Home Health Cost Reports – Part 1

A home health Cost Report is supposed to one of the backbones of Medicare reimbursement. But the cost report is sometimes one of the most ignored reporting requirements for an agency.

Now in an industry of dropping and negative profit margins, is the lack of focus on Cost Report accuracy and importance suddenly coming back to bite us?  In a very obvious way, yes! Almost all recommendations for reimbursement is based upon the profit margins reported by data used in your Cost Report.

Over the next few days, we are going to provide you with a refresher on cost report reporting methods.

Medicare cost reports are relied heavily upon by MedPac (medpac.gov).  MedPac is an independent group of 17 various members who are ‘healthcare experts’.  Many of MedPac’s recommendations are closely monitored by politicians and CMS.  The major reports issued by MedPac are delivered to Congress in March and June each year.  Typically, MedPac’s recommendations are a good indication of reform which is likely to negatively affect your agency in the coming year.

The last publication regarding home health occurred in August when MedPac commented on 2014’s Final Rule. In this commentary, MedPac’s chair believed that the elimination of the Market Basket update which helps reduce the overall cut to reimbursement should be cancelled.  This comment was based on the data provided by CMS via Cost Report data.  (You can find the comment on Medpac’s Website.) MedPac’s position justified position based on their belief that home health margins are still too HIGH.

So as you can see – Cost Report data is STILL relevant. And, MedPac is not your friend. In fact, it seems that MedPac doesn’t want you to make ANY money at all.  We all know that margins are extremely tight and small, if existing at all.  MedPac might seem like an obscure government oversight committee, but is directly affecting your livelihood.

MedPac isn’t the only one to blame.  This might shock you, but CMS also bares fault.  Cost Report methodology developed by CMS is out of date.  Common business expenses that are fully deductible by agencies for tax purposes is not considered allowable costs for cost reimbursement purposes. If CMS updated allowable costs to include many common business expenses such as marketing, reported margins will likely be more realistic.

Tomorrow’s report will focus on data gathering and information that is required to file an accurate cost report.  Friday will conclude with a discussion on allowable and non-allowable costs.

Tortolano & Company specializes in financial and operational solutions for home health agencies across the United States.  Our philosophy is based on proving your agency with the tools and information needed to succeed. We are Home Health’s Partner in Success!


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