As hospitals with a September 30th fiscal year end rapidly approach their Medicare cost report filing deadline, their finance departments should take heed as CMS continues to tighten the requirements for how costs may be reimbursed by Medicare.

In the November issuance of the final 2016 Outpatient Prospective Payment System (OPPS) update rule, CMS attempted to limit the seemingly endless litigation over whether the Provider Reimbursement Review Board (PRRB) has jurisdiction over costs not claimed on a provider’s cost report. Specifically, CMS has imposed a new standard that essentially mandates that an item must be claimed on a provider’s cost report in order to be reimbursed. In other words, if an item is not claimed on the cost report, then no payment is allowable for that item, either by the Medicare Administrative Contractor (MAC) in a Notice of Program Reimbursement (NPR) or by any reviewing body such as the PRRB or a court.

Disputes over non-claimed items typically arise when a hospital has failed to include certain Medicaid eligible days in its Disproportionate Share Hospital (DSH) payment calculation because such days were discovered only after the cost report was filed and an NPR was issued. Under CMS’s new regulation, a provider must either claim the item on the cost report or self-disallow the item by observing the requirements for protesting items.

The new regulation sets forth the requirements for properly protesting an item. The provider must report the protested item on the appropriate “protested amount” line of the cost report; attach a worksheet explaining why a self-disallowance is necessary; and, describe how it determined the estimated amount for each self-disallowed item.

However, all hope is not lost for providers who fail to include a particular item on a given cost report. Items not included on a cost report still might be allowed if the provider files an amended cost report or seeks a reopening within three years of filing the cost report. Although these two avenues are purely within the discretion of the MAC and offer no appeal rights for the provider, it is heartening that CMS recognizes that some Medicaid days (which are crucial to the Medicare DSH calculation) cannot be known at the time of filing the cost report. CMS has instructed MACs that they must accept one amended cost report that is submitted within 12 months of the cost report due date solely to update Medicaid eligible days after the hospital receives updated Medicaid eligibility information from the state. When the provider submits an amended cost report in such an instance, it must include an explanation of why the days could not be verified in the initial cost report. CMS also notes that a MAC should accept an amended cost report that reflects GME and IME adjustments from a prior or penultimate year that were made after the cost report was filed.

These revisions to the provider cost reporting requirements and appeals process place a further onus on providers to identify and preserve appealable issues as part of the cost report. Rather than engaging legal counsel to prosecute appeals at the PRRB and argue that the Board has jurisdiction over unclaimed items, providers may well be advised to get counsel involved at the time of preparing cost reports in order to preserve rights to Medicare reimbursement.