Despite expectations, the federal fiscal year (FFY) 2018 S-10 audit process wasn’t complete with all data uploaded to the Hospital Cost Report Information System (HCRIS) by December 31, 2020. At that date, however, the data of 1,540 of approximately 2,400 audited hospitals changed from their as-filed cost reports.
This provides significant information to reassess initial observations of the audits. These S-10 audits are complex and place additional burdens on hospitals to meet the stringent audit requirements.
Below, explore the results of changes visible at the year-end and how they can provide insight for hospitals facing future audits.
Approximately 2,100 more S-10 Medicare Administrative Contractors (MAC) audits were performed during the 2018 round of audits than in previous cycles.
The FFY 2018 audits included all identified Disproportionate Share Hospital (DSH) qualified hospitals, plus sole community hospitals. It’s anticipated that Centers for Medicare & Medicaid Services (CMS) will continue to instruct MACs to complete audits on this large group of hospitals in future years.
It appears that a large portion of the audits were complete by December 31, 2020, but not all. With that in mind, any analysis on the Q4 2020 Healthcare Cost Reporting Information System (HCRIS) file should note that not all audit results are present.
Review our initial November 2020 audit assessment for previously available information on:
- The 2018 audit letter
- The requested year-over-year documentation requirement
- MACs’ in-depth review of hospitals’ charity and financial assistance policies
- Additional observations and challenges
New Audit Changes
Steps Taken Before Samples Were Requested
Once the requested information was provided, MACs generally performed several steps before requesting samples, such as:
- Reviewing the financial assistance policies
- Looking for duplicate claims, both within categories of provided data and between the various categories
- Tying out accounts within the provided template
Financial Assistance Policies
Of particular note, MACs spent significant time trying to understand transactions and transaction codes—and how they relate to charity and financial assistance policies.
As your hospital prepares for future audits, it’s worthwhile to step back and assess your policies to verify they’re clear, accurately represent the provided discounts, and actively followed.
Hospitals encountered challenges with MACs as they worked through duplicate claims reviews.
Due to the fluid nature of the process across the revenue cycle, patient classifications change; write-offs are often reversed or revised based on new information. Care should be taken before concluding the presence of a patient duplication.
Tying Outpatient Claim Activity and Reconciling Accounts
Tying outpatient claim activity and reconciling accounts was perhaps the biggest challenge—one that will likely remain once new cost reporting requirements are active for periods beginning on or after October 1, 2020. Timing was one of the most prominent issues, among many, that contributed to the challenge. Though providers were afforded additional time compared to the initial requests in many cases, the amount of data to compile and additional steps to complete, like reconciliations, required even more.
Completing the reconciliation of the accounts within the MAC templates proved difficult due to the fluid nature of an account over time—and because activity can cross cost reporting periods.
Steps Taken After Samples Were Requested
The categories sampled or the sample size weren’t consistent across MACs. As a result, hospitals had different experiences depending on their MAC.
The documentation required for the charity review, however, was somewhat consistent across MACs. These included:
- Uniform Billing Form 04 (UB-04). These verify total charges and the exclusion of professional fees.
- Charity and financial assistance policies. These must identify the underlying support required, by policy, to grant the charity award. The hospital must then provide the underlying support once it’s identified. This includes items like charity applications, presumptive eligibility score sheets, low-income status determinations, and support.
- Remittance advices or Explanation of Benefits (EOBs). These verify that the write-offs reported on line 20, column two were only the patient responsibility amounts.
- Patient account histories. These verify the write-off amount.
Documentation proved to be challenging for some hospitals, so it’s strongly advised to investigate documentation for future audits as soon as possible.
For example, if your policy calls for 10 items of supporting documentation to reach a specific charity determination, anticipate that all 10 items will be requested. If your policy permits presumptive eligibility scoring, the score sheets are required.
Some significant proposed audit adjustments resulted from lack of supporting documentation issues.
Bad Debt Sample Reviews
Similar documentation was requested in support of the bad debt write-off claimed.
As part of the audit review, MACs identified cases in which:
- The bad debt write-off was more than the deductible, coinsurance, or copayment amount for insured patients
- The self-pay discount wasn’t applied before the bad debt amount was determined for accounts where insurance payment was recouped
- The remittance advice or EOB couldn’t be produced to verify patient responsibility
Each of these items resulted in audit adjustments, and in some cases, material extrapolations.
Early Insights Based on the Data
To compile an idea of the audit result, we looked at FFY 2018 cost reports in HCRIS and compared the Q2 2020 HCRIS data to the Q4 2020 HCRIS data.
We identified line 30 changes for 1,539 hospitals out of the 2,389 eligible hospitals from the 2021 final Inpatient Prospective Payment System (IPPS) rule. Overall, line 30 dropped over $1 billion dollars, or 4.7%.
Following is a summary of the key components that contributed to that change.
Line 20: Uninsured and Insured Charity Care Charge Changes
On line 20, total charity care charges, 1,393 hospitals experienced a change.
The revised amount for uninsured charity was $207 million greater than initially reported, only a .37% change.