First off, let’s understand what a settlement on a cost report is.  At the bottom of the Worksheet S signature page, your cost report may be showing an amount.  This amount is called the settlement.

For a standard prospective payment system facility, such as a SNF, HHA, hospice, or FQHC, which is neither claiming Medicare bad debt nor vaccine charges on their cost report (more about these later), the settlement would be zero.  This means that neither does your facility owe Medicare money nor do they owe your facility money.

In the following circumstances, the settlement would be an amount other than zero:

1. This facility is cost-reimbursed, not on a prospective payment system.  As of this writing, this is still applicable to RHCs and some types of hospitals.*  The settlement in this case would show the difference between the actual facility costs per the cost report and the amount reimbursed the facility over the course of the year per the PS&R or internal records.
2. The facility is claiming Medicare bad debt for uncollectible co-pays or deductibles.**  The settlement amount, in this case, would be the difference between 65% of the bad debt claimed on the cost report (the current reimbursement rate for bad debt, as of this writing) and the interim payments for bad debt actually reimbursed the facility over the course of the year as entered on the cost report, if any.
3. The facility administered vaccines to Medicare patients and is claiming their cost on the cost report.  This may apply to hospitals, SNFs, HHAs, FQHCs, and RHCs.  The settlement is usually the amount that the vaccines administered to Medicare patients cost the facility per the cost report calculations.  If the facility received some compensation for vaccines over the course of the year, this amount would be entered on the cost report, and the settlement would be the difference between the vaccine administration costs and the reimbursement already received.

If the settlement is a negative number, it means that the facility owes Medicare money, since there was an overpayment.  If the settlement is positive, it means that Medicare owes the facility money.

It should be noted that, since hospices can neither claim bad debt nor claim reimbursement for administration of vaccines, the settlement on a hospice cost report is always zero.  It is for this reason that the settlement information shown above does not even appear on a hospice signature page.

It should be further noted that, by signing the cost report, you are indicating that you believe the settlement is correct, whether an over- or under-payment is indicated.  As such, it is wise to check the settlement amount to verify its veracity before signing.

* For more information on the prospective payment system and the cost report, see our blog How Does a PPS Cost Report Work?

**You may read more about claiming Medicare bad debt on our blog Medicare Bad Debt.

Disclaimer:  This blog does not contain legal advice. What it does contain are our best
explanations, advice, and suggestions to help facilities and cost report preparers to understand the cost report forms and offer suggestions for their preparation. Progressive Provider Services assumes no legal responsibility for the content of this blog, nor for cost reports prepared based on the content herein.