What are the three key financial statements?

What are the three key financial statements?

by | Feb 12, 2024 | Budgeting, Financials

Financial statements record an agency’s financial activities and convey the agency’s financial health. Financial statements are often audited by accountants to ensure their accuracy and are prepared in accordance with a specific set of accounting rules called Generally Accepted Accounting Principles (GAAP). GAAP ensures that financial statements are consistent and comparable across agencies. 

In some instances, agencies are required to follow GAAP in preparing their financial statements. For example, the financial statements that are submitted with hospice cost reports must be prepared in accordance with GAAP.

An agency’s financial statements describe the results of the agency’s operations and provide information about the agency’s assets and liabilities, revenues and expenses as well as cash flow activities. Together, this information provides a picture of the agency’s financial health and activities and can be used to monitor agency performance over time. An agency’s financial statements can also be used to support decision-making.

There are three key financial statements

The three key financial statements are the balance sheet, the income statement, and the cash flow statement.

The balance sheet provides a snapshot of the agency’s financial health at a given point in time. It lists the agency’s assets and liabilities as of the last day of a specified period, also known as its capital structure. The balance sheet will usually be produced on a quarterly basis.

The income statement, also known as the profit and loss statement, provides information on all the agency’s revenue and expenses during a specified period. The income statement is usually prepared quarterly, often as an aggregation of internal monthly ledgers, and is used to review revenue and expenses over the period. Subtracting expenses from revenues results in the agency’s profit, also called the net income.  

The cash flow statement details cash inflow and outflow over a specified time period. Cash flow statements are generally prepared quarterly and are separated into operating activities, investment activities, and financing activities. The cash flow statement, which tracks how the agency uses its cash over a period of time to fund operating expenses and investments and pay off its debt obligations, provides a view of the agency’s liquidity and cash sources and uses, which can provide insight into the ability of the agency to generate sufficient cash to support its operations over the near- and long-term horizon.

How can an agency director use financial statements?

Financial statements are critical to assess the financial viability of an agency, its capital structure, income generation and cash flow needs.  Financial statements can also be used to measure the impact of initiatives on the agency’s bottom line. Compare direct expenses to revenue, as reported on the income statement. Did revenue increase? Were expenses reduced? How did the net income compare to expectations?

Financial statements also provide information on agency spend and cash flows and can provide insight into how cash uses are allocated. Periodically reviewing expenses, when necessary on a line by line basis from the relevant internal ledgers, can provide visibility into potentially unnecessary costs and areas where expenses can be reduced and spend can be reallocated to more productive areas.

Analysis of financial statements can provide an overall agency view of revenue and expenses, identifying how different areas in the agency are contributing to overall financial performance.  This can support discussions with different area leads on goals and budgeting and helps management reassess overall agency performance. Financial statements can also be used to motivate and engage the agency’s teams. The income statement can show employees how their activities impact revenue, providing them with an understanding of how they can directly impact agency financial health. Remember, only a financially strong agency can deliver improved patient services and higher quality of care.

Where can you find out more?

Financial statements as a management tool

Business owner perspective on financial statements

Medicare Credit Balance Report

by | Sep 29, 2022 | Billing, Billing - General, Compliance and Regulatory - Directors, Financials, Rules and Regulations - Office Team

What is Medicare credit balance?

A Medicare credit balance represents a Medicare overpayment to a provider due to patient billing error or claims processing error that must be refunded to Medicare.  The report is referred to as a Credit Balance Report because when a provider receives excess payment for a claim that was submitted, this is typically reflected in the provider’s accounting records (i.e., in the patient account receivable) as a “credit.”

What instances may give rise to a credit balance?

Different situations may give rise to a Medicare overpayment. For example:

  • Paid twice by Medicare or may be paid by Medicare and by another insurer for the same service
  • Incorrect calculation of patient deductible or patient coinsurance amount
  • Paid for non-covered services
  • Billed at incorrect daily rate

Which hospice agencies must file a Credit Balance Report?

If a hospice provider has more than one provider number, a separate report must be submitted for each provider number.  Providers who have a low utilization (i.e., determined by the intermediary that they should file a low utilization Medicare cost report) or who file less than 25 Medicare claims per year are not required to file a Medicare Credit Balance Report.

What does a credit Balance Report Consist of?

The Credit Balance Report consists of two pages. The first page is a Detail Page, where the hospice provider enters information about each credit balance, on a claim by claim basis. Once a claim has been reported on one Credit Balance Report it should not be reported again on a subsequent Credit Balance report. The second page is a Certification Page. All providers must complete the Certification Page.  The Detail Page is only required if the provider has credit balances to report.

The Detail Page

On this page, the provider must include detailed information about each Medicare claim with a credit balance, explanation  why the credit balance arose, and indicate whether the credit balance is being repaid with the filing of the report.

The Certification Page

The second page of the Credit Balance Report is a certification page. Facilities that do not have any credit balances in a quarter are only required to submit the signed certification page. There are key areas of this page.

  • The first area serves as a reminder that there is a requirement to file a Credit Balance Report and failure to file this report will result in suspension of Medicare payments. Further, any misrepresentations may lead to fines and further penalties
  • The second area requires an officer or administrator of the hospice agency to sign a certification that that Credit Balance Report is true and accurate
  • The third area requires a selection from one of three choices: (i) provider qualifies as Low Utilization Provider (ii) Detail Page included with Report (iii) no credit balances to report

When is the report due?

A hospice provider must assess any Medicare credit balances on a quarterly basis and must report any identified Medicare credit balances within 30 days of the end of each calendar quarter. The Medicare Credit Balance Report due dates are as follows:

Quarter Ending Due Date
March 31 April 30
June 30 July 30
September 30 October 30
December 31 January 30

What happens if a provider fails to submit a Credit Balance Report?

Failure to submit a Credit Balance Report by the 15th calendar day after the report due date will result in a Suspension Warning letter. If the completed report is not received within 15 calendar days from issuance of the letter, Medicare payments to the provider are suspended under a completed letter is received, accepted, and processed.

Where can you find a Credit Balance Report form?

The Credit Balance Report that must be completed and submitted is Form CMS-838, which can be found here: Medicare Credit Balance Form (pdf)

Timely filing of Notice of Election

Timely filing of Notice of Election

by | Sep 12, 2022 | Billing, Billing - General, Compliance and Regulatory - Directors, Documentation - Nurses, Financials, Intake, Medical Records, Notice of Election

The Notice of Election (NOE) is more than a clinical administrative task; it is a critical financial trigger. In the hospice revenue cycle, the NOE serves as the formal notification to Medicare that an agency has assumed responsibility for a patient’s care. Failure to file this document within the mandatory window results in permanent, unrecoverable revenue loss.

The Standard for Timely Filing

Medicare regulations require that an NOE be filed within five calendar days after the beneficiary’s hospice admission date. For a filing to be considered legally “timely,” it must meet two specific criteria:

  • Receipt Date: The NOE must be received by the Medicare contractor within five calendar days after the admission date.
  • Processing Status: The NOE must successfully process and reach the final status/location P B9997.

The Cost of Non-Compliance

When an NOE is filed late, the financial consequences are immediate. Medicare will not reimburse the agency for the days of care provided from the date of admission until the date the NOE is finally submitted and accepted.

Consider this example of a late filing:

  • Admission Date: May 1st
  • NOE Receipt Date: May 10th
  • The Result: The agency is responsible for the cost of care from May 1st through May 9th. These nine days are considered “non-covered” and represent a 100% loss of revenue for that period.

The “RTP” Trap: Resubmissions and Timeliness

One of the most common drivers of revenue loss is the Return to Provider (RTP) error. If an NOE is submitted within the five-day window but contains errors, it will be sent back for corrections.

It is critical to understand that the resubmission date becomes the new “receipt date” for timeliness purposes. Even if your initial attempt was on day two, if the corrected version isn’t accepted until day ten, the entire period remains non-covered. This is why “clean” initial submissions are just as important as “fast” submissions.

Operational Requirements for Late Filings

If an agency identifies that an NOE was filed untimely, the subsequent claim must be coded specifically to reflect the non-covered period. This is not optional; failure to code correctly can lead to claim rejections or audits.

  • Occurrence Span Code (OSC) 77: This must be used on the claim to identify the specific dates that are non-covered due to the late NOE.
  • Dual-Line Billing: The claim must be split into two distinct rows: one for the non-covered days (associated with OSC 77) and one for the covered days following the NOE acceptance.

Leadership Strategy: Moving to a 48-Hour Standard

To eliminate the risk of late filings, high-performing agencies do not aim for the five-day deadline. Instead, they implement an internal 48-hour submission rule.

By requiring NOEs to be filed within two days of admission, leadership creates a “buffer” to handle unexpected RTP errors or technical issues with the billing software. This proactive operating rhythm ensures that administrative delays never compromise the agency’s financial stability or the clinical team’s ability to focus on patient care.

What is a MAC?

What is a MAC?

by | Sep 12, 2022 | Billing, Billing - General, Compliance and Regulatory - Directors, Financials, Metrics and KPIs, Office Setup, Rules and Regulations - Nurses

A Medicare Administrative Contractor (MAC) is a private health care insurer that has been awarded a geographic jurisdiction to process Medicare Part A and Part B medical claims for Fee For Service (FFS) beneficiaries.

CMS relies on these contractors to serve as the primary operational contact between the Medicare FFS program and the health providers enrolled in the program.

MACs are multi-state regional contractors who are responsible for administering Part A and Part B claims.

What types of MACs are there?

There are two types of MACs: Part A/B MACs and DME MACs. 

Hospice claims are administered by Part A/B MACs. Part A/B MACs process about 95% of all FFS claims. 

There are 12 Part A/B MACs. 

Four of the MACs specialize in processing claims for hospice and home health providers

 

What geographic areas do each of the hospice and home health MACs cover?

The following map shows the geographic regions that each of the hospice MACs is responsible for administering.

What activities do MACs perform?

MACS perform a number of activities including:

  • Provider Enrollment
  • Claims processing, payment, and payment notices
  • Provider customer service (but not beneficiary customer service)
  • Audit provider cost reports
  • Respond to provider inquiries
  • Audit payments and review medical records

How are MACs measured and how well do they perform?

Each year, CMS evaluates MAC performance against specific metrics in eleven functional areas. MAC performance quality has been consistently improving since CMS began measuring MAC performance. Average MAC performance has increased from 62% to 93% since CMS began measuring MAC performance.

Print ‘n take hospice keys

  • Seeking to contact your MAC? Here’s their contact information

hospiceKeys - CMS MAC contact


Download

  • A map of MAC regional jurisdictions

hospiceKeys - CMS MAC


Download

Where can you find more information?

This PowerPoint from Medicare Learning Network provides more helpful information about MACs: MLN MAC PowerPoint

Unusual Circumstances: Face to Face Encounters

Unusual Circumstances: Face to Face Encounters

by | Aug 4, 2022 | Billing, Billing - General, Compliance and Regulatory, Compliance and Regulatory - Directors, Documentation - Nurses, Financials, Intake, Patient Care, Rules and Regulations - Nurses, Rules and Regulations - Office Team

Prior to the third hospice benefit period, and prior to each subsequent benefit period, a hospice physician or nurse practitioner is required to have a face to face encounter with the hospice patient to recertify that the patient continues to be Medicare eligible for hospice benefits.  The face to face encounter must occur within 30 calendar days prior to the start of the third benefit period and each subsequent benefit period.

The face to face encounter is necessary to recertify that the patient remains eligible for Medicare hospice benefits. If face to face encounters are not performed timely, the patient is is no longer hospice eligible. The hospice may continue to provide hospice services to the patient but may no longer continue to bill Medicare. Instead, the hospice would need to assume all financial responsibility for the patient until such time that the hospice is able to reestablish patient hospice eligibility. The patient may be readmitted to hospice once hospice eligibility criteria are once again met.

What if there are exceptional circumstances that cause the hospice to be unable to timely complete the face to face encounter?

What are exceptional circumstances?

If a patient is admitted and is in the third benefit period or later, the hospice agency may be unable to perform the face to face encounter prior to the start of the benefit period.

For example, if the patient is an emergency weekend admission and the nurse practitioner or hospice physician is unable to meet with the patient prior to hospice admission. The patient is only seen the following Monday.

Another exceptional circumstance may be where the CMS data system is unavailable and the hospice agency is unaware that the patient is in the third or later benefit period.

In these documented exceptional circumstances, the face to face encounter is considered timely if it is completed within two days after admission.

In addition, if the patient dies within two days of admission, the face to face encounter is considered complete.

Where can you get more information?

Details on Medicare Face to Face encounter requirements: Medicare F2F encounter requirements