Reducing risk, improving accuracy, and strengthening Medicare and Medicaid reimbursement outcomes

Cost reporting is one of the most technically demanding and influential processes for healthcare organizations participating in Medicare and Medicaid programs. While it is often associated with year-end settlements, the implications extend far beyond reimbursement. During the pandemic, for example, it became clear that many cost report schedules, particularly those not directly tied to reimbursement, are routinely used by the Centers for Medicare and Medicaid Services (CMS) and other agencies for data gathering, benchmarking, and public reporting.

Given its complexity and long-term impact, cost reporting requires a detailed understanding of regulatory guidance, cost allocation methodologies, and the operational realities of healthcare delivery.

Why Experience Matters in Cost Reporting

Facilities that prepare their own cost reports typically complete one per year, while specialized consultants prepare hundreds annually across a wide range of provider types. This volume of experience allows external experts to identify best practices, incorporate current CMS interpretations, and ensure that each facility receives the reimbursement it is entitled to under the law.

Engaging professionals to prepare Medicare and Medicaid cost reports can provide several key advantages:

Technical Expertise with Complex and Evolving Regulations

Medicare and Medicaid cost reporting is governed by an extensive set of rules, including CMS regulations and guidance from Medicare Administrative Contractors (MACs). Professional preparers remain current with these updates and understand:

• Changes in CMS rules and data reporting formats 
• Allowable versus non-allowable costs
• Reimbursement methodologies such as TEFRA, PPS, and CAH

This technical proficiency reduces the risk of noncompliance, audit findings, and potential financial adjustments.

Audit Readiness and Risk Mitigation

Experienced preparers understand the expectations of MAC auditors and develop audit-ready documentation throughout the process. This includes:

• Ensuring all supporting schedules are properly reconciled to the facility’s financial statements
• Anticipating common audit questions and potential areas of disallowance
• Providing timely and accurate responses during audit reviews to minimize the risk of unfavorable proposed adjustments.

Comprehensive documentation and a strong understanding of audit procedures can significantly reduce processing delays and protect against reimbursement claw backs. In addition, external preparers often maintain established relationships with all MACs nationwide. These relationships facilitate clear communication and efficient issue resolution throughout the cost reporting and audit processes. Familiarity with each MAC’s preferences, interpretation of regulatory guidance, and review procedures help ensure smoother submissions, quicker turnaround times, and a more streamlined path to final settlement.

Efficient Use of Staff Time and Organizational Resources

Preparing a cost report requires coordination across finance, billing, human resources, and clinical departments. Outsourcing this function allows internal teams to focus on patient care and operational priorities, while leveraging external expertise to:

• Streamline data collection and reconciliation
• Prevent errors that could delay submission or impact reimbursement
• Ensure deadlines are consistently met without staff overtime pressures

Optimization of Reimbursement Opportunities

An expert preparer can help ensure that all reimbursable costs are accurately captured and properly allocated. Key benefits include:

• Identifying areas of understated expenses, which could reduce future payments
• Aligning departmental allocations with CMS cost principles
• Identify opportunities for full cost recovery or rate enhancements 

Even small inaccuracies can have cumulative effects on interim rates and future settlements, making precision essential.

Independent Perspective and Quality Assurance

An external reviewer provides objective insight, often identifying inconsistencies or opportunities that internal teams may overlook due to familiarity or workload constraints. This independent analysis supports both compliance, reimbursement, and operational improvement.

Long-Term Financial and Operational Value

While there is a cost to engaging an external preparer, the long-term financial return can be significant through:

• Prevention of disallowed or misallocated costs
• Avoidance of audit-related matters
• Accurate and timely reimbursement that supports financial stability

For healthcare providers that depend on Medicare and Medicaid reimbursement, cost report preparation is not merely an administrative task, it’s a function that impacts compliance, financial performance, and strategic decision-making. Leveraging specialized expertise helps ensure that cost reports are accurate, defensible, and reflective of the true cost of care delivery.
                                                                                                                                                       

RubinBrown’s Healthcare Consulting team has prepared more than a thousand cost reports across a broad range of provider types, including hospitals, rural health clinics, skilled nursing facilities, and home health agencies. Our approach is grounded in technical accuracy, efficiency, and close collaboration with our clients. Rather than relying on client-prepared workbooks, we gather the required information through a focused documentation request and prepare all supporting schedules internally. Ongoing communication throughout the engagement allows us to fully understand each facility’s operations, cost structure, and reimbursement considerations. Our process is designed to deliver a completed cost report prior to the filing deadline, allowing clients adequate time for review prior to certification and submission. This structured approach promotes compliance, accuracy, and transparency - core components of effective cost reporting.

If your organization is evaluating whether to outsource cost report preparation, understanding the approach and level of support provided can be just as important as technical expertise. Our team is available to discuss your specific circumstances and share how our process is designed to support accurate reporting and sound reimbursement outcomes.

Published: 01/06/2026

_{^{Readers should not act upon information presented without individual professional consultation.}}

_{^{Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.}}