Robert Howey, MBA, MHA, CPA Manager, Medicare Strategy Unit
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1 Operational Management of Medicare Organ Acquisition Cost Centers The Prac;ce of Transplant Administra;on September 12, 2016 Robert Howey, MBA, MHA, CPA Manager, Medicare Strategy Unit 2016 MFMER slide-1
2 Objectives Understand the role of the Medicare cost report in Transplant finance Understand the areas of risk and opportunities within the Medicare cost report 2016 MFMER slide-2
3 Agenda Overview Common misconceptions Advanced topics Strategies 2016 MFMER slide-3
4 What is a Medicare cost report? 2016 MFMER slide-4
5 What is a Medicare cost report? Why is it important? 2016 MFMER slide-5
6 What is a Medicare cost report? Why is it important? What are organ acquisition costs? 2016 MFMER slide-6
7 Generally, represents the necessary and reasonable costs aeributable to acquiring an organ and preparing the potential donor(s) and transplant recipient for organ transplantation MFMER slide-7
8 PRE-TRANSPLANT Evaluation Maintenance Transplant Surgery Post-Transplant I II III IV ORGAN ACQUISITION FOR RECIPIENTS ORGAN ACQUISITION FOR LIVE DONORS 1 1 Effective 11/28/11, excludes post-discharge complications 2016 MFMER slide-8
9 Medicare Organ Acquisition Cost Report Schedules Illustrated 2016 MFMER slide-9
10 W/S A Direct Department Expenses Transplant Department Budget What % Can You Claim? Claimable Pre-Transplant & Organ Acquisition Expenses Salaries & Benefits Pre-Tx % (b) Pre-Tx Salaries & Benefits Physician Admin Services (a) Pre-Tx % (b) Pre-Tx Physician Admin Services Organ Acquisition Fees 100% OAC Organ Acquisition Fees Purchased Pre-Tx Services Physician & Lab 100% OAC Purchased Pre-Tx Services Department Support Expenses Pre-Tx % (b) Department Support Expenses (a) Medical Director services not billable to patients subject to RCE Limits (b) Pre-Tx % & RCE limits determined by monthly time studies 2016 MFMER slide-10
11 W/S B & B-1 Indirect Expenses W/S A Claimable Pre-Transplant & Organ Acquisition Expenses W/S B & B-1 Allocated Hospital Indirects from Medicare Cost Report W/S B Claimable Direct & Indirect Expenses Pre-Tx Salaries & Benefits Pre-Tx Physician Admin Services Organ Acquisition Fees Purchased Pre-Tx Services Department Support Expenses Space Related (Building Depreciation, Facilities, Housekeeping) Administration Finance Purchasing Information Systems Telecommunications Social Work Nursing Admin Medical Records Claimable Pre-Transplant and Organ Acquisition Direct Expenses Claimable Hospital Indirect Expenses 2016 MFMER slide-11
12 W/S D-4, Part I Hospital Services Pre-Transplant Hospital Services Track Hospital Charges for Medicare & Non- Medicare Patients Medicare Cost Report Converts Hospital Charges & Days into Costs Pre-Tx Recipient & Donor Evaluations Pre-Tx Diagnostic Services Recipients & Donors $ Charges $ Cost $ Charges $ Cost Live Donor Admission Deceased Donor Procurement Services $ Charges and # of Days $ Charges and # of Days $ Cost $ Cost Post-Tx Routine Follow- Up Actual Donors $ Charges $ Cost 2016 MFMER slide-12
13 TRANSPLANT RECIPIENT SERVICES MEDICARE NON-MEDICARE HOSPITAL PHYSICIAN HOSPITAL PHYSICIAN Pre- Transplant Write-off charges and capture for cost report Reimbursed via C/R Bill to transplant hospital Bill to Payer Capture charges for cost report Bill to transplant hospital Transplant I/ P Episode Bill to MAC Reimbursed DRG Bill to Carrier Reimbursed via Fee Schedule Bill to payer Bill to payer Post- Transplant Bill to MAC Reimbursed APC Bill to Carrier Reimbursed via Fee Schedule Bill to payer Bill to payer 2016 MFMER slide-13
14 TRANSPLANT LIVE DONOR SERVICES MEDICARE NON-MEDICARE HOSPITAL PHYSICIAN HOSPITAL PHYSICIAN Pre-Transplant Write-off charges and capture for cost report Reimbursed via C/R Bill to transplant hospital Write-off charges and capture for cost report Reimbursed via SAC Bill to transplant hospital Reimbursed via SAC Transplant I/P Episode Write-off charges and capture for cost report Reimbursed via C/R Bill to Carrier w/ Q3 modifier Reimbursed via Fee Schedule Write-off charges and capture for cost report Reimbursed via SAC Bill to recipient s payer Post-Transplant Follow-Up Write-off charges and capture for cost report Reimbursed via C/R Bill to Carrier w/ Q3 modifier Reimbursed via Fee Schedule Write-off charges and capture for cost report Reimbursed via SAC Bill to recipient s payer Post-Discharge Complications (effective 11/28/11) Bill to MAC Reimbursed via IPPS/OPPS Special procedures Bill to Carrier w/ Q3 modifier Reimbursed via Fee Schedule Bill to recipient s payer Bill to recipient s payer 2016 MFMER slide-14
15 Pre-Transplant Charge Flow: Recipients START Pre-Transplant Hospital Service OAC Related? YES Medicare Primary? NO Payer follows Medicare Methodology? NO Bill to Non- Medicare Payer NO YES Bill to Payer: Not Claimed on Medicare Cost Report YES Write Off Charges Do Not Bill Accumulate Charges for Medicare Cost Report STOP 2016 MFMER slide-15
16 Pre-Transplant Charge Flow: Living Donors START Live Donor Hospital Services Transplant Related? YES Post-Transplant Complications? NO Accumulate Charges for Medicare Cost Report NO YES Bill to Donor s insurance Bill to Recipient s Payer Not Claimed on Cost Report Not Claimed on Cost Report STOP 2016 MFMER slide-16
17 W/S D-4, Part I Illustration: Hospital Charges and Costs (example) W/S D-4, Part I Inpatient Routine Cost Center Perdiem Cost Patient Days Total Cost 1.00 Adults & Pediatrics $1, , Intensive Care Unit $2, ,000 Total Routine Days & Costs ,000 Total Routine Charges $200,000 Ancillary Service Cost Center RCC Charges Cost 8.00 OPERATING ROOM ,000 30, ANESTHESIOLOGY ,000 5, RADIOLOGY-DIAGNOSTIC ,000 42, LABORATORY ,000 72, BLOOD STORING ,000 15, ELECTROCARDIOLOGY ,144 9, MEDICAL SUPPLIES ,000 4, DRUGS CHARGED TO PATIENTS ,000 18, CARDIAC CATHETERIZATION ,000 12, PULMONARY FUNCTION ,000 18, CLINIC ,000 54,000 Total Ancillary Costs & Charges 873, ,000 Total Routine & Ancillary Costs 1,073, , MFMER slide-17
18 Best Practices Centralized Registration Flagging transplant patients Bill review process Reconciliation of living donors to transplant list Capturing services for all payers 2016 MFMER slide-18
19 W/S D-4, Part I: Routine and Ancillary Charges and Costs (from your hospital) Pre-Transplant Recipients Hospital charges must be accumulated for all payers (Medicare and other) and reported on W/S D-4, Part I Hospitals may not bill Medicare fee for service for qualifying pre-transplant services as they should be reimbursed through the cost report It is OK to bill non-medicare payers and report non-medicare charges on W/S D-4, Part I as hospitals must account for all OAC costs due to the Medicare ratio Set-up bill-hold process on all pre-transplant candidates to review and track qualifying pre-transplant charges 2016 MFMER slide-19
20 W/S D-4, Part I: Routine and Ancillary Charges and Costs (from your hospital) Living Donors Includes pre-transplant, transplant admission, and routine post-transplant follow-up charges Charges must be accumulated for all donors and reported on W/S D-4, Part I Hospitals may not bill Medicare or the Donor Set-up payer code or patient type to track donor charges 2016 MFMER slide-20
21 Documenting Pre-Transplant Recipient and Donor Charges Pre-transplant charges should be supported by: - Itemized billing statements - Pre-transplant billing and registration procedures - Transplant department records - Protocols Deceased donor charges should be supported by: - Itemized billing records - OPO procurement log - Donor s medical record abstract 2016 MFMER slide-21
22 W/S D-4, Part III Illustration of Organ Acquisition Cost Components + W/S A: Pre-Transplant Salaries $ 800,000 + W/S A: Other Direct Pre-Tx & OAC 2,400,000 + W/S B: Indirect Expenses 600,000 + W/S D-4, Part I Hospital Costs 400,000 = W/S D-4, Part III: Total Costs $ 4,200,000 Note: Medicare will pay a pro-rata share of total organ acquisition costs 2016 MFMER slide-22
23 Medicare s Pro-Rata Share using the Organ Ratio Method Total Organ Acquisition Costs Medicare Organs Total Organs Medicare Organ Ratio Revenue from Medicare Organs NET MEDICARE ORGAN ACQUISITION COST 2016 MFMER slide-23
24 Medicare Ratio Medicare Usable Organs Total Usable Organs Medicare Primary Transplants Medicare Secondary Transplants (if Medicare had some liability) Total Transplants Deceased Donor Organs Organs Sold to Other Hospitals (e.g., Paired Exchange) 2016 MFMER slide-24
25 W/S D-4, Part III Medicare Organ Ratio Determinants Medicare Primary Transplants = 60 Medicare 2 nd Payor Transplants if Medicare Liable = 2 Deceased Donor Organs Procured at Your Hospital = 10 Total Medicare Organs = Total Transplants + 10 Deceased Donor Organs Procured = 108 MEDICARE ORGAN RATIO = 66.7% 2016 MFMER slide-25
26 W/S D-4, Part III Revenue from Medicare Organs Relates only to organs reported in the Medicare count Report only revenue received for organ acquisition costs claimed Typically includes Revenue received from OPO for organs procured Portion of MSP transplants counted as Medicare Organs related to organ acquisition 2016 MFMER slide-26
27 W/S D-4, Part III Illustration of Revenue from Organs Sold + OPO Revenue for Deceased Donor Organs $ 140,000 + MSP Primary Payor Revenue for organs 40,000 + Medicare flipped 20,000 = W/S D-4, Part III: Total Revenue $ 200, MFMER slide-27
28 W/S D-4, Part III Illustration of Organ Acquisition Reimbursement + W/S D-4, Part III Total OAC $4,200,000 x W/S D-4, Part III Medicare Ratio x 66.67% + W/S D-4, Part III Medicare Costs $2,800,000 - W/S D-4, Part III Revenue from Organs Sold - 200,000 = W/S D-4, Part III: Net Reimbursement $2,600, MFMER slide-28
29 Summary of Medicare Organ Acquisition Cost Components & Reimbursement + W/S A: Pre-Transplant Salaries $ 800,000 + W/S A: Other Direct & OAC 2,400,000 + W/S B: Indirect Expenses 600,000 + W/S D-4, Part I Hospital Costs 400,000 = W/S D-4, Part III: Total Costs $4,200,000 x W/S D-4, Part III Medicare Ratio x 66.67% + W/S D-4, Part III Medicare Ratio 2,800,000 - W/S D-4, Part III Revenue from Organs - 200,000 = W/S D-4, Part III: Net Reimbursement $2,600, MFMER slide-29
30 Common Misconceptions 2016 MFMER slide-30
31 Common Misconceptions about Medicare Organ Acquisition Costs All transplant costs are organ acquisition costs Not true, OAC excludes transplant admission and posttransplant costs and other non-allowable costs defined by CMS All pre-transplant services are organ acquisition Not true, treatment and disease management are not OAC 2016 MFMER slide-31
32 Common Misconceptions about Medicare Organ Acquisition Costs Medicare pays 100% of allowable organ acquisition costs Not true, Medicare pays its share of OAC based on the Medicare ratio calculation 2016 MFMER slide-32
33 Common Misconceptions about Medicare Organ Acquisition Costs Transplant Programs may not claim pre-transplant hospital charges that are billed to commercial payors Not true, since Medicare only pays its share of OAC. Hospitals must claim both Medicare & Commercial pretransplant services to be appropriately reimbursed MFMER slide-33
34 W/S D-4, Part III Illustration of Organ Acquisition Reimbursement + W/S D-4, Part III Total OAC $4,200,000 x W/S D-4, Part III Medicare Ratio x 66.67% + W/S D-4, Part III Medicare Costs $2,800,000 - W/S D-4, Part III Revenue from Organs Sold - 200,000 = W/S D-4, Part III: Net Reimbursement $2,600, MFMER slide-34
35 Common Misconceptions about Medicare Organ Acquisition Costs Pre-transplant payments from commercial payors must offset allowable organ acquisition costs This is generally not true. Hospitals should only offset commercial payments when the commercial patient flips to Medicare at time of transplant and is counted as a Medicare organ MFMER slide-35
36 W/S D-4, Part III Illustration of Revenue from Organs Sold + OPO Revenue for Deceased Donor Organs $ 140,000 + MSP Primary Payor Revenue for organs 40,000 + Medicare flipped 20,000 = W/S D-4, Part III: Total Revenue $ 200, MFMER slide-36
37 Advanced Topics 2016 MFMER slide-37
38 Medicare Secondary Payer (MSP) Guidelines 1 Medicare secondary payer benefits may be payable if: - Patient has commercial primary and Medicare secondary - Primary payment < charges for Medicare covered services - Primary payment < gross amount payable by Medicare - Hospital does not accept or not obligated to accept primary payment as payment in full - Hospital must bill MSP claims to MAC - MSP benefits always apply when Medicare pays on MSP claim and may apply if Medicare does not pay 1 Medicare Secondary Payer Manual (Pub ), Chapter 3, Section MFMER slide-38
39 Medicare Secondary Payer Benefits Hospital can claim MSP transplant as a Medicare organ (W/S D-4, Part III Line 63) Recoup shortage of OAC payment from primary payer Hospital must determine if MSP transplant qualifies to be claimed as Medicare Hospital must determine primary payer offset to qualifying MSP transplants 2016 MFMER slide-39
40 Medicare Secondary Payer First Calculation Compare primary payer payment to Total Charges and Medicare Allowable Commercial vs. Medicare Payment Total Charges Primary Payment Medicare DRG C/R cost per organ* Total Medicare Qualify? 1 $180,000 $123,500 $25,000 $30,000 $55,000 No 2 $105,000 $66,000 $25,000 $30,000 $55,000 No 3 $110,000 $36,000 $25,000 $30,000 $55,000 Yes 4 $100,000 $24,000 $25,000 $30,000 $55,000 Yes * W/S D-4, Part III Line 61 divided by Line MFMER slide-40
41 Medicare Secondary Payer Second Calculation for Qualifying MSP cases Calculate the amount of primary payer payment to offset from organ acquisition Total Charges Primary Payment % of Charges Determine Offset SAC Charge Offset 1 $180,000 $123,500 69% $50,000 N/A 2 $105,000 $66,000 63% $50,000 N/A 3 $110,000 $36,000 33% $50,000 $16,400 4 $100,000 $24,000 24% $50,000 $12, MFMER slide-41
42 Medicare Secondary Payer Summary of Reimbursement Impact Increase Medicare usable organs by 2 Results in $60,000 increase in Medicare OAC reimbursement ($30,000 per organ x 2 organs) Report offset $(28,400) on D-4 Pt III Line 66 Net Medicare OAC reimbursement increase = $31,600 ($60,000 - $28,400) 2016 MFMER slide-42
43 Medicare Secondary Payer Best Practices Review primary payer contract language pertaining to 2 nd insurance should include 2 nd payer billing provision Properly identify all Medicare secondary accounts Must bill all MSP claims to MAC 2016 MFMER slide-43
44 Documenting Revenue Received for Medicare Organs Pertains to revenue received for organs included in the Medicare count - Never includes Medicare Primary - MSP organs included in the Medicare count should have a pro-rata share of Primary Payer revenue allocated between the transplant admission and the cost of the organ - Revenue received for organs procured at your hospital by the OPO should be supported by: OPO procurement log Hospital invoices sent to the OPO OPO checks paid to hospital 2016 MFMER slide-44
45 Time Surveys for Transplant Staff and Physicians 2016 MFMER slide-45
46 Transplant Time Surveys Purpose Identify Medicare claimable pre-transplant services Track administrative (non-billable) time for physicians Calculate Physician Reasonable Compensation as prescribed by CMS Calculate hours/fte s for indirect cost allocation 2016 MFMER slide-46
47 Transplant Time Survey Personnel Physicians - Medical/Surgical Directors - Other Transplant Physicians Allied Health Personnel - Nurse Coordinators - Medical Social Workers - Dietitians - Living Donor Advocate 2016 MFMER slide-47
48 Transplant Time Survey Personnel Administrative - Administrator - Manager - Financial Coordinators - Database Administrator - Transplant Charge Coordinator - Transplant Compliance - Other Administrative 2016 MFMER slide-48
49 Transplant Time Survey Examples of Claimable Pre-Transplant Activities Patient selection OPO meetings UNOS meetings CMS compliance reviews Polices/procedures/protocols In-service presentations UNOS data and submission Education/counseling with candidates & living donors Organ offers & procurement Dialysis outreach Other meetings Non-billable pre-transplant patient management 2016 MFMER slide-49
50 Transplant Time Survey Frequency One full week per month Equally distributed weeks (e.g., ) Not same week in consecutive months This is the minimum standard! Provider Reimbursement Manual (Pub. 15-1), Section E 2016 MFMER slide-50
51 W/S A Direct Salaries and Post-Transplant Salary Reclassification Illustration Transplant Annual Payroll Time Study % Pre-Tx Post-Tx Labor Type FTE Salary Pre-Tx Post-Tx FTE Salaries FTE Salaries Administrator , % 10.0% , ,000 Inpatient Coordinator , % 100.0% ,000 Pre-Transplant Coordinators , % 10.0% , ,000 Post-Transplant Coordinator , % 90.0% , ,000 Data Specialist , % 20.0% , ,000 Administrative Secretary , % 10.0% , ,000 Social Worker , % 25.0% , ,000 Financial Counselor , % 20.0% , ,000 Total Salaries , % 35.9% , ,000 W/S A-6, Reclassification FTE Salary Kidney Acquisition (pre-tx) (2.95) (251,000) Outpatient Clinic (post) , MFMER slide-51
52 Transplant Physician Time Surveys Kidney Transplant Surgeon Example Compensation = $30,000 per year Time Survey Results (Part A) Category Hours % Pre-Transplant Post-Transplant Total MFMER slide-52
53 Transplant Physician Time Surveys Kidney Transplant Surgeon Example (continued) Step 1: Determine Reasonable Compensation Equivalent (RCE) Hourly Rate Find RCE Limit = $246,400 (Surgery) Divide by 2,080 hours = $118.46/hour Step 2: Determine RCE Amount $118.46/hour x 200 hours = $23, MFMER slide-53
54 Transplant Physician Time Surveys Step 3: Compare Actual MD Comp to RCE Amount Actual Comp = $30,000 RCE Amount = $23,692 Allowable MD Comp = $23,692 (lesser of above) 2016 MFMER slide-54
55 Transplant Physician Time Surveys Step 4: Apply Pre-Transplant % Allowable MD Comp = $23,692 x 66.7% pre-transplant % Allowable OAC MD Comp = $15, MFMER slide-55
56 Published RCE Limits by MD Specialty FINAL CY 2015 RCE LIMITS Total... $211,500 General/Family Practice ,000 Internal Medicine ,500 Surgery ,400 Pediatrics ,700 OB/GYN ,100 Radiology ,900 Psychiatry ,300 Anesthesiology ,400 Pathology , CFR , 79 FR (Aug 22, 2014) 2016 MFMER slide-56
57 Transplant Time Survey Pitfalls Less than one week per month 100 percent allocation to pre when logic suggests otherwise Incomplete surveys Confusion with survey instructions Time not allocated to other organs Completion date to survey period PTO and Education 2016 MFMER slide-57
58 Transplant Time Survey Best Practices Establish time survey periods in advance Review personnel periodically Review for reasonableness Provide education and feedback Monitor completion rates Signed/dated by individual Include aeestation statement Share financial impact to institution 2016 MFMER slide-58
59 2016 MFMER slide-59
60 2016 MFMER slide-60
61 Strategies for Organ Acquisition 2016 MFMER slide-61
62 Pre-Transplant Charge Flow: Recipients Y N N N Y Y 2016 MFMER slide-62
63 Approving Hospital Pre-Transplant Services Establish review process for approving hospital pretransplant services Don t assume all pre-transplant services are related to organ acquisition Review/update pre-transplant services bill-hold protocol Validate that services claimed are for pre-transplant patients Obtain organ acquisition approval from qualified personnel AEach other supporting documentation as necessary 2016 MFMER slide-63
64 Hospital Pre-Transplant Charge Capture & Review Review Internal Process - Determine billing system mechanism for flagging pretransplant accounts for bill-hold review (i.e., permanent transplant flag, pre-transplant episode of care, insurance code, etc.) - Remote point of service registration areas will seldom effectively manage the complexities of pre-transplant billing - Non-Medicare charges should be billed to payer - Review all charges claimed in the Medicare cost report 2016 MFMER slide-64
65 Other Medicare Cost Report Opportunities Medicare organ count q Document through Medicare remits q Review for MSP q Include deceased donor organs 2016 MFMER slide-65
66 Other Medicare Cost Report Opportunities Transplant Time Surveys q Completion by all staff q Exclude vacation hours from calculation of pretransplant percentage q Allocate to other organs 2016 MFMER slide-66
67 Other Medicare Cost Report Opportunities Indirect Expenses (Pre-tx portion) q Square Feet (Bldg/Equipt, Plant Ops, Housekeeping) q Salaries (Employee Benefits) q FTEs (Cafeteria, Telephones) q Gross Charges (Revenue Cycle, Med Records) q Nursing Hours (Nursing Administration) q Time Spent (Social Services) 2016 MFMER slide-67
68 Takeaways ü Remember the Medicare ratio determinants ü Review Commercial Contracts for 2 nd payer billing language and Bill all MSP Transplant Claims ü Review existing processes/system capabilities for pre-transplant charges ü Review Staff and Physician Time Studies forms and processes for distribution, reviewing and training 2016 MFMER slide-68
69 Let s Stay in Touch! Robert Howey, MBA, MHA, CPA (904) howey.robert@mayo.edu 2016 MFMER slide-69
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