On July 10, 2013, the Commonwealth Court of Pennsylvania ruled that providers wishing to challenge adjustments made to their Medical Assistance ("MA") cost report must file a timely appeal from their audit report in order to preserve any audit issues for purposes of setting case-mix rates.
As Pennsylvania nursing facility providers well know, a nursing facility participating in the MA Program is required to submit cost reports on an annual basis, which are then audited by the Department of Public Welfare ("DPW"). At the conclusion of the audit, DPW issues an audit report. DPW then inputs the audited cost data into the Nursing Information System. DPW uses this data to set peer group prices and ultimately, calculate the provider's case‑mix reimbursement rate.
Under the regulations governing case‑mix reimbursement, providers have the right to appeal the audit reports issued by DPW as well as the case‑mix rate notices which inform the provider of its reimbursement rate for a given fiscal year. In The Manor at St. Luke Village v. Department of Public Welfare, the case decided by the Commonwealth Court, three providers did not appeal their audit findings at the time of audit. Rather, they challenged the audit findings when they filed an appeal of their case‑mix rate notices. The Commonwealth Court sided with DPW, ruling that because the providers failed to avail themselves of the right to raise objections to the audit results at the earliest possible point in the rate setting process, they waived their ability to raise those objections at the conclusion of the rate setting process - i.e., when the case‑mix rate notices were issued.
In light of this decision, nursing facilities wishing to challenge cost report adjustments should appeal both the audit report and the case mix rates that are calculated using those audited costs in order to preserve the opportunity to seek an increase in payment rates resulting from an increase in audited costs.