The Centers for Medicare and Medicaid Services (CMS) has rolled out its first major change to the SNF Medicare Cost Report in 15 years, no longer accepting Resources Utilization Groups (RUGs)-based proxies for the Patient Driven Payment Model (PDPM).

The efforts are aimed at better capturing managed care revenue and census, while refining the SNF market basket modeling and enhancing preparation for a SNF wage index. The changes represent a compliance and operational reset, with transparency being a hallmark, and CMS requiring auditable reporting on costs, staffing and services, experts from Zimmet Healthcare Services Group noted.

Overall, the changes will provide CMS with better data for rate setting and future fund projections, the agency said. Changes include data collection related to Medicare and Medicaid HMO activities, as well as data collection for home office expenses, contract labor, and a removal of obsolete reporting and worksheets.

Cost reporting periods ending on or after Sept. 30 are affected by these changes, according to Marinela Shqina, managing director of reporting and analytics with Zimmet. After capturing real staffing, cost and payor mix data, CMS can shift from formulas to verifiable operational reporting, Shqina said, with transparency and accountability being the new baseline.

“Historically, SNF cost reporting relied on data elements that were designed to support a RUGs-based system, which no longer aligns with how Medicare reimburses facilities today,” said Shqina. “With the implementation of PDPM, CMS shifted away from formula driven rate constructs and towards payment based on patient characteristics and resource needs.”

The redesign places greater emphasis on “granular” data that can be verified and tied back to facility operations, she said. As a result, transparency and accountability are foundational expectations with the new cost reporting requirements.

CMS is granting nursing homes a 60-day filing extension for year-end cost reporting this year, considering all of the changes, added Lynda Hebbeln, director of financial reporting for Zimmet

“CMS knew that there might be a learning curve here and would require extra time to get some of the data together,” said Hebbeln. “It’s recommended that this extension be used to validate and reconcile the data that’s being reported. And of course, after this time period, the normal five month filing deadline will resume.”

Cost reporting worksheet changes

Shqina laid out RUGs changes alongside panelist Lynda Hebbeln, director of financial reporting for Zimmet.

Considering the laundry list of worksheet updates published by CMS, Shqina and Hebbeln said it might help to focus first on high risk areas, including contract labor tracking for costs and hours, related-party and home office documentation, then census, bad debt and payor-specific statistics.

The agency’s “S” series of cost reporting worksheets, for one, involves basic provider and component data information with census, direct care labor wages and contract labor wages being collected for wage index analysis in the future.

Key changes with the “S” series, Shqina and Hebbeln said, include expanded payor reporting for Medicare Fee for Service (FFS) versus Medicare Advantage, as well as reporting distinction between Medicaid FFS and Medicaid Managed Care. In other words, payor-specific statistics.

Detailed staffing data including contract labor wages and hours is required, while worksheet S-7, or RUG days, is eliminated as part of series “S” worksheet changes.

“Previously, reporting was limited to aggregated Medicare, Medicaid and other categories, so this is a significant expansion of detail,” said Shqina.

Contract labor is mentioned in “A” series changes too, with a new contract labor column across all cost centers. “A” series worksheets handle expense reporting, the Zimmet panelists said. “A” series worksheet changes also involve major cost restructuring to better reflect modern operations, plus removal of obsolete departments and programs, as well as new capital cost reconciliation requirements.

“Under the prior form, contract labor reporting was limited to nursing therapy and other medical staff. The new form expands this reporting across all departments,” added Shqina.

It’s in series “A” worksheets where providers will need to document expanded related-party disclosure requirements, another high risk area, along with filing a CMS-287 report for home office costs. Incomplete disclosures here increases audit and disallowance risk, Shqina and Hebbeln said.

“For example, lines related to programs such as schools of nursing and rural health clinics have been removed, while new lines have been added for quality assurance, performance improvement in service, training, transportation, audiology, IV therapy, blood and blood products,” Shqina said. “These revisions align cost reporting with the services furnished by the SNFs today.”

Series “E” worksheets calculate a provider’s reimbursement settlement if there is bad debt or vaccine activity, which the Zimmet panelists say are some more high risk areas. Key changes to “E” worksheets include separate settlement worksheets for Medicare Part A and B, requirements around improved clarity in payment reconciliation, and the need for a Notice of Amount of Program Reimbursement (NPR) date to track settlement timing.

“It’s very, very important to be properly recording and keeping the proper documentation on this log for what is going to end up on worksheet E. This is one of the most audited areas of the cost report and it could hurt your bottom line if you’re lacking the proper data on this log,” Ebbeln said.

Compliance and operational reset

The worksheet changes represent a compliance and operational reset, Shqina and Hebbeln said, not just a form update.

Transparency is more important than ever, with CMS expecting clear, auditable reporting costs, staffing and services, they said. Preparation for the cost report changes should include team preparation about these new worksheets, payor splits, contract labor and related-party reporting.

“They want clear, auditable reporting of costs. Of course, the staffing information is important, and the services, cost report data is going to inform our future rate setting and our wage index analysis, which is very important,” said Ebbeln. “Accurate reporting from the cost report is going to protect our reimbursement, our credibility and our audit outcomes.”

Aligning systems by updating accounts for new cost centers, contract labor and payor-specific reporting will help too, especially when it comes to Medicare Advantage and Medicaid managed care reporting.

“Whether it’s your finance team, your operations team or your business office, they need to know the worksheets, how the payors are going to split,” added Ebbeln. “Our contract labor information is very, very important, as well as our related party reporting.”