Thanks to advances in science and medicine, people are living longer than ever. According to the Census Bureau, 14.9% of the United States population was age 65 or over in 2015. And, that number is expected to more than double by 2050. To meet the needs of an aging population, excellent home health care and hospice services will become increasingly important. As the industry grows, more and more people will have a stake in the home health care business.
There is plenty to think about when trying to manage a home health agency or hospice care company, one of the most important being finances. Among the facets of business management that anyone involved in home or hospice care must understand is the Medicare Cost Report.
What Is a Medicare Cost Report?
The Medicare Cost Report (MCR) is a financial record of all costs and charges a healthcare provider endures throughout the course of a fiscal year. The reports are required by the Centers for Medicare and Medicaid Services (CMS) from any entity that bills CMS and receives reimbursement from the agency. Medicare Cost Reports are not only required for hospitals, but all institutional providers, including home health agencies and hospice services. CMS then uses the reports to determine whether the facility over or underpaid CMS, similar to when someone files their personal taxes to see whether they owe the IRS money, or if they need a refund.
Medicare Cost Reports are due 150 days from the end of the fiscal year and require both electronic submission of the cost report itself as well as supporting documentation. Staying on top of the due date is essential, as any payments will be withheld until CMS receives the cost report. A full MCR is comprised of many different forms, referred to as worksheets. Businesses are also required to verify the specific claims made in the report. Compiling and submitting all of the necessary information for a MCR is no easy feat- when all is said and done, CMS estimates hundreds of hours go into preparing the cost reports.
Why is a Medicare Cost Report Important?
On a micro level, the reports are extremely important for any home care or hospice business because they are necessary for Medicare reimbursement. Failure to accurately complete the reports can result in great loss in reimbursements. By taking the time to prepare for your Medicare Cost Report and carefully check that the reports are error-free, you will get the most money back in reimbursements for your business.
Reimbursement amounts aside, MCRs are useful for home health agencies or hospice services because they provide a clear picture of the business’ financial health at the end of the fiscal year. Cost reports force businesses to take a close look at their revenues and expenses, net income or losses, and their payer mix. All business in every industry should be paying close attention to these financial components throughout the year; but, it definitely does not hurt to be forced to carefully examine them for the purpose of the MCR.
The importance of cost reports expands beyond each individual business, too. CMS uses the reports for rate setting and policy purposes. Thus, Medicare Cost Reports play a role in shaping CMS policy in future years, and correctly completing them can impact all healthcare providers involved with CMS for years to come.
How to Manage Your Business’ Cost Report
In order to complete a Medicare Cost Report, a business must meticulously document all of their expenditures and earnings throughout the year. Documentation, and a well-organized system to manage those documents, is crucial for an accurate MCR and the overall financial health of a business.
Even a skilled CFO can face some obstacles when attempting to compile a Medicare Cost Report. To make the process much simpler, and ultimately improve the financial health of a home health care or hospice provider, you may consider working with a financial consulting and management service. Organizations like Liberty Consulting who specialize in financial services for home health and hospice services can significantly ease the burden of compiling and submitting your Medicare Cost Report.
Everyone in the healthcare industry wants to help their patients. But, the business and financial aspects of home health agency and hospice services cannot be ignored. Staying on top of your business’ finances is necessary not only for the Medicare Cost Report, but ultimately for ensuring you can deliver the best quality care to patients.