When it comes to Medicare compliance, one document that healthcare providers can’t afford to overlook is the Medicare Cost Report. Even if your organization billed only a modest amount to Medicare during the year, you’re not necessarily off the hook. Whether you’re running a hospice, a home health agency, a mental health facility, or a small outpatient clinic, filing this report correctly can mean the difference between staying compliant and getting penalized.
Most providers today are reimbursed under the Prospective Payment System (PPS), rather than the older cost-based model. But that doesn’t mean cost reports have gone away. In fact, the Centers for Medicare & Medicaid Services (CMS) continues to require them for nearly all certified providers. In this blog, we’ll walk through what type of cost report you need, how to file it correctly, and how to avoid common mistakes.
Why Medicare Cost Reporting Still Matters
Today, most providers are paid under PPS, which reimburses providers based on national averages, adjusted for local and case-specific factors. Still, Medicare requires an annual cost report because it remains a primary tool to:
- Monitor provider compliance
- Inform adjustments to PPS rates and payment formulas
- Reimburse allowable Medicare bad debts
- Support audits and overall reimbursement program integrity
That said, it’s easy to see why some smaller or newer providers might wonder if cost reporting still applies. After all, if your payments aren’t based on your expenses, what’s the point? The answer is simple: oversight. Even if your payment isn’t determined by your costs, CMS still wants to know what they are.
Types of Medicare Cost Reports
There are three primary types of Medicare Cost Reports, and the kind you need to file depends on how much Medicare reimbursement your organization received during your fiscal year.
- Full Medicare Cost Report: Required if you received more than $200,000 in Medicare reimbursement. This version includes a full suite of worksheets (S, A, B, C, F, etc.), departmental cost allocations, visit statistics, bad debt reporting, and a reconciliation with your trial balance. What types or organizations file these? Typically, hospices, home health agencies, and skilled nursing facilities with consistent PPS activity.
- Low-Utilization Medicare Cost Report: Required if you received between $1 and $200,000 in Medicare reimbursement. This report still requires certification, basic statistics, and worksheets—but skips the deep allocation detail. It’s streamlined, but no less important.
- No-Utilization Medicare Cost Report: Required even if you received $0 in Medicare reimbursement. It’s a low-complexity report that affirms no use. It’s minimal but mandatory if you maintained your Medicare certification.
What’s Required for a Low Utilization Filing
While a Low Utilization Cost Report is shorter than a full report, it still has strict requirements. At minimum, you’ll need to prepare the following:
- Worksheet S: The signed certification by an officer or authorized provider representative.
- Worksheet A: A summary of applicable expenses.
- Financial Statements: Typically include an income statement and balance sheet.
- Working Trial Balance: A detailed list of account balances.
- Supporting Documentation: Any additional materials to verify reported costs.
- Statistical Data: Basic visit or service-level data, depending on your provider type.
Unlike the full cost report, this version doesn’t require departmental cost allocation or a full complement of schedules. Still, it’s not a casual exercise, and errors, omissions, or poor documentation can delay processing or trigger a rejection.
Who’s Eligible to File a No Utilization Report?
If you didn’t bill or receive any Medicare funds during the fiscal year, you’re not exempt—you’ll file a No Utilization Report instead. This includes agencies that didn’t treat any Medicare beneficiaries; providers who had all claims denied or no billing activity; and entities temporarily pausing their Medicare operations.
Filing Your Medicare Cost Report: MCReF and More
CMS strongly encourages the use of its Medicare Cost Report e-Filing (MCReF) system for submitting reports electronically. The platform offers faster confirmation, validation checks to catch errors, and a lower risk of misplacement.
While some Medicare Administrative Contractors (MACs) may still accept hard copies, it’s best to verify with your MAC before proceeding. In general, electronic submission is the safest and most efficient route.
Key Deadlines and What Happens If You Miss Them
All cost reports—full, low utilization, or no utilization—are due five months after the end of your fiscal year. So, if your fiscal year ends on December 31, your filing deadline will be on May 31.
Missing a Medicare reporting deadline can be costly for your organization. Consequences may include:
- Suspension of Medicare payments
- Delays in future rate adjustments
- Forfeiture of Medicare bad debt reimbursement (for the year in question)
- Increased audit risk or targeted program integrity actions, and
- Threats to your certification status if delays or chronic non-filings persist.
Importantly, these penalties apply equally to low and no-utilization filings. There are no exceptions based on volume.
Avoiding Common Mistakes
Even simplified reports come with common pitfalls. Here are some you should avoid:
- Missing your filing deadline even for low- or no-utilization reports
- Filing the wrong type of report based on incorrect revenue assumptions
- Submitting unbalanced trial balances or mismatched financials
- Forgetting to include or properly document Medicare bad debts, and
- Submitting on paper instead of through MCReF, unless CMS has explicitly allowed it.
Whether you billed $2 million or nothing at all, your Medicare Cost Report is a non-negotiable part of compliance. Even if you qualify for a simplified report, you must meet the same deadlines, include all required documentation, and certify the report accurately.
At Walters Accounting, we help healthcare providers navigate Medicare compliance and the reporting process with confidence. Indeed, we assist over 1,000 healthcare providers each year in filing accurately and on time. If you’re unsure of your utilization and reporting status, need help understanding your Provider Statistical and Reimbursement (PS&R) Report data, or just want to ensure your submission is accepted the first time, we’re here to help.
Reach out to our team today for tailored, expert support.
