COST REPORT PITFALLS

COST REPORT PITFALLS

 

LUTZ BUSINESS INSIGHTS

 

cost report pitfalls

kirk delperdang, healthcare director

 

Matching Principle for Cost and Charges, including Updating Revenue Code Crosswalk

A guiding principle of Medicare cost report preparation is matching – comparing Medicare charges by revenue code to total revenues recorded in the general ledger to the expenses incurred in providing the services generating these revenues. The Medicare cost report must be prepared by matching costs and charges by cost report cost center. Essentially, the department used to record the revenues from a service provided needs to match the same department in which the expenses are recorded.

One useful tool to assist in this process is to review and update your Revenue Code Crosswalk on an annual basis. The crosswalk is a list of all revenue codes utilized to bill for services provided during the year and the department in which the charge is recorded on the general ledger. As simple as this may sound, it can get complicated on the cost report. How do you account for the expenses related to a single revenue code that is recorded in several departments? How do you ensure expenses are being recorded to the same department as the revenue?

If there is a situation in your general ledger in which costs do not match revenues, this will result in either an A-6 expense reclassification or a reclassification of charges on worksheet C, or both. In the world of Medicare cost reports and reimbursement, this is the ultimate matching game.    

 

CRNA

It’s that time of year for facilities to fill out the required information to retain their exemption to the Certified Registered Nurse Anesthetist (CRNA) Fee Schedule and remain cost reimbursed. Be sure to meet the deadline mentioned in your letter and retain proof the documentation was sent in on or before the December 31st deadline.

Under the provisions at 42 CFR 412.113(c), “Payment is determined on a reasonable cost basis for anesthesia services provided in the hospital or CAH by qualified nonphysician anesthetists (certified registered nurse anesthetists and anesthesiologist’s assistants) employed by the hospital or CAH or obtained under arrangements”. It is the CAH’s responsibility to supply all supporting documentation to determine if the qualifications are met.

Qualifications:

  1. Employ or contract with a qualified nonphysician anesthetist(s) to perform services in that hospital/CAH that does not exceed one FTE per year.
  2. The volume of surgical procedures with anesthesia services does not exceed 800 procedures.
  3. In writing, each qualified nonphysician anesthetist has agreed not to bill on a fee schedule basis for the patient care to Medicare beneficiaries.

If the MAC completes an audit of the nonphysician anesthetist reimbursement and the hospital has not met the requirements during the cost reporting period, the MAC will exclude all costs, charges, and Medicare charges related to CRNA services, disallowing all cost reimbursement for CRNA services in that period.

Examples of CRNA documentation that may need to be submitted include copies of CRNA contracts, documentation of total hours worked at the hospital, a log of all surgical procedures performed during the specified time period, and a signed agreement by each CRNA not to bill on a fee schedule basis for patient care.

Also, if your facility qualifies for the CRNA exemption services, these charges are submitted on the UB-04 using revenue code 964 and the appropriate CPT code for the service rendered.

 

Allocation of Physician Time and RHC (Rural Health Clinic) Time Tracking

Accurate and complete timekeeping for practitioners (MDs, PAs, NPs) is of the utmost importance in a CAH/RHC environment. Shoddy and improper records can cost you reimbursement on the Medicare cost report. Auditable records must be kept to allocate the time for these practitioners amongst the various services they are providing.  These hours are directly tied to Medicare reimbursement dollars in an RHC environment when you consider the CMS productivity standards that must be met. If not met, your RHC is leaving Medicare dollars on the table.

 

Provider-Based Physicians

On the Medicare cost report, the time and cost physicians spend in direct patient care activities must be offset on worksheet A-8-2 and removed from allowable costs. These situations require either actual time records or valid time studies in addition to a written allocation agreement. Conducting a valid time study in this scenario helps facilities track how much time the providers are spending directly related to patient care. Absent these items, Medicare may offset the entire ER physician cost instead of only the cost associated with time directly related to patient care. This issue is an area of emphasis from CMS and the MACs. Work with your cost report preparer to ensure you are properly prepared to submit this data on your cost report.

If you have any questions, please contact us learn more about our healthcare services.

ABOUT THE AUTHOR

402.496.8800

kdelperdang@lutz.us

LINKEDIN

KIRK DELPERDANG + HEALTHCARE DIRECTOR

Kirk Delperdang is a Healthcare Director at Lutz with over 28 years of experience. He provides healthcare enrollment services to clients with a focus on Medicare providers and reimbursement analyses. In addition, he is responsible for leading Lutz's cost report service line.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • Healthcare Financial Management Association - Nebraska Chapter, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
EDUCATIONAL BACKGROUND
  • BA in Accounting, University of Northern Iowa, Cedar Falls, IA
COMMUNITY SERVICE
  • St. Vincent de Paul, Knights of Columbus, Member
  • Active in various youth sports leagues: Aldrich Elementary, Millard Athletic Association, Millard North Schools, Omaha FC, Skutt Catholic High School and YMCA

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11.10.21 | Non-Profit Tax Update + Form 990 | Webinar

11.10.21 | Non-Profit Tax Update + Form 990 | Webinar

 

LUTZ BUSINESS INSIGHTS

 

AM I READY TO SELL MY BUSINESS?

Non-Profit Tax Update + Form 990

11.10.21 | 11:30AM – 12:30PM | Webinar

Even though tax-exempt nonprofits do not pay federal taxes, they do have to file an information form with the IRS. Form 990 makes sure that nonprofits conduct their business in a way that is consistent with their public responsibility. In this presentation, Deyna Rouse and Hannah Goscha will cover Form 990, as well as other hot topics currently seen in the Not-For-Profit industry.

Key Takeaways:

  • Form 990 Overview
  • Not-For-Profit Form 990 Filing Requirements
  • Nebraska Sales and Use Tax Updates for Not-For-Profits

Who Should Attend: Professionals in the Non-Profit Industry, Non-Profit Board Members

Seminar Level: Beginner

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6 Bookkeeping Tips to Keep Your Private Practice Healthy

6 Bookkeeping Tips to Keep Your Private Practice Healthy

 

LUTZ BUSINESS INSIGHTS

 

6 BOOKKEEPING TIPS TO KEEP YOUR PRIVATE PRACTICE HEALTHY

6 bookkeeping tips to keep your private practice healthy

erin baas, cas director

 

Physicians play a crucial role in helping patients stay healthy, avoid chronic diseases, and recover from health crises. That calls for elaborate planning, consultations, follow-ups, and goal setting. 

Applying the same strategy to your business can keep your private practice in excellent financial health. Proper bookkeeping is central to the practice’s financial wellbeing. It provides a clear picture of the practice’s financial status to help set and meet your goals while avoiding crippling financial mistakes. 

Here are six crucial bookkeeping tips to ensure a healthy cash flow for your private practice. 

1. Separate Business and Personal Finances 

Once you’ve registered a private practice, it becomes an entity governed by different rules and is scrutinized by the IRS. As such, it is important to maintain a separate bank account and credit card for the business. Charging personal expenses to the business may create friction between partners and lead to cash flow problems. It could also lead to bookkeeping issues, triggering an audit by the IRS. 

Be sure to set clear guidelines on how to approach this issue from the onset. You may choose to write off personal expenses as partner bonuses or distributions. Or make it clear from the beginning that the practice does not pay for personal expenses. 

2. Review Financial Statements Regularly 

In addition to your medical duties, you should set aside time to review your monthly financial statements. Be sure to examine both the income statement and the balance sheet. 

Like a patient’s progress reports, your balance sheet offers deep insights into the practice’s financial health. It shows current cash position, debt balances, fixed assets, and equity investment in real-time. 

On the flip side, an income statement reflects financial performance over time. It can help you compare your current position with past performances and determine the progress you’re making. A skilled CPA can assist you with proper bookkeeping.

A review of your financial statements helps you spot business trends and identify your strengths and weaknesses. You can take corrective measures to remedy shortcomings, play up your strengths, and adjust your goals to collect on the upcoming trends. 

3. Review Account Receivables Monthly 

Unlike other business operations, medical practices don’t always get their invoices paid in full. Bad debts and professional courtesy often lead to charge-offs that affect the accounts receivable. Reviewing the accounts receivable report shows the relationship between your service billing and revenue received. 

Proper bookkeeping offers insights into the collection percentage and times. A clear picture of these two metrics can help you avert a future cash crunch. It also provides clear insights into the actual value of outstanding collections. 

Examining your aging accounts receivable by insurance payer can help you determine if there’s an issue with a given insurance provider. You can then follow up with their care coordinators to mitigate the problem. Reviewing accounts receivable allows you to refine your billing department’s performance for efficiency and increase collections. 

4. Keep Detailed Internal Production Reports 

Keeping an eye on the monthly revenue is great, but understanding the revenue generation process is more crucial. That’s where internal production reports come in. They offer insights into the flow of patients, procedures performed, and the insurance plans the patients use. 

These reports can also help track physician output. It lets you keep an eye on patient acquisition, daily performance, and popularity with patients. The data makes it easy to determine productivity among your staff and quickly take corrective measures when needed. 

Production reports come in handy when negotiating health care contracts and determining distribution bonus amounts. You can confidently show the number of patients you can handle and the type of services you can provide. More importantly, internal reports highlight your best performers – procedures, physicians, and insurance payers. 

5. Refine the Income Distribution Method 

Like any other business, a medical practice has predictable fixed costs like rents and utilities. Variable costs, including salaries and medical supplies, take up the lion’s share and aren’t as easy to predict. Having an apt income distribution method lets you meet your monthly expense obligations.

The best approach entails associating incoming revenue with the generated costs. That could mean allocating revenue to work performed, including cash revenue, charges, and relative value units. Your revenue distribution method must account for the diversity in procedures and schedule. This allows you to come up with competitive compensation plans that help attract and retain top talent.

6. Hire an Accounting Expert 

As mentioned earlier, accurate financial records are essential when running a medical practice. The data associated with accurate financial records helps to determine your market position and improves your negotiating powers. It lets you profile your patients, their insurance companies, and employee performance. 

Collecting and reconciling detailed financial records can be a grueling job, and it eats into your main duties as a physician. Seeking professional help frees up your time and keeps your practice in excellent financial health. It allows you to focus on what you do best, caring for patients.

An experienced accounting firm will compile the raw data into detailed but easy-to-understand reports. They can assist you with monthly financial statements, internal production reports, compiling and analyzing key performance indicators, and more.

Professionally prepared financial reports let you understand your financial position at a glance. It makes running your private practice go as smooth as possible while shielding you from potential financial mistakes. Like staying healthy, running a sound private practice boils down to consistent, good financial habits and seeking professional advice.

If you need an experienced accounting firm to help you keep your books, please contact us. You can also learn more about our healthcare and bookkeeping services or read related articles on our healthcare blog or outsourced accounting blog.

ABOUT THE AUTHOR

Erin Baas + Lutz CAS & Healthcare Manager

402.827.2045

ebaas@lutz.us

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ERIN BAAS + CAS DIRECTOR

Erin Baas is a Client Accounting Services Director at Lutz with over 15 years of experience. She provides business accounting and advisory services to a wide variety of industries with a special focus in private physician medical practices.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • American Institute of Certified Public Accountants, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Nebraska Medical Group Management Association, Member
  • Certified Public Accountant
EDUCATIONAL BACKGROUND
  • BSBA in Accounting, Creighton University, Omaha, NE
COMMUNITY SERVICE
  • Nebraska Wildlife Rehab, Treasurer

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Lutz adds Staff Accountants to Omaha, Grand Island and Hastings Offices

Lutz adds Staff Accountants to Omaha, Grand Island and Hastings Offices

 

LUTZ BUSINESS INSIGHTS

 

Lutz adds staff accountants to Omaha, Grand Island and Hastings Offices

Lutz, a Nebraska-based business solutions firm, recently added seven staff accountants to its Omaha, Grand Island and Hastings offices.

Elizabeth Czarnick joins the accounting department in Lutz’s Grand Island office. She is responsible for the preparation of individual and business income tax returns and providing credibility to clients through financial reporting. Czarnick previously interned with Lutz during tax season 2021. Elizabeth graduated from the University of Nebraska-Kearney with a Master’s degree in accounting.

Kelsey Folkers joins the firm’s tax department in Lutz’s Omaha office. She is responsible for preparing individual and business income tax returns, as well as providing general accounting assistance to clients in a variety of industries. Folkers previously interned with Lutz during tax season 2019, 2020 and 2021. Kelsey graduated from the University of Nebraska-Lincoln with a Master’s degree in accounting.

Thomas Geiger joins the accounting department in Lutz’s Grand Island office. He is responsible for providing credibility to clients through financial reporting and arranging income tax returns. Geiger previously interned with Lutz during tax season 2019. Thomas graduated from the University of Nebraska-Kearney with a Bachelor’s degree in accounting.

Alex Hower joins the firm’s healthcare department in Lutz’s Omaha office. His primary responsibility is to work with clients to prepare accurate monthly financial statements and cost reports. In addition, he will provide general accounting and consulting assistance. Hower graduated from the University of Nebraska-Omaha with a Bachelor’s degree in accounting and history.

Robin Maher joins the firm’s healthcare department in Lutz’s Omaha office. She is responsible for providing accounting and consulting services to healthcare organizations with a focus on outsourced accounting services and cost reports. Maher previously interned with Lutz during tax season 2019 and 2020. Robin graduated from the University of Nebraska-Lincoln with a Master’s degree in accounting.

Alyssa Miller joins the accounting department in Lutz’s Grand Island office. She is responsible for providing credibility to clients through financial reporting and preparing individual and business income tax returns. Miller previously interned with Lutz during tax season 2020 and 2021. Alyssa graduated from the University of Nebraska-Kearney with a Bachelor’s degree in accounting.

Dallas Yates joins the accounting department in Lutz’s Hastings office. He is responsible for preparing individual and business income tax returns. In addition, he will provide credibility to clients through financial reporting. Yates previously interned with Lutz during the summer and tax season 2019 and 2020. Dallas graduated from the University of Nebraska-Kearney with a Master’s degree in accounting.

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Managing S-Corp Entities to Maximize Tax Benefits

Managing S-Corp Entities to Maximize Tax Benefits

 

LUTZ BUSINESS INSIGHTS

 

managing s-corp entities to maximize tax benefits

austin sabaliauskas, senior accountant

 

Lower tax obligation is one of the many advantages of establishing a business as an S-Corporation. Also known as an S-Corp, this business entity is taxed under the Subchapter S of the Internal Revenue Code. An S-Corp allows shareholders to report income and loss as personal income and pay taxes at their standard tax rates. Primarily, S-Corps help owners to avoid double taxation.

As legal business entities, S-Corporations are governed by state corporation laws but must observe numerous internal formalities and practices. Strict adherence to these rules is crucial to harnessing the tax advantages. Here are a few key insights to help you maximize tax benefits when managing an S-Corporation.

 

Proper Book and Record-Keeping

Proper bookkeeping is at the heart of a successful S-Corporation. User-friendly accounting solutions such as QuickBooks allow you to track your expenses and income, organize, and streamline your financials. You can even automate repetitive tasks while maintaining a high degree of accuracy.

Keeping electronic financial records helps users find and store documents with ease. Better yet, it allows you to share those documents with relevant parties easily. That could include your CPA during tax season, creditors when you need an additional cash injection or investors for accountability.

QuickBooks uses the chart of accounts to classify company accounts for your convenience. It means you can generate financial statements in minutes whenever you need them. Digital accounting helps you to comply with the strict federal laws relating to S-Corporations.

 

Streamline Payroll 

When properly applied, an S-Corporation structure lowers the self-employment tax. But this requires S-Corp owners to draw reasonable compensation from the business.  Unreasonable income division may be construed as a tax avoidance measure, drawing the eye of the IRS.

S-Corps have the benefit of splitting their business income into two components – salary and distribution. The owner’s salary is taxable, while distributions are not. Distributions should be allocated based on the ownership percentage. Your payroll must comply with these requirements to lower tax obligations.

In addition, S-Corporations do not pay tax at the entity level and pass through the corporate income, credits, loss, and deductions to shareholders. Therefore, S-Corp owners should report income and losses from the business on their personal tax returns.

 

Maintain Active S Status 

An S-Corporation’s tax privileges are tied to Subchapter S of the Internal Revenue Code. The business can only reap these benefits if it meets the set IRS requirements. To qualify for S Status, a company must:

  • be incorporated within the United States,
  • have only one class of stock, and
  • have 100 or fewer shareholders.

The shareholders of an S-Corporation must be US citizens or US residents. Select estates, trusts, or tax-exempt organizations are eligible as shareholders. Corporations and partnerships don’t qualify as shareholders. Some corporations in the financial and insurance sectors are forbidden S-Corp status and, therefore, not permitted as shareholders. 

 

Cultivate Professional Relationships 

S-corporations are governed by numerous protocols by which they must abide to maintain their S status. Some protocols include scheduling shareholder and directors’ meetings and taking minutes, as well as formalizing by-laws. They also have extensive record-keeping and legal requirements. 

Due to the strict set of rules, S-Corps require a range of professional services. Hiring a qualified accountant can help them keep the books and reconcile their accounts. Attorneys are necessary to offer legal advice when entering into a new business venture or conducting various transactions. They also may need a line of credit with various creditors to meet their growing business needs and to ensure there is adequate cash flow for daily operations. Therefore, S-Corps must cultivate professional relationships with their CPA, attorneys, bankers, and creditors. Such a move is critical not only for smooth operations but also for their survival. 

In summary, the tax privileges and exemptions are among the most alluring reasons for creating an S-Corporation. While attractive, this business designation is subject to compliance with various protocols set by the IRS. Any deviation from these requirements may lead to the loss of the coveted S Status and accompanying tax benefits. Working with a qualified accounting service provider like Lutz can help S-Corporations maximize their tax benefits and compliance. 

Need a professional accounting firm to handle your S-Corp’s books? Contact us today. Want to learn more? You can find related topics on our accounting blog.

ABOUT THE AUTHOR

402.778.7994

asabaliauskas@lutz.us

LINKEDIN

AUSTIN SABALIAUSKAS + SENIOR ACCOUNTANT

Austin Sabaliauskas is a Senior Accountant at Lutz with over three years of experience in taxation. He specializes in providing tax consulting and compliance services for individuals and businesses with a focus on the real estate industry.

AREAS OF FOCUS
  • Tax
  • Real Estate Industry
AFFILIATIONS AND CREDENTIALS
  • Certified Public Accountant
EDUCATIONAL BACKGROUND
  • Master of Accounting, University of Nebraska, Omaha, NE
  • BSBA in Accounting, University of Nebraska, Lincoln, NE
COMMUNITY SERVICE
  • Malmberg Foundation, Board Member
THOUGHT LEADERSHIP
  • Managing S-Corp Entities to Maximize Tax Benefits

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QuickBooks Online Series

QuickBooks Online Series

 

LUTZ BUSINESS INSIGHTS

 

QuickBooks Online

QuickBooks Online Series

Join us for a QuickBooks Online Series throughout August, September & November!

Accounts Receivable Set-Up Tutorial

8.31.21 | 11:30AM – 12:00PM | Webinar

Key Takeaways:

  • General Overview Demo
  • Customer & Job Set-Up
  • Item Set-Up
  • Using Invoice Templates

Accounts Receivable Module Tutorial

9.15.21 | 11:30AM – 12:00PM | Webinar

Key Takeaways:

  • Creating Invoices
  • Receiving Payments & Undeposited Funds
  • Record Deposits for Payments Received
  • Credit Memo Options
  • Memorize Recurring Invoices

Banking Module Tutorial

11.17.21 | 11:30AM – 12:00PM | Webinar

Key Takeaways:

  • General Overview Demo
  • Connect Accounts (Bank & Credit Card)
  • Rules Option
  • Receipt Capture

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We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

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