where DSH payments were greater than the UCC. If it is determined that a hospital is in a longfall, the state’s Medicaid plan may require hospitals to pay some or all of the DSH funds back. With potentially significant financial implications, it is in the hospital’s best interest to understand the requirements and to complete the audit in a timely and accurate fashion. 

Completion of the DSH audit can be a daunting task. For some, the mere mention of the words “DSH audit” is enough to send chills down one’s spine. It is best assigned to those with solid reimbursement, revenue cycle, hospital operations, and information management system (IT) knowledge. 

It is not uncommon for hospitals to have a consulting firm, such as BerryDunn, complete the DSH audit on their behalf. While the DSH audit may seem like a heavy lift, we hope the following tips will assist you in tackling the audit and getting through the process smoothly and efficiently. 

  1. Allow enough time for completion of the DSH audit. A considerable amount of time and effort is needed to collect, reconcile and summarize the internal claims data and to enter information into the required schedules. The time needed to complete the audit will depend on your organization’s available resources and complexity of the IT and financial systems. Typically, this process takes one to two weeks to complete, sometimes longer. Creating the patient data support files themselves is arguably the most time-consuming aspect of the process. 
  2. Review the minimum federal requirements for DSH payment eligibility and document your organization’s qualifications. To receive DSH payments, hospitals must have a low-income inpatient utilization rate (LIUR) greater than 25 percent, or the hospital must have a Medicaid utilization rate (MIUR) that is at least one standard deviation above the mean rate of all hospitals in the state that receive Medicaid payments. States may distribute DSH payments to other hospitals provided they have a MIUR of at least one percent, and if they offer obstetric services that they have at least two OB/GYN on staff.
  3. Take time to understand how DSH payments are calculated in your state and if any recent state Medicaid plan changes may affect your organization’s eligibility and amount of qualifying payments. 
  4. Carefully review any audit instructions provided, paying particular attention to types of claims, service dates, and required supporting information. 
  5. Gather all the data files needed for completion of the DSH audit before diving in, including the cost report(s) for the period under audit, patient data support files that support the Medicaid and uninsured populations, and audited hospital financial statements (if applicable). Remember: bad data in, bad data out!
  6. Reconcile the state claims data. If the state claims data is used by the state Medicaid agency or its contractor to complete a portion of the audit, we strongly recommend a reconciliation of the state claims data to internal records, to help ensure all eligible claims, inpatient days, and charges are included.
  7. Identify and capture all Medicaid and uninsured patients. When completing schedules, hospitals should ensure they are identifying and capturing all Medicaid and uninsured patients, and accurately report the charges and payments for these patients for the DSH audit. Certain data elements are required, including patient demographic data and hospital charge and payment information. 
  8. Review insured patients' claims with no insurance payment. For uninsured patient charge capture, hospitals may benefit from reviewing insured patients’ claims with no insurance payment. Some claims, meeting state Medicaid plan coverage requirements, could be included as “uninsured” if they meet one of the three exclusion requirements: (1) service was not covered by insurance, but is covered by a Medicaid state plan; (2) patient’s benefits were exhausted prior to the admission/service date, and (3) patient reached the lifetime insurance limit. Some accounts that appear to be insured on the surface may in fact be eligible for inclusion in the calculation of the UCC. Remember, claims denied by insurance, such as untimely filing, lack of pre-authorization, or medically unnecessary services, should not be reported. In many cases, the only way to know for sure if an account can be included is through research of patient notes and financial information. Leave no stone unturned! It could be the difference between a longfall and a shortfall in your UCC.
  9. Review your work prior to submission. Many states will provide a checklist with the audit package, to ensure all data elements have been included with the submission. Even if the hospital has resources to complete the audit, consider arranging for a third-party review of the DSH audit and other submission items to help ensure the accuracy and completeness of the data. 
  10. Schedule time to review audit adjustments. The Medicaid state agency or its contractor will likely provide an adjustment report for your review. Plan your time for review of the audit adjustments, as the window for response or amendments may be very narrow. Take note of the adjustments, especially the high dollar ones, and either confirm that they are accurate or make revisions as necessary. This is another opportunity to bring in an advisor for a second review. 

Should you have any questions about or during the DSH reporting process, please do not hesitate to reach out to Andrew Berube and Olga Gross-Balzano at BerryDunn. We’d be pleased to serve as a second set of eyes to your process or alleviate the time requirements on your finance team. 

Andrew Berube
aberube@berrydunn.com
207-239-9893

Olga Gross-Balzano
OGross-Balzano@berrydunn.com
207-842-8025

Article
Medicaid Disproportionate Share Hospital (DSH) audits: 10 tips for a successful audit

Release Date: July 27, 2022 
Federal Register Publication Date: August 1, 2022 
Effective Date: October 1, 2022  

The Centers for Medicare & Medicaid Services (CMS) issued a final rule that would update Medicare payment rates and policies for Inpatient Rehabilitation (IRF) Prospective Payment System (PPS) and IRF Quality Reporting Program (QRP) for the fiscal year 2023, as well as other provisions. Following is a summary of the major provisions of this final rule. 

IRF PPS Final Changes to Payment Rates: 

CMS finalized a 3.9% net increase in FY 2023 Medicare IRF PPS rates and a 0.6% decrease in outlier payments to maintain outlier payments at 3% of total payments. Net overall IRF payments will increase by 3.2%, or an estimated $275 million (note: the net overall increase is 3.2% due to rounding). Components of the increase are broken down as follows: Table of IRF PPS Final changes to Payment Rates

Major Final Provisions: 

  • Apply a 5% cap on any decrease in IPF’s wage index to mitigate negative effects of year-to-year variation in wage index 
  • IRF teaching payment adjustment to reflect higher costs similar to the IPPS indirect medical education (IME) adjustment.  
  • IRF QRP expands quality data reporting requirements to include all IRF patients, regardless of payor, beginning on October 1, 2024 
  • Outlier threshold amount increased from $9,491 to $12,526 for FY2023.  
  • Labor-Related Share remains the same as FY2022 at 72.9%. 
  • Standard Payment Conversion factor is $17,878 for FY2023 
  • Update to IRF Cost-to-Charge Ratio (CCR) ceiling and urban/rural averages for FY2023.  
    • Estimated national average CCR of 0.466 for rural IRFs. 
    • Estimate national average CCR of 0.392 for urban IRFs. 
    • National Ceiling of 1.41 for FY2023 

Sources:  

CMS-1767-F Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2023 and Updates to the IRF Quality Reporting Program. 

Article
Medicare Final Rule for FY 2023 Inpatient Rehabilitation Facility Prospective Payment System

Release Date: July 27, 2022
Federal Register Publication Date: July 29, 2022
Effective Date: October 1, 2022

The Centers for Medicare & Medicaid Services (CMS) issued a final rule that would update Medicare payment rates and policies for Inpatient Psychiatric Facility (IPF) Prospective Payment System (PPS) for the fiscal year 2023, as well as other provisions. Following is a summary of the major provisions of this final rule.

IPF PPS Final Changes to Payment Rates:

CMS finalized a 3.8% net increase in FY 2023 Medicare IPF PPS rate and a 1.2% decrease to the outlier payments to maintain outlier payments at 2% of total payments. Net overall IPF payments will increase by 2.5%, or an estimated $90 million increase (note: the net overall increase is 2.5% due to rounding). Components of the increase are broken down as follows:

Table of IPF PPS Final Changes to Payment Rates

*Market based update for FY23 would be the highest implemented due to recent high inflationary trends impacting the outlook for price growth over the next several quarters.

Major Final Provisions:

  • Apply a 5% cap on any decrease in IPF’s wage index to mitigate negative effects of year-to-year variation in wage index
  • IPF Federal per diem base rate from $832.94 to $865.63
  • IPF Labor-Related Share from 77.2 percent to 77.4 percent.
  • Update to IPF Cost-to-Charge Ratio (CCR) ceiling and urban/rural averages for FY2023.
    • National Median CCR of .05720 for rural IPFs.
    • National Median CCR of .4200 for urban IPFs.
    • Rural ceiling of 2.0412
    • Urban ceiling of 1.7437

Sources:

CMS-1769-F Medicare Program; FY 2023 Inpatient Psychiatric Facilities Prospective Payment System-Rate Update and Quality Reporting-Request for Information.

Article
Medicare Final Rule for FY 2023 Inpatient Psychiatric Facility Prospective Payment System

Release Date: July 07, 2022
Federal Register Publication Date: Scheduled for July 29, 2022
Effective Date: January 1, 2023
End of Comment Period: September 6, 2022

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would update Medicare payment rates under the Physician Fee Schedule (PFS) for the calendar year 2023, as well as other Part B provisions. Following is a summary of the major provisions of this proposed rule.

PFS Proposed Changes to Conversion Factor:

  • PFS conversion factor reflects the statutory update of 0%, expiration of the 3% increase in PFS payments for CY2022 provided by the Consolidated Appropriations Act of 2021 (CCA), 1.55% reduction necessary for changes in relative value units for budget neutrality, and anesthesia-specific practice expense and malpractice adjustments of 0.53%.

Major Provisions Proposed:

  • Future rebasing and revision of the Medicare Economic Index (MEI) cost share weights that would use publicly available data from the US Census Bureau NAICS 6211 Offices of Physicians to set PFS payments rates. Using new MEI cost weights for PFS rate setting would not change overall spending on PFS services but would likely result in significant changes to payments among the various PFS services. Therefore, CMS is not proposing the use of the newly proposed method for CY2023 rate setting and is seeking comment on the proposed updated MEI cost share weights to calibrate payment rates and update the geographic practice cost indices (GPCI) under the PFS in the future.
  • Changes in coding and documentation for Other Visits (hospital inpatient, hospital observation, emergency department, nursing facility, home or residence services, and cognitive impairment assessment) intended to reduce administrative burden using a similar approach to changes finalized in the CY2021 PFS final rule for office/outpatient Evaluation and Management (E/M) visit coding and documentation. Also propose to maintain the current billing policies that apply to E/M visits while potential revisions are considered for future rulemaking. 
  • Delay the Split (or Shared) E/M visits policy finalized in CY 2022 related to the definition of substantive portion as more than half the total time. Until CY 2024, clinicians will continue to have a choice of meeting the definition of substantive portion based on history, physical exam, medical decision making, or more than half of the total practitioner time spent.
  • Proposing to cover several services that were temporarily available as telehealth services during the PHE through CY 2023 on a Category III basis and extending the time these services are temporarily included on the telehealth services list for a period of 151 days following the end the PHE. 
  • Telehealth claims would require the appropriate place of service (POS) indicator to be included on the claim instead of modifier “95” after the period of 151 days following the end of the PHE. For Medicare telehealth services furnished via audio-only technology modifier “93” would be available, where appropriate. 
  • Establish a new General Behavioral Health Integration (BHI) service for monthly care integration where mental health services performed by Clinical Psychologists (CP) or Clinical Social Workers (CSWs) is the focal point of care integration. This new General BHI service would also allow a psychiatric diagnostic evaluation to serve as the initiating visit. 
  • Make an exception to the direct supervision requirement under “incident to” regulations to allow behavioral health services provided by auxiliary personnel (such as licensed professional counselors and licensed marriage and family therapists) incident to the services of a physician or non-physician practitioner (NPP) to be allowed under general supervision of a physician or NPP, rather than under direct supervision.
  • Proposing new HCPCS codes and valuation for Chronic Pain Management and treatment services (CPM) that would include a bundle of services furnished during a month. 
  • Opioid Treatment Program (OTP) would revise the pricing methodology for the drug component of the methadone weekly bundle and the add-on code for take-home supplies of methadone. CMS also proposes to allow the OTP intake to be furnished via two-way audio-video communications technology when billed for the initiation of treatment with buprenorphine, when authorized by the Drug Enforcement Administration (DEA) and Substance Abuse and mental Health Services Administration (SAMHSA). Audio-only communication technology to initiate treatment with buprenorphine would also be permitted where audit-video technology is not available. 
  • Create a new G-code for audiologists to bill for services without a physician referral for non-acute hearing or balance assessments unrelated to disequilibrium, hearing aids or examinations for the purpose of prescribing, fitting, or changing hearing aids. Billing the new G-code would be limited to once every 12 months.
  • Expand coverage for certain colorectal cancer screening tests by reducing the minimum age to 45 years and considering a follow-up screening colonoscopy after a Medicare covered at-home test to be a preventative service.
  • Preventive vaccine administration would receive annually updated payment amount based on the increase in the MEI and adjustment for geographic locality. Also, CMS proposes to continue the additional payment for at-home COVID-19 vaccinations and clarifies that policies regarding the administration of COVID-19 vaccines and monoclonal antibody products will continue until the Emergency Use Authorization (EUA) declaration for drugs and biological products is terminated.
  • CMS proposes a variety of changes for the Quality payment Program and Medicare Shared Savings Program.

Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs):

  • Add the new chronic pain management and behavioral health integration services to the RHC/FQHC-specific general care management HCPCS code, G0511.
  • Policies to extend telehealth flexibilities for 151 days after the PHE would be applicable to RHCs and FQHCs as well. 
  • Provider-based RHC’s payment limit per visit would be established by using a 12-consecutive month cost report. 

Sources: 
CMS-1770-P Medicare and Medicaid Programs; CY 2023 Payment Policies under the Physician Fee Schedule and Other Changes to Part B Payment Policies; Medicare Shared Savings Program Requirements; Medicare and Medicaid Provider Enrollment Policies, Including for Skilled Nursing Facilities; Conditions of Payment for Suppliers of Durable Medicaid Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS); and Implementing Requirements for Manufacturers of Certain Single-dose Container or Single-use Package Drugs to Provide Refunds with Respect to Discarded Amounts

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Medicare Proposed Rule for CY 2023 Medicare Physician Fee Schedule

Read this if you are a Skilled Nursing Facility (SNF) providing services to Medicare beneficiaries.

Skilled Nursing Facility (SNF) bad debt expenses resulting from uncollectible Medicare Part A and Part B deductible and coinsurance amounts for covered services are reimbursable under the Medicare Program on a full-utilization Medicare cost report. SNF providers can report allowable Medicare bad debt expense on Worksheet E, form CMS-2540-10. Currently Medicare reimburses 65% of the allowable amount, less sequestration, if applicable.  

BerryDunn maintains a database of SNF as filed Medicare cost reports nation-wide. We analyze data annually, looking for trends and opportunities to help providers optimize available reimbursement. Cost reports data shows that in 2018–2020, on average, 75% of facilities nation-wide reported allowable bad debts, and claimed, on average, close to $63,000 of reimbursable bad debts for Medicare Part A. 

To compare facilities of different sizes and Medicare utilization rate, we also show bad debts on per Medicare patient day basis (figure 2). In FY 2020, all US regions experienced an increase in reimbursable Medicare Part A debt, averaging $19.43 per Medicare patient day.  

Understanding the requirements for bad debts and utilizing this reimbursing opportunity could help your facility’s bottom line. 

Medicare bad debt checklist now available

To support SNFs with reimbursement for these costs, BerryDunn’s healthcare consulting team has developed a checklist that provides insight into the Medicare cost report opportunities. 

Download the checklist, and please contact us if you have any questions about your specific situation or would like to learn more.

Article
Medicare bad debt: Review sample procedures for Skilled Nursing Facilities