According to the fiscal year (FY) 2019 Final Rule, the Centers for Medicare & Medicaid Services (CMS) will enforce the longstanding requirement of completing a CMS approved home office cost statement in the 287-05 format. CMS will reject entire cost reports for providers that bring in cost(s) from chain components, or related parties, in a nonapproved format (hospital, skilled nursing facility, home health aide, hospice). When and if a cost report is rejected, the Medicare payments will be put on hold and interest charged for any payments due. Once an acceptable cost report is submitted, it can take up to 30 days for the payments to be released. This new requirement will be enforced for all cost reports beginning on or after Oct. 1, 2018.
A chain organization consists of a group of two or more healthcare facilities which are owned, leased, or through any other device, controlled by one organization (Provider Reimbursement Manual 1 (PRM-1), CMS Pub. 15-1, Chapter 21, Section 2150). When a provider claims costs on its cost report that are allocated from a home office (also known as a chain home office or chain organization), the Home Office Cost Statement constitutes the documentary support required of the provider to be reimbursed for home office costs in the provider’s cost report as set forth in Section 2153, Chapter 21, of the PRM-1. Section 2153 states that each contractor servicing a provider in a chain must be furnished with a detailed Home Office Cost Statement as a basis for reimbursing the provider for cost allocations from a home office or chain organization. However, many cost reports that have home office costs allocated to them are submitted without a Home Office Cost Statement as a supporting document. In addition, there are home offices or chain organizations that are not completing a Home Office Cost Statement to support the costs they are allocating to the provider cost reports. Lack of this documentation should result in a disallowance of costs. It is our understanding that some providers paid under a PPS mistakenly believe that a Home Office Cost Statement is no longer required. However, the home office costs reported in the provider’s cost report may have an impact on future rate-setting and payment refinement activities. We stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20748) that we believe that requiring a home office or chain organization to complete a Home Office Cost Statement and a provider to submit, with its cost report, a copy of the Home Office Cost Statement completed by the home office or chain organization that corresponds to the amounts allocated from the home office or chain organization to the provider’s cost report, is consistent with Section 2153 of the PRM-1 and would be consistent with a provider’s recordkeeping and cost reporting requirements of §§ 413.20 and 413.24, which require a provider to substantiate its costs.
For questions, contact Amanda Springborn, manager, RSM health care advisory services, at + 1 314 925 3838.