CMS Proposes Cuts to 340B Hospital Reimbursement

CMS has recently issued a proposed rule for the OPPS Payment System that included a proposal to significantly scale back reimbursement for Part B drugs to hospitals participating in the federal 340B Drug Discount Program.  CMS believes hospitals are being overpaid and are potentially overutilizing the Program; therefore, it wants to reduce reimbursement rates for separately payable, non-pass-through Part B drugs purchased through the 340B Program.

For those that may not be familiar with the Program, the 340B Program is a federal drug discount program (Section 340B of the Public Health Service Act).  The 340B Program requires drug manufacturers to sell drugs at a statutorily-set discounted rate to certain health care providers (designated in the statute as “covered entities”) that serve indigent populations. Covered entities are not required to pass these discounts on to insurers or patients.  The intent is to allow covered entities to use these savings to stretch scarce resources in order to better serve their patients.

For 340B Hospitals, Medicare reimbursement for Part B drugs often exceeds the acquisition cost of the drugs by a substantial margin. As a result, 340B hospitals realize high profits on these Part B drugs.  CMS believes there is a correlation between participation in the 340B Program and overutilization of certain drugs, such as potentially higher Medicare spending for chemotherapy drugs among 340B participating hospitals than those that do not qualify for 340B.

CMS is also concerned with rising costs to Medicare beneficiaries. Medicare beneficiaries are responsible for paying 20 percent of the Medicare payment rate for Part B drugs, and those co-payments, in some instances, may exceed what 340B hospitals pay to acquire the drugs.

To address these concerns, CMS has proposed to reduce reimbursement to an amount that is more aligned with the resources expended by hospitals to acquire the drugs.  CMS believes a reduction in reimbursement to equal the Average Sales Price minus 22.5% will adequately represent the minimum discount that a 340B participating hospital receives for separately payable drugs under the OPPS.  The reduction will only apply to Part B drugs that are separately payable, and excludes drugs on pass-through status and vaccines.

CMS is certain to receive a huge number of comments by potentially impacted facilities and their representatives seeking either exclusions for certain types of facilities, for certain types of drugs or simple reductions in the size of the cuts.  Comments must be received by their September 11, 2017 deadline.

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CMS Publishes Final FY 2016 Wage Index PUF

CMS published the final FY 2016 wage index Public Use File (PUF) on May 1, 2015. CMS indicated that hospitals will have approximately 1 month to verify their data and submit correction requests to both CMS and their MAC to correct errors due to CMS or MAC mishandling of the final wage and occupational mix data.
The updated PUF was published at:

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Frequently Asked Question

Question:   Bill Super (named changed) at Bill Super and Associates, CPA firm is the best and the brightest!  We hire him to prepare our cost reports!  How can we have any errors on our Medicare cost reports that you could possibly correct for us?

Answer: Bill Supers are out there and they are extremely gifted individuals, but they usually have many clients and are spread very thin!  In bigger firms, they may not actually review your Medicare cost report at all!  Here are a few ways that we have found that mistakes do happen in this circumstance:

1)                 Bill Super does not actually prepare your cost report.  His less gifted and experienced staff does.

2)                 Bill Super’s staff makes a keying error when keying data into a spreadsheet.

3)                 Bill Super’s staff makes a keying error when keying one of the thousands of numbers in the cost report.

4)                 Bill Super’s staff is overworked at cost report deadline time and cuts a corner or two so they can meet the filing deadline.

5)                 Bill Super’s staff runs the PS&R incorrectly.

6)                 Bill Super’s staff has turnover and the new staff does not fully understand what the old staff did.

7)                 Bill Super’s staff did it just like last year, but was not aware that the circumstances had changed this year.

8)                 Bill Super’s staff overlooked, ignored or improperly corrected cost report software edits.

9)                 Bill Super’s staff does not read and fully understand new law and regulations.

10)                 Bill Super is going through some personal issues that distract him temporarily from his work.

11)                 The MAC auditor makes a judgment error during the Medicare audit.

12)                 The MAC auditor makes a keying error during the Medicare audit.

13)                 The MAC auditor is at their deadline time and cuts a corner to meet the deadline.

14)                 The MAC has turnover in auditors and the new auditor does not fully understand the situation.

15)                 The MAC settlement personnel don’t fully understand the MAC auditors’ work.

16)                 The MAC auditor did it just like last year, but was not aware of the circumstances changed this year.

17)                 The MAC auditor overlooked, ignored or improperly corrected cost report software edits.

18)                 The MAC auditor does not read and fully understand new law and regulations.

19)                 The MAC changed and the new MAC does not know or understand what the old MAC did.

20)               The MAC auditor is given improper data or no data at all and makes an incorrect adjustment.

21)                The MAC auditor is not sane.

22)                 The required data was not available to Bill Super’s staff at the time of filing and they did not remember that they needed to amend the report when the data became available.

23)                    Hospital staff coded an invoice wrong, but it was not big enough in amount for Bill Super’s staff to review.

24)                    Hospital staff made an incorrect Journal Entry, but it was not big enough for Bill Super’s staff to review.

25)                    Hospital’s accounting system improperly maps revenue or expense, but the totals were right.

26)                    Hospital’s Chargemaster needed to be updated to reflect proper revenue codes, services, etc.

27)                    Hospital’s census data is incorrectly accumulated or stated in census reports.

28)                    Hospital’s staff produced bad debt listing did not capture all the Medicare allowable bad debts.

29)                    Hospital staff made a keying error in a spreadsheet prepared for Bill Super’s staff.

30)                    Hospital staff did not fully understand how to conduct a particular time study and its impact.

31)                    Hospital staff forgot to conduct a time study.

32)                 Hospital staff had turnover and some things did not get done during the interim period.

33)                 Hospital staff did it just like last year, but the circumstances had changed in this year.

34)                 Hospital staff does not read and fully understand new law and regulations.

35)                 Bill Super’s staff went over budget on hours and cuts corners to reduce hours and fees written off on engagement.

The cost reporting law, regulations and process are very complex.  The process has a lot of human elements.  Given adequate opportunity, as there is in the cost reporting process, human beings will make errors!  All it takes is one small error in the right place to swing hundreds of thousands or millions of dollars in reimbursement.

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Understanding Where We Fit In and How We Can Take Your Reimbursement Strategy To a New Level!

Welcome to this new entry into my Reimbursement Blog!

As I go about my work of helping small and mid-size hospitals obtain all the Medicare reimbursement that they deserve for the services that they have delivered, I have found that there are some misconceptions out there about where we fit in to their hospital’s reimbursement strategy, who we are, what we do and what we don’t do much of.  I hope to clear up one of those misconceptions in this blog post today!

When I am trying to get approval to help a hospital (i.e. doing sales), the first and most common response is “we are using XYZ Firm to prepare our cost report.”  At that point, I have to let them know that we are fine with that and really want them to continue using XYZ Firm if they are happy with the service they are getting.  It surprises some hospital administrators that there is a reimbursement consulting firm that is not after their cost report preparation business (for full disclosure, we choose to prepare a handful of cost reports each year only upon a specific request of our clients).

At this point, I have to explain to them that our main consulting service starts about the time XYZ Firm and the hospital have completed all the work they are going to do with a cost report, so they are both over and done with it!    Based upon our experience, the hospital has probably received about 95% to 98% of the total reimbursement due under the law for the services delivered at this point.

My next question is, “Does the hospital want to take a chance of leaving 2% – 5% on the table or do they want to allow us to make sure they get as close to 100% as they can?”   If a relatively small hospital that receives $5,000,000 per year from Medicare left 2% on the table, that equals $100,000 per year.  Over a four year period, that is $400,000 and beginning to add up to real money!

On this front, the Congress has been kind to hospitals.  They knew there would be both disagreements and mistakes made, so the Medicare regulations provide hospitals a great appeal process to a non-partisan board and ultimately to Federal courts with a 180 day window for appeal.  They also provide a full 3 years for reopening a report.  These avenues are there for all and meant to be used when needed.  The large urban hospitals use these regulations!  They protect their rights, appeal every cost report and use the reopening process.  Unfortunately, the small and mid-size hospitals dramatically under-utilize the avenues the Medicare program provides to improve their reimbursement.

On occasion (maybe 10% of the time), we review a hospital’s cost reports and find that we think they received very near 100% or 100% of the amounts due from Medicare.  Due to this real risk, a contingent type fee arrangement works well for this service (we will also do this work on an hourly basis).   Through this type arrangement, we accept all the risk of us not finding any issues, so the hospital only pays us a fee if we are successful.  Under this arrangement, the hospital retains the final call on what issues we pursue and don’t pursue.  In addition, we will do virtually all the work to get the reimbursement.

So the bottom line is….the hospital gets our assistance in pursuing the final 2% – 5% in reimbursement that may be due or, for a small group, a free  confirmation that there is nothing we can do, it retains all rights, it only pays if we are successful and it also gets to  continue its current relationship with XYZ Firm.   It makes so much sense!

I guess that is why these type arrangements and consulting services have been commonplace in large urban hospital for 25 – 30 years.  The misconception that the cost report preparation is all there is to getting proper reimbursement is the result of us being the first firm or one of them to bring this level of reimbursement sophistication to the small and mid-size hospital market.

I hope this post helps the reader understand where our services fit into his or her business and are related to the services of XYZ Firm!   Please don’t hesitate to contact me with any questions or if I can be of service in any way!


Kendall Quisenberry, President





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A Cost Report Reopening and Appeal Renaissance

Welcome to this entry into my Reimbursement Blog! If you are a new reader, I invite you to take a moment and subscribe to the blog  through the link at the bottom of this page.

Throughout the history of the Medicare cost report, you could always count on a hospital receiving another Notice of Program Reimbursement (“NPR”), or audited cost report, almost every year.  This was the case until 2010 when The Center’s for Medicare and Medicaid Services (“CMS”) placed a hold on all cost reports that were potentially impacted by the SSI Ratio; therefore, all hospital cost reports which had DSH reimbursement were placed in a timeout for an indefinite period of time.  In the last year, CMS has begun instructing it’s MAC’s to begin the process to issuing several years of belated NPR’s.

While none of this is probably news to anyone in the field, what is important is to remember that the issuance of the NPR starts the clock ticking on cost report reopening (3 years)  and PRRB appeal (180 days) deadlines.  Prior to the CMS delays, most major hospitals had a process in place to ensure that every new NPR was appealed in a timely fashion and that the reopening deadlines were at least noted.  The hospital’s appeal of every new NPR held the hospital appeal rights “open” for additional time and allowed group appeals issues to be added and transferred.

My concern at this time is that several years of no NPR’s may have caused hospital personnel or consultants to get off their appeal and reopening game so to speak and to potentially miss deadlines as the newly issued NPR’s pile up quickly.  I recently became aware of one such case for a FYE 2007 NPR issued last fall.   From January 1, 2013 through 2015 should be a renaissance period for the PRRB Appeal, and to a lessor extent the Medicare reopening, due to the large number of NPR’s that will be issued during this time period.  Hospital personnel, Attorneys and Consultants that specialize in appeals and have had little appeal work to do in recent years should be swamped with appeal requests and position papers!

If you have let the years passing fog your memory regarding PRRB procedures, deadlines, etc, now is the time to act!  You may have an NPR date related clock ticking right now that you were not even aware of!  I encourage you to check any NPR’s and document those dates, so not to miss an important one.

I hope this and all future blog entries help you identify the most important reimbursement issues and new developments in the field for you.  If we can be of help with the above or other issues, please let me know!


Kendall Quisenberry
Reimbursement Counselors

(972) 403-9910

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Underutilized Exception – Waiver of RHC Productivity Standard

Welcome to this new entry into my Reimbursement Blog! If you are a new reader, I invite you to take a moment and subscribe to the blog through the link at the bottom of this page.

This entry is important to any hospital that operates or has operated a Rural Health Clinic. Throughout the history of Medicare and no matter what the payment system, the availability of exceptions to the payment rules has been a constant. While some exceptions become well known and eventually become an annual procedure for the hospitals for which they apply (i.e. SNF and TEFRA), other exceptions seem to remain outside of the realm of “common knowledge.” They remain hidden in the details, unknown to most hospitals and their cost report preparers, and underutilized.

As we review hundreds of Medicare/Medicaid cost reports per year, we come across these underutilized exceptions. One of these exceptions is the waiver of the RHC productivity standard, also referred to as a guideline. The Medicare cost report and the applicable instructions specifically reference the fiscal intermediary’s authority to waive the RHC productivity guidelines at a hospital’s request. All a hospital has to do is “reasonably justify” why they have not meet the guideline. It is right there in black and white, but we have seen very few hospitals that have been limited by the guideline actually make such a request. The few waiver requests that we have seen filed have all been accepted by the hospital’s FI and resulted in additional reimbursement to the hospital.

As we studied this opportunity, we wondered just how many hospitals might benefit from this exception/waiver. We analyzed cost reporting data and determined that about 400 small and mid-size hospitals may be able to benefit from this exception. There are over 50 hospitals that could benefit by in excess of $100,000, if they submitted a request and it was accepted.

Hospital executives are always rightfully concerned about any downside risk that could be associated with such a request. What is the downside to requesting this exception? If an exception is requested and denied by the FI, you are right back where you started. The hospital will just have to apply or continue to apply the productivity guidelines. The Hospital loses nothing by making the request.

If your hospital has an RHC, have you been or will your payments be materially limited by the RHC productivity standards? If so, take the time to request an exception or call us we will be happy to help you with the filing. Your hospital may have a lot to gain and nothing to lose by making the request.

I hope this and all future blog entries help you identify the most important reimbursement issues and new developments in the field for you.


Kendall Quisenberry
Reimbursement Counselors

(972) 403-9910

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Cost Report Workpapers – Get Them Up Front!

Welcome to this new entry into my Reimbursement Blog! If you are a new reader, I invite you to take a moment and subscribe to the blog through the link at the bottom of this page.

This entry is important to any hospital that is contracting out its annual Medicare/Medicaid cost report preparation. We have noticed an increasing number of the accounting/consulting firms that are providing cost report preparation services are not providing their clients with a complete set of cost report preparation workpapers and an electronic cost report file at the completion of the preparation project.

I highly recommend including language, in any contracts for this service, that requires the preparer to provide a complete set of workpapers at the completion of the project. This is not to much to ask of the preparer and it will halt their efforts to tie themselves forever to your hospital while simultaneously making your job more difficult. At a minimum, hospital’s should require copies of any workpapers provided to the Fiscal Intermediary as a part of the submission process.

I also recommend language that requires the preparer to provide the hospital with the Medicare/Medicaid cost report in electronic form, known as the ECR file. While the hospital may not have the software to run the ECR file, obtaining the ECR file upfront could save the hospital substantial fees should they choose to utilize a different accountant or consultant that has the required software for future cost reports or other special projects.

While including the above language in the contract is certainly helpful, hospital management must also make sure that their accountants and/or consultants comply with the terms of the contract by actually providing the data to them at the completion of the project.

In most instances, reputable accounting and consulting firms will provide both the workpapers and ECR files upon the request of a current or former client, but often the data is not produced in a timely fashion and occasionally a fee is attached to the provision of the data. The worst case would be the accountants going out of business (if it can happen to Arthur Anderson- it can happen to your firm), losing the workpapers or being upset with a hospital’s subsequent change in accounting firms. In these cases, the hospital may have no way to get their own workpapers that support their cost report. Getting the data up front as a part of the required deliverable is always a good idea!

I hope this and all future blog entries help you identify the most important reimbursement issues and new developments in the field for you.

Kendall Quisenberry
Reimbursement Counselors

(972) 403-9910

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Geographic Service Area Expansion

After serving mostly the Hospitals of our home State of Texas for nine years, we decided to expand our geographic service area in 2009.

The expansion has proved to be a great success. In 2009, we recovered a cumulative total in excess of half a million dollars of lost reimbursement for four Hospitals located in the State of Georgia. We have also recovered smaller dollar amounts, from $10,000 to $120,000 each, for Hospitals located in Colorado, Maine, New York, Oklahoma, West Virgina, Wisconsin and Wyoming.

During this time, we have also initiated relationships with Hospitals or Hospital Corporations located in Arkansas, Florida, Idaho, Louisiana, Mississippi, Missouri, New Mexico, Nebraska, Oregon and Tennessee.

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Updated FFY ‘05 SSI Ratios Available

Welcome to this new entry into my Reimbursement Blog! We invite you to take a moment and subscribe to the blog through the link at the bottom of this page.

This entry is important to any hospital receiving Disproportionate Share payments for a fiscal year beginning during Federal Fiscal Year 2005. CMS posted updated SSI Ratios for Federal Fiscal Year 2005 on the website on September 3, 2008. Click Here to go to the CMS post.

Upon review of the data, you will find that most hospitals were helped marginally by the SSI Ratio changes. It will be up to hospital personnel and their consultants to determine if the additional amount of reimbursement is worth pursuing.

There will be some big winners. Eighty three facilties had increases of over one percent. One percent in DSH can result in hundreds of thousands of additional reimbursement dollars. I my opinion some of the data seems unreasonable and will unquestionably lead to further questions regarding the validity of the data and processes used to arrive at the numbers.

If your facility received DSH payments for a fiscal year beginning in FFY 2005, checking out these numbers is a must. It may result in an unexpected windfall. I wish you all the best!

I hope this and all future blog entries help you identify the most important of reimbursement issues and new developments in the field for you.


Kendall Quisenberry
Reimbursement Counselors

(972) 403-9910

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Occupational Mix Survey

Welcome to this new entry into my Reimbursement Blog! We invite you to take a moment and subscribe to the blog through the link at the bottom of this page.

This entry is important because it will inform you of due dates for the Medicare Occupational Mix Survey that will be applied to Hospital’s Medicare Wage Index from FY 2010 to FY 2012. Anything that effects the wage index is vitally important to PPS reimbursed Hospitals. If it effects the wage index for three consecutive years, then….

The 2007-2008 Occupational mix survey will collect hospital specific wages and hours data by type of clinician (RN, LVN, Aide, Etc.). The completed survey must be submitted to FI by September 1, 2008. The survey is available on CMS’ website. To see the survey click here.

The interesting note about the Occupational Mix Survey is that the financial impact of the survey is somewhat counter-intuitive. Most would think that a higher mix of staff would mean added reimbursement. In reality, when a close look at the mechanics of the calculation is done, the lower the skill mix of staff that is reported on the survey the more reimbursement a hospital will receive. This may be as good a time as any to recheck those clinicians credentials to make sure your “RN’s” and “LVN’s” have competed all the requirements to keep their credentials (i.e. continuing education, etc.). It would also be a good idea to get Nursing Administration’s input into the contents of the survey. They may be privy to recent developments with regard to a clinicians status that have not found their way to personnel or the applicable information systems.

The preliminary, unaudited 2007-2008 Occupational Mix Survey data should be released by CMS in early October 2008.

I hope this and all future blog entries help you identify the most important of reimbursement issues and new developments in the field for you.


Kendall Quisenberry
Reimbursement Counselors

(972) 403-9910

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