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With complex managed care arrangements and Medicare's fraud and abuse laws, consulting for diverse health care organizations has become more difficult. Some of the complex issues covered in this Guide include: Medicare reimbursement issues; understanding how to code medical bills; developing a Medicare compliance program; understanding and negotiating managed care contracts; governmental laws and regulations (including HIPAA, Stark I and Phases I and II of the Stark II Rules, Antikickback Statute, and other referral regulations); incurred but not reported (IBNR) claims liabilities; and performing a medical practice valuation. The Guide also includes national Medicare E/M code statistics.
TOC for HLC
INTRODUCTORY MATERIAL
PREFACE
HOW TO USE THE GUIDE
ACKNOWLEDGMENTS
ACKNOWLEDGMENT OF COPYRIGHTS
ABOUT THE AUTHORS . . .
LIST OF SUBSTANTIVE CHANGES AND ADDITIONS
CHAPTER 1: HEALTH CARE CONSULTING--AN INTRODUCTION
100 CURRENT STATE OF THE HEALTH CARE INDUSTRY
Managed Care
Medicare Reimbursement
Government Regulations
Stark III Regulations.
Medical Information Sharing.
Medicare Reform.
Health Savings Accounts.
Patient's Bill of Rights.
Economic Crisis Impact
Government Responses.
Health Care Reform Legislation.
101 OPPORTUNITIES FOR PRACTITIONERS
Consulting Services
How This Guide Helps
102 STANDARDS FOR CONSULTING SERVICES
Statement on Standards for Consulting Services
General Standards That Apply to All AICPA Members
Professional Competence.
Due Professional Care.
Planning and Supervision.
Sufficient Relevant Data.
General Standards That Apply to All AICPA Members for Consulting Services
Client Interest.
Understanding with Client.
Communication with Client.
Other Standards
Attestation Standards.
Standards on Business Valuation Services.
Standards on Financial Forecasts and Projections.
Standards on Reports on Internal Control over Financial Reporting.
Standards on Reporting on Historical Financial Information.
Independence and Consulting Services
Quality Control and Peer Review Standards
Outsourcing to Third-party Service Providers
CHAPTER 2: ACCOUNTING FOR HEALTH CARE PROVIDERS
200 INTRODUCTION AND AUTHORITATIVE LITERATURE
AICPA Audit and Accounting Guide
Other Literature
FASB Codification
Resulting Changes.
Health Care Entities.
Effective Date.
201 THE FINANCIAL REPORTING ENTITY
Consolidated Financial Statements
Consolidation.
Guidance for Noncontrolling Interests.
Variable Interest Entities.
The Equity Method of Accounting for Investments in Common Stock.
Consolidated Financial Statements of Nonprofit Entities: Ownership Interests in For-profit Entities
Controlling Financial Interest.
Less Than a Majority Voting Interest.
Consolidated Financial Statements of Nonprofit Entities: Financially Interrelated Nonprofit Organizations
Controlling Financial Interest.
Control and Economic Interest.
Control or Economic Interest, but Not Both.
Nonprofit Business Combinations
Mergers and Acquisitions.
Goodwill and Other Intangible Assets.
Effective Dates.
Consolidated Financial Statements of For-profit Entities
What Constitutes a Controlling Interest?
Reporting Management Arrangements
Consolidation of a Physician Practice by a PPM.
Combined Financial Statements
Conduit Bond Obligor
202 AGENCY FUNDS
Agency Relationships
Agency, Trustee, or Intermediary Transactions.
203 RECEIVABLES
Is Charity Care a Receivable?
Medicare
Medicare Prospective Payment System (PPS).
Medicare Periodic Interim Payments (PIP).
Contractual Adjustments with Medicare and Other Third-party Payors
Medicaid Receivables
Estimated Final Settlements
Allowances for Uncollectible Receivables
Transfers of Receivables
Transfers without Recourse.
Transfers with Recourse.
204 PHYSICIAN LOANS RECEIVABLE
A Word of Caution
Impairment of Loans or Notes Receivable
Measuring Impairment of Notes Receivable.
Recognizing the Impairment Loss.
Recognizing Interest Income on Impaired Loans.
205 PROMISES TO GIVE (CONTRIBUTIONS RECEIVABLE)
Conditional versus Unconditional Promises to Give
Initial and Subsequent Recording of Unconditional Promises to Give.
Intentions to Give
Agency, Trustee, or Intermediary Transactions
Accounting Requirements.
Initial Recording of Unconditional Promises to Give Cash
Promises Expected to Be Collected in Less Than One Year.
Promises Expected to Be Collected in More Than One Year.
Initial Recording of Unconditional Promises to Give Noncash Assets
Promises Expected to Be Collected in Less Than One Year.
Promises Expected to Be Collected in More Than One Year.
Donated Facilities and Services.
Subsequent Changes in Unconditional Promises to Give
Subsequent Increases in Present Value.
Fair Value versus Quantity or Nature of the Assets to Be Received.
Grants Receivable
Collectibility.
Split-interest Agreements
Accounting for Revocable Split-interest Agreements.
Accounting for Irrevocable Split-interest Agreements.
206 INVESTMENTS
Authoritative Literature
Accounting for Investments Held by Nonprofit Organizations
Definitions.
Basis of Valuation of Investments.
Gains, Losses, and Investment Income.
Accounting for Investments Held by Investor-owned Organizations
Summary of Accounting Principles.
Derivative Instruments
Other Investments
Fair Value Measurement Disclosures under SFAS No. 157
Fair Value Option
207 PROPERTY AND EQUIPMENT
Capital Leases
Requirements for Capital Lease Treatment.
HIPAA Computer Costs
Donated Materials
Determining the Fair Value.
Donated Materials Used for Fund-raising Purposes.
Agency Transactions.
Donated Advertising.
Donated Long-lived Assets and Facilities
Free Use of Facilities.
Accounting Policy on Implying Time Restrictions.
Donated Services
Board Members' Services.
Would Other Services Be Purchased?
Promises to Give Services.
Interest Capitalization
An Example of Interest Capitalization on Construction.
How Interest Income on Tax-exempt Borrowings Affects Capitalization.
Capitalization of Asbestos Removal Costs
Depreciation--Estimated Useful Lives
Impairment of Long-lived Assets
Classification of a Long-lived Asset.
Assets to Be Held and Used.
Assets to Be Disposed of by Sale.
Assets to Be Disposed of Other Than by Sale.
Related Goodwill.
Related Goodwill before the Effective Date of SFAS No. 164--Nonprofit Organizations.
208 UNRELATED BUSINESS INCOME TAXES
Unrelated Trade or Business
Computation of Tax on Unrelated Business Income.
209 GUARANTEES
Scope and Scope Exceptions
Loans Offered as Financial Incentives
AICPA Guidance.
210 LONG-TERM DEBT
Tax-exempt Debt Issued by Financing Authorities
Arbitrage Rebate Liabilities.
Advance Refunding
211 CONTINGENT LIABILITIES
Medical Malpractice Claims
Pending or Threatened Claims.
Unasserted Claims.
How Is the Malpractice Liability Estimated?
Retrospectively Rated Insurance Premiums
Malpractice Trust Funds
Third-party Payor Reserves (Liabilities)
212 ASSET TRANSFERS BETWEEN RELATED NONPROFIT ENTITIES
Equity Transfers
Other Transfers
213 ACCOUNTING CONSIDERATIONS FOR PROVIDERS OF PREPAID HEALTH CARE SERVICES
Accounting for Health Care Costs
Calculating Claims Incurred but Not Reported (IBNR).
Example IBNR Claims Liability Calculation.
Accounting for Loss Contracts
Accounting for Stop-loss Insurance
Accounting for Withholds and Risk Pool Settlements Receivable
Withholds.
Risk Pools.
Accounting for Contract Acquisition Costs
214 ACCOUNTING CONSIDERATIONS FOR CONTINUING CARE RETIREMENT COMMUNITIES
Contract Types
Payment Methods
Accounting for Refundable Advance Fees
Balance Sheet.
Income Statement.
Accounting for Advance Fees Refundable upon Reoccupancy
Accounting for Nonrefundable Advance Fees
Accounting for the Obligation to Provide Future Services and Use of Facilities
Accounting for Continuing Care Contract Acquisition Costs
Why Are Quality Improvement Organizations Necessary?
The Provider Reimbursement Review Board (PRRB)
The Office of Inspector General
Recovery Audit Contractors (RACs)
303 THE INPATIENT PROSPECTIVE PAYMENT SYSTEM (PPS)
What Is the PPS?
Risk Shifting.
PPS Exempt Hospitals and Units
Inpatient Acute PPS Payment Components
Medicare Severity Diagnostic Related Groups (MS-DRGs)
Hospital Acquired Conditions (HAC).
DRG Base Payment Amounts.
Outlier Payments.
Patient Transfers.
Capital Payments
Fully-prospective Capital Add-on Payments.
Disproportionate Share Operating Payments (DSH)
Tracking Patient Days.
Calculating the DSH Payment.
Medical Education Costs
Direct Graduate Medical Education (GME)
Intern and Resident Count Considerations.
Limitation on the Number of Resident FTEs.
Adjustments to the Resident Limitations.
Rolling Average Resident Counts.
Required Intern and Resident Information.
Determining the GME Reimbursement.
Graduate Medical Education Reimbursement of Nonhospital Providers.
Indirect Medical Education (IME) Payments
Intern and Resident Count Considerations.
Calculating the Number of Beds.
Example IME Reimbursement Calculation.
Allied Health Education
Organ Acquisition Costs
Medicare Bad Debts
Bad Debt Collection Efforts.
Documentation of Bad Debts.
Understanding How DRGs Are Used by Other Payors
How DRGs Affect Contract Negotiations.
How to Succeed under the DRG Reimbursement Method
Identifying and Controlling Costs.
Controlling Patient Lengths of Stay.
Educating Physicians.
Medical Records and Coding.
304 OUTPATIENT PROSPECTIVE PAYMENT SYSTEM (PPS)
Services Included in OPPS
Status Indicators
Ambulatory Payment Classifications
Covered Services
Evaluation and Management Coding
Inpatient Only Procedures
APC Payment Window
APC Payment Calculations
Relative Weights and Service Mix Index.
Wage Index Adjustment.
Conversion Factor.
Quality Reporting.
Payment Calculation.
Beneficiary Coinsurance.
Reduced Beneficiary Coinsurance Election.
Outlier Payments.
Transitional Pass-through Payments.
Transitional Corridor Payments.
Annual Updates.
Provider Based Status
Obligations of Provider-based Entities.
305 PROSPECTIVE PAYMENT SYSTEM FOR INPATIENT REHABILITATION HOSPITALS AND UNITS
Excluded from Inpatient Acute Care PPS
Rehabilitation Hospitals.
Rehabilitation Unit.
Patient Assessment Instrument
Penalties for Late PAIs.
Case Mix Groups.
Payment under Rehab PPS
Payment Rates.
Adjustments for Rural Location.
Adjustments for Low Income Patients.
306 COST-BASED REIMBURSEMENT
Basic Principles of Cost-based Reimbursement
Understanding the Ratio of Costs to Charges.
Relationship of Medicare Costs to Costs Determined under Generally Accepted Accounting Principles (GAAP).
How Is Cost Reimbursement Used?
Reimbursement of Outpatient Services--before Implementation of the Outpatient Prospective Payment System (OPPS)
Ambulatory Surgery.
Reimbursement of Skilled Nursing Facilities (SNF)
Prospective Payment System (PPS) Exempt Hospitals and Units
Advantages of PPS Exemption.
PPS Exemption Criteria.
Reimbursement of Home Health Agencies
Outcomes and Assessment Information Set (OASIS).
Home Health Resource Groups.
HHRG Base Payment Amount.
Request for Anticipated Payment.
Low Utilization Payment Adjustments.
Partial Episode Payments.
Adjustment for Significant Change in Condition.
Outlier Payments.
Maximizing Medicare Cost Reimbursement
307 MEDICARE FEE SCHEDULE REIMBURSEMENT
What Is RBRVS?
Calculating Physician Reimbursement under RBRVS
Geographic Adjustments.
Conversion Factors.
Example Calculation.
Reimbursement of Radiology and Anesthesia Services.
Participating and Nonparticipating Physicians
Limiting Charges of Nonparticipating Physicians.
Physician Private Contracts with Beneficiaries.
308 THE COST REPORT PROCESS
Why Cost Reports?
Types of Cost Reports and Cost Report Filers.
Filing the Cost Report
Filing Deadlines.
Cost Report Software Vendors
Information Needed to Prepare the Cost Report
The Medicare Log.
Cost Report Worksheets.
Other Information Required to Be Filed
Amending Filed Cost Reports
Desk Review and Tentative Settlement
The Cost Report Audit Process
Desk Audits.
Field Audits.
The Auditor Adjustment Report.
The Final Settlement.
Requesting a Repayment Plan.
Final Settlement Appeals.
Appeal Procedures.
Reopening Settled Cost Reports
309 UNDERSTANDING MEDICARE PAYMENT PROCEDURES
Simplification of Standards
National Provider Identifiers.
Standard Formats for Electronically Transmitted Claims.
Standards Under HIPAA.
Billing Claim Forms
Filing Claims
Electronic Claims Filing.
Claims Processing over the Internet.
Claim Filing Deadlines.
Assignment of Claims.
Other Medicare Payment Considerations
Claims Reviews.
Coverage Determinations.
Payments to Providers and Suppliers.
Periodic Interim Payment (PIP) Method.
Medicare as a Secondary Payor.
Deductibles and Coinsurance.
Contractual Adjustments.
Calculating Interim Contractual Adjustments for Non-DRG Services.
Reserves for Open Cost Reports
Experience Method.
Item Method.
A Word of Caution.
Other Medicare Reporting Requirements
Credit Balance Reporting.
Ownership and Control Statement.
Provider Number Requests.
310 MEDICARE MANAGED CARE
Considerations for Non-HMO Physicians
Beneficiary Participation
The Future of Medicare Managed Care
311 RESEARCHING MEDICARE ISSUES
Resources Available
Code of Federal Regulations.
Federal Register.
CMS Manuals.
How to Obtain Federal Documents.
Comprehensive Information Services.
Other Sources of Information.
312 OTHER GOVERNMENT HEALTH CARE PAYORS
The Medicaid Program
TRICARE
Veterans Administration
Federal Employees
APPENDIX 3A: The Centers for Medicare and Medicaid Services Consortia and Regional Offices
APPENDIX 3B: Diagnostic Related Groups (DRG) Grouper Assignments--Example Complex Decision Tree
APPENDIX 3C: Selected Medicare Reimbursement Factors--Effective October 1, 2009
APPENDIX 3C-1: Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas by CBSA (Effective October 1, 2009)
APPENDIX 3C-2: Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas by CBSA (Effective October 1, 2009)
APPENDIX 3C-3: List of Medicare Severity Diagnosis-related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay (LOS)
APPENDIX 3C-4: Medicare Payment System Websites
APPENDIX 3D: Summary Descriptions of the Medicare Cost Report Worksheets
APPENDIX 3E: Example Notice of Program Reimbursement (NPR)--Medicare Cost Report
APPENDIX 3F: Example Centers for Medicare & Medicaid Services Patient Information and Billing Forms
APPENDIX 3F-1: HCFA Form 1450--Request for Payment of Services (Uniform Billing Form for Hospital and Home Health Services)
APPENDIX 3F-2: CMS Form 1500--Physician and Supplier Billing Form (Medicare Part B Services)
APPENDIX 3G: Medicare Credit Balance Report Certification and Medicare Credit Balance Report--CMS Form 838
APPENDIX 3H: MS-DRGs Paid as Transfers (Source: CMS)
CHAPTER 4: PROCEDURAL CODING AND BILLING
400 INTRODUCTION TO THE CODING PROCESS
Coding Methods
CPT Codes.
ICD-9-CM Codes.
HCPCS.
Diagnostic Related Groups.
The Role of the Practitioner
What This Chapter Covers
401 OVERVIEW OF CPT CODING AND BILLING
Why CPT Codes?
Payors That Require CPT Codes
Providers That Use CPT Codes
The Role of CPT Coding in Generating Revenue for a Medical Practice
Explanation of Benefits.
Patient Statements.
Where Are CPT Codes Stored in a Medical Practice?
The Master List.
The Charge Ticket--How Coding Information Is Captured.
CPT Coding and Billing Problems
CPT Coding Problems.
Other Billing Problems.
What Effect Will the Hospital Outpatient Prospective Payment System (OPPS) Have on Physician Reimbursement?
Who Should Assign CPT Codes?
The Provider Who Performed the Service.
Nursing Support Staff.
Coders.
Who Is Responsible for CPT Codes?
402 UNDERSTANDING THE CPT BOOK
Introduction
Sections
Section Guidelines.
Unlisted Services or Procedures.
Special Reports.
Modifiers.
Appendixes and Index
Appendix A.
Appendix B.
Appendix C.
Appendix D.
Appendix E.
Appendix F.
Appendix G.
Appendix H.
Appendix I.
Appendix J.
Appendix K.
Appendix L.
Appendix M.
Index.
How to Use the CPT Book
Symbols Used to Indicate Code Changes.
How to Read CPT Code Descriptions
Terminology Format.
403 EVALUATION AND MANAGEMENT (CODES 99201-99499)
Overview of E/M Categories
Office or Other Outpatient Services (Codes 99201-99215).
APPENDIX 6D-2: Fraud Alert--Routine Waiver of Copayments or Deductibles under Medicare Part B
APPENDIX 6D-3: Fraud Alert--Hospital Incentives to Physicians
APPENDIX 6D-4: Fraud Alert--Prescription Drug Marketing Schemes
APPENDIX 6D-5: Fraud Alert--Clinical Lab Services
APPENDIX 6D-6: Fraud Alert--Home Health Fraud
APPENDIX 6D-7: Fraud Alert--Fraud and Abuse in the Provision of Medical Supplies to Nursing Facilities
APPENDIX 6D-8: Fraud Alert--Fraud and Abuse in the Provision of Services in Nursing Facilities
APPENDIX 6D-9: Special Fraud Alert--Office of Inspector General--Fraud and Abuse in Nursing Home Arrangements with Hospices
APPENDIX 6D-10: Special Fraud Alert--Physician Liability for Certifications in the Provision of Medical Equipment and Supplies and Home Health Services
APPENDIX 6D-11: Fraud Alert--Rental of Space in Physician Offices by Persons or Entities to Which Physicians Refer Exhibit
APPENDIX 6D-12: Fraud Alert--Telemarketing by Durable Medical Equipment Suppliers
APPENDIX 6D-13: Special Advisory Bulletin--Gainsharing Arrangements and CMPs for Hospital Payments to Physicians to Reduce or Limit Services to Beneficiaries
APPENDIX 6D-14: Special Advisory Bulletin--Effects of Exclusion from Federal Health Care Programs
APPENDIX 6D-15: Special Advisory Bulletin--Practices of Business Consultants
APPENDIX 6D-16: Special Advisory Bulletin--Contractual Joint Ventures
CHAPTER 7: OTHER CONSULTING SERVICES
700 INTRODUCTION
701 CONDUCTING A PRACTICE MANAGEMENT REVIEW
Identifying Opportunities
Interviewing.
Communication Skills Used by Interviewers.
Observation.
Reviewing Documents.
Analyze Financial Performance
Accounts Receivable Analysis.
Fee Schedule Analysis.
Procedure Code Analysis.
Ratio Analysis.
Impact of Corporate Structure on Financial Performance.
Assess Operations Performance
Outsourcing Operations.
Benchmarking.
Assess Clinical Performance
Develop Recommendations
Communicate Problems and Make Recommendations
Report Format and Content.
Liability Considerations and Reporting.
Implement the Plan and Monitor Changes
702 DETERMINING A PROVIDER'S COST STRUCTURE
Introduction
Critical Requirements in Determining Cost per Procedure
Necessity of Accrual Basis Accounting.
Cost Components.
Which Costs Should Be Considered?
Which Procedures Should Be Costed?
How Frequently Are Procedures Performed?
Determining Cost per Procedure
Relative Value Units Method.
Ratio of Cost to Charges.
Time and Motion Studies.
Activity Based Costing.
Uses of Cost Structure Information
Analysis of Internal Service versus Outsourcing.
Developing a Budget to Monitor Performance.
Patient Management
Allocating Capitation Payments
703 VALUING A PHYSICIAN PRACTICE
Purchase or Sale of Entire Practice
Purchase or Sale of Partial Interest
Divorce
General Factors Affecting Practice Valuations
Payment Reform.
Changing Regulatory Environment.
Other Changes in the Health Care Industry.
Nature of Services Performed.
Nature of the Patient Base.
Typical Accounting Policies.
Value Heavily Dependent on Goodwill and Other Intangibles
Consolidation and Integration of Practices.
Data Gathering for Valuing a Physician Practice
Valuation Approaches and Methods
Electronic Valuation Resources.
Methods Using the Income Approach.
Methods Using the Market Approach.
Methods Using the Asset Based Approach.
Excess Earnings Method.
Which Method Should Be Used?
Discounted Future Cash Flow Method
Overview.
The Effect of Intangible Assets and the Regulatory Environment on Physician Practice Valuations
Professional versus Practice Goodwill.
Federal Anti-kickback Statutes.
Safe Harbors.
The Stark Laws.
Legal Counsel.
Treatment of Professional and Practice Goodwill in Divorce Valuations.
Professional Licenses.
Tax Considerations
Business Enterprise Value (BEV).
Considerations for Taxable Entities.
Revenue Rulings.
Guidelines of the Internal Revenue Service
Issuing the Valuation Report
A Final Word of Advice
Business Valuation Credentials
American Institute of Certified Public Accountants.
Institute of Business Appraisers.
National Association of Certified Valuation Analysts.
APPENDIX 7H: Normalized Net Income Worksheet--Physician Practice Valuation Engagement
APPENDIX 7I: Worksheet for Adjusting Forecasted Earnings to Net Cash Flow--Physician Practice Valuation Engagement
APPENDIX 7J: Discount and Capitalization Rate Worksheet--Build-up Method
APPENDIX 7K: Present Value Tables
APPENDIX 7L: The Thornton Letter
APPENDIX 7M: Selected Professional Practice Valuation Bibliography
GLOSSARY OF COMMONLY USED HEALTH CARE TERMS
Continuing Professional Education
CPE & Training Solutions
INDEX
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INTRODUCTORY MATERIAL
PREFACE
