As a refresher, a significant percentage of hospital overhead cost is allocated on the Medicare cost report using square footage statistics. Accordingly, inaccurate square footage statistics used on the cost report are likely to result in either an overstatement of allowable Medicare costs on the cost report or an understatement of those costs.  As a result, the cost to charge ratio for outliers and ancillary departments used for other components of Medicare reimbursement and Medicaid cost-based programs are impacted. More importantly, the accuracy of an institution’s reported square footage data appears to be an indicator of one’s intended compliance with applicable Federal and State regulations.

In several high profile court cases, federal and state enforcement agencies have brought costly actions against cost reporting irregularities, often including the use of inaccurate or undocumented square footage data

In our Medicare cost reporting practice, SRG has observed a somewhat casual regard for the accuracy of square footage statistics. We strongly believe such inattention can be a compliance issue to the Medicare participating hospital. Even as most hospitals are currently reimbursed under the prospective payment system, square footage statistics remain an integral part of the cost reporting process and are determinative of Medicare reimbursement in many cases.