FQHC Cost Reporting
CEO and CFO working together
June 22, 2012
Who do we have in the room?
 CFOs and Accountants
 CEOs, COOs, and non-accountant types
 Gap is a store, not generally accepted
accounting principles (GAAP).
 Fast bees are something to avoid, not
the Financial Accounting Standards
Board (FASB)
CEOs: What happens when you
The cost report is due
Our cost rate has gone down
 We owe Medicare or Medicaid
Other concerns??
CFOs: Once every year cost report
 The time for the annual cost reporting exercise
arrives, what thoughts start to crowd your
 New accounting staff or managers have not coded
transactions appropriately
 Trial balance from the auditors is still not ready
 What else…..
 Remember even if you have been a CFO for 20
years, that is only 20 cost reports. Unlike financial
statement preparation at once per month for 20
years or 240 chances to get it right.
Goal of cost reporting:
 To align payments with reasonably efficient FQHCs’
costs of furnishing care, thereby helping to ensure
beneficiaries’ access to high-quality services.
 Cost report is to accurately reflect the costs to
provide FQHC-covered services to Medicare and
Medicaid beneficiaries.
Where Are We Going Today?
 Why it matters to have it right? (Hint: ACA 2014)
 The gut check: a quick formula
 Learning how to count visits & FTE
 “Book ‘em, Danno” – your accounting staff’s
coding behavior is very important
 HR plays a part in cost reporting. No, they really
 The Biggest Mistakes & Growing a backbone
 How can the visionary CEO help the down-to-earth CFO
with cost report and operational analysis?
Your Future, Your Cost Report
Thanks to the Affordable Care Act:
Medicare is going PPS
 In 2011 FQHCs have been transmitting
Medicare claims with CPT/HCPCS detail
 Probably 2013-14 year will be the base
year for Medicare PPS calculation
Baby Boomers & FQHCs
 The Medicare program generally the
second best payer after state Medicaid
 Payer mix goal for community health
 Growing percentage of Medicare
beneficiaries served as population ages.
 If Medicaid is block granted, Medicare
may become the BEST payer
 What percent of your current
patients are Medicaid or dual
 In 5 years you project X?
10 years?
The formula
(Costs divided by visits)
 Take one month of medical expenses and divide by the
medical provider visits for the month
 Back out your dental, pharmacy and other non-primary medical
care expenses
 2012 Medicare Ceilings:
 Urban: $ 126.98
 Rural: $109.90
 Where are you compared to these limits? If you are
more efficient and doing for less, great, but most of are
struggling to keep our heads above water with costs at
and above $150 per visit.
 My story: $54 per visit
This is simple division. Right?
 Determining allowable DIRECT costs
takes the entire leadership and
management team (as well as staff)
 Counting visits is never straightforward
 Problems:
 Many practice management systems count
visits from the appointment table, not the
charge table
 Canned reports from the vendors are
RARELY accurate, usually over counting
visits, inflating encounters (Misys and HC)
 IT staff writing visit reports usually do NOT
understand the definition of a FQHC visit.
Too Many Visits – is that a problem?
 UDS Visits are NOT Medicare/Medicaid FQHC visits
Medicare Visit:
Face-to-face encounter between the patient and a
physician, physician assistant, nurse practitioner,
certified nurse midwife, visiting nurse, clinical
psychologist or clinical social worker during which an
FQHC service is rendered.
Only one visit per day
(An exception: patient suffers an illness/injury
subsequent to the first encounter requires additional diagnosis/treatment.)
 NEVER accept the first report or
analysis as definitive.
 Run detail reports and analyze it
How to Count (1 of 3)
 Generate a report from the CLAIMS system (not the
appointment system) with the following fields:
Patient name,
Patient account,
Date of service,
Claim id (unique to each claim),
CPT code
 Run a frequency distribution by CPT code
 Analyze which CPT codes are being billed.
How to Count (2 of 3)
 Determine which CPT codes are FQHC visits and
which are not.
 Most E/M codes are FQHC visits, except for nursing
visits (99211)
 Venipunctures and Urinalysis are not.
 Flag the CPT codes that are FQHC visits
Who is best equipped to do this analysis?
 Not necessarily the CFO. It might be better to
have a provider work with finance staff.
How to Count (3 of 3)
 Using a relational database, link the CPT code
table with the claim detail table
 Remove duplicate entries so that for each date of
service one, and only one, claim exist for each
CEOs listen up
 Give your CFOs and Medical Directors what
they need for financial and clinical analysis:
 Analytics
 You need one person who is proficient with
relational databases.
 The power of the “what if” analysis
Sidebar: Productivity Screens
 It is important for providers to accurately track
their time because it WILL affect the cost report.
 FTEs are an important part of the cost report.
 If you over count FTEs you may be “dinged” for not
meeting productivity floors.
 UDS FTEs are NOT Medicare/Medicaid FQHC FTEs
 Again – providers, HR and accounting staff must make
sure that there is an accurate record of provider time.
 The number of full time equivalent employees (FTE) of each type (i.e.,
physician, physician assistant, or nurse practitioner) is determined by the
following formula.
 Divide the total number of hours per year worked by all employees of that
type by the greater of:
 The number of hours per year for which one employee of that
type must be compensated to meet the clinic/center’s definition
of an FTE. (If the clinic/center is open on a full time basis, the
usual definition of an FTE is 2,080 hours per year, 40 hours per
week for 52 weeks); or
 1,600 hours per year (40 hours per week for 40 weeks).
 Medicare guidelines state that a provider’s FTE
must be reduced by all administrative and nonworked days (vacation, sick, personal, etc.) for
reporting purposes.
 Vacation hours
 Sick hours
 Holiday hours
 CME hours
 Administrative Duties
 Total Non-Work Hours
Booking: Accounting Staff
 Cost report is affected by how transactions
are coded by staff/management and
booked in the accounting system
 FQHC costs are one of three:
 Direct Medical
 Overhead
 Non-Covered Services
 Direct costs:
 salary and benefits for medical and behavioral health
 medical supplies, etc.
 Overhead:
 administrative salaries,
 utilities,
 Non-covered costs:
 marketing,
 laboratory, etc.
Why does it matter which cost?
 If costs are in the Direct Medical Cost classification,
every penny spent is captured
 Overhead/Administrative costs are allocated over the
Direct Medical Costs and the Non-Covered Costs
 As such, if you misclassify a Direct Medical Cost as
administrative costs, a portion of the costs will not be
captured in the FQHC cost rate
 Accurate coding in accounting is FUNDAMENTAL
But it is not so clear cut…
 Electronic medical/health records:
 NGS and Palmetto try to classify as administrative overhead
 Patient education materials
 Electronic access to HealthWise
 Diabetes, Hypertension paper handouts
 Staff
 Triage nurses working at the call center
 Medication assistance staff
 Intake staff when part of the job is preventive health
Accounting and Coding
 The CEO and Medical Director authorize the mass production
of 30,000 full-color hypertension education handouts
 Accounting receives the invoice from the print company and
codes it as follows:
 G/L: Printing Supplies
 Dept: Medical
 When the trial balance is sent to the intermediary this
expense will be re-classed as administrative.
 OUCH!!
Other examples from the audience?
Human Resources
 Job Descriptions are important
 For positions where job crosses two cost centers
(Direct Medical and Administrative costs)
 Intake staff who do PHQs
 Do time studies to justify % Direct Medical and %
Growing a backbone
 Question intermediary disallowances and
 Do not accept. Just because the auditor
disallows/reclasses it does not mean that should be.
 Examples:
 Changing depreciation basis
 Requesting copies of BPHC CHC grant and NGAs
 Medical nutrition, social services
 Question assumptions
 Medicaid story: CFO and CEO working together
Know how to argue with the rules
Read Cost Principles & Medicare FQHC:
Top Ten Mistakes
(Source: BKD, LLP - CPA)
 No reclassifications and/or adjustments
reported to align costs properly
 Not properly listing clinic locations which
may affect per-visit payment limit(s)
 No tracking & reporting of influenza &
pneumococcal vaccines and/or other Part B
billing issues
 No reporting of Medicare bad debts - reclaim
it, but prove you tried to collect
Lack of review of intermediary proposed
adjustments during settlement process
FQHC provider number issues
No reconciliation of expenses reported
on cost report with total expenses per
the audited financial statements
Not reporting expenses correctly
in the proper “buckets”
Incorrect computation of FTEs &
related productivity standard
Inaccurate reporting of visits
General rules of thumb
 UDS full-time equivalency (FTE) on Table 5 are almost
always higher than Medicare and Medicaid FTE
 UDS Provider Visits on Table 5 are usually higher than
FQHC visits
 Always question visits – never accept the first pass.
 Costs – ask questions about coding of expenses
 Give your finance and clinical staff a database expert
 Grow a backbone – question the intermediary’s
Questions? Resources?
Brian O. Harris
[email protected]

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