Cost Center I: Understanding

the Cost Report and the TFC

Role
Alexsandra (Alex) Mullin
Director of Reimbursement
For the Health System
UT Southwestern Medical Center
And

William (Bill) Vaughan

Principal, Health Systems Concepts, Inc.

TFCA Workshop
October 21st - 23rd , 2009

Why, Why, Why Must I Understand the Cost

Report?

The cost report is the only mechanism to

determine Medicare reimbursement for
organs.
Organ acquisition is reimbursed at cost.
The managed care industry uses the data
as a benchmark.
Getting it right on the cost report gives
everyone useful information in transplant

Medicare Reimbursement of Transplant Services at

Every Stage
Stage

Description

Reimbursement

Phase I

Pre- Transplant
Evaluation, Listing,
Maintenance, Organ

Cost Based

Phase II

Transplant

DRG

Phase III

Post Transplant & Monitoring APC, Fee Schedule, DRG

What Exactly Does Medicare Pay For at Cost?

Program cost and time spent evaluating all

patients referred to the center for transplant
Program cost and time listing, managing and
maintaining patients on transplant waiting list
All ancillary testing and physician services
needed to make an adequate decision on
potential recipients and living donors
All expenses necessary to obtain the organ
All expenses necessary in harvesting organs at
your facility regardless of whether or not one of
your patients becomes the recipient
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Does that Mean Carte

Blanche Spending?

Costs need to be reasonable and necessary in the

delivery of patient care.
Remaining competitive in the market dictates we
must remain frugal about how we spend money.
We must have policies and procedures in place that
explain the need for the costs especially ancillary
services testing.
We must ensure that the cost is related to
evaluation & management of the patient and the
organ procurement during the pre-transplant phase.
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Whats Reasonable and Necessary

in Pre-Acquisition Cost?

Salary & Benefits for Pre-Transplant time/ services

Tissue Typing/ HLA cost
All potential recipient evaluation & testing
All living donor evaluation & testing
Professional meetings & memberships
Space & office cost for pre-transplant services
OPO Organ Acquisition Costs
OPTN new patient registration fees
Square footage for pre-transplant space
Donation related complications of a living donor
Costs to administer the transplant programs according to
licensing, certification and regulatory requirements

Whats Not Allowed in Pre-transplant?

Item

How will it get covered?

Medical intervention for the donor or

recipient during evaluation

This service is billable to patients payor following an preauthorization process

Travel & Housing for living donor

This is between the donor & recipient

Post transplant care of recipient

This service is billable to patients payor following an preauthorization process

Routine post transplant care of the

living donor

This service is billable to patients payor following an preauthorization process

Salary, benefits & program exp.

involving post transplant activity

These costs are covered under the services billed for this
activity.

Marketing Cost

Not covered/not allowed at all

Recipients Drugs

Billable to payor until coverage runs out, then not

covered/ not allowed at all

Write off of evaluation charges

The evaluation charges are covered when their cost is

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computed in D 6 Part I of the cost report

What is a Cost Center?

According to CMS PRM 15 2302.8, a cost center is:

An organizational unit, generally a department or its
subunit, having a common functional purpose for which
direct and indirect costs are accumulated, allocated and
apportioned.

Generally a cost center involves:

Space where the service is provided.
Involves staff dedicated to provide the service within that
space
Is a service which reports to hospital management and
subject to facility policies.

What Expenses Are In An Organ

Cost Center?

Salaries & Benefits of program personnel

OPO costs and other organ direct costs
HLA /Tissue Typing
Purchase services expenses (such as physician
evaluation, outside ancillary testing)
Dues and other charges from UNOS for participating in
the OPTN
Medical Director Expenses
Incidental expenses involved in taking care of the
patient such as office supplies, telephone, freight,
equipment and/or space rentals, repairs &
maintenance, staff education, etc.
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Organ acquisition is one of the very few services

left that are reimbursed at cost on the Medicare
cost report.
The transplant programs involvement with a
patient transcends through three different payment
stages in the transplantation process.
Special Analysis and cost redirection must occur in
order to report pre-transplant and organ acquisition
costs on the cost report.

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CMS Expectations of Hospital

Accounting

The hospital has an accepted method for allocating cost

correctly to the different areas of service within a transplant
program. Time studies are the accepted method for cost
allocation in the absence of dedicated personnel and services.
Proper analysis of any amounts reported in the cost report as
being pertinent to the providers operations and allowed under
the Medicare program as a service related to the care of
patients.
Any information included in a Medicare cost report is subject to
audit including non-ledger items such as statistics and the
financials/ledger of anyone providing/ selling services to a
Medicare Provider.
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Other Organ Acquisition Expenses

Other Ancillary Services, Donor Stays, Harvests

These are not included in the organ cost center but they get
added to the organ cost through a cost report analysis based
on the charges for these services and the ratio of cost to
charges of these different hospital areas. For the room & board
the formula is based on the cost per patient day. (D-6 Parts I &
II)

Indirect/ Overhead Costs

These costs are added to the direct expense of the organ cost
center based on statistics that adequately demonstrate the use
of the cost. (Example: Admin & general oversight, Cafeteria,
Medical Records, Nursing Admin, etc. (D-6 Part III Line 51,
w/organ direct expense)
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Sample D-6 Part I Computation of Organ Acquisition Costs (Inpatient

Routine and Ancillary Services
KIDNEY
Computation of Inpatient Routine Service Costs Applicable to Organ Acquisition
Routine
Cr Loc
Per-Diem Organ
Cost
Charges
D-1
Cost D-1 Acq Days (Col 3x4)
1. 2.
3.
4.
5.
1.
Adults & Pediatrics
7,300
38.
716.24 10
7,162
2.
ICU 1,800
43.
1,445.41 1
1,445
3.
Total 9,100
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8,607
Computation of Ancillary Service Cost Applicable to Organ Acquisition
Ratio of
Organ Acq.
Organ Acq.
Cost/Charges Anc Charges
Anc. Costs
1.
2.
3. (Col 1x2)
4. Operating Room 37.
.538023
70,086 37,708
5. Recovery Room 38.
.625307
2,225 1,391
6. Radiology Diagnostic
41.
.146996 318,369 46,799
..
Total
1,885,283378,509
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Sample D-6 Part III Summary of Cost and Charges

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List of Transplant DRGs

DRG
Number

Description

DRG
Weight

Unadjusted
Base Pymt

HEART TRANSPLANT OR IMPLANT OF HEART ASSIST

SYSTEM W MCC
24.8548
HEART TRANSPLANT OR IMPLANT OF HEART ASSIST
SYSTEM W/O MCC
11.754
LIVER TRANSPLANT W MCC OR INTESTINAL
TRANSPLANT
10.1358

LIVER TRANSPLANT W/O MCC

4.7569

$ 26,721.27

LUNG TRANSPLANT

9.4543

$ 53,108.30

SIMULTANEOUS PANCREAS/KIDNEY TRANSPLANT

5.0615

$ 28,432.32

BONE MARROW TRANSPLANT

6.5419

$ 36,748.27

10

PANCREAS TRANSPLANT

4.2752

$ 24,015.38

652

KIDNEY TRANSPLANT

2.9736

$ 16,703.81

1
2

$ 139,618.61
$ 66,026.57
$ 56,936.54

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Questions?

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