Medicare cost report data, considered among policymakers to be the definitive source of hospital financial data, is always rather stale by the time it's released. But this year, an extra 15-month delay means available cost report data is downright musty.
In fact, the latest information dates from 1999, a time when many hospitals and healthcare systems were feeling the full force of the Balanced Budget Act of 1997. With much of the industry well into a recovery, the 3-year-old data now seem more relevant to historians than policymakers.
The extraordinary delay stems from the implementation of a prospective payment system for outpatient services in August 2000 that was ordered by Congress. The Centers for Medicare and Medicaid Services extended deadlines for filing cost reports affected by the outpatient PPS to give itself time to prepare new data sets.
For example, cost reports for August and September 2000, which would have been due in February 2001, did not have to be filed until late May of this year. Subsequent reporting periods have deadlines this summer. Because of an anticipated processing backlog, fiscal 2001 data also are expected to be delayed by several months.
Surprisingly, there's been little outcry, probably because no one believes anything can be done to change the situation. Nevertheless, repercussions of the delay are being felt in many small ways throughout the industry.
Most significantly, the data gap has made it more difficult to gauge the precise impact of many significant changes in Medicare funding that have occurred since the balanced-budget law took effect, including Medicare reimbursement relief and outpatient prospective payment.
Though providers complain that the cost report has become an unnecessary burden since Medicare has shifted away from cost-based reimbursement and that it does not reflect hospitals' true costs of providing services, the cost report still is widely used for analysis. Other sources of data are available, but none is considered as comprehensive and reliable. Not only is cost report data audited, it also is required universally for hospitals that serve Medicare. In addition, data on individual providers are available to the public.
In March, the Medicare Payment Advisory Commission made its 2003 Medicare payment update recommendations after estimating three years of prior industry financial data, rather than the usual two years of estimates. MedPAC expects to be in a similar bind when it makes its next round of recommendations early next year.
"That's a lot of estimating, a lot of room for error," says MedPAC analyst Jack Ashby. "It will be a couple of years down the line before we can look back and see how much of a difference it's made (in accuracy)."
Financial analysts, lobbyists, managed-care companies, consultants and other trend-trackers also are working with a handicap.
"It's very difficult for everyone who deals with the healthcare industry not to have an official source of financial information," says Jean Chenoweth, a vice president at Solucient, an Evanston, Ill.-based healthcare information firm.
One of Solucient's key products, its annual Sourcebook, which contains regional data gleaned from cost reports, is at least 13 months behind schedule, Chenoweth says. The most recent Sourcebook should have been published last November. Also delayed is Solucient's annual list of 100 top hospitals, which uses financial data from cost reports.
Another well-known data and consulting firm, Cleverley & Associates based in Columbus, Ohio, has indefinitely postponed its State of the Hospital Industry report, which is normally published in the spring, says William Cleverley, the firm's president. "We have some audited financial statements from our clients, but our sample size isn't large enough (to produce a report)," Cleverley says.
Many hospital financial staffs plan to work overtime this year to complete both years' cost reports. Although the cost report delay has not slowed the flow of Medicare dollars to hospitals, it has delayed Medicare settlements-annual adjustments to facilities' payments-adding financial uncertainty for some hospitals.
"The disadvantage is, if you have a liability you might not be aware of it," says Dennis Fuller, director of reimbursement and tax accounting at Gainesville, Fla.-based Shands Healthcare. Fuller says it could be an issue particularly for hospitals that rely heavily on outpatient business, such as large rural facilities. He's particularly concerned about Shands' 80-bed Shands at Lakeshore in Lake City, Fla., which receives about half its revenue from outpatient procedures.
A reimbursement director at a hospital system in the Southwest who declined to be named says delays in knowing settlement amounts for two years running poses a financial risk for his institution, which receives cost-based reimbursement for inpatient rehabilitation services, medical education, disproportionate-share funding and some outpatient services. His hospital lost $1.4 million last year, and a large Medicare debt could hurt.
Although most observers say executives should be fairly sure of their final settlement amount, some still could be in for a surprise.
In a few cases, hospital cash flow has been affected. In Temple, Texas, 468-bed Scott and White Memorial Hospital expects to receive a $1.3 million payment from the military's Tricare program this summer, 18 months late. The payment is based on cost report data. "We still had it reflected on our financial statements for the past year," says Linda Burke, assistant executive director of research, education and reimbursement at the hospital.