
Members from the NYCPA Health Care Committee spoke at the Foundation for Accounting Education's Healthcare Conference on Sept. 19 about the activities and updates in their specialty areas, such as acute care and nursing facilities.
John Peterson, a principal at Freed Maxick, discussed a crucial development in the acute care area. The Centers for Medicare & Medicaid Services (CMS) released the final rule for inpatient prospective payment systems (IPPS) for acute care hospitals. During the panel discussion, Peterson reviewed the main points of the final rule. “Some of the things to take away when I go through these highlights are that there are a lot of facilities with the state providers that are struggling financially with cashflow issues,” he said.
In the final rule effective Oct. 1, the Centers for Medicare & Medicaid Services (CMS) increased the Medicare inpatient prospective payment system rates by 2.9% in 2025 compared to 2024. The increase in 2024 was 3.1%. CMS expects overall payments to increase by $2.9 billion, which includes a $200 million decrease in disproportionate share hospital (DSH) payments. The decrease is based on a reduction in the uninsured rate.
Peterson said providers must look at their cost report schedules, Schedule S-10, DSH eligible days, and the number of eligible days reported for Medicaid to ensure they are not leaving “dollars on the table.” A schedule S-10 is a Medicare cost report that hospitals utilize to know how much uncompensated care they offer and how much reimbursement they receive get.
Another change Peterson mentioned concerns the wage index, which CMS says is a Medicare adjustment to hospital inpatient payments accounting for local labor cost differences. According to Peterson, in the final rule, the change was that the inpatient rule’s low wage index hospital policy was extended for three years so the core-based statistical areas in the bottom 25% of the wage index could receive adjusted and higher payments.
Providers are fighting this change. “A couple of lawsuits are ongoing right now because the wage index is a zero-sum game and budget-neutral. By giving those facilities additional dollars, they are taking away from other providers across the country,” Peterson said.
Another panelist, Dottie Russo, a partner at PKF O’Connor Davies, discussed the challenges and opportunities in nursing homes. She said the 2022-2023 Executive Budget implemented the 70-40 minimum spending mandate. This mandate calls for 70% of a facility's revenue to be spent on direct care and 40% on resident-facing staffing. Additionally, New York has capped the allowable profits of the nursing home business at 5%.
“Neither of these mandates has been acted upon or fully processed by the state, so to date, there has been no final procedure about these refunds, and there are facilities that fall into the category of not having spent 70% or 40% where appropriate. Those dollars are in the tens of millions, and if calculated across the state, they would theoretically go back to the state. According to the regulations, those dollars would go into a quality pool and be shared with the facilities that are in compliance,” Russo said.
The other big challenge for the facilities is the staffing mandate, which requires them to provide 3.5 hours of nursing care daily for residents. Given the workforce shortage, Russo said two-thirds of facilities across the state need to comply with the mandate.
She added that during COVID, nurses moved into the agency and travel work arrangements. Nursing home operators prefer not to use agency nurses, but the workforce shortages are forcing them to do so. If staffing is not available at the facilities, admissions are reduced. “This is where we get into this terrible vicious cycle of hospitals needing a place to put patients and not being able to put them in the facilities because the facilities have to beg off because they can't get staffing,” Russo noted
Another challenge that Russo mentioned is that Medicaid rates are based on a 2007 cost report. This means the rate is insufficient to support residents in skilled nursing facilities. In addition to not being sufficient, the challenge with these Medicaid rates is that they are released and paid well after the effective date, making it very difficult to predict cash flow and budgeting because of the retroactive adjustments that must be made during the year.
Fee-for-service Medicare beneficiaries with reasonable rates are moving to Medicare-managed care plans with lower rates and a much more difficult payment arrangement is another obstacle.
Despite the challenges, there are some bright spots, including grant funding from the state and going into new programs that collaborate with other partners. “In my group of clients, we have seen some of the not-for-profits collaborate, and they joined some shared services, and that seemed to have worked,“ Russo said.
She also mentioned less dependency on Medicaid occupancy, which she characterized as an “easy one to say but difficult to achieve.” There is also capital or the opportunity for financing if that is available for updating and investing in new programs because capital improvements are mostly reimbursed,
As for the other areas, Erica Calderon, a managing partner at Brinster & Bergman, provided updates on home care. She discussed preparing Form LS300, an annual compliance statement of wage parity, hours, and expenses, and promptly submitting it to the managed long-term care system. She also mentioned that cost reports for home care agencies were due on Aug. 31.
Allan Blum, a partner at Forvis Mazars, focused on behavioral health. He reminded everyone that filing for the current cycle, which is the June 30 providers, have a filing for the cost report due on Dec. 1. For Office for People With Developmental Disabilities providers, there are very harsh penalties for lateness, and there are few extensions given. He asked everyone to get their cost reports done as early in November or risk running into the Thanksgiving holiday. Mental health and serious emotional disturbance providers' cost reports are due on Nov. 1, but there is a one-month extension. Office of Children and Family Services cost reports called Standards of Payment are due on Nov. 1.
For updates on diagnostic and treatment centers, Steve Schwartz, a partner at CohnReznick, talked about cost reports in this area. The software was released on Sept. 5 for updates to the cost report. Schwartz said that “for the most part, the cost report has not changed. There were a couple of changes, some for the positive, just like outdated terms have been updated, and they added some lines to reflect certain standards that have been implemented, such as the operating assets and liabilities.” The deadline for the cost report is Dec. 16.