In this episode, Andrew Kinnaman, Reimbursement Manager with BESLER, provides us with a glimpse into BESLER’s next free live webinar, the first in our new 2025 Reimbursement Corner Webinar Series, Avoid Chaos: Guide to Cost Report Preparation, presented live on Wednesday, January 8, at 1 PM ET.
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Learn how to listen to The Hospital Finance Podcast® on your mobile device.Highlights of this episode include:
- The reasoning behind the title of this upcoming webinar, Avoid Chaos: Guide to Cost Report Preparation
- Know your facility, what that means as it relates to cost report preparation
- The difference between know your facility and know your data
- What is the best way to determine how to use your data
- Preparation tools
- How to avoid or minimize chaos when preparing cost reports
Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Andrew Kinnaman, Reimbursement Manager with BESLER. In this episode, Andrew will provide us with a glimpse into BESLER’s next free live webinar, the first in our new 2025 Reimbursement Corner Webinar Series, Avoid Chaos: Guide to Cost Report Preparation, that he’s presenting live on Wednesday, January 8th at 1 PM Eastern Time. Welcome back and thank you for joining us, Andrew.
Andrew Kinnaman: Well, thank you, Kelly. First, let me say Happy New Years to you and everyone, and thank you for inviting me back.
Kelly: Of course. Happy New Year to you as well. Well, let’s go ahead and jump in. So, Andrew, what was the reasoning behind the title of this upcoming webinar, Avoid Chaos: Guide to Cost Report Preparation?
Andrew: Well, I chose this title because most, if not, all of us in the reimbursement industry have gone through cost report preparations, and at a time, it became chaotic. This can happen for a lot of reasons. Staffing, data issues, organizational issues, and let’s face it, life in general can change things. So, I began the preparation of this topic looking up the definition of chaos, which is a state of utter confusion or disorder, a total lack of organization or order. Now, the use of the word utter may be a little strong, but the point is that by organizing, planning, and setting clear goals, we can attempt to avoid the reasons behind chaos. Now, when chaos does come, it affects us physically, mentally, emotionally. It can cause a decrease in efficiency and accuracy at the same time, increasing errors and stress. We have all probably been there at some time during the cost report preparations where things are not going right for any number of reasons. This may have caused us to use shortcuts to be taken, things overlooked, or simple errors that under any other conditions might not have been made. Today, what I’d like to discuss some of the practices I’ve employed over the years to limit chaos in the cost report preparation. I would say most times this has helped me produce a report in a timely and accurate manner. But what I’ll cover is the four practices of cost report preparation I would like to discuss today, and they are, know your facility, know your data, preparation tools, and bring chaos to order.
Kelly: Wow, thank you for sharing those and for explaining what chaos is specifically. That was awesome. So, Andrew, you just listed out four practices. Can you please discuss the first practice, know your facility, and what this means as it relates to cost report preparation.
Andrew: Yeah, sure. But I will point out that since we’re going to be going to this in a much more in-depth during the upcoming webinar, I will address these at more of a very high level with general points. First, I will sit there and say know the forms and requirements necessary to file the reports for your specific facilities. Let’s take, for example, that you have an acute facility and you’re filing a 2552-10. Possibly you have freestanding SNF, HHA, renal dialysis, or rural health clinics as part of your organization. Well, each of these have separate required reports that require different data sets. Also ask the question, do your facilities have hospital-based units? Or how does this impact the cost report process? These are the things that should be identified well in advance to the actual cost report processing. Secondly, I like to identify the important reimbursement issues related to any facility. Does your facility receive disproportionate share payments, uncompensated care? Do they claim indirect or direct medical education? Has there been a designation as a special category hospital or is it a transplant facility? Any one of these or other facility-specific reimbursements will require the necessary data and plan to incorporate in the cost report process. Probably third and last is have there been impactful changes between years that warrant your special attention, such as there may have been operational service changes. Medical education may have started or ended or changes in your medical education reimbursement. Significant payer reclassification changes. Maybe your level of Medicare to Medicaid or other payers have drastically changed, which will impact your cost report.
Ownership changes are part of the issues or related organization. And also we look at physical and plant changes just so that we know what is happening at our facility for these reporting years. I also want to point out that many times what I’ve done is gone back to the prior year audit adjustments and verified that do I need to incorporate that in the current year cost report? Are they applicable carry forward? Were they a one year so that then I’m actually looking at the compliance of the cost report. You may think of other issues relating to your facility, but the point is the better you know your facility and reporting requirements, the better you can plan and implement the cost reporting process.
Kelly: Most definitely. Thank you for that summary on know your facility. Can you share the difference between know your facility and know your data? Are they not somewhat similar?
Andrew: Well, Kelly, I guess in a manner of speaking, they are related because in many cases the data required is based on your knowledge of your facility. For cost report purposes, know your data is about what data is necessary to complete the report, and that will differ significantly for each facility or facility type. One thing that is common among most reports is the base data required. I call these the big five. Usually, they consist of the general ledger, your revenue and usage, your payroll, your patient census, and claims data, or possibly your provider statistical and reimbursement system report, or PSNR. These sources, in most cases, will assist us with about 80 to 90 percent of the cost report process. Then there is what I call auxiliary purpose data. And this is any data necessary for the report, but it’s very facility-specific. Some examples are maybe your Medicare payment details, like your pass-through amounts and lump sums, your B1 statistics, intern and residents’ data. If you’re a transplant facility, organ acquisition data that is required for filing. Also, do you have sub-providers and hospital-based providers like rural health clinics, home health agency, hospice and renal. All of these have different requirements and set of data that you may have to identify and incorporate in your cost report plan.
For reporting and filing purposes, I also want to make sure people are aware of CMS exhibits. These are things that have to be submitted if you actually claim these on your cost report. That can be your exhibit 2A, 3A, 3B, 3C, as these are critical exhibits for filing and possible subsequent audit. Certainly, my examples are not all-inclusive and there may be more, but I think the point is made. All of these data sources could be required to be incorporated into the cost report preparation.
Kelly: Wow, yeah. Thank you for explaining that for us. If you obtain all that data, what is the best way to determine how to use that data?
Andrew: Well, I take the steps of evaluating the data source into minimal data source, meaning what are the minimal necessary data fields I need to complete the report. Each source can be different, but there’s usually some commonality that can be found like a department number, a name, account number, name, a value. These are the primary fields for the general ledger and for other sources. Be aware that facility-specific general ledgers may need to be evaluated for other required fields. Specific data sets may require additional fields, and I’ll give you a couple examples. The revenue and usage probably should include an inpatient-outpatient identifier, have a revenue code or UB code associated with it, revenue and unit amounts, a payer or financial class identifier, maybe even the procedure code or other fields that might be necessary for your filing of your cost report. Consider how this data will be used in possible Worksheet S3 Part 1 patient days. It can also be possibly used as statistical or allocation basis in Worksheet A6 or B1 statistics. Revenue reclassifications on Worksheet C and by payer group for the allocation of program charges for possible Medicare and Medicaid. Take those sources, and then let’s look at a different source. The payroll.
The payroll data can include items such as an earn code and description identifier, job classification and a description identifier. The value here in your payroll will most likely be your hours and dollars. In some cases, you may have to identify payroll to a job classification or even an employee level for the purposes of filing your report or coming up with calculations for different Worksheets. There is also the necessity to define includeable hours and dollars by earn code or some similar identifier. This database can be used in various areas of the cost report preparation like Worksheet S3 Part 1 FTEs, your wage index, which is Worksheet S3 Part 2. It can be used as a statistical or allocation basis in your A6s or B1 stats. Additional fields or separate databases may be necessary for specific personnel identification for such things as rural health clinics, home health agency, and other cost report Worksheets. Regardless of the source, steps should be considered prior to starting your preparation process to determine the necessary data requirements for your specific facility and how and where that data would be used.
Kelly: Wow, thank you so much for all that information, Andrew. Can you please discuss the third practice you mentioned, preparation tools?
Andrew: Yeah, for our industry and the way we prepare a cost report, there are certain tools that are required for cost report purposes. Not all facilities or basically all facilities would probably use a cost report submission software, but not all facilities may use the same sources or tools to get to the final result of submitting a cost report. We touched upon one of the most important ones above, and that is what is the required forms and requirement. This is verifying that you have an approved cost report software that is licensed and available for the applicable reporting year and your specific facility. Having that completed at the beginning of the process could save a lot of time and effort later. I tend to always have at my fingertips the most current cost report instructions in CMS transmitters. Typically, the cost report instructions can be found in your electronic cost report submission software, or you can obtain a copy or a PDF version. Both cost report instructions and transmittals can typically be found in a web search. For example, I searched the term CMS Cost Report Transmittal. I quickly found that Transmittal 23, which is the most current one, was released on December 20th, ’24, and it’s effective for cost reports beginning on or after 10/1/24. Thus, knowing the various transmittals that apply to your facility and reporting period is especially important. Next, I’m going to need tools that I’m going to use to process and reprocess the significant amount of data required for the cost report submission. In that way, I need to determine, for my purposes, the most efficient and accurate tools to process for you and your facility. That might include using Excel, Access, homegrown systems, or a cost report preparation system. In most cases, this could be a combination of all the above that may be necessary to provide your processing of the actual data that we talked about and know your data.
Kelly: Thank you for sharing all of that with us. So, Andrew, how does one avoid or minimize chaos when preparing cost reports? And that’s a loaded question. [laughter]
Andrew: Yeah, no kidding. I’m sure everyone would sit there and say, “Well, I did everything perfect, and I still had some issues.” But what I do is each year, regardless of the filing requirements or my knowledge of the facility or data, I’d just like to put a plan together using all the practices discussed. I want to determine my primary goals when preparing the report, included in this is this being compliant, high impact issues identification, overall accuracies, and knowing my required deadlines. Next is pulling the data together. I tend to use a checklist or some other means to track the data requirements. I identify the source of the data, when the data will be available, and changes to that data or source from the previous year. And I also do not forget that this may include new data requirements depending on changes that we discussed up in knowing your facility or knowing your data. I will focus on specific areas other than general data processing, determining the areas that may need additional time or effort. For example, medical education, wage index, organ acquisition, S10, Medicare bad debts, and other facilities specific issues may require a lot more time or interaction with other individuals within your organization or external partners to get that data for the purpose of the cost report.
I set realistic and reasonable benchmarks to complete. I use my checklist and estimation and data receipts to plan when specific areas of the cost part should be completed and what order. I’ve learned that the order of completion is not as important as the results incorporating all the necessary and relevant data when it’s received in process. What this means is that I complete specific work paper sections or focus areas based on the receipt of the data rather than some prescripted order. That does not mean that I would not go back and review changes based on getting that subsequent data. Know your internal and external timelines required to complete, review and submit the cost report and allow time to complete all aspects of these benchmarks. Finally, I always trigger this as being one thing I think of in the beginning, but also as I’m finishing it up is know your target audience and who will use that data. Ultimately, we are preparing the cost report to meet a regulatory requirement of Medicare or another payer. Know who else will be utilizing the report and what is needed. A need or requirement of upper management can be vastly different than a direct supervisor, which could be different than an outside source such as an external review partner or other interested party. Each of these may have its own agenda and timing, so it’s particularly important to consider the target audience as you do your planning.
Kelly: Wow, those are some really great tips. Thank you, Andrew. So, Andrew, is there anything further that you would like to discuss related to this topic?
Andrew: Well, I am just hopeful that some of the points today will help anyone who has a responsibility for preparing the cost report. The more that an individual can plan, organize, and implement the cost reporting process, the more chances that chaos is minimized or eliminated altogether. We want to avoid as much as possible the chance that chaos undermines our effort to complete an efficient and accurate cost report timely. And so, as a summary, those four practices have worked very well for me over the years of preparing cost reports. And I think if you practice those or you have your own methodology in which you can incorporate some of those, that hopefully this will help you lead to a better cost report preparation process.
Kelly: Sounds great. Well, thank you so much for joining us, Andrew, and for sharing this great sneak peek into the upcoming live webinar, Avoid Chaos: Guide to Cost Report Preparation that you’re presenting live on Wednesday, January 8, at 1 PM Eastern Time. And as a bonus, you can earn CPE. Thanks again, Andrew.
Andrew: Oh, thank you, Kelly.
Kelly: And thank you all for joining us for this episode of the Hospital Finance Podcast. Until next time…
[music] This concludes today’s episode of The Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit besler.com/podcasts. The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.
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