When it comes to long-term care, skilled nursing facilities (or SNFs) are an essential part of the healthcare system. They bridge the gap for patients who require ongoing medical attention but no longer need the intensive resources of a hospital. Like other healthcare providers, SNFs operate in a highly regulated environment and deliver a comprehensive range of services, from rehabilitation and therapy to round-the-clock medical care, helping patients recover from illness, surgery, or injury. To ensure transparency and proper funding, SNFs are required to submit annual cost reports to the Centers for Medicare & Medicaid Services (CMS). These cost reports offer a detailed look into the financial and operational health of each facility.
The underlying dataset for these reports includes information that is compiled into the Healthcare Cost Report Information System (HCRIS), creating a valuable public-use dataset. Researchers, policymakers, and even competitors can use it to analyze trends, assess facility performance, and inform policy decisions.
A Closer Look at the Cost Report
A skilled nursing facility cost report is comprehensive. It includes:
- Financial statement data – outlining revenue, expenses, and net income.
- Medicare settlement data – capturing reimbursement adjustments.
- Utilization data – showing patient days, bed occupancy, and service volumes.
The cost report is structured into multiple worksheets, with data for each variable organized in rows and columns to facilitate analysis and extraction. Within these reports, “cost centers” break down expenses by department (nursing, therapy, dietary, etc.), allowing for precise cost analysis. Each facility is identified by a unique CMS Certification Number, which is used to organize and report data in the dataset.
The historical availability of this dataset, which spans multiple years, makes it a powerful tool for trend analysis. For instance, policymakers can track whether staffing shortages are affecting patient care costs, or whether therapy utilization is increasing among certain patient groups.
A Case Example: Consider a 150-bed SNF in the Midwest that specializes in rehabilitation for post-surgical patients. After reviewing its cost report data from the previous three years, the facility’s financial team realized that therapy costs were high compared to peer facilities. By examining the breakdown of costs by department (cost centers) in the dataset, they identified inefficiencies in staffing schedules and reduced overtime by 20% without compromising patient care. The analysis also considered the total costs and charges for each cost center to identify inefficiencies.
Cost Report Preparation and Submission
SNF cost reporting is a meticulous process that requires a thorough understanding of CMS requirements. That said, it typically begins with collecting data from various departments, ensuring that all cost centers (such as nursing, therapy, dietary, and administration) are properly accounted for. Facilities must then complete the official CMS cost report forms, which require detailed breakdowns of expenses, revenues, and patient utilization statistics. Accuracy is paramount.
Once the cost report is compiled, it must be submitted to CMS by the required deadline, usually within five months after the end of the facility’s fiscal year. Timely submission is essential to avoid penalties and ensure continued participation in Medicare/Medicaid programs. Many facilities use specialized software or consult with accounting professionals to streamline the process and for compliance with all reporting requirements.
Accessing the Data
Once reports are submitted, the data doesn’t just sit in a filing cabinet. CMS aggregates it into HCRIS, creating a resource that can be used for analysis far beyond reimbursement. The report data becomes publicly available in multiple formats, including text and CSV data files. Users can access detailed data through various methods, such as direct download, API, and online portals, making it easy to retrieve and integrate data into analytic tools. For accountants and analysts, cost report files are relatively user-friendly. Each file is organized by fiscal year and provider type, allowing for targeted searches. The accompanying documentation explains variable names, coding conventions, and how to interpret each field.
Because the dataset includes provider IDs, location data, bed counts, and other facility characteristics, it’s possible to filter by region, facility type, or ownership model. The HCRIS public use file contains key information for analysis by researchers and industry stakeholders.
A Case Example: A healthcare policy research group wanted to evaluate Medicaid reimbursement adequacy for rural SNFs. Using five years of HCRIS data, they compared reported costs with reimbursement amounts. Their analysis uncovered that rural facilities were consistently reimbursed at rates 10–15% below their reported costs and prompted state policymakers to revisit Medicaid funding formulas.
Regulatory Compliance and Audits
As we often note, regulatory compliance is a critical aspect of operating a healthcare facility, with SNFs being no different. Their filing of the annual cost report demonstrates adherence to federal and state requirements. CMS and other regulatory bodies use cost report data to monitor facility performance, ensure proper use of public funds, and detect potential issues such as overbilling or misallocation of resources. As a result, facilities are subject to periodic audits, during which their cost reports and supporting documentation are reviewed for accuracy and completeness. These audits help verify that reported costs align with actual expenditures and that facilities follow all applicable guidelines. Non-compliance or inaccuracies in cost reporting can result in financial penalties, repayment demands, or even exclusion from Medicare and Medicaid programs.
To maintain compliance, SNFs must implement robust internal controls, regularly review their reporting processes, and stay up to date with changes in CMS regulations.
Getting Help with Data Analysis
Not every SNF administrator or CFO has the time or in-house expertise to dig into the nuances of cost report data. That’s where resources like the Research Data Assistance Center (ResDAC) come in. They provide free guidance to help users interpret and apply cost report data effectively. Additionally, workshops, webinars, and industry conferences often include sessions on HCRIS data, giving stakeholders practical skills to extract meaningful insights.
A Case Example: A multi-facility SNF operator used ResDAC’s guidance to compare the cost-per-patient-day across all its locations. They discovered one facility’s dietary costs were 30% higher than the average, not because of inefficiency, but because it served a significantly higher proportion of residents with specialized nutritional needs. That insight shifted their focus from cost-cutting to advocating for higher reimbursement for special diets.
The Fine Print: HCRIS Data Disclaimer
While the dataset is powerful, CMS makes it clear that the accuracy of the data is only guaranteed as of its validation date, meaning the information is accurate at that specific point in time. Cost reports reflect a snapshot in time, and there may be a lag between data submission and publication. It’s also important to consider potential biases. For example, facilities may code costs differently, making direct comparisons tricky without adjusting for these variations.
Facility-Level Insights
Beyond cost and reimbursement figures, the dataset provides general facility information:
- Number of certified beds
- Staffing levels and types of services offered
- Ownership details and accreditation information
This broader profile helps analysts and decision-makers understand the operational context behind the numbers. For example, a facility with high nursing costs might have a larger proportion of complex-care patients, making direct comparison to a standard rehab-focused SNF misleading without this additional context.
Best Practices for Facility Management and Reporting
We’d like to wrap up this article with some actionable tips on the effective management of cost reports and how they can help facility managers and administrators with operational efficiency and financial performance. Here are some best practices to consider:
- Centralize Data Collection: Streamline the process by organizing financial statement data, Medicare settlement data, and utilization data in a centralized system, making it easier to prepare accurate cost reports.
- Regularly Review Cost Centers: Analyze expenses by department to identify trends, inefficiencies, or areas for improvement. This can help control costs and optimize resource allocation.
- Leverage Technology: Use specialized software to automate data entry, validate information, and generate reports that meet CMS standards.
- Train Staff: Ensure that team members involved in cost report preparation understand the requirements and the importance of accurate data entry.
- Monitor Regulatory Updates: Stay informed about changes in CMS guidelines and reporting requirements to avoid compliance issues.
- Benchmark Performance: Compare your facility’s cost report data with industry averages or peer facilities to identify strengths and areas for improvement.
By adopting these best practices, skilled nursing facilities can not only ensure compliance with cost reporting requirements but also use the data to drive better decision-making, improve financial health, and deliver high-quality care.
At Walters Accounting, we help healthcare providers, including skilled nursing facilities, make sense of their cost reports, not just for compliance, but as a tool for financial insight. If you have questions or want to see how these reports can be used to strengthen your facility’s operations, we’d love to hear from you.
