Just thinking about Medicare reimbursement gives me a headache. Lucky for me, I only have to write about it now and then. But for senior leaders at critical-access hospitals, more than an occasional glance is required. With a high caseload of Medicare patients, these facilities often need the maximum reimbursement to survive. As it turns out, however, many of these hospitals may be leaving thousands of dollars on the table.

At the Rural Health Care Leadership Conference earlier this year, I attended a session on improving critical-access hospital margins. When the speakers began discussing how to maximize the reimbursement for the time that emergency department physicians are on call and not treating patients, multiple hands shot into the air. The questions went like this:

• "We get reimbursed for the time that ED docs are on call, but not treating patients?" Yes.
• "What if they are on call, but offsite?" Still, yes (as long as they are available by phone and can arrive at the ED within 30 minutes).
• "Does this apply to specialists, too?" No.

I was surprised by the number of executives who were not clear on this rule. After all, the federal government established the critical-access designation with the added benefit of cost-based reimbursement to help keep these hospitals open. While most hospital leaders understand the general concept of cost reimbursement, they haven't taken the time to review the details, says Joseph M. Watt, a partner in the healthcare group at BKD, a CPA and advisory firm.

The challenge for many CAHs is that they either do not have the reimbursement staff internally, leaving the chief financial officer or controller to focus on cost allocation as an afterthought, or they may rely heavily on an independent third party to do the cost report, says Watt. Most independent third parties, however, are not digging into the details. They are preparing the report based on information that the hospital provides, whether the costs are allocated correctly or not, Watt says. "This is where you can run afoul and potentially claim costs that are not allowable or miss costs that should be claimed on the cost report."

And claiming more than your share is potentially more hazardous than not claiming enough. If Medicare finds that they reimbursed your hospital more than they should have, they will request that money back--with interest. What if you don't have the cash? "Then the hospital has to go on a payment plan with the Medicare program and their interest rate is close to 12 percent," says Watt.

Here are two examples of the types of questions that you should be asking yourself:

1. Are we using the correct statistic for each of the cost centers? Medicare uses cost-allocation statistics like square footage or FTEs or number of meals to allocate the different departments' costs to the different cost centers, explains Watt. So if those statistics aren't accurate, you run the risk of claiming more costs than you should--or not claiming enough. In other words, if you have recently remodeled or expanded your facility, get out the measuring tape. Because if the square footage has increased in the med/surg department, for example, that department would get more of the capital costs allocated to it.
2. Are we tracking the time ED physicians are providing on-call services appropriately? Since most docs don't punch a time clock, on-call physicians need to log in and out of the ED. Some hospitals classify "direct patient care" as the length of time that the patient is in the ED, but Watt isn't sure that is accurate. "If you are in an ER, how much of that time are you actually with the physician?" He recommends that CAHs start the clock when the physician arrives in the ED and stop it when he or she leaves the ED.

Senior leaders also need to test these statistics and review the way that they are billing on a regular basis. "Many of these change over time, so you need to continually look at it and test it to make sure the reports are being prepared properly," says Watt. "One of the traps that hospitals fall into is thinking, 'This is how we have always done it.'"

Editor's note: Don't forget to submit your entries for the 2008 HealthLeaders Media Top Leadership Teams Conference and Awards. Deadline for entries is March 27.

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Carrie Vaughan is editor of HealthLeaders Media Community and Rural Hospital Weekly. She can be reached at cvaughan@healthleadersmedia.com.

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