Client Alert: CMS Signals Openness to Updating Skilled Nursing Facility Cost Reporting Guidance Based on OIG Report
Date: January 13, 2025
By:
Kyle R. René
Requirements for Reporting/Adjusting for Related-Party Costs
As the OIG explains in its Report, an organization is considered “related” to a provider under 42 C.F.R. § 413.17(b) if “the provider to a significant extent is associated or affiliated with or has control of or is controlled by the organization furnishing the services, facilities, or supplies.” Costs associated with related-party services, facilities, or supplies are not considered “allowable” for Medicare cost-reporting purposes to the extent that they exceed the price of comparable services, facilities, or supplies that could be purchased elsewhere. Although SNFs are not reimbursed on a cost basis, failing to account for related-party costs in a Medicare cost report can impact reimbursement to the extent that Medicare uses the cost report to establish future reimbursement rates for individual facilities (for example, under the SNF Prospective Payment System). As the Report highlights, failure to adequately account for related-party costs can result in a SNF’s costs being overstated, which may impact future reimbursement to the facility.
OIG Recommendations to CMS and CMS’ Response
Based on its findings, OIG made the following recommendations to the Centers for Medicare & Medicaid Services (“CMS”):
- Require Medicare Administrative Contractors (“MACs”) to include, as part of the normal desk review or audit process, a review of reporting and disclosure of related-party costs;
- Develop and implement guidance for SNFs on the appropriate methods for providers to determine their allowable related-party costs; and
- Provide guidance to reeducate MACs on the need to review, grant, and document requests from skilled nursing facilities for exceptions to cost reporting requirements in compliance with 42 C.F.R. § 413.17(d).
CMS responded, disagreeing with the first recommendation and highlighting that cost reporting does directly impact reimbursement to a skilled nursing facility. However, CMS concurred with the remaining recommendations above.
What This Means for Providers
The OIG report follows a pattern among regulatory bodies to require detailed reporting and disclosures from facilities concerning their operations, ownership, and the parties with which they are affiliated and contracted. Other examples from recent years include:
- Rules implemented in 2019 requiring disclosure of certain relationships among Medicare participating providers and third parties that have been excluded/suspended from federal health care programs, had their Medicare billing privileges denied/revoked, or that owe money to a federal health care program;
- Rules implemented in early 2024 requiring nursing homes to disclose substantial information about their ownership and control structures, including with respect to entities that lease property used to operate a nursing home; and
- The implementation and continuing evolution of CMS’ Skilled Nursing Facility Quality Reporting Program.
Given CMS’ agreement regarding the potential development of expanded guidance on facility cost reporting and allowable related-party costs, SNF providers are encouraged to monitor for and review any such guidance from CMS once it is issued. SNF providers may also wish to review their cost reporting processes to ensure they are accurately capturing and accounting for related-party costs as highlighted by the OIG.
If you need guidance on Medicare cost reporting rules and compliance, or if you have questions about any of the other reporting and disclosure requirements noted above, please contact krene@whitefordlaw.com.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.