1. Cost Reporting Presented by Bill Lubaway Paul Evers Lubaway, Masten & Co. Doug Horner St. Mary’s of Michigan 2012 Annual Insurance & Reimbursement Update Eastern Michigan Chapter HFMA March 22, 2012

2. Agenda I.Overview II.Who Cares? III.Worksheets IV.Real Job Description V.Audit Issues VI.Wrap Up

3. Who Cares? 1.CMS uses the information submitted by hospitals in the aggregate to set future payment rates & as a basis for market basket updates. 2.Hospital specific information impacts certain payment factors (wage index, outlier RCC). 3.Each year could potentially be used as a base year for a future change in payment regulations. 4.Medicaid & BCBSM use for rate setting.

4. Who Cares? Blues Care 1.The Blue Cross Full Cost Model -Currently rebasing 2013 based on 2010 2.Piggybacks on the Medicare cost report 3.Uses Full Cost Method reimbursement principles as defined by Blue Cross 4.To calculate inpatient and outpatient rates

5. Cost Finding Objectives 1.Determine reimbursable cost 2.Establish full cost for rate setting 3.Provide management information such as profitability of services

6. Cost Finding Process 1.Gather revenue and expenses by department from general ledger and departmental statistical reports. 2.Make reclassifications to match expense to revenue. 3.Adjust to regulations vs. accounting differences, offset other revenue and eliminate non-allowable costs. 4.Allocate overhead cost centers to revenue producing departments. 5.Allocate cost to program.

7. Worksheet S-10

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9. Real Job Description includes 1.Bad debts 2.Wage Index-pension & contract labor issues 3.Medical Education 4.Disproportionate Share 5.Case Mix Index 6.Value Based Purchasing 7.Readmissions 8.Transfers 9.HIT

10. Provider Number Name CMI 2007 CMI 2010 Actual - Assumed 6.1% 230089BON SECOURS HOSPITAL 1.34 1.42-0.1% 230151BOTSFORD GENERAL HOSPITAL 1.36 1.40-2.7% 230279BRIGHTON HOSPITAL 0.66 0.7811.9% 230259CHELSEA COMMUNITY HOSPITAL 1.27 1.478.9% 230135COTTAGE HOSPITAL 1.53 0.99-41.4% 230254CRITTENTON HOSPITAL MEDICAL CENTER 1.51 1.59-0.7% 230273DETROIT REC HOSP & UNIV HLTH CENTER 1.52 1.54-4.9% 230230EDWARD W SPARROW HOSPITAL ASSOCIATION 1.53 1.47-9.7% 230244GARDEN CITY HOSPITAL 1.47 1.42-9.8% 230197GENESYS REGIONAL MEDICAL CENTER 1.58 1.754.6% 230104HARPER UNIVERSITY HOSPITAL 1.61 1.69-1.6% 230275HEALTHSOURCE SAGINAW 0.59 0.62-1.4% 230204HENRY FORD BI-COUNTY HOSPITAL 1.34 1.463.0% 230053HENRY FORD HOSPITAL 1.67 1.73-2.4% 230146HENRY FORD WYANDOTTE HOSPITAL 1.41 -6.0% 230132HURLEY MEDICAL CENTER 1.44 1.604.5% 230277HURON VALLEY-SINAI HOSPITAL 1.42 1.595.4% 230297KARMANOS CANCER CENTER 1.70 1.905.3% 230193LAPEER REGIONAL MEDICAL CENTER 1.31 1.401.0% 230141MCLAREN REGIONAL MEDICAL CENTER 1.62 1.68-2.6% 230031MERCY HOSPITAL - PORT HURON 1.40 1.522.6% 230099MERCY MEMORIAL HOSPITAL 1.20 1.24-3.1% 230227MOUNT CLEMENS GENERAL HOSPITAL 1.51 1.58-1.6% 230013NORTH OAKLAND MEDICAL CENTERS 1.36 1.34-7.4% 230142OAKWOOD ANNAPOLIS HOSPITAL 1.27 1.415.2% 230270OAKWOOD HERITAGE HOSPITAL 1.29 1.445.2% 230020OAKWOOD HOSPITAL AND MEDICAL CENTER -DEARBORN 1.73 -5.9% 230176OAKWOOD SOUTHSHORE MEDICAL CENTER 1.31 1.454.4% Case Mix Index

11. Provider Number Name CMI 2007 CMI 2010 Actual - Assumed 6.1% 230207POH MEDICAL CENTER 1.39 1.45-2.4% 230216PORT HURON HOSPITAL 1.52 1.49-8.1% 230019PROVIDENCE HOSPITAL 1.68 1.66-7.5% 230069SAINT JOSEPH MERCY LIVINGSTON HOSPITAL 1.18 1.21-3.6% 230212SAINT JOSEPH MERCY SALINE HOSPITAL 0.99 1.01-4.3% 230059SAINT MARY'S HEALTH CARE 1.57 1.670.2% 230024SINAI-GRACE HOSPITAL 1.75 1.69-9.7% 230264SOUTHEAST MICHIGAN SURGICAL HOSPITAL 1.90 2.209.7% 230165ST JOHN HOSPITAL & MEDICAL CENTER 1.73 1.68-9.1% 230195ST JOHN MACOMB HOSPITAL 1.47 1.55-0.6% 230257ST JOHN NORTH SHORES HOSPITAL 0.97 0.99-4.3% 230241ST JOHN RIVER DISTRICT HOSPITAL 1.21 -5.4% 230156ST JOSEPH MERCY HOSPITAL 1.63 1.68-2.6% 230029ST JOSEPH MERCY OAKLAND 1.64 1.73-0.5% 230047ST JOSEPH'S MEDICAL CENTER 1.43 1.563.3% 230002ST MARY MERCY HOSPITAL 1.31 1.400.6% 230077ST MARY'S OF MICHIGAN MEDICAL CENTER 1.90 1.89-6.6% 230071STRAITH HOSPITAL FOR SPECIAL SURGERY 1.03 1.2414.0% 230046UNIVERSITY OF MICHIGAN HEALTH SYSTEM 1.91 1.98-2.3% 230092WA FOOTE MEMORIAL HOSPITAL 1.36 1.43-0.9% 230130WILLIAM BEAUMONT HOSPITAL 1.75 1.73-7.1% 230269WILLIAM BEAUMONT HOSPITAL-TROY 1.50 1.45-10.0% Average 1.44 1.49-2.3%

12. Audit Issue – Medicare sampling 1.Medicare uses one of the most punitive and harsh sampling methodologies. 2.There are 3 levels of errors that may be applied against a sample: a)Most Likely Error b)Upper Error Limit c)Upper Error Limit plus the basic precision 3.The method used is based on auditor discretion. 4.It is important to receive the sampling error worksheets so you can determine how the adjustment was reached.

13. Stratified Sample

14. Random Listing

15. Calculation of Error

16. Karmanos Komen Race for the Cure May 26, 2012