Nationwide or statewide reports on hospitals' quality and financial information, such as CMS cost reports, are designed to allow easy comparison of performance across hospitals that are each unique, differing in patient population, processes and other areas. However, some hospitals may interpret questions or report differently. It becomes more difficult to compare "apples to apples" when there is variability in reporting.
Here are four sources of possible variability in CMS cost reports from Objective Health, the McKinsey & Company unit that serves healthcare providers:
1. Difference in fiscal years. Some hospitals file with the calendar year, while others file with the federal fiscal year, which may cause results to vary outside of variance in performance.
2. Lack of comprehensive audits. Hospitals have little incentive to be accurate because Medicare does not conduct comprehensive audits on these reports, according to Objective Health.
3. Differences in reporting units. Hospitals may also vary in their reporting structures, which can skew results. For example, instead of reporting itself as a sole entity, a hospital might include affiliated hospitals and subsidiaries. Comparing data for one hospital against a hospital and its subsidiaries would not be a meaningful comparison. While this is not a common issue with Medicare cost reports, leaders should be aware of this potential discrepancy, according to Objective Health.
4. Difference in cost allocation. The CMS cost report requires hospitals to allocate general administrative costs across departments using square footage or charges, according to Objective Health. If hospitals use different methodologies to allocate costs, the results could vary greatly among similar hospitals.
Hospitals should verify they are collecting and reporting data according to CMS specifications so their data are accurate. With the growing trend of transparency, accurate data will be more important because consumers and other organizations will have access to some of hospitals' data.
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Here are four sources of possible variability in CMS cost reports from Objective Health, the McKinsey & Company unit that serves healthcare providers:
1. Difference in fiscal years. Some hospitals file with the calendar year, while others file with the federal fiscal year, which may cause results to vary outside of variance in performance.
2. Lack of comprehensive audits. Hospitals have little incentive to be accurate because Medicare does not conduct comprehensive audits on these reports, according to Objective Health.
3. Differences in reporting units. Hospitals may also vary in their reporting structures, which can skew results. For example, instead of reporting itself as a sole entity, a hospital might include affiliated hospitals and subsidiaries. Comparing data for one hospital against a hospital and its subsidiaries would not be a meaningful comparison. While this is not a common issue with Medicare cost reports, leaders should be aware of this potential discrepancy, according to Objective Health.
4. Difference in cost allocation. The CMS cost report requires hospitals to allocate general administrative costs across departments using square footage or charges, according to Objective Health. If hospitals use different methodologies to allocate costs, the results could vary greatly among similar hospitals.
Hospitals should verify they are collecting and reporting data according to CMS specifications so their data are accurate. With the growing trend of transparency, accurate data will be more important because consumers and other organizations will have access to some of hospitals' data.
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