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Now that the Health Care Financing Administration (HCFA) has made the hospice cost report requirement official, hospices must now prepare for their first filing, which for some will be as early as August 2000.
Despite the illusion of time, hospice leaders need to begin collecting the required data in a way that allows the filing process to go smoothly and efficiently. HCFA has said that hospices should expect to spend more than 170 hours preparing their cost report for filing. Whether a hospice can complete its cost report in less than that, without errors, will depend largely on the organizational changes it makes today.
"The problem I see right now is that hospices don’t understand costs," says William Cuppett, CPA, partner in the Clarksburg, WV-based Doak, Cuppett & Poling, a home health and hospice consulting firm. "Our concern is that they don’t know what HCFA wants."
The need for accurate reporting is important on both macro and micro levels. The importance for individual hospices is that accurate cost reports will enable them to make better business decisions. For the hospice community as a whole, accurate cost reports will enable HCFA to better understand the costs that hospices incur and adjust rates.
"Hospice organizations need to recognize the importance of the cost report," Cuppett says. "The report will provide HCFA with substantial information. This information could be used to modify payment rates, establish provider-specific payment rates, set base years for determining future rates, stimulate future legislation, indicate specific provider problems to HCFA, and much more. We strongly encourage the hospice to take this report very seriously. We have seen how HCFA interprets and uses other cost reports."
Cuppett recommends that hospices do the following to begin preparing:
• Educate board and management. This should be the first step in hospice preparation. Management and a hospices board of directors should know about the new requirement, when the first cost report deadline is and the need to begin collecting data, which will affect information systems.
• Identify management personnel to further promote education. A hospice should identify individuals who need more detailed education about cost reporting. Determine who will be responsible for the preparation and completion of the cost report, and make those employees responsible securing educational material about cost reporting.
• Determine changes in financial accounting. The way a hospice keeps its financial records will likely have to change. These changes should be determined based on not only cost centers identified in the cost report, but also by a hospice’s own internal reporting needs.
"You can’t design an accounting system just for the cost report," Cuppett says. "Hospices need to be able to use the data for their own purposes to help them make business decisions."
• Determine data that needs to be collected and the process for doing so. The cost report is the first place you should look. The report and worksheets are specific cost centers, providing direction in the kinds of data HCFA will expect you to collect. The process a hospice will use to collect the data will largely be determined by its current data collection processes and information system. (See list of cost centers, above.)
In addition to the cost centers specified in the cost report, hospices should be prepared to collect additional data for their fiscal intermediary or attach additional information to the provider questionnaire (Form 339). Cuppett advises that hospices create medicare cost report permanent files. The files represent information that requires updating from time to time, rather than the constant accumulation of data required for cost center data. They should include:
— organizational documents;
— chart of organization;
— job descriptions for all key personnel;
— square footage for each facility utilized, reflecting the dimensions of each room, each room’s use, and cost center classification of each room;
— identification of all related parties;
— copies of all long-term debt agreements;
— copies of all non-cancelable lease obligations;
— capitalization policy;
— copies of all patient service contracts, such as nursing, physicians, hospitals, and nursing homes.
— standard charge structure and prices.
• Prepare interim cost reports. Because preparing cost reports will be new to some administrators — aside from those who may have experience from other segments — a hospice should consider preparing quarterly cost reports for the first year. This will allow hospices to identify data collection problems and allow time to correct them before the year-end cost report is filed with their fiscal intermediaries.
One of the areas that hospices will spend a great deal of time in collecting data and preparing the cost report is in the administrative/general cost area. According to Cuppett, the cost report will allow for the election of multiple administrative general cost centers.
Hospice will be allowed to choose from three separate alternatives for handling administrative costs:
1. Allocation of administrative general costs on the basis of accumulated costs of all managed activities.
2. Segregation of administrative general costs into hospice administrative costs, non-hospice administrative costs, and organizational administrative costs.
3. Segregation of administrative general costs into multiple categories.
The first method requires no advance approval, but the remaining two must be approved by a hospice’s fiscal intermediary. "It is imperative that the hospice determine the allocation impact of any alternative selected," Cuppett says. "This clearly indicates that the hospice should begin to look at the options available at the earliest possible date." n
The hospice cost report requires providers to collect costs figures for these categories:
• General Services
Capital related — buildings and fixtures
Capital related — moveable equipment
Plant operations and maintenance
Transportation — staff
Volunteer services coordination
Administrative and general
• Inpatient Care Services
Inpatient — general care
Inpatient — physician services
Inpatient — respite care
Inpatient — physicians, respite care
Inpatient — medical social services
• Visiting Services
Medical social services
Home health aide
Other visiting services
• Other Hospice Service Costs
Drugs and biological
Durable medical equipment/oxygen
Lab and diagnostic
Outpatient services, including emergency room services
• Non-reimbursable Services
Bereavement program costs
Volunteer program costs
Other program costs