The Medicare Cost Report, a report of the costs associated with treating Medicare patients, serves multiple purposes for health care facilities.

What is the Medicare Cost Report?

All providers who are certified to treat patients with Medicare insurance are required to complete a cost report annually. The report is designed to capture the statistical activity and costs related to patient care. This includes revenue, costs, and patient care statistics like patient days, patient visits, and discharge volumes.

Importance for Health Care Providers

There are ten cost report forms related to the different types of providers throughout the country including acute care hospitals, skilled nursing facilities, home health agencies, outpatient rehab clinics, rural health clinics, federally qualified health centers, and more. Below is a summary of these forms.

To participate in Medicare and receive proper reimbursement for their services, providers must file an accurate and timely cost report annually.

Medicare has specific rules that define what costs are allowed to be reimbursed by Medicare. The Medicare Cost Report identifies those costs so that Medicare can identify the reimbursement settlement a provider should receive for a specific cost reporting period.

The primary purpose of a cost report is to settle the reimbursement owed to Medicare-certified providers, but its impact reaches beyond the reimbursement settlement.

Cost reports are used by multiple audiences to drive health care policies, identify financial and statistical information about providers, and establish payment rates that impact providers across the country. Because of this, the need for an accurate cost report cannot be understated.

Filing the Medicare Cost Report

The cost report filing process includes several coordinated steps, and it’s generally best to start the cost reporting process early, even before the end of the cost reporting period. In general, there are three broad movements of the cost reporting process.

Gather Needed Data 

Providers will need to collect detailed data from their internal operational records, as well as from their financial accounting records.

Since this data is also maintained on a monthly basis for their internal operations and accounting process, the data can be readily available and compiled for the year-to-date information needed. The practice of updating monthly data throughout the year is recommended to ensure the compiled data is readily available for what will be needed on the report.

Complete the Cost Report Worksheets

Utilizing an approved cost report software, providers should utilize their data and follow the instructions to thoroughly complete all the cost report worksheets that are associated with their provider type.

Submit Report to Medicare Administrative Contractor

Cost reports must be submitted to a provider’s Medicare Administrative Contractor, also referred to as a MAC. These reports are submitted electronically through the Medicare Cost Report e-Filing, or MCReF system. The Centers for Medicare and Medicaid Services (CMS) has approved a short list of software vendors who provide cost report software. Each of the approved software solutions has the appropriate checks and balances in place to ensure technical and critical errors are excluded from the original filing by the provider. Once the cost report is submitted electronically, it will be subject to an audit and review by the MAC. But first, the cost report must pass an initial check to confirm that it was submitted on time and is compliant with reporting requirements.

Deadlines and Submission Requirements

Providers have 150 days to submit their cost report, starting on the last day of their cost reporting period. For example, if a provider’s cost reporting period ends June 30, the cost report must be filed no later than November 30.

This deadline can change when a provider withdraws from Medicare, or there’s a change of ownership. But generally, the Medicare Administrative Contract is very strict about the 150 day deadline.

The cost report must be filed electronically and include these key requirements:

• The completed Electronic Cost Report (ECR) prepared with the approved software
• A Print Image (PI) file of the cost report, which allows the MAC to read the file
• A signed Certification page by an authorized official of the provider organization  

Other supporting files must also accompany the upload of information at time of filing. These include:

• Working trial balance
• Audited financial statements
• Balance sheet
• Statement of revenues and expenses
• Medicare Bad Debt listings
• Disproportionate Share Hospital (DSH) report
• Charity care and uninsured listings
• Intern and Residential Information System (IRIS) detail

Components of Cost Report Preparation

Successful cost report preparation requires gathering and organizing data from multiple sources:

Data collection and organization

To complete a cost report, providers will need to identify the financial and operational information from the following data sources:

• Financial records including the working trial balance which includes the revenues, expenses, and internal financial statements
• Audited financial reports and the balance sheet and income statement
• Hospital statistical and cost data, which must be grouped in the proper pre-determined cost reporting formats per the instructions and guidelines
• Payroll and contract services records
• Provider specific patient utilization data and statistics such as patient service days, visits, and patient counts
• Detailed patient billing system information such as charges and payment activity data, including payer breakdown for Medicare, Medicaid, Medicare HMO, Medicaid HMO, Commercial, and Self-Pay categories
• Medicare Provider Statistical and Reimbursement (PS&R) Reports

Medicare provides PS&R reports electronically and they can be requested through the CMS Enterprise Identity Management (EIDM) system for any time period needed. They summarize All Medicare Part A and Part B claims data for the fiscal year.

Payment dates and service dates can be specific to the providers need for the cost report year end data timeframe.

Major Software Solutions for Cost Reports

CMS approves a handful of cost reporting software vendors which can help providers compile cost reports.

Cost Report Software Vendors Approved by CMS

Features and Benefits of Each Solution

While each vendor will have its own strengths, there are some common features and core benefits of utilizing these software tools.

These include:

Core Features

• Automated Medicare cost report preparation and submission tools
• Integration with provider financial, billing, and patient accounting systems
• Support for multiple provider types and various Medicare cost report forms
• Built-in data validation, error checking, and compliance monitoring
• Tools for managing cost report deadlines, appeals, and adjustments
• Consulting, training, and support services to assist with complex reimbursement issues

Core Benefits

• Increased accuracy and efficiency in cost report preparation
• Improved compliance with CMS regulations and timely submissions
• Enhanced ability to maximize Medicare reimbursement and identify revenue opportunities
• Reduced risk of errors, audit findings, and penalties
• Streamlined workflows through automation and system integration
• Access to expert guidance and education to strengthen internal capabilities

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Additional Resources

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