Latest / The Home Health & Hospice Profitability Podcast / Your Hospice Could Be Over Cap and You Don’t Even Know It

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Your Hospice Could Be Over Cap and You Don’t Even Know It · The Home Health & Hospice Profitability Podcast

• 0:02
  SPEAKER_01: Every home health and hospice owner knows the feeling.
• 0:05
  SPEAKER_01: Census is up, the team is working harder than it ever has, and the margin still isn't there.
• 0:10
  SPEAKER_01: Your host has spent a career finding out why.
• 0:13
  SPEAKER_01: Doug Walters is a CPA with a master's degree in taxation.
• 0:17
  SPEAKER_01: And before that, a home health agency owner himself.
• 0:20
  SPEAKER_01: So he's lived the problem before he built a career solving it.
• 0:24
  SPEAKER_01: He founded Walters and Associates in 1999, and the firm has since served more than a thousand home health and hospice providers nationwide.
• 0:34
  SPEAKER_01: Medicare and Medicaid cost reports, hospice cap, outsourced CFO work, and TEMEX.
• 0:40
  SPEAKER_01: It anchors the Walters Family Companies, alongside Walters Billing Solutions, running revenue cycle and denials management for agencies, and Walters Strategic Advisors managing wealth for the owners who built them.
• 0:54
  SPEAKER_01: Three companies, one obsession.
• 0:56
  SPEAKER_01: The profitability of home health and hospice.
• 0:59
  SPEAKER_01: Here's Doug Walters.
• 1:00
  SPEAKER_03: Welcome to the first episode of the Home Health and Hospice Profitability Podcast.
• 1:05
  SPEAKER_03: I'm really excited today to have with me my guest, Lisa Rivard.
• 1:09
  SPEAKER_03: Thank you.
• 1:09
  SPEAKER_03: Welcome, Lisa.
• 1:10
  SPEAKER_03: Thank you.
• 1:10
  SPEAKER_03: Lisa, we've been working together for how long?
• 1:12
  SPEAKER_00: Oh gosh, we're going on six years now.
• 1:14
  SPEAKER_03: Six years already.
• 1:15
  SPEAKER_00: Six years, yes.
• 1:16
  SPEAKER_03: Quite a long time.
• 1:16
  SPEAKER_03: And you just got back from vacation.
• 1:18
  SPEAKER_00: I did just get back from vacation.
• 1:19
  SPEAKER_00: We have a tradition we go to the Florida Keys for the opening week of lobster season.
• 1:24
  SPEAKER_00: Brought back quite a few.
• 1:26
  SPEAKER_03: How many did you bring back?
• 1:27
  SPEAKER_00: 134.
• 1:28
  SPEAKER_03: Oh my goodness.
• 1:28
  SPEAKER_03: 134.
• 1:30
  SPEAKER_00: Yes.
• 1:30
  SPEAKER_03: Is there a limit or a cap on those?
• 1:32
  SPEAKER_00: There is actually a cap on those.
• 1:34
  SPEAKER_00: We're allowed six per person per day.
• 1:37
  SPEAKER_03: Six per person per day.
• 1:38
  SPEAKER_03: Wow.
• 1:39
  SPEAKER_00: Can't go over that limit.
• 1:40
  SPEAKER_03: So you got there.
• 1:41
  SPEAKER_03: We got there.
• 1:42
  SPEAKER_03: We got there.
• 1:42
  SPEAKER_03: Well, congratulations on that.
• 1:43
  SPEAKER_03: Thank you.
• 1:44
  SPEAKER_03: Well, speaking of the cap, let's talk about the hospice cap.
• 1:46
  SPEAKER_03: Yes.
• 1:47
  SPEAKER_03: So most owners don't find out why they've gone over the cap, or they don't find out that they have gone over the cap until months later.
• 1:53
  SPEAKER_03: Correct.
• 1:53
  SPEAKER_03: By the time they're going to write a check.
• 1:55
  SPEAKER_03: So walk me through that.
• 1:56
  SPEAKER_03: What kind of phone calls have you had on that?
• 1:58
  SPEAKER_03: What's the worst call you've ever had?
• 2:00
  SPEAKER_00: Yes.
• 2:00
  SPEAKER_00: So one of the worst phone calls that I've received is from a hospice agency that was so far behind on CAP and was put on Medicare suspension.
• 2:09
  SPEAKER_00: She didn't realize what the suspension was coming from originally.
• 2:13
  SPEAKER_00: And we found out that she was had been over CAP, had been receiving demand letters that she was not, she wasn't paying attention to.
• 2:20
  SPEAKER_00: She missed some of the deadlines on the demand letters and it put her agency in suspension.
• 2:24
  SPEAKER_00: And so in educating her with the hospice cap and the rules and regulations, you know, we uncover a lot that hospice agencies really aren't familiar with CAP and really what that means.
• 2:36
  SPEAKER_02: Yeah, for sure.
• 2:37
  SPEAKER_02: So was she able to get through that?
• 2:40
  SPEAKER_00: She did.
• 2:40
  SPEAKER_00: We were able to, you know, most certainly it's the an educational piece.
• 2:45
  SPEAKER_00: And we talked to them about some different options that they can do to help mitigate this situation, looking at their senses.
• 2:51
  SPEAKER_00: It does take some time to get out of CAP as we talk about, because with CAP is with hospice is its end-of-life stage.
• 3:00
  SPEAKER_00: So hospice care is and CAP was originally created to prevent long-term care facilities.
• 3:10
  SPEAKER_00: So hospice should be utilized as the last stage in life as a patient transitions.
• 3:16
  SPEAKER_00: And Medicare CAP was the aggregate.
• 3:31
  SPEAKER_00: Once that patient goes over that allowable, meaning the hospice agency has billed over and beyond that amount.
• 3:50
  SPEAKER_03: For sure.
• 3:50
  SPEAKER_03: Yeah, six months.
• 3:51
  SPEAKER_03: And then, you know, depending on, I guess, where you live, right?
• 3:52
  SPEAKER_00: So that's correct.
• 3:53
  SPEAKER_03: We'll see that some states may be four months or less.
• 3:56
  SPEAKER_00: That's correct.
• 3:57
  SPEAKER_00: And unfortunately, those are our friends out on typically, we see that out on the West Coast.
• 4:00
  SPEAKER_00: Um California, Nevada, and Arizona are some bigger the hotspot states where just the wage index is so much higher than say here in the state of Florida where we're at.
• 4:10
  SPEAKER_03: For sure.
• 4:10
  SPEAKER_03: Yeah.
• 4:10
  SPEAKER_03: And we'll we'll get into that, I'm sure.
• 4:12
  SPEAKER_03: So so when we look at hospice cap, let's just for those that are new to hospice out there, so new agencies that just starting out, what is the cap?
• 4:22
  SPEAKER_00: So the cap is a again, it is used for it's putting a cap on the amount that a patient is to be charged or to be billed.
• 4:34
  SPEAKER_00: So the hospice patient is brought on service, have never has never been on hospice care before, enters into that facility as a first-time benefit patient, and they are allowed a beneficiary amount, which for 2026 is just over about$35,000.
• 4:53
  SPEAKER_00: They come to that agency with a full purse of money, so to speak.
• 4:57
  SPEAKER_00: As that patient stays on service and the hospice is billing for this patient, they are pulling money from that purse.
• 5:04
  SPEAKER_00: So that$35,000 as the patient stays on service, they're billing that$35,000 drops down to$30,000 and so on and so forth.
• 5:16
  SPEAKER_00: That$35,000, Medicare has quantified that amount to last six months or less of life.
• 5:25
  SPEAKER_00: If that patient stays on service longer than six months of life, the agency is running a risk of that patient going over cap.
• 5:34
  SPEAKER_03: Right.
• 5:35
  SPEAKER_03: So when we look at that and we say, and you mentioned the 35,000, I think for fiscal year 2026, the cap is 35,361, and that gets inflated every year.
• 5:46
  SPEAKER_03: Yes.
• 5:46
  SPEAKER_03: And I think for 37, it's 36,174.75.
• 5:50
  SPEAKER_03: So it's just going up a little bit.
• 5:52
  SPEAKER_03: Right.
• 5:52
  SPEAKER_03: But if you have a single patient and you bill for two years on that patient, you're gonna get paid, right?
• 5:58
  SPEAKER_00: You are gonna get paid, correct?
• 5:59
  SPEAKER_03: Right.
• 5:59
  SPEAKER_03: So when we look at that cap, and the cap basically is if you look at the beneficiary count, how many patients you have during that cap period, correct?
• 6:09
  SPEAKER_03: Multiplied by that cap amount.
• 6:12
  SPEAKER_03: And like I said, for 27 is 36,175.
• 6:16
  SPEAKER_03: That's your total cap.
• 6:17
  SPEAKER_03: You compare that to what you billed on those patients, and the difference is the overdraw, or hopefully you're under cap.
• 6:24
  SPEAKER_03: That's correct.
• 6:24
  SPEAKER_03: So it allows you to look at all of the patients in the aggregate, not just on a single patient.
• 6:29
  SPEAKER_03: That's right.
• 6:30
  SPEAKER_03: Right.
• 6:30
  SPEAKER_03: So that's the benefit is if you have one or two long-term patients, you're gonna be okay.
• 6:35
  SPEAKER_03: Yes, right, because you've got enough short-term patients to offset that long-term stay.
• 6:39
  SPEAKER_03: That's correct.
• 6:40
  SPEAKER_03: But as your late lifetime length of stay across your agency is going up and you're starting to see that uptick, that's when you're you need to really pay attention to make sure that you're not gonna go over a cap in the aggregate.
• 6:51
  SPEAKER_03: That's correct.
• 6:52
  SPEAKER_00: Okay, that's correct.
• 6:53
  SPEAKER_03: Wonderful, wonderful.
• 6:54
  SPEAKER_03: Well, so that's why it matters so much to look at it in the aggregate.
• 6:57
  SPEAKER_03: We we talk about the government fiscal year.
• 7:00
  SPEAKER_03: Yes.
• 7:01
  SPEAKER_03: What is the fiscal year?
• 7:02
  SPEAKER_03: Because it gets confusing, right?
• 7:03
  SPEAKER_03: I mean, I think most people think it's just follows the this the typical financial statement year, which is for most agencies, it's 1231, you know, January through December.
• 7:12
  SPEAKER_03: Yes.
• 7:13
  SPEAKER_03: Tell me about the cap.
• 7:14
  SPEAKER_00: So the cap runs from October 1st and ends September 30th.
• 7:18
  SPEAKER_00: So we're actually getting ready to close CAP year period ending 2026.
• 7:22
  SPEAKER_00: So as of October 1st, and here in a couple weeks, we're going to be starting CAP period ending 2027.
• 7:28
  SPEAKER_03: Because we're st we're here sitting at August 27th.
• 7:32
  SPEAKER_03: So we've only got a little bit of time left.
• 7:34
  SPEAKER_00: Just a little bit of time left, about five weeks left in the CAP period.
• 7:38
  SPEAKER_00: So that is something that you know we do want to look at carefully, especially when an agency becomes Medicare certified, because based on their date of certification, we have to report at least 12 months' worth of data.
• 7:53
  SPEAKER_00: So if an agency were to just recently get certified, say today, August 27th, their CAP report, this CAP period will end in five weeks, but we unfortunately are not able to report on that, which is due the end of February.
• 8:09
  SPEAKER_00: So it's the CAP annual CAP report is due five months after end date.
• 8:13
  SPEAKER_00: So September puts us the end of February.
• 8:15
  SPEAKER_00: So if an agency were to get certified today, we would actually run their cap report from 827, 2026 through 930, 2027, because we need to have that full 12 months plus worth of data.
• 8:30
  SPEAKER_00: But generally speaking, 10.1 to 9.30 following suit after that.
• 8:35
  SPEAKER_03: And that's the government fiscal year, is why that follows correct.
• 8:38
  SPEAKER_03: Interesting.
• 8:39
  SPEAKER_03: Okay.
• 8:39
  SPEAKER_03: Wonderful.
• 8:40
  SPEAKER_03: So we talked about the fact that the cap is not on a level playing field, right?
• 8:44
  SPEAKER_03: They someone in Florida or rural Mississippi is going to hit cap much faster than someone in California, for example.
• 8:54
  SPEAKER_03: Right.
• 8:54
  SPEAKER_03: Why is that?
• 8:56
  SPEAKER_00: So it has to do with wage index.
• 8:58
  SPEAKER_00: So our cost of living here in Florida or rural Missouri, generally speaking, is less is a lot less than our friends out on the West Coast.
• 9:07
  SPEAKER_00: So typically what we see are our friends here in Florida, so to speak, they're billing anywhere between$175 to$180 per day, where our friends out in California are close to$300 a day.
• 9:23
  SPEAKER_00: So the general rule is six months or less of life.
• 9:26
  SPEAKER_00: And that holds true, generally speaking, for the main population of hospice agencies, however out west, primarily in your higher cost of living states, we see typically anywhere from three to four months or less of life because they're going to exhaust those benefits a lot sooner.
• 9:45
  SPEAKER_00: So they're respectively, their patient census, kind of going back to that four to one rule where generally speaking, it would take four short-term patients to cancel out those long-term patients that you were referring to.
• 9:58
  SPEAKER_00: Out west, you're looking at, you know, anywhere from it could be six to seven short-term patients to cancel out one long-term patient.
• 10:05
  SPEAKER_00: Right.
• 10:06
  SPEAKER_00: Just because you've got to, you know, respectfully, you know, have those patients come in, pass away quickly to offset that long-term patient.
• 10:12
  SPEAKER_03: Yeah.
• 10:13
  SPEAKER_03: So when we look at that and we say, okay, well, we had a patient that we admit for two days.
• 10:18
  SPEAKER_03: Let's say we the patient came in two days ago and they passed today, they still get the benefit of that entire cap.
• 10:25
  SPEAKER_00: That's correct.
• 10:25
  SPEAKER_03: So that's why you're looking at, okay, if we have some short-term stays, we do have that long-term patient.
• 10:31
  SPEAKER_03: We need enough cap exposure at the long-term short-term stays to offset the longer term.
• 10:36
  SPEAKER_03: That's that may be under.
• 10:37
  SPEAKER_03: Correct.
• 10:38
  SPEAKER_03: Or over.
• 10:38
  SPEAKER_03: I'm sorry.
• 10:39
  SPEAKER_03: Correct.
• 10:39
  SPEAKER_03: That's right.
• 10:40
  SPEAKER_03: That's right.
• 10:40
  SPEAKER_03: It's confusing.
• 10:41
  SPEAKER_03: Yes, it does.
• 10:41
  SPEAKER_03: It does feel confusing.
• 10:43
  SPEAKER_03: Okay, wonderful.
• 10:44
  SPEAKER_03: So, you know, one of the things I I often hear is generalities.
• 10:48
  SPEAKER_03: You know, you may hear a hospice provider say that, well, I have a 120-day length of stay and I'm I never have a cap issue, right?
• 10:57
  SPEAKER_03: But to your point, you know, that really they may be in a lower wage index state.
• 11:03
  SPEAKER_03: That's correct.
• 11:03
  SPEAKER_03: So if you're listening to your buddy who has a hospice across the country, those things are drastically different.
• 11:10
  SPEAKER_03: Length of stage that are going to hit cap that's correct for your agency.
• 11:12
  SPEAKER_03: So you really need to understand how many days it hits it takes to hit cap.
• 11:16
  SPEAKER_00: Yes.
• 11:17
  SPEAKER_03: And you're in your location.
• 11:18
  SPEAKER_00: It is important to have tools in place, which we'll be talking about, how we can help agencies monitor that as well.
• 11:26
  SPEAKER_03: Okay, wonderful.
• 11:27
  SPEAKER_03: So so I know that there's two methods for counting patients.
• 11:31
  SPEAKER_03: One is the streamlined and one is the proportionate.
• 11:34
  SPEAKER_03: And I think today we'll just focus on a proportional method because the streamlined no one qualifies anymore.
• 11:40
  SPEAKER_03: There are very few providers that are still in the streamlined method.
• 11:44
  SPEAKER_03: That's correct.
• 11:45
  SPEAKER_03: But a proportional method, can you walk us through how to count a patient and how that that works?
• 11:51
  SPEAKER_00: How that works, yes.
• 11:52
  SPEAKER_00: So when we run the reports for the cap report, we have to run the PSNR, which is the provider statistical and reimbursement report, and that shows what the agency brought in.
• 12:04
  SPEAKER_03: And where's that report come from?
• 12:06
  SPEAKER_00: That comes from CMS's portal.
• 12:08
  SPEAKER_00: We do need to register, hospice agencies are required to have that for the submission of the CAP report.
• 12:13
  SPEAKER_00: We do need to run reports out of the system.
• 12:16
  SPEAKER_00: So the revenue that the agency generates is reported on the PSNR.
• 12:22
  SPEAKER_00: And then we also run what's called a beneficiary count summary report.
• 12:27
  SPEAKER_00: And that's where the proportional figure comes into because what that report shows is all of the Medicare patients that are on service being billed by Medicare.
• 12:42
  SPEAKER_00: And what that report represents is regardless of where that patient is at.
• 12:47
  SPEAKER_00: And what I mean by that, and this is where CAP definitely can get confusing and overwhelming, is if I have a hospice agency and Mrs.
• 13:00
  SPEAKER_00: Jones comes into my practice, into my hospice agency, and she is on service with me for 30 days and I discharge her.
• 13:09
  SPEAKER_00: She's no longer hospice appropriate, and I discharge her.
• 13:13
  SPEAKER_00: And let's say, Doug, you pick her up, your hospice agency admits the patient.
• 13:18
  SPEAKER_00: Unfortunately, my agency is still going to take a piece of that overage.
• 13:23
  SPEAKER_00: We call this erosion.
• 13:24
  SPEAKER_00: So when a patient, the longer the patient stays on service, their dollar amount that they they're allowable is eroding.
• 13:33
  SPEAKER_00: Every day that they're being billed, that that purse is getting smaller, so to speak.
• 13:36
  SPEAKER_03: But why is that?
• 13:37
  SPEAKER_03: Like if I look at a patient, and sometimes you pull that beneficiary count from the PSNR as put out by CMS.
• 13:43
  SPEAKER_03: Because that's really the only place that you can get an accurate number.
• 13:47
  SPEAKER_03: Because CMS only is the only one that knows where these patients are and if they've been to another hospice and all of all this kind of stuff.
• 13:53
  SPEAKER_03: There are ways that you could do it in your own hospice, but it's there's a process, right?
• 13:56
  SPEAKER_03: Correct.
• 13:57
  SPEAKER_03: But CMS has it and it's accurate.
• 13:59
  SPEAKER_03: So when you look at that patient count, it's like it could be 43.75.
• 14:03
  SPEAKER_03: Right.
• 14:04
  SPEAKER_03: So 43.71.
• 14:05
  SPEAKER_03: Right.
• 14:06
  SPEAKER_03: Why how can I have a fractional patient?
• 14:09
  SPEAKER_00: It's a great question.
• 14:11
  SPEAKER_00: How a patient crosses over cat periods or it's it goes off of the amount of total amount of days that a patient is on service.
• 14:20
  SPEAKER_00: So using Mrs.
• 14:21
  SPEAKER_00: Jones as an example, if she enters into cat period ending 2026 and she has used 30 days into the 2026 cat period, first time benefit patient.
• 14:35
  SPEAKER_00: So she's allowed that full amount.
• 14:37
  SPEAKER_00: She's one benefit, one whole benefit patient.
• 14:42
  SPEAKER_00: As she remains on service for those 30 days, come October 1st, she's still on service.
• 14:48
  SPEAKER_00: She now crosses into cat period ending 2027.
• 14:52
  SPEAKER_00: And say she stays on service in 2027 for 30 days.
• 14:57
  SPEAKER_00: So she has remained on service for 30 days in 2026, 30 days in 2027 before she respectfully passes away.
• 15:07
  SPEAKER_00: And in 2026, she was allowed that full 100% allowable, that benefit.
• 15:15
  SPEAKER_00: She crossed over and now her allowable, she fractions.
• 15:20
  SPEAKER_00: So she's now her allowable is 50% in 2026 and 50% in 2027.
• 15:28
  SPEAKER_03: Got it.
• 15:28
  SPEAKER_03: So so we're only counting the patient once, right?
• 15:30
  SPEAKER_03: So every patient gets counted once.
• 15:32
  SPEAKER_03: Correct.
• 15:33
  SPEAKER_03: And so if she came in the the first cap period and died in that first cap period, she would get the full cap amount, or the agency would get the benefit of that full cap amount.
• 15:41
  SPEAKER_02: Correct.
• 15:42
  SPEAKER_03: But if she overlaps other periods, then she's gonna she's gonna be split between each period.
• 15:47
  SPEAKER_03: So that's why you get that fractional in each one.
• 15:49
  SPEAKER_03: That's correct.
• 15:50
  SPEAKER_03: So it certainly explains why when you get a demand letter, and hopefully most of our listeners will not get a demand letter, but unfortunately, as we'll see, we're seeing that uptake, right?
• 16:01
  SPEAKER_03: A lot of them are.
• 16:02
  SPEAKER_03: In fact, it's upward to I think 28%, the last I saw.
• 16:05
  SPEAKER_03: Yes, that's so as the the provider or as the the Mac runs the cap calculation and they could do it now.
• 16:17
  SPEAKER_03: Yes, and if that those patients are still on service, when they run it again in six months, that first initial period where we calculated those beneficiary accounts now are spread over a longer period than the second cap period.
• 16:30
  SPEAKER_03: So now what you were talking about, that erosion continues to happen.
• 16:33
  SPEAKER_03: That's correct.
• 16:34
  SPEAKER_03: And if you think about the math here, the number of beneficiaries that are now discounted or decreased times the cap amount is a lower cap amount.
• 16:45
  SPEAKER_03: That's right.
• 16:45
  SPEAKER_03: Your building hasn't changed.
• 16:46
  SPEAKER_03: That's correct, right?
• 16:47
  SPEAKER_03: So your billing is static, but your cap is coming down.
• 16:49
  SPEAKER_03: That's correct.
• 16:50
  SPEAKER_03: And so over time, as long as those patients are on service, you're getting closer and closer to that cap or you're paying more and more back, right?
• 16:57
  SPEAKER_03: If you're already over.
• 16:58
  SPEAKER_03: So wow, a really complicated system.
• 17:01
  SPEAKER_03: Yeah.
• 17:02
  SPEAKER_00: You know, sometimes I often think of it also as, and we'll talk into like at the end of the cap year, what happens when we do receive a demand letter or the end of a cap year ends, that cap period is susceptible to a three-year look back window.
• 17:18
  SPEAKER_00: And what that means is kind of what you were just alluding to, Doug, of the Mac has three years to look into any given CAP period for all hospice agencies, up to three years.
• 17:33
  SPEAKER_00: And any point from the time that the CAP report is submitted, three years out, they are susceptible to internal look back by the MAC, which is Palmetto and GS or CGS based on where you live, where your hospice agency is based.
• 17:49
  SPEAKER_00: And they will periodically run these CAP reports.
• 17:52
  SPEAKER_00: If you are doing well and you are under CAP, you will get a letter stating that your CAP was reviewed.
• 17:58
  SPEAKER_00: However, you've stayed under the CAP and you've maintained your agency well.
• 18:02
  SPEAKER_00: But this is where hospice agencies get surprised demand letters because at any given point, these Macs can look into your hospice agency.
• 18:10
  SPEAKER_00: And if that point in time you are over, is when you'll receive that demand letter.
• 18:16
  SPEAKER_00: But what happens is you know, you're going along and you submitted a CAP report that is under the allowable.
• 18:25
  SPEAKER_00: So you were under the allowable, say by$500,000, and a year and a half goes by and you receive a demand letter for$50,000.
• 18:37
  SPEAKER_00: This is where a lot of the confusion comes in because agencies, that's when we get the calls and say, Oh, I don't understand because I was under CAP.
• 18:44
  SPEAKER_00: How can I be over cap now?
• 18:47
  SPEAKER_00: And that is that long life length of stay that these patients have remained on service.
• 18:52
  SPEAKER_00: And that example of you, these, you know, you're billing, billing, that cushion that you had that under the allowable.
• 19:00
  SPEAKER_00: Now it's almost like an overdraft of your bank.
• 19:03
  SPEAKER_00: Yeah.
• 19:03
  SPEAKER_00: So you it's just there is no more overdraft protection.
• 19:08
  SPEAKER_00: Once you hit zero and you go over cap, you're you're in the negative, and that you have to pay that money back.
• 19:13
  SPEAKER_00: So it's just it's slowly eroding that dollar amount the longer those patients stay on service.
• 19:19
  SPEAKER_00: That allowable is exhausted.
• 19:21
  SPEAKER_00: That cushion has been exhausted over those periods of the year and a half of those, and it's driven from patients who have remained six months or longer, and you've not had enough of those short-term patients to cancel out.
• 19:34
  SPEAKER_03: For sure.
• 19:34
  SPEAKER_03: So I think I'm kind of getting the point of yeah, as we talk about the PSNR, right?
• 19:38
  SPEAKER_03: Here we talk about the need for really monitoring this.
• 19:42
  SPEAKER_03: Yes.
• 19:42
  SPEAKER_03: Because you don't want to get caught when you run your CAP report annually, right?
• 19:46
  SPEAKER_03: So so walk me through why you shouldn't rely on your CPA to prepare your CAP report and pull your PSNR at your end, right?
• 19:54
  SPEAKER_00: So as you go along, and I think a lot of, you know, what I see from a pure from a purely from a business perspective is a lot of hospice agency owners are also out in the field.
• 20:06
  SPEAKER_00: And so they are caring for patients, they could be a part of the admissions process.
• 20:11
  SPEAKER_00: They, you know, they're working hands-on with the patients and then also running the business side.
• 20:17
  SPEAKER_00: And so their focus really should be, you know, either the business side or the patient side.
• 20:27
  SPEAKER_00: And it's hard to do both because I feel like they their main goal is to take care of these patients.
• 20:33
  SPEAKER_00: And so what happens is patients are on service, you're billing for these patients, and it's just it's a daily routine, right?
• 20:42
  SPEAKER_00: So patients are being seen, you're being billed, and you're not really paying attention to what is occurring in the background.
• 20:48
  SPEAKER_00: And that is what we see happen a lot, is it's this background erosion that is occurring.
• 20:54
  SPEAKER_00: It's not evident to you until the CAP report comes.
• 20:58
  SPEAKER_00: You think you're moving along nicely throughout the year.
• 21:01
  SPEAKER_00: It's time to submit your CAP report, and you are hit with a number that you are you're over cap.
• 21:08
  SPEAKER_00: You're shocked.
• 21:08
  SPEAKER_00: And you're shocked.
• 21:09
  SPEAKER_03: And it's too late.
• 21:10
  SPEAKER_03: Too late.
• 21:12
  SPEAKER_03: So that PSNR is a static report, right?
• 21:16
  SPEAKER_03: It assumes, and this is a terrible thing to say, but it assumes all the patients are deceased when you run it.
• 21:21
  SPEAKER_00: That's correct.
• 21:21
  SPEAKER_03: Right?
• 21:21
  SPEAKER_03: Because that's a beneficiary account at that point in time.
• 21:23
  SPEAKER_00: That's right.
• 21:24
  SPEAKER_03: And if you run that PSNR today, as long as those patients are still on service and you run it in another month, that number is gonna be different.
• 21:32
  SPEAKER_03: That's correct.
• 21:32
  SPEAKER_03: And so it really highlights the fact that providers should have their own PSNR access and be running this monthly.
• 21:41
  SPEAKER_03: Absolutely.
• 21:41
  SPEAKER_03: Right.
• 21:42
  SPEAKER_03: If not quarterly, certainly monthly.
• 21:44
  SPEAKER_03: Absolutely.
• 21:44
  SPEAKER_03: And not waiting for your end because then there's not much you can do.
• 21:48
  SPEAKER_00: That's correct.
• 21:48
  SPEAKER_03: Right.
• 21:49
  SPEAKER_03: So walk me through how to do it.
• 21:50
  SPEAKER_03: I mean, there's a registration process.
• 21:52
  SPEAKER_00: So there is a registration process, it is through portal.cms.gov.
• 21:57
  SPEAKER_03: You know that off the top of your head.
• 21:58
  SPEAKER_00: I knew that off the top of my head.
• 21:59
  SPEAKER_00: Yes.
• 22:00
  SPEAKER_00: Done it before.
• 22:00
  SPEAKER_00: Done it before.
• 22:01
  SPEAKER_00: And you go in and it's very similar to if you've, you know, bought a car, you know, you go through a verification process, they have to verify your identity, but you put in your contact information, name of the hospice agency, and you register as a PSNR security official.
• 22:19
  SPEAKER_00: That is something that is important.
• 22:21
  SPEAKER_00: There are other subtitles underneath when you go into that system, but you want to be the security official.
• 22:28
  SPEAKER_00: And what that will allow you to do is run the PSNR as well as allow yourself or a third party, someone like ourselves, when it comes time to do your cost report, to electronically file through that system, through that portal.
• 22:42
  SPEAKER_00: And there's other wealth of information and tools that you can utilize throughout that portal.
• 22:47
  SPEAKER_00: But for hospice specifically, that allows us to run that beneficiary count report as well as the PSNR.
• 22:55
  SPEAKER_03: Got it.
• 22:56
  SPEAKER_03: So now for our clients, correct.
• 22:58
  SPEAKER_03: We do we become a security official?
• 23:00
  SPEAKER_00: We can become your security official, yes.
• 23:03
  SPEAKER_00: So what we would do in that circumstance is uh you grant us permission.
• 23:07
  SPEAKER_00: We using our secure portal and our secure logins, we reach out to be your security official.
• 23:13
  SPEAKER_00: And what that does is that allows me and my team to log into our secure portal, pull the necessary reports without having to, you know, interrupt the club the client during the day to get a code.
• 23:25
  SPEAKER_00: So once you enter into this system and you're approved as a security official, any third party or even yourself, when you go to log in, it's going to generate a multi-factor code.
• 23:35
  SPEAKER_02: Sure.
• 23:35
  SPEAKER_00: So we would need that code.
• 23:37
  SPEAKER_00: So having us be that security official takes that piece out so we don't have to bother you throughout the day.
• 23:41
  SPEAKER_00: We can run the reports as often as we need to, again, without your interruption and generate you a really nice report.
• 23:47
  SPEAKER_03: That's great.
• 23:48
  SPEAKER_00: So which report specifically do you pull to prepare the cap monitoring or to prepare an interim cap an interim cap, we run the PSNR, which is that PS provider statistical and reimbursement.
• 24:00
  SPEAKER_02: And what's on that report?
• 24:02
  SPEAKER_00: That report shows your gross reimbursement.
• 24:05
  SPEAKER_00: It shows your 2% sequestered fee, which we'll get into when it comes when we talk about monitoring, of course, your net reimbursement.
• 24:13
  SPEAKER_00: It also shows your Medicare days, which is important.
• 24:16
  SPEAKER_00: And then it also shows your services, pharmacy, it gives you some dollar amounts of things that you have billed throughout that period.
• 24:25
  SPEAKER_03: Now, interestingly enough, that's based on an accrual system.
• 24:28
  unknown: Yes.
• 24:29
  SPEAKER_03: So it's based on your billing.
• 24:31
  SPEAKER_03: So oftentimes, excuse me, when I've worked on taxes for home health or hospice providers or other services for them, and we look at the PSNR and we compare it to their financial statements, a provider will often say, I didn't get that much money for Medicare.
• 24:45
  SPEAKER_03: And that's the difference.
• 24:46
  SPEAKER_03: They may be on a cash basis for their financial statements or for their tax purposes, but for an accrual statement is how the uh the PSR is runs.
• 24:55
  SPEAKER_03: That's correct.
• 24:55
  SPEAKER_03: Yep.
• 24:55
  SPEAKER_03: So it's based on your billing.
• 24:56
  SPEAKER_03: So it's great, it's a great document.
• 24:58
  SPEAKER_00: It's a great document.
• 24:59
  SPEAKER_03: Because it shows you your total billing and your net reimbursement.
• 25:01
  SPEAKER_00: Yes, that's right.
• 25:02
  SPEAKER_00: And I think it's important to understand that.
• 25:04
  SPEAKER_00: So that is something that when we do talk to our clients, we go over these because it's important to understand the report that you're getting, right?
• 25:11
  SPEAKER_00: We we want to utilize this report as a tool to help make decisions.
• 25:15
  SPEAKER_00: But in addition to that PSNR, which is run from 10.1 to 9.30.
• 25:20
  SPEAKER_03: So important to run the same fiscal year.
• 25:22
  SPEAKER_00: Absolutely.
• 25:23
  SPEAKER_00: Right, the cap year.
• 25:24
  SPEAKER_00: Absolutely.
• 25:25
  SPEAKER_00: We also run the beneficiary count report, which again that shows the Medicare patient regardless of where they are.
• 25:32
  SPEAKER_00: And that's also run 10.1 to 9.30.
• 25:37
  SPEAKER_00: We prepare the cap report.
• 25:39
  SPEAKER_00: Again, that's going off of the current beneficiary count times the allowable gives you what you were allowed to get from a reimbursement standpoint.
• 25:50
  SPEAKER_00: And then the PSNR shows you what you actually received.
• 25:54
  SPEAKER_00: If you are under, we show you that amount.
• 25:58
  SPEAKER_00: And that is that is what we call your cushion.
• 26:00
  SPEAKER_00: So you're currently under the allowable buy, X amount of dollars, or unfortunately, if it's over, then you know we have those conversations as well.
• 26:10
  SPEAKER_03: For sure.
• 26:11
  SPEAKER_03: So when we look at this, what does that self-determined report actually do?
• 26:16
  SPEAKER_00: It is due five months after the end of the of the cap year.
• 26:20
  SPEAKER_00: So February 28th is the due date.
• 26:23
  SPEAKER_03: Typically, if let's say it falls on a weekend, for example, it may be March 2nd, something like that.
• 26:27
  SPEAKER_03: Right, right.
• 26:28
  SPEAKER_00: Very next business day.
• 26:29
  SPEAKER_03: Yes.
• 26:29
  SPEAKER_03: Okay.
• 26:30
  SPEAKER_03: Interesting.
• 26:30
  SPEAKER_00: And we're able to run the reports, or I should say we're not able to run the reports until after December 30th.
• 26:38
  SPEAKER_00: Okay.
• 26:38
  SPEAKER_00: So generally what we do is right after the holidays and January 2nd, or again, our first business day back in the office is when we start reaching out to our clients to start this CAC report.
• 26:49
  SPEAKER_03: And the reason for that is because that's the earliest possible date that you can run it, which means your beneficiary account is the highest.
• 26:55
  SPEAKER_00: That is absolutely correct.
• 26:56
  SPEAKER_03: Because if you wait till March, it's going to be lowered by two months at least, right?
• 27:00
  SPEAKER_03: That's exactly right.
• 27:01
  SPEAKER_03: So interesting.
• 27:02
  SPEAKER_03: Yeah, interesting.
• 27:03
  SPEAKER_03: So it doesn't prevent you from having that overpayment, but it certainly delays it.
• 27:07
  SPEAKER_00: That's correct.
• 27:08
  SPEAKER_03: Right.
• 27:08
  SPEAKER_03: So yeah, that's a good process.
• 27:10
  SPEAKER_03: Yes.
• 27:11
  SPEAKER_03: So let's talk about a buyer's nightmare.
• 27:13
  SPEAKER_03: You know, oftentimes I'll have a client come to me and say, I just purchased a hospice.
• 27:19
  SPEAKER_03: We'd love to engage you for services.
• 27:21
  SPEAKER_03: They were over cap, but they paid it.
• 27:24
  SPEAKER_03: So now we're good to go.
• 27:25
  SPEAKER_03: And I have that unfortunate situation of having to break their hearts and say, it's just beginning, right?
• 27:30
  SPEAKER_03: So let's talk about that, walk you through that.
• 27:33
  SPEAKER_00: Yes.
• 27:33
  SPEAKER_00: So unfortunately, hospice does not discriminate who the owner of the agency is.
• 27:38
  SPEAKER_00: So if hospice ABC is selling and I'm going to be the buyer, and I don't do due diligence and realize that the agency unfortunately has been on the receiving end of multiple demand letters and has a lot of cap issues throughout the lifespan of the agency, I just inherited that, regardless of what the agency has already paid off.
• 28:02
  SPEAKER_00: And that is due to that three-year look back window.
• 28:06
  SPEAKER_00: That three-year look back window unfortunately, you know, can uh uh extend three years can turn into years.
• 28:17
  SPEAKER_00: It really can.
• 28:18
  SPEAKER_00: What we see is hospice agencies, we're currently working with an agency that, you know, bless their heart, they still have patients on service from 2019 and unfortunately have been on the receiving end of numerous demand letters, which is why it's keeping 2019 cap period open all these years later.
• 28:36
  SPEAKER_03: Because as soon as you receive some sort of a notice from CMS on that cap period, the three-year window starts over.
• 28:42
  SPEAKER_00: That's exactly right.
• 28:43
  SPEAKER_03: So it can start and start.
• 28:44
  SPEAKER_03: So so they're gonna be on the hook until they're completely pulled payback.
• 28:48
  SPEAKER_00: Yes, until they're and until all those patients pass away or come off of service, an agency, regardless of ownership, is responsible for that payback.
• 28:57
  SPEAKER_03: So it just shows you how important it is if you're in a due diligence phase to really do your homework and project the cap liability ultimately and have something built into the agreement where you're identified against that.
• 29:10
  SPEAKER_03: You've got some sort of a holdback, some something in escrow to cover that ultimate cap liability.
• 29:15
  SPEAKER_03: That's exactly right.
• 29:16
  SPEAKER_02: Yeah, very good.
• 29:17
  SPEAKER_03: Well, Lisa, that's all I have.
• 29:20
  SPEAKER_03: I really appreciate your time.
• 29:21
  SPEAKER_03: I'd much rather talk about lobster caps than hospice caps.
• 29:25
  SPEAKER_03: But in another episode, we'll talk about what to do when you're over cap.
• 29:28
  SPEAKER_03: Yes.
• 29:29
  SPEAKER_03: And I'm gonna have you back.
• 29:30
  SPEAKER_03: So certainly appreciate you.
• 29:31
  SPEAKER_03: I'm Doug Walters, I'm your host.
• 29:33
  SPEAKER_03: And Lisa Rivari, thank you so much for your time.
• 29:35
  SPEAKER_03: Thank you, guys.
• 29:36
  SPEAKER_03: Appreciate it.
• 29:36
  SPEAKER_00: Thank you.
• 29:42
  SPEAKER_01: Thanks for listening to the Home Health and Hospice Profitability Podcast.
• 29:46
  SPEAKER_01: If you enjoyed today's episode, make sure you subscribe so you don't miss what's coming next.
• 29:51
  SPEAKER_01: You can also follow us on social media for more insights, updates, and practical ideas for running a stronger home health or hospice organization.
• 30:00
  SPEAKER_01: And if you'd like to learn more about how Walters can help your agency, visit Walters Accounting.com, Walters Billing.com, and WaltersAdvisors.com.