Insights: Article

Top 5 Medicare Cost Report Tips

By   Eddie Phibbs

January 24, 2018

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The Medicare Cost Report is a complicated document you can’t avoid filling out. Sure, there are instructions on the Centers for Medicare and Medicaid Services (CMS) website, but they do little to alleviate the cost report’s complexity.

To help you spend less time on figuring this document out, we’ve put together our top five tips for filling out the Medicare Cost Report.



  1. Exclude medical directors from A-8-2 as they are not subject to RCE limits (Pub. 15-2, §Section 401

    Given the differing roles and responsibilities of today’s medical directors, the compensation paid for directorships can vary widely. For the Medicare Cost Report, Reasonable Compensation Equivalent (RCE) limits are not applicable to a medical director, chief of medical staff, or to the compensation of a physician employed in a capacity not requiring the services of a physician and can be excluded from disclosure on Worksheet A-8-2.

  2. If your hospital’s internal report has Medicare HMO days, you should expect to have PS&R report 118.

    Shadow billing, also known as “no pay” or “information only” claims, is an unofficial term that refers to the process that hospitals should follow when providing inpatient services to Medicare Advantage/Health Maintenance Organization (HMO) patients. The claims should be submitted to their Medicare Administrative Contractor so they can get credit for the patient days of service, just like employees punch a time clock to record time spent working.

    The patient days can then be used in calculation of reimbursement for Health Information Technology, Medical Education, Allied Health, Disproportionate Share or Uncompensated Care. The Provider Statistical and Reimbursement (PS&R) report 118 summarizes the Medicare HMO days.

  3. Confirm and include all pass through and lump-sum payments (Pub 15-2, §4031)

    Medicare pays acute care hospitals for Part A and B services via submitted claims; inpatient is paid under Diagnosis Related Groups and outpatient is Ambulatory Payment Classifications. Some hospitals can receive added payments for things such as medical education, bad debts, uncompensated care and more. Medicare will often make additional payments for these items on a periodic basis.

    When completing the cost report, it is extremely important to identify the payments you have received on individual claims—these are on a PS&R report. You also need to include any additional payments you have received for other items. Overstating or understating one of these could have a significant impact on the due to/from settlement.

  4. For Wage Index contract labor, you may include clinical/patient care-related and/or executive/administrative services (Pub 15-2, §4005.2).

    Worksheet S-3, Part II is used to report wage and hour data, which is needed to update the hospital wage index applied to the labor-related portion of the national average standardized amounts of the PPS. It is important for hospitals to ensure that the data reported on Worksheet S-3, Parts II, III and IV are accurate.

  5. Confirm all S-2 questions are answered properly (Pub 15-2, §4004)

    CMS generally publishes regulations and notices on the fourth Friday of each month.

    One thing that may make it easier to stay current with the changes is a better understanding of your own facility. The cost report includes a Worksheet S-2 that has various questions about your facility. If you can develop an understanding of these, it could help you know when a newly published regulation has a potential impact on you.