Guest Columnist: Are You Getting What You Paid For?

By Thomas E. Boyd, Boyd & Nicholas

I have been a financial consultant to the home health industry since 1989 and have been and continue to be amazed on the number of providers who are paying for the work of a CPA but do not know what they are paying for or think that they are paying for one thing while getting another. I have seen providers pay for a compiled statement while thinking they were getting an audited statement. I have seen providers pay for “CPA” work that from all appearances and results was not done by a qualified CPA.

Does the Medicare cost report require a CPA financial statement?

Along with the Medicare cost report the provider is also required to submit:

  1. Financial Statements
  2. Working Trial Balance

Medicare does not say you need to have a CPA financial statement but if you do then you need to supply it in it’s entirely when you submit the Medicare cost report.

The Medicare requirement is given in Provider Reimbursement Manual 15 Part II Section 1102.3

“Submit copies of financial statements that are compiled, reviewed or audited by the independent public accountant. Where you do not engage public accountants for this type of service, submit a copy of the financial statements prepared by you…

Where financial statements are available, include the independent public accountant’s opinion, the statements themselves, and the footnotes.”

The Form CMS 339, Provider Cost Reimbursement Questionnaire required to be signed and filed with the Medicare cost report asks if financial statements were prepared by a CPA.

“Exhibit 1

B. Financial Data and Reports

1. During this cost reporting period, the financial statements are prepared by Certified Public Accountants or Public Accountants (submit complete copy or indicate available date) and are:

a. Audited;

b. Compiled; and

c. Reviewed.

NOTE: Where there is no affirmative response to the above described financial statements, attach a copy of the financial statements prepared and a description of the changes in accounting policies and practices if not mentioned in those statements.”

The above question gives three possible answers to the a. b. and c. The answers are Yes, No or N/A. You can mark NO to all three but it is untrue to mark YES to more than one.

What is a CPA financial statement?

Audited Financial Statements are the CPA’s highest level of assurance services and the most expensive of the three. The CPA performs all of the steps indicated for compiled or reviewed statements, but also performs verification and substantiation procedures. The CPA’s standard audit report states that an audit was performed in accordance with generally accepted auditing standards, and expresses an opinion that the financial statements present fairly the entity’s financial position and results of operations.

Compiled Financial Statements represent the most basic level of service CPAs provide with respect to financial statements and is the cheapest of the three. The CPA must comply with certain basic requirements of professional standards, such as having a knowledge of the client’s industry and applicable accounting principles, having a clear understanding as to the services to be provided, and reading the financial statements to determine whether there are any obvious departures from generally accepted accounting principles. The report on the financial statements is issued that states a compilation was performed in accordance with AICPA professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles.

Reviewed Statements require that the CPA perform inquiry and analytical procedures in addition to the procedures described above for a compilation. The CPA charge for this report is more than for a compiled but less than that for an audit. A report is issued stating that a review has been performed in accordance with AICPA professional standards, that a review is less in scope than an audit, and that the CPA did not become aware of any material modifications that should be made in order for the statements to be in conformity with generally accepted accounting principles.

 What is a CPA?

A CPA has passed the Uniform Certified Public Accountant Examination and has met additional state education and experience requirements for certification as a CPA. In most U.S. states only CPAs who are licensed are able to provide to the public attestation (including auditing) opinions on financial statements.

I have seen providers hire “CPAs” just because they said they were. More than that is needed. A CPA designation obtained from another country may not be valid in this country. A CPA licensed to practice in California (heaven) may not be able to practice in Alabama (censored) without obtaining reciprocity from the Alabama state CPA board (exceptions exist, varies by state).

A CPA is not always a handsome intelligent dude in a nice suit like Mark Cannon of Healthcare Provider Solutions, Inc. A CPA is like an RN, CFE (J), CNA and others in that the CPA must obtain annual professional education, must be licensed in their state and should belong to professional organizations.

If you look at Mark Cannon’s corporate profile on the HPS website, you will read that he is a member of the American Institute of Certified Public Accountants (AICPA) and the Tennessee Society of CPA’s (TSCPA). His forty hours of annual professional education is routinely obtained by attending Healthcare Conferences, Home Health Conferences and Healthcare Financial Management Conferences.

What do you do before you hire a caregiver? Don’t you verify that they have a current license and can practice their profession in your state? You should do the same when hiring your CPA.

A good CPA can provide valued assistance with properly prepared financial statements and by being a consulting resource to management. 

The Nutshell Statement

A good businessperson knows what is required, what they want and finds qualified people to do the work.

About the Author

Thomas E. Boyd has over 30 years of Medicare reimbursement experience, including almost 12 years with one of the Medicare intermediaries for home health agencies. He has been a consultant to Medicare-certified home health agencies and hospices since 1989 and is a principal of Boyd and Nicholas, Inc., THE COST REPORT PEOPLE®.

Mr. Boyd has spoken on home health financial and compliance issues before NAHC, NHPCO, and more than 20 state and regional home health care associations.

Tom has a BA in Management/Accounting from Sonoma State University and a MBA in Business Administration from St. Mary’s College. He is a member of the HHFMA workgroup, the Association of Certified Fraud Examiners, and the U.S. Chess Federation.

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