Home health agencies rely on Medicare reporting to keep reimbursement accurate and predictable. Each year, this data submitted informs financial planning and helps the Centers for Medicare & Medicaid Services (CMS) evaluate the real cost of providing care in the home.
At the center of this work is Form CMS-1728-20, the Home Health Agency Cost Report. It captures the agency’s expenses, utilization patterns, and overhead allocation. CMS uses this information to refine payment rates and support the Medicare Payment Advisory Commission (MedPAC) margin analysis, so the quality of cost reports directly shapes future reimbursement levels. For those unfamiliar with MedPAC, it is a nonpartisan and independent legislative branch agency that gives Congress analysis and policy advice on the Medicare program.
Home Health Agency Cost Report: Introduction to CMS-1728-20
For background, part of CMS’s role is maintaining a national cost-reporting system. This system gives them insight into provider expenses and supports both interim and final reimbursement calculations.
While the title of Form CMS-1728-20 refers to home health, the form covers the full scope of services provided under the agency’s Medicare certification. That typically includes:
- Skilled nursing and home health aide services
- Therapy disciplines such as physical therapy (PT), occupational therapy (OT), and speech-language pathology (SLP)
- Medical social work (MSW)
And if a home health agency operates a provider-based hospice, certain financial data related to that component is also captured and allocated on specific worksheets within the same form. The intent is to present a complete, consistent picture of costs tied to Medicare-certified services.
More than 10,900 providers file CMS-1728-20 each year. Collectively, they submit a large volume of auditable data on daily operations, expenses, visit volumes, patient care activities, and overhead allocation methods. Each submission is typically associated with a unique provider transaction access number to ensure accurate tracking and identification. CMS then uses this dataset to support prospective payment systems and MedPAC’s margin analysis. These findings often shape future payment rules and policy updates.
Because the cost report is an annual requirement (and not a one-time audit) organizations need ongoing processes to collect, validate, and store financial and operational data throughout the year. Missing or inconsistent data can lead to payment delays, audit risk, or other compliance issues. CMS provides detailed instructions and guidance on its website, and it is worth building regular review of those materials into an organization’s compliance calendar.
Regulatory Background and Why the Form Is Mandatory
The requirement to file CMS-1728-20 is rooted in federal law and broader oversight of information collection. CMS, which operates under the Department of Health and Human Services (HHS), must comply with statutes that govern what data agencies may request and how they request it.
One of the key laws here is the Paperwork Reduction Act (PRA). This requires federal agencies to show that information collections are necessary for program operations and that the burden on respondents is not excessive. Agencies must also provide notice and an opportunity for public comment before they implement or renew a form.
To meet these requirements, CMS must obtain approval from the Office of Management and Budget (OMB) for Form CMS-1728-20. Whenever CMS revises, extends, or reinstates the form, it issues a federal register notice to inform the public and solicit comments, seeks input from providers and other stakeholders, and demonstrates that the data serve a legitimate program purpose, such as accurate payment and program integrity.
For home health agencies, the takeaway is straightforward: the cost report is a mandatory, ongoing requirement tied to participation in Medicare. Because the data directly inform national payment policy, CMS expects reports to be accurate, complete, and on time.
Key Compliance Requirements for CMS-1728-20
Agencies need internal systems that support the level of detail CMS expects. The cost report goes beyond a basic profit-and-loss statement. Among other elements, it requires:
- Financial statements that support the reported costs
- Visit volumes by discipline, used to calculate cost per visit
- Methods for allocating patient-care costs
- Overhead allocation statistics
- Wage and related information that support program integrity
To manage this, home health agencies (and any associated hospice or therapy components) need well-organized accounting and operational records throughout the year with many agencies using specialized cost report software to streamline data entry, validation, and electronic submission. Trying to reconstruct a full fiscal year’s data at the last minute almost always increases the risk of errors.
Timeliness is also part of compliance. Cost reports are generally due five months after the end of the provider’s fiscal year. Late or missing reports can trigger payment holds, suspensions, or other administrative actions. Smaller organizations with lean administrative staff often mitigate this risk by putting monthly or quarterly data checks in place and, in many cases, partnering with firms that specialize in Medicare reimbursement and cost reporting. CMS also publishes instructions, electronic templates, and regular updates on its sites, so keeping reporting processes aligned with these materials is essential.
What the Cost Report Actually Captures
CMS-1728-20 organizes information into multiple worksheets and sections that capture:
- Operating costs and administrative overhead, including staff, occupancy, and general expenses
- Patient care services and utilization, broken down by discipline and setting
- Therapy services, with cost and volume for PT, OT, and SLP
For agencies with multiple service lines such as skilled nursing, therapy, social work, home health aides, and potentially hospice, the form requires cost and volume data that reflect the real economics of each discipline. CMS applies standardized allocation methods to assign overhead (for example, administrative salaries, rent, utilities) and calculate cost per visit for each type of service.
This information is then used to evaluate whether payment methodologies need adjustment. It can also highlight where costs are concentrated, which helps CMS assess whether resources are aligned with patient needs. For agencies operating in high-cost or rural markets, accurate and defensible cost reporting is one of the few tools available to support fair payment relative to regional wage indices and local conditions.
Cost Report Components
The report is organized into several worksheet series, each serving a specific purpose. The S series gathers essential provider information, such as location, Core-Based Statistical Area (CBSA), certification dates, operational details, and census days. This foundational data helps CMS understand the context in which each agency operates.
The A series presents a trial balance of expenses, breaking down costs into overhead, direct patient care, and non-revenue cost centers. This level of detail ensures that all aspects of agency operations are accounted for. The B series is dedicated to allocating overhead costs across both revenue-generating and non-revenue centers, ensuring that expenses are distributed accurately according to CMS guidelines.
To determine the average cost per visit for home health services, the C series compiles and analyzes cost and utilization data by discipline. The D series focuses on Medicare-specific reimbursement calculations, translating reported costs into figures that drive payment rates. Finally, the F series includes the provider’s balance sheet and income statement, offering a complete financial picture.
Each of these components is essential for CMS to determine reasonable costs, uphold the quality of health services, and maintain the security of sensitive data.
Revenue and Expense Reporting
Accurate revenue and expense reporting is at the heart of the Home Health Agency Cost Report. Providers are required to maintain meticulous financial records, including trial balances, detailed expense allocations, and precise revenue calculations. The cost report mandates that expenses be categorized into specific cost centers—such as overhead, direct patient care, and non-revenue centers—so that the Centers for Medicare & Medicaid Services (CMS) can clearly see how resources are being utilized.
This level of detail allows CMS to refine payment rates, develop the home health market basket, and calculate Medicare margins with confidence. The official CMS website (https://www.cms.gov) offers comprehensive guidance on how to report revenue and expenses, making it easier for providers to find the information they need to complete the form accurately.
CMS Review and Audit Process
As readers of Walters articles know well, review and audit processes conducted by CMS are critical safeguards for the accuracy and reliability of data supplied by agencies. CMS routinely reviews and audits this data submitted to make sure compliance with official regulations and to verify that all information is complete and accurate.
During this process, CMS examines each component of the cost report, including revenue and expense reporting and statistical data, to identify any discrepancies or errors. Providers are expected to maintain thorough documentation and records to support every figure reported. If inconsistencies are found, CMS may request additional information or take corrective action to resolve the issues, thereby protecting the security and integrity of the Medicaid services and Medicare programs.
Providers can find detailed information about audit requirements and procedures on the official CMS website, helping them prepare for and respond to reviews. We at Walters are also ready to work with agencies to best prepare them for any such audit action.
Reimbursement and Payment
Reimbursement and payment for Home Health Agency services are directly tied to the data submitted through the cost report. CMS uses this data to calculate reimbursement rates, ensuring that providers are compensated fairly for the care they deliver to Medicare beneficiaries.
The reimbursement process involves several key steps: CMS analyzes the data, calculates appropriate rates, and processes payments in accordance with program guidelines. Timely and accurate reimbursement is key for the financial health of home health agencies and for the sustainability of the Medicaid services and Medicare programs.
Data Security and Confidentiality
All of this must be done with data security in mind. Cost reports contain sensitive financial and, in some cases, patient-related information. Providers are responsible for ensuring that data compiled for the cost report comply with CMS privacy rules and the requirements of the Health Insurance Portability and Accountability Act (HIPAA).
That means:
- Systems used to store and process cost-report data must be protected from unauthorized access.
- Data transmitted to CMS must follow federal security protocols.
- Policies should be in place for access control, monitoring, and responding to potential breaches.
Treat cost-report data with the same level of protection you apply to clinical records and other protected information.
Certification, Accreditation, and Ongoing Compliance
Cost reporting is only one part of the broader compliance picture. Home health agencies and other Medicare providers must also maintain certification and, when applicable, accreditation.
- Certification confirms that the agency meets CMS’s Conditions of Participation. These standards cover patient care, safety, governance, and overall operations. Without current certification, an agency cannot bill Medicare.
- Accreditation from organizations such as ACHC or The Joint Commission can help demonstrate ongoing compliance and may support various aspects of enrollment and quality oversight.
Certification and accreditation standards include expectations for privacy, security, and record-keeping. Agencies must protect patient information, keep secure records, and have clear policies for data access and breach response. Cost-report data should be handled under the same policies and controls.
Patient Rights and Protections
Cost-reporting ultimately supports a program that exists for patients. All of the data submitted to CMS feeds into a system designed to maintain access to quality care and protect beneficiaries.
Medicare requires all participating providers to:
- Inform patients of their rights at the start of care
- Explain confidentiality protections and complaint processes
- Obtain informed consent where required
- Provide access to medical records upon request
Agencies are responsible for training staff to understand and uphold these rights and for maintaining documentation procedures that support them.
Conclusion
By building clear workflows, maintaining accurate year-round records, investing in staff training, and staying current with CMS guidance, home health agencies can make cost reporting a manageable part of operations. That approach helps reduce compliance risk and supports a more predictable financial future in a healthcare landscape that continues to change.
