RESIDENTIAL TREATMENT COST REPORTING Presented By: Steven Kohler, Senior Director Mary Cloney,...

RESIDENTIAL RESIDENTIAL TREATMENT TREATMENT

COST COST REPORTINGREPORTINGPresented By:Presented By:

Steven Kohler, Senior DirectorSteven Kohler, Senior DirectorMary Cloney, SupervisorMary Cloney, Supervisor

Matthew Rogers, SupervisorMatthew Rogers, SupervisorMcBee Associates, Inc.McBee Associates, Inc.

Introduction to Cost Introduction to Cost ReportsReports

Why Now?Why Now? Integrated Children’s Service InitiativeIntegrated Children’s Service Initiative Conversion to Medical Assistance Conversion to Medical Assistance

FundingFunding Purpose of a Cost ReportPurpose of a Cost Report

Per Diem Rate DeterminationPer Diem Rate Determination OMAP RatesOMAP Rates Managed Care Funding SourcesManaged Care Funding Sources

Cost Report FormsCost Report Forms

Pennsylvania Joint Financial Pennsylvania Joint Financial Schedule (JFS)Schedule (JFS) Report all of an entity’s costsReport all of an entity’s costs

County FormsCounty Forms

PA JFSPA JFS

Schedule ASchedule A 3800 Capacity vs. RTF Beds3800 Capacity vs. RTF Beds Payer ClassesPayer Classes Total Bed Days UsedTotal Bed Days Used Occupancy PercentageOccupancy Percentage

85% minimum85% minimum Average Length of StayAverage Length of Stay

PA JFSPA JFS

Schedule BSchedule B The ColumnsThe Columns

Relation to Service AreasRelation to Service Areas Relation to Cost CentersRelation to Cost Centers

Account DescriptionsAccount Descriptions Relation to your chart of accountsRelation to your chart of accounts

Combination determine reimbursementCombination determine reimbursement

PA JFS ColumnsPA JFS Columns

Column 2 – Total ExpensesColumn 2 – Total Expenses Calculated FieldCalculated Field

Columns 3 – OccupancyColumns 3 – Occupancy Maintenance or facility costsMaintenance or facility costs Can not be directly attributed to any Can not be directly attributed to any

other columnother column Examples on page 11 of InstructionsExamples on page 11 of Instructions Allocated on Square FootageAllocated on Square Footage


Column 4 – General and Column 4 – General and AdministrativeAdministrative ““Common or joint purpose”Common or joint purpose” Can not be directly attributed to Can not be directly attributed to

Columns 8 or 11Columns 8 or 11 Examples on Page 11 of InstructionsExamples on Page 11 of Instructions Allocated on total expense less this Allocated on total expense less this

columncolumn


Column 5 – Room & BoardColumn 5 – Room & Board Examples: Night Workers, Food, LaundryExamples: Night Workers, Food, Laundry All RTF Living Area Square Footage All RTF Living Area Square Footage

All Living Area Occupancy ExpenseAll Living Area Occupancy Expense

Column 6 – Related ServicesColumn 6 – Related Services Expense used by both Column 7 and 8 Expense used by both Column 7 and 8

that can not be individually attributed to that can not be individually attributed to eithereither


Column 7 – Residential Mental Column 7 – Residential Mental Health ServicesHealth Services Directly associated with mental health Directly associated with mental health

servicesservices ExamplesExamples

Mental Health WorkersMental Health Workers Medical Supplies (No prescription Medical Supplies (No prescription

medication)medication) Religious ServicesReligious Services


Column 7 (continued)Column 7 (continued) Professional vs. Provider ComponentProfessional vs. Provider Component

Professional – Not Allowable – Column 10Professional – Not Allowable – Column 10 PhysiciansPhysicians DentistsDentists PsychiatristsPsychiatrists

Medication Management & EvaluationsMedication Management & Evaluations Provider – Allowable – Column 7Provider – Allowable – Column 7

PsychiatristsPsychiatrists Consultations & SupervisionConsultations & Supervision

TIME STUDIESTIME STUDIES


Column 8 – EducationColumn 8 – Education Approved Private Schools (APS) or Approved Private Schools (APS) or

Private Residential Rehabilitative Private Residential Rehabilitative Institute (PRRI)Institute (PRRI) All other education expense in column 11All other education expense in column 11

No APS or PRRI No APS or PRRI All education expense in column 8All education expense in column 8

Include: School salaries, supplies, Include: School salaries, supplies, square footagesquare footage


Column 9 – Therapeutic Day ProgramColumn 9 – Therapeutic Day Program Only use if you have a separately funded Only use if you have a separately funded

Therapeutic Day Program or Partial Therapeutic Day Program or Partial Hospitalization Program supporting the Hospitalization Program supporting the RTFRTF

Column 10 – UnallowableColumn 10 – Unallowable Marketing/Fund RaisingMarketing/Fund Raising Professional ComponentProfessional Component Bad DebtsBad Debts Personal Care Items Personal Care Items


Column 11 – Other ProgramsColumn 11 – Other Programs All other program not related to RTFAll other program not related to RTF Only include program for this entityOnly include program for this entity

PA JFS Account PA JFS Account DescriptionsDescriptions

Salaries and WagesSalaries and Wages Time StudiesTime Studies

Professional and Senior Administrative StaffProfessional and Senior Administrative Staff Once each quarter for two weeksOnce each quarter for two weeks Identify time in each programIdentify time in each program Identify face-to-face time (professional)Identify face-to-face time (professional) Identify Administrative timeIdentify Administrative time

Tie to Exhibit 1Tie to Exhibit 1 Details individual salaries and wagesDetails individual salaries and wages


Fringe BenefitsFringe Benefits Enter TotalEnter Total Allocation Following Employee Salaries Allocation Following Employee Salaries

and Wagesand Wages

Operating ExpensesOperating Expenses Tie to internal chart of accountsTie to internal chart of accounts Home Office Costs Restricted to Home Office Costs Restricted to

Column 4Column 4


Purchased ServicesPurchased Services Administrative GeneralAdministrative General

AccountingAccounting AuditingAuditing Data ProcessingData Processing PayrollPayroll LegalLegal

Other expense classification vary with Other expense classification vary with useuse


Buildings & FixturesBuildings & Fixtures If not attributed to one program must If not attributed to one program must

be Occupancybe Occupancy

Major Movable Equipment & Major Movable Equipment & Transportation/VehiclesTransportation/Vehicles Classified according to useClassified according to use Maintenance & Repair reported in Maintenance & Repair reported in

OperatingOperating


Restricted IncomeRestricted Income USDA – PDE Food ProgramsUSDA – PDE Food Programs Chapter 1Chapter 1 Interest IncomeInterest Income Offset expense in appropriate column to Offset expense in appropriate column to

determine Net Operating Expensedetermine Net Operating Expense


AllocationsAllocations Square FootageSquare Footage

Allocation of Occupancy ColumnAllocation of Occupancy Column Related ServiceRelated Service

Residential Mental Health 65%Residential Mental Health 65% Education 35%Education 35%


Allocations (continued)Allocations (continued) G & AG & A

Expense allocation of net operating Expense allocation of net operating including occupancy less G&Aincluding occupancy less G&A

Per Diem CalculationsPer Diem Calculations 85% Bed Day Minimum 85% Bed Day Minimum 13% G&A limitation13% G&A limitation

PA JFSPA JFS

Supporting Schedules – Schedule CSupporting Schedules – Schedule C Exhibit 1 – Salary & Wage RosterExhibit 1 – Salary & Wage Roster

Tie to Schedule B Column 2 Line 1Tie to Schedule B Column 2 Line 1 Exhibit 2 – Loans & InterestExhibit 2 – Loans & Interest

Tie to sum of Loans & Interest on Schedule BTie to sum of Loans & Interest on Schedule B Exhibit 3 – DepreciationExhibit 3 – Depreciation

Each line should tie to corresponding line on Each line should tie to corresponding line on Schedule BSchedule B

Exhibit 4 – Transactions with Related Exhibit 4 – Transactions with Related Parties Parties

Filing RequirementsFiling Requirements

Filed to the Department of Public Welfare Filed to the Department of Public Welfare for RTF’sfor RTF’s

Filed to Department of Education for APS’s Filed to Department of Education for APS’s and PRRI’sand PRRI’s

90 Days from June 3090 Days from June 30thth

Can request extensionCan request extension

Include Program Description with first and Include Program Description with first and when changes are madewhen changes are made

Follow ChecklistFollow Checklist

CMS Cost Accounting CMS Cost Accounting ModelModel

The Medicare Cost Allocation ModelThe Medicare Cost Allocation Model Has roots back to 1965, developed in part Has roots back to 1965, developed in part

by the American Hospital Association (AHA) by the American Hospital Association (AHA) and exists today some 40 years later, and exists today some 40 years later, virtually unchangedvirtually unchanged

Concepts include determining allowable Concepts include determining allowable cost; allocation of overhead; matching cost cost; allocation of overhead; matching cost with revenue or days / visits; and with revenue or days / visits; and apportioning the cost to the Medicare apportioning the cost to the Medicare Program based upon the ratio of cost to Program based upon the ratio of cost to charges / units times Medicare charges / charges / units times Medicare charges / units (RCCAC)units (RCCAC)

CMS Cost Accounting CMS Cost Accounting ModelModel

Allocation MethodsAllocation Methods Occupancy – Indirect FacilityOccupancy – Indirect Facility

Square footage less Occupancy square Square footage less Occupancy square footagefootage

Administrative/GeneralAdministrative/General Total expense less administrative expenseTotal expense less administrative expense

Regulatory AuthorityRegulatory Authority Where the Commonwealth or Pennsylvania Where the Commonwealth or Pennsylvania

does not provide specific regulatory authority does not provide specific regulatory authority to define allowable costs, the Medicare to define allowable costs, the Medicare Regulations prevail.Regulations prevail.

Commonwealth of Pennsylvania regulations Commonwealth of Pennsylvania regulations can be found in Instructions and 55 PA Code can be found in Instructions and 55 PA Code 62116211

CMS (Centers for Medicare and Medicaid CMS (Centers for Medicare and Medicaid Services) regulations and program Services) regulations and program instructions can be found at:instructions can be found at:

42 CFR 413 – Principles of Cost Reimbursement42 CFR 413 – Principles of Cost Reimbursement CMS Publication 15-1 – Provider Reimbursement ManualCMS Publication 15-1 – Provider Reimbursement Manual

Recordkeeping Recordkeeping RequirementsRequirements

Accrual Basis of AccountingAccrual Basis of Accounting Liquidation of Liabilities – 1 Year (few Liquidation of Liabilities – 1 Year (few

exceptions)exceptions) Cost FindingCost Finding

Direct Cost AllocationsDirect Cost Allocations Indirect Cost AllocationsIndirect Cost Allocations Home Office CostHome Office Cost

Direct AllocationsDirect Allocations Functional AllocationsFunctional Allocations Pooled AllocationsPooled Allocations

CMS Provider CMS Provider Reimbursement ManualReimbursement Manual

CMS Website Reference:CMS Website Reference:

www.cms.hhs.gov/manuals/pub151/PUwww.cms.hhs.gov/manuals/pub151/PUB_15_1.aspB_15_1.asp

CMS – Provider CMS – Provider Reimbursement Manual 15-Reimbursement Manual 15-

1 (Relevant Chapters)1 (Relevant Chapters) Chapter 1 Chapter 1 - Depreciation - Depreciation Chapter 2 Chapter 2 - Interest Expense - Interest Expense Chapter 8 Chapter 8 - Purchase Discounts and - Purchase Discounts and

Allowances, and Allowances, and RefundsRefunds

Chapter 9 Chapter 9 - Compensation of Owners - Compensation of Owners Chapter 10 Chapter 10 - Cost to Related Organizations- Cost to Related Organizations Chapter 21 Chapter 21 - Costs Related to Patient Care - Costs Related to Patient Care Chapter 22 Chapter 22 - Determination of Cost of - Determination of Cost of

ServicesServices Chapter 23 Chapter 23 - Adequate Cost Data and Cost - Adequate Cost Data and Cost

FindingFinding

Allowable & Non-Allowable Allowable & Non-Allowable CostsCosts

CMS StandardsCMS Standards CMS Publication 15-1- Provider CMS Publication 15-1- Provider

Reimbursement Manual – Chapter Reimbursement Manual – Chapter 21 – Costs Related to Patient Care21 – Costs Related to Patient Care What is an allowable cost?What is an allowable cost?

Must be reasonable and related to patient Must be reasonable and related to patient care - Section 2102.1care - Section 2102.1

What would be paid for an item by a What would be paid for an item by a prudent and cost conscious buyer – Section prudent and cost conscious buyer – Section 21032103


CMS StandardsCMS Standards CMS Publication 15-1- Provider Reimbursement CMS Publication 15-1- Provider Reimbursement

Manual – Chapter 21 – Costs Related to Patient Manual – Chapter 21 – Costs Related to Patient CareCare What is a non-allowable cost?What is a non-allowable cost?

Cost that are not related to patient careCost that are not related to patient care Costs of gifts or donations – Section 2105.7Costs of gifts or donations – Section 2105.7 Cost of entertainment – Section 2105.8Cost of entertainment – Section 2105.8 Cost of employee personal use of motor vehicles – Section Cost of employee personal use of motor vehicles – Section

2105.92105.9 Cost of fines or penalties – Section 2105.10Cost of fines or penalties – Section 2105.10 Costs of patient phones / television – Section 2106Costs of patient phones / television – Section 2106 Federal Income; State or Local Income Taxes – Section 2122.2Federal Income; State or Local Income Taxes – Section 2122.2 Taxes for which exemption of taxes are available to the Taxes for which exemption of taxes are available to the

provider – Section 2122.2provider – Section 2122.2 Special Assessments on land which represent capital Special Assessments on land which represent capital

improvements (e.g. sewers, water, and pavements) – Section improvements (e.g. sewers, water, and pavements) – Section 2122.22122.2


CMS StandardsCMS Standards CMS Publication 15-1- Provider CMS Publication 15-1- Provider

Reimbursement Manual – Chapter Reimbursement Manual – Chapter 21 – Costs Related to Patient Care21 – Costs Related to Patient Care What is a non-allowable cost?What is a non-allowable cost?

Certain advertising cost – Section 2136.2Certain advertising cost – Section 2136.2 Political and lobbying cost – Section 2139Political and lobbying cost – Section 2139


CMS StandardsCMS Standards Costs to Related Organizations - Costs to Related Organizations -

CMS Publication 15-1– Chapter 10 CMS Publication 15-1– Chapter 10 PrinciplePrinciple

Costs applicable to services, facilities, or Costs applicable to services, facilities, or supplies furnished to a provider by common supplies furnished to a provider by common ownership or control are includable in the ownership or control are includable in the allowable cost of the provider at the cost to allowable cost of the provider at the cost to the related organization.the related organization.

Such costs must not exceed the price of Such costs must not exceed the price of comparable services, facilities, or supplies comparable services, facilities, or supplies that could be purchased elsewhere.that could be purchased elsewhere.


CMS StandardsCMS Standards Related OrganizationsRelated Organizations

PurposePurpose To avoid payment of a profit factor to the To avoid payment of a profit factor to the

provider through the related organizationprovider through the related organization To avoid the payment of artificially inflated To avoid the payment of artificially inflated

costs which may be generated from less costs which may be generated from less than an arm’s-length bargainingthan an arm’s-length bargaining



DefinitionsDefinitions Related to the provider means that the provider to a Related to the provider means that the provider to a

significant extent is associated or affiliated with, or significant extent is associated or affiliated with, or has control of, or is controlled by, the organization has control of, or is controlled by, the organization furnishing the services, facilities, or supplies.furnishing the services, facilities, or supplies.

Common ownership exists when an individual or Common ownership exists when an individual or individuals possess significant ownership or equity in individuals possess significant ownership or equity in the provider and the institution or organization serving the provider and the institution or organization serving the provider.the provider.

Control exists where an individual or an organization Control exists where an individual or an organization has the power, directly or indirectly, to significantly has the power, directly or indirectly, to significantly influence or direct the actions or policies of an influence or direct the actions or policies of an organization or institution.organization or institution.



Tests of Common Ownership and Tests of Common Ownership and ControlControl If either common ownership or control are If either common ownership or control are

present, costs to the provider must be present, costs to the provider must be reflected as the costs of the supplier, with reflected as the costs of the supplier, with the reasonable cost provisions guiding. (e.g. the reasonable cost provisions guiding. (e.g. must be less than or equal to market rates must be less than or equal to market rates that a prudent buyer would pay)that a prudent buyer would pay)



Determination of a related organization’s Determination of a related organization’s costcost The related organization’s cost include all The related organization’s cost include all

reasonable costs, direct and indirect, incurred in reasonable costs, direct and indirect, incurred in the furnishing of services, facilities, and supplies the furnishing of services, facilities, and supplies to the provider. The intent is to treat the costs to the provider. The intent is to treat the costs incurred by the supplier as if they were incurred incurred by the supplier as if they were incurred by the provider itself, subject to the allowable by the provider itself, subject to the allowable cost provisions.cost provisions.

Access to the books and records of the related Access to the books and records of the related party must be provided for.party must be provided for.


CMS StandardsCMS Standards Related Organizations - ExceptionsRelated Organizations - Exceptions

The following criteria apply for an The following criteria apply for an exceptionexception The supplying corporation is a bona-fide The supplying corporation is a bona-fide

separate organizationseparate organization A substantial part of the supplying A substantial part of the supplying

organization’s business activity is transacted organization’s business activity is transacted with other organizations not related to the with other organizations not related to the providerprovider

The services, facilities, or supplies are those The services, facilities, or supplies are those which are commonly obtained by providers which are commonly obtained by providers from other organizationsfrom other organizations

Open market charging practicesOpen market charging practices


CMS StandardsCMS Standards Interest Expense – Pub 15-1, Section 200Interest Expense – Pub 15-1, Section 200

NecessaryNecessary Incurred on a loan to satisfy a financial needIncurred on a loan to satisfy a financial need For a purpose related to patient careFor a purpose related to patient care Is reduced by investment incomeIs reduced by investment income

ProperProper Interest incurred at a rate not in excess of what a Interest incurred at a rate not in excess of what a

prudent borrower would payprudent borrower would pay Interest paid to a lender not related to the provider Interest paid to a lender not related to the provider

(e.g. – Interest paid on loans from owner are not an (e.g. – Interest paid on loans from owner are not an allowable cost)allowable cost)


CMS StandardsCMS Standards Owners Compensation – Pub 15-1, Chapter Owners Compensation – Pub 15-1, Chapter

99 Reasonable value of services rendered limited to Reasonable value of services rendered limited to

the fair market value of such services on the open the fair market value of such services on the open marketmarket

Applies to the actual compensation of all Applies to the actual compensation of all individuals performing services at the providerindividuals performing services at the provider

Necessary – Had the owner not performed the Necessary – Had the owner not performed the services, the provider would have to employ services, the provider would have to employ another person to perform them.another person to perform them.

Criteria for assessing reasonable compensation:Criteria for assessing reasonable compensation: Survey of comparable size providersSurvey of comparable size providers Comparable services providedComparable services provided Geographic locationGeographic location Qualifications of the individualQualifications of the individual

Reference MaterialReference Material

www.dpw.state.pa.us/omap/www.dpw.state.pa.us/omap/ www.pacode.comwww.pacode.com www.cms.govwww.cms.gov www.cms.hhs.gov/manuals/pub151/Pwww.cms.hhs.gov/manuals/pub151/P

UB_15_1.aspUB_15_1.asp

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