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HITECH incentive payment audits will require hospitals to examine all the factors that go into incentive payment calculations or risk losing incentive dollars.


Keep Incentive Dollars — Prepare for Medicare EHR Incentive Payment Audits

  • 5/13/2015

The Health Information Technology for Economic and Clinical Health Act (HITECH) provides incentive payments for eligible hospitals that are meaningful users of certified electronic health record (EHR) technology. As promised at the start of the incentive program, the Centers for Medicare and Medicaid Services (CMS) has started conducting HITECH incentive payment audits for hospitals. To successfully navigate these audits, hospitals should re-evaluate all of the factors that go into the incentive payment calculations or risk losing incentive dollars they have already received. Virtually all of the metrics evaluated in an audit come from the hospital’s Medicare cost report. While some of the factors impacting prospective payment system (PPS) and critical access hospitals (CAH) differ in the determination of the incentive amount, the calculation arriving at the Medicare share is identical. Accuracy is essential to ensure proper incentive payments.

Total discharges for PPS hospitals

The total discharges reported for use in the incentive payment calculation should include only acute care inpatient discharges that correspond with acute care inpatient days. The total acute care discharges should not include nursery, excluded units, labor and delivery, respite, or swing-bed discharges. The total number of acute care discharges reported will determine the add-on incentive payment, if any, to the $2 million base amount for any subsection (d) hospitals. The add-on to the base amount is calculated at $200 per discharge for 1,149 – 23,000 discharges.

Inpatient days

Similar to total discharge reporting, total inpatient days should not include nursery, excluded unit, labor and delivery, swing-bed, or respite days. Total inpatient days must be reconciled with revenue and usage report days.

Medicare and Medicare managed care days

Medicare and Medicare managed care days (collectively “Medicare days”) are used to determine Medicare’s share of the incentive payment. During the audit process, Medicare administrative contractors (MACs) will adjust the acute care Medicare days reported on the Medicare cost report to the provider statistical and reimbursement report (PS&R). This is a key component in the calculation of the Medicare utilization, so Medicare claims must be properly billed and included on the PS&R.

Audit results to date have identified many hospitals that have not been billing shadow claims for Medicare managed care days, and as a result, these days are not being reflected on the PS&R. The MACs will adjust to the days reported on the PS&R in Report Type 118 during the audit, so if a hospital has not shadow billed these claims, there will be zero days. This will have a negative impact on the incentive dollars the hospital receives. Organizations must reconcile internal traditional care days and Medicare managed care days to ensure that both have been appropriately billed and reported on the PS&R.

Total charges

Total inpatient and outpatient charges reported on Worksheet C of the Medicare cost report should exclude any professional charges because they are payable under Medicare Part B. They will be used to calculate incentive payments to eligible professionals under a separate calculation. Reports must reconcile total charges and the revenue and usage report to ensure that professional and other excludable charges are removed. Remember that charges relating to nursery, excluded units, labor and delivery, respite, and swing-bed services are all included in total charges. This is different from the amounts used to determine total discharges and total inpatient days, and may be a point of confusion.

Charity care charges

Charity care is one of the most scrutinized areas during HITECH audits. Accuracy of reporting is critical because of the direct correlation between the amount of charity and the amount of a hospital’s incentive payment.

Charity care is defined in the Medicare Cost Report Worksheet S-10 cost reporting instructions as:

Health services for which a hospital demonstrates that the patient is unable to pay. Charity care results from a hospital's policy to provide all or a portion of services free of charge to patients who meet certain financial criteria. For Medicare purposes, charity care is not reimbursable and unpaid amounts associated with charity care are not considered as an allowable Medicare bad debt.

HITECH audits have focused on verifying that hospitals’ charity care policies are consistently followed. The audit process often includes selecting a sample of charity care patients and tracking patient interactions through to the hospital’s written policy. If the hospital’s policy was not followed, the charity care interaction may be disallowed. In addition, the error rate of the population tested may be extrapolated to the hospital’s entire charity care population charges. Hospitals should carefully check that their charity care policies are being followed and accurately reported. Given the importance of charity care in today’s environment, these self-audits should take place on a regular basis.

Charity care and bad debt

HITECH audits have also focused on the difference between charity care and bad debt. Only charity care charges are used in the determination of Medicare’s share of the incentive calculation. Bad debt is when health services are provided and the hospital determines the individual has the ability to pay but chooses not to. Hospitals should perform an examination of charity care charges reported in the Medicare cost report on Worksheet S-10 to ensure that the only charges reported are for patients who met the financial indigence requirement in the hospital’s charity care policy. The HITECH audits will request the payer for patients included on the hospital’s charity care log, and will deny any charity care charges which have been (or will) be claimed as a Medicare bad debt.

Charity care reporting period

Charity care reported on Medicare cost report Worksheet S-10 must only include services delivered during the cost reporting period. Charity care is one of the largest areas of misreporting in the HITECH audits. This is because many facilities track the amount of charity care written off during the year rather than focusing on the time period in which care was delivered.

In the July 28, 2010, final regulations on HITECH payments, commenters urged CMS to calculate charity care charges based on when the amount was written off because it would streamline reporting across the federal government (specifically the IRS), and reduce the administrative burden on facilities. CMS declined this request and put the burden back on hospitals to report charity care written off based on the period when care was delivered.

Reporting of charity care is becoming a critical element of reporting for a variety of governmental agencies, and has a potentially significant impact on reimbursement and compliance. Hospitals should conduct an analysis of charity care write-offs after the initial filing of the Medicare cost report but prior to final settlement or HITECH audit of that report. The timing of this analysis is important because charity care write-offs may take place after the initial filing of the cost report. If these are not identified, charity care is at risk for being understated. It is important to understand your MAC’s rules for including this revision prior to final settlement. Some MACs require the submission of an amended cost report that includes these revisions, while others will accept them at the time of the audit.

Since total charges reported in the Medicare cost report on Worksheet C do not include professional charges or charges related to non-reimbursable cost centers, the charity care charges should also exclude them. Charity care charges can be reported for any cost centers reported in the Medicare cost report on Worksheet C, including nursery, excluded units, labor and delivery, respite, and swing-bed services. Hospitals should examine the listing of charity care to ensure an understanding of the area in the hospital where the service took place so it can be reconciled with the Medicare cost report.

How we can help

Proper reporting of data in the Medicare cost report on Worksheets S-3, S-10, and C will have a significant impact on the incentive payments hospitals receive. In order to ensure proper reimbursement for incentive payments, a considerable amount of due diligence must go into the reporting of days, discharges, charges, and charity care. Organizations must proactively ensure that policies are followed, that billing is appropriate, and that reporting is accurate. CLA can help you systematically gather this information, confirm its accuracy, and perform a mock audit in preparation for a real HITECH incentive payment audit.