Strategies for Managing Payment Uncertainty as a Critical Access Hospital



Caravan Health will host Eric Shell of Stroudwater Associates to present a free, interactive webinar on Friday, April 12 at 11 a.m. PDT/2 p.m. EDT to discuss a pressing financial issue for Critical Access Hospitals (CAHs) participating in value-based payment. This webinar will help CAHs understand their options for managing payment uncertainty.

CAHs are generally small, Rural and Community Hospitals that receive specific federal benefits to maintain health care access in rural and underserved communities. The federal government pays CAHs based on the cost of care provided, rather than a capped amount based on a patient’s diagnosis.

Despite this special arrangement, CAHs face a great deal of uncertainty due to the mechanics of payment. The government makes estimated payments to CAHs based on anticipated costs throughout the year. At year’s end through the cost report settlement process, the Centers for Medicare & Medicaid Services (CMS) calculates an annual settlement with each CAH based on whether the actual costs were higher or lower than estimated costs. This means that each CAH may receive a payment or be required to make a payment to CMS several months after the end of the year. These year-end payments can be quite large, sometimes topping $1 million per year.

The webinar will review strategies for CAHs to manage cost reporting. This will help to minimize the effect of prior period settlements and maintain accurate financial reporting systems throughout the year for optimal decision-making. The presentation will review scenarios under which Medicare costs can be over- or understated, impacting future cost report settlements. Participants will also get recommendations about whether to file an interim cost report based on changes to utilization or the hospital’s cost-to-charge ratio.

“CAHs often work under tough financial conditions with very slim margins and struggle with being unsure of the status of federal payments months after the care was delivered,” said Eric Shell of Stroudwater Associates. “These organizations can’t afford either to be underpaid throughout the year or to make large payments to the government. CAHs must understand the importance of accurate and timely cost reporting when considering participation in an ACO or other value-based payment system.”

“CAHs should be considering alternative payment models such as ACOs to avoid falling behind – especially as Medicare margins for all Rural and Community Hospitals has declined to negative 6 percent. CAHs can be reluctant to engage in value-based payment on top of the uncertainty brought on by prior period settlements,” said Lynn Barr, CEO and Founder of Caravan Health. “These hospitals are looking for solutions, and we are pleased to welcome such an esteemed expert to review the facts and help CAHs chart a path forward.”

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