PYA Takeaway: A Medicare Cost Report review is a pre-filing evaluation of key reimbursement and compliance areas that can help hospitals identify reporting issues, validate calculations, and assess potential reimbursement opportunities before the Medicare Administrative Contractor’s review.
For many hospitals and health systems, the Medicare Cost Report is a consequential reimbursement filing submitted each year. Whether a provider prepares its report internally or with outside assistance, an independent Medicare Cost Report review can help identify reimbursement opportunities and reduce compliance risk before the report is reviewed by the Medicare Administrative Contractor (MAC).
Even when organizations have experienced internal reimbursement teams, the complexity of cost reporting rules, evolving reimbursement methodologies, and increasing regulatory scrutiny can create compliance risk and missed reimbursement opportunities.
Common Areas of Risk and Opportunity in the Medicare Cost Report
While every provider’s circumstances are unique, certain Medicare Cost Report components may warrant additional scrutiny because of the reimbursement impact and audit risk. A Medicare Cost Report review can identify these and other areas of risk and opportunity:
Disproportionate Share Hospital (DSH) Calculations
DSH reimbursement can represent a significant source of Medicare funding for qualifying hospitals. Errors in patient data, eligibility calculations, or reporting methodologies may affect both DSH reimbursement and related 340B Drug Pricing Program eligibility thresholds. An independent review can help validate calculations and identify potential opportunities before filing.
Nursing and Allied Health Education Programs
Nursing and Allied Health Education (NAHE) programs often receive MAC scrutiny. Reviews frequently focus on provider-operated requirements, allowable costs, and supporting documentation. Ensuring compliance in these areas can help hospitals reduce the risk of lost NAHE reimbursement.
Indirect Medical Education (IME) & Graduate Medical Education (GME) Reimbursement
For teaching hospitals, IME and GME programs are a significant source of reimbursement and are highly scrutinized areas of the cost report. Resident counts, training arrangements, and supporting documentation all play a critical role in determining reimbursement. A pre-filing review can help verify calculations and identify potential concerns before they become audit issues.
Cost-to-Charge Ratios, Bad Debts, and Other Reimbursement Drivers
Changes in cost-to-charge ratios, Medicare bad debts, wage index data, and other reimbursement drivers can significantly affect payment outcomes. Year-over-year variance analyses often reveal unusual trends, reporting inconsistencies, or opportunities for additional investigation before submission.
Benefits of Conducting a Medicare Cost Report Review Early
Conducting a Medicare Cost Report review before filing can help identify potential compliance and reimbursement issues before MAC review. If issues are not identified until the MAC performs its review, addressing them may require additional documentation and prolonged discussions with the MAC.
Benefits of a System-wide Medicare Cost Report Review
For health systems with multiple hospitals, consistency is often just as important as technical accuracy. Individual facilities may interpret reimbursement guidance differently or apply inconsistent reporting methodologies. Over time, these variations can create compliance concerns or lead to missed reimbursement opportunities. A system-wide Medicare Cost Report review helps promote consistency across facilities and supports a more defensible reimbursement strategy.
The Bottom Line
Medicare Cost Reports often involve complex reimbursement rules and significant financial implications. PYA’s Medicare Cost Report Review service can provide management with additional insight into key reimbursement and compliance considerations before submission. By identifying potential issues before filing, providers can better prepare for MAC review and more effectively identify reimbursement opportunities.
For more than 40 years, PYA’s Managed Care and Reimbursement team has helped hospitals manage reimbursement, strategy, and cost reporting in support of our clients’ financial sustainability goals.
