How proactive cost reports could improve cash flow, Medicare Advantage reimbursement, and financial stability.

As a cost-based reimbursed provider, Critical Access Hospitals (CAHs) depend heavily on their Medicare cost report to ensure accurate and timely reimbursement for a significant portion of their operations. Yet too often, reimbursement is treated as a year-end exercise—only to result in unwelcome surprises once the cost report is prepared and submitted to the Medicare Administrative Contractor (MAC). Those surprises don’t just affect final settlement. They can negatively impact your income statement, cash flow, and operational planning throughout the year.

The Case for Interim Medicare Cost Reports

Preparing interim Medicare cost reports throughout the year provides visibility into your expected reimbursement and helps avoid unexpected results at fiscal year-end. This proactive approach is especially important as CAHs continue to adjust to post-pandemic realities.

Operational Changes: The Cost Report Impact

As you evaluate changes in your organization – volumes, payor mix, service lines, expenses, medical staff contracts, length of stays, statistical allocations, etc. – it’s important to understand how each decision flows through the Medicare cost report. Each of these factors can materially change your cost report outcome. Understanding that impact before year-end allows leadership to make informed financial and operational decisions.

Don’t Overlook Medicare Advantage (HMO) Reimbursement

As Medicare Advantage enrollment continues to grow, reimbursement methodologies for CAHs have evolved. It is critical to:

• Know which Medicare HMO plans you are contracted with
• Understand contract terms and reimbursement methodologies
• Monitor pre-authorization requirements by service line

A Medicare cost report receivable at year-end often signals lost Medicare Advantage reimbursement, as many Medicare HMO plans reimburse based on Medicare interim rate letters, not final settlements. Without active monitoring, CAHs may unintentionally leave reimbursement on the table.

Medicare Bad Debts: Track Them in Real Time

Another common area of risk is Medicare Bad Debts. Tracking allowable bad debts throughout the year helps prevent over- or under-estimation at cost report time. Changes in collection activity, revenue and payor mix can all influence allowable Medicare Bad Debts. Ongoing review ensures accuracy and compliance while supporting appropriate reimbursement.

A Proactive Approach to Cost Reporting

Interim cost reports aren’t just about compliance, it’s about financial stability, predictability, and strategic insight. When used effectively, your Medicare cost report becomes a management tool that supports informed decision-making rather than a year-end scramble.

Thank You to Our Critical Access Hospitals

We would be remiss not to recognize the essential role CAHs play in delivering accessible, high-quality healthcare to rural communities across the country. Your work is challenging and vital, and thoughtful financial stewardship is a key part of sustaining that mission.

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How We Help Critical Access Hospitals

RubinBrown’s Healthcare Consulting team partners with Critical Access Hospitals (CAHs) to deliver accurate, compliant, and predictable Medicare reimbursement. Our healthcare reimbursement specialists support CAHs with interim and year-end Medicare cost reports, prior year cost report opportunities, reimbursement risk assessment, payment optimization, navigation of Medicare Advantage complexity, and assistance with Medicare Administrative Contractor (MAC) audits. 

If you’re looking to reduce uncertainty and strengthen reimbursement predictability, we’re here to help.

 

Published: 01/28/2026

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