Why Accurate Cost Reporting Could Be Key To Higher Rates In Home Health Care

Regardless of what the U.S. Centers for Medicare & Medicaid Services (CMS) decides to do with its home health final payment rule, industry experts believe providers need to drastically improve their cost reporting data.

“CMS seems to think there are too many of us and we’re making too much money,” Robert Markette, an attorney with the law firm Hall, Render, Killian, Heath & Lyman, said during an Axxess panel. “If you look at the data they’re relying upon, we’ve somewhat done that to ourselves with cost reporting. The reason they think we have a 45% profit margin, which is essentially what they’re saying, is because our cost report data is off.”

Prior to the implementation of PPS at the turn of the century, home health providers were accustomed to spending months on cost reports. At the time, providers would have to submit accurate data and were paid based on those cost reports.


Because of that, home health agencies got accustomed to spending a lot of money on those cost reports to make sure they were accurate and thorough.

“What happened with PPS is that CMS came out and said, ‘Well, you still have to submit cost reports, but we’re really not going to look at the data,’” Arlene Maxim, SVP of clinical services with Axxess said on the panel. “Well, they have done something. MedPAC now takes that data from the cost reports and gives that to Congress. Therein lies the problem.”

Over the years, Maxim said she has seen providers cutting corners firsthand when hiring accountants to put together cost reports. As the industry has evolved and demand has risen, those cost reports have taken a back seat to other operational priorities.


Now is the time to change that, she said.

“I believe that’s where our industry has gotten ourselves into a major problem,” Maxim said. “I think we’ve looked at the cost of preparing cost reports and have not looked ahead to what might possibly happen as a result of that. CMS is seeing a huge range of profit margins. I work with a lot of agencies and I know no one who is working at a 45% margin, let alone 5%. That would be generous.”

To make sure CMS is getting as clear of a profit picture from agencies, Maxim said hiring CPAs and other legal and financial experts with experience in the home health space is critical moving forward.

At the same time, Markette believes CMS is too far removed from the actual day-to-day realities of home health and hospice care.

“CMS still views hospice like it’s 1979,” he said. “With a lot of this stuff, they don’t understand that our cost structure today is not the same as it was in 1985. And yet, when we cry poor, they don’t believe us.”

Some of that onus is still on the providers, however.

“We have failed to give them good data,” Markette continued. “They rely on the cost report. When they look at our cost reports, they see an industry whose data shows our costs aren’t real.”

Markette has seen this same type of confusion in Indiana in the Medicaid space. In 2016, the state’s Medicaid program in Indiana asked for cost-reporting data from the whole state after providers criticized the Medicaid budget.

When the data came back, the state was of the impression that home care costs were lower in 2016 than they were in 2010.

“That was mathematically impossible,” Markette said. “This is the same kind of situation. In order for NAHC and these other organizations to go to CMS, make the case and ask for more money, we have to adequately show them how much it costs to do a visit. When our data shows a visit may cost as much as $39,000, or as little as two cents, it’s hard to make a case to them.”

It’s important to remember, Markette said, that CMS and its experts do not operate — they regulate.

“I’ve talked to CMS regulators and outlined concerns about home health and hospice, and it’s news to them,” he said. “Because it’s not what they do. So we’ve got to paint that picture and that cost reporting data is very important in order to do that.”