MAC Worksheet S-10 Audits: FFY 2018 Observations and Next Steps for Hospitals

As federal fiscal year (FFY) 2019 Worksheet S-10 audits approach, it’s important that hospitals are aware of key observations that surfaced during 2018 audits so they can prepare for the next round of reviews.

Medicare Administrative Contractors (MAC) must complete their Medicare cost report Worksheet S-10 reviews for FFY 2018 by the end of December 2020. Following their reviews, MACs will likely start auditing all eligible Medicare Disproportionate Share Hospital (DSH) FFY 2019 cost reports in early 2021.

Below, we cover key FFY 2018 observations, implications for your hospital, and ways to prepare for FFY 2019 audits.

Increased Number of Audits

During the 2018 audit round, approximately 2,100 more S-10 MAC reviews were performed than in the 2017 cycle—a more than 75% increase. Worksheet S-10 data was reviewed for all qualifying providers that receive federal uncompensated care (UC) reimbursement in addition to Sole Community Hospitals.

To account for the workload increase, MACs grew their staffing considerably and subcontracted more audits to outside firms. Not only were there many first-time hospitals subject to these Worksheet S-10 reviews, but there were also many first-time auditors navigating their way through the Worksheet S-10 audit protocol.

2018 Audit Letter

As part of the audit process, MACs send an annual audit letter summarizing required documentation. Parts of the 2018 audit letter were similar to the 2017 letter, with both versions requesting the following:

  1.  A copy of the hospital’s charity care policy and financial assistance policy (FAP) that was in effect during the cost report period under audit.
  2.  A copy of the hospital’s audited financial statements or working trial balance for the cost report period under audit.
  3.  A reconciliation of the bad debts claimed on Worksheet S-10, Line 26, to the audited financial statements or working trial balance.
  4.  A detailed listing of the hospital’s transaction codes and their descriptions and explanations. For example, revenue codes, charity care and bad debt write-off codes, charity care discount codes, and all contractual adjustment codes.
  5.  Detailed query logic that describes how the hospital identified patient charges included in the patient listing used to support charges on Worksheet S-10, Line 20.
  6.  Detailed query logic that describes how the hospital identified bad debts included in the patient listing used to support bad debts on Worksheet S-10, Line 26.
  7.  Detail patient listing of charity care charges and deductibles and coinsurance claimed on Worksheet S-10, Line 20, Columns 1 and 2.
  8.  Detail patient listing of bad debts claimed on Worksheet S-10, Line 26, Columns 1 and 2.

The letter may also include additional guidance as well as a submission guide, data templates, attestations, and examples.

Additional Items

Auditors requested some additional items during the course of the audit that created a more detailed level of review than prior-year audits. These included the following:

  • Year-over-year (YOY) documentation. Auditors are requesting documentation and explanations for any variances between the YOY reporting of charity and bad-debt amounts.
  • In-depth policy reviews. Policies are being reviewed much more thoroughly than in prior year audits and are even being questioned by auditors. In response, hospitals are having to provide additional explanation as to how certain charity transactions or programs reported in the charity section of their Worksheet S-10 may have been covered in their financial assistance policy.
  • Duplicate-account and reconcile testing. Auditors are supplying templates for hospitals to populate with charity and bad-debt detail. They’re then testing the data for duplicate accounts and attempting to reconcile and tie out accounts to a zero balance. In many cases, hospitals must provide additional support, such as remits and explanations of benefits (EOB), to verify there wasn’t a duplication of discounts or discounts given in excess of patient responsibility.

Additional Audit Observations

There were a number of additional audit observations that could affect your audit results, such as:

  1.  Inconsistent reporting and audit approaches, due in part to confusion regarding Worksheet S-10 instructions
  2.  Inconsistent application of audit methodologies and protocols, not only among the MAC population, but also among auditors within the same MAC
  3.  Unfair application of statistical sampling and error extrapolations across small sample population sets as well as inconsistent application among MACs

Practical Issues

There were many practical issues associated with 2018 reviews that will need to be addressed and more effectively applied in future years.

For example, at the onset of many reviews, MACs asked hospitals to provide information that isn’t required to complete Worksheet S-10. Hospitals spent significant time gathering the requested information, which was often two-to-three years old and difficult to locate.

Request Challenges

Many hospitals weren’t prepared to provide the level of data needed for MACs to complete their reviews, such as patient detail at the transaction-code level.

In most cases, information requested needed to be found in large databases that included hundreds-of-thousands of lines for charity and bad debt. Formatting and manipulating the data to meet MAC acceptability requirements and short turnaround times only amplified challenges for hospitals.

Additionally, MACs introduced more challenges by selecting sample patients for review and then requesting specific supporting documentation from the hospitals. If the requested information wasn’t made available by a specific—often short—deadline, MACs could count this as an error, leading to a potential extrapolation.

We’re Here to Help

As the number of hospitals subject to MAC reviews increases and new complexities develop during Worksheet S-10 audits, additional burdens are being placed on hospitals to meet the stringent requirements. 

If you have questions about potential implications of the 2018 audits—or need assistance filing amended Worksheet S-10 reports so your hospital is in compliance and prepared for 2019 Worksheet S-10 audits—contact your Moss Adams professional.