Article
Unlocking healthcare back-office value: Medicare and Medicaid cost reporting
Apr 04, 2025
Medicare and Medicaid cost reporting is a critical aspect of financial management for healthcare providers. While often viewed as a routine and compliance driven task, cost reporting holds significant potential for uncovering valuable insights that can drive strategic decisions and improve financial performance. Effective cost reporting doesn’t come without its hurdles. Providers commonly face:
- Complexity: Medicare and Medicaid requirements are intricate and ever-evolving.
- Accuracy: Ensuring precise documentation to avoid discrepancies and potential audit findings.
- Missed reimbursements: Failure to capture all qualifying costs can lead to missed reimbursement opportunities.
- Timeliness: Delays in submission can result in delayed or forfeited payments.
Is your current cost reporting approach effective?
Beyond compliance, cost reports offer valuable financial and operational insights to help make informed business decisions. Here are three key areas to focus on, with self-reflection questions to help you assess the effectiveness of your current cost reporting strategy:
1. Bad debt reimbursement: Are you capturing what you’re owed?
Accurately identifying and reporting Medicare Part A bad debts can significantly boost reimbursements. To avoid leaving funds unclaimed, consider:
- Are we being reimbursed for any bad debts on our Medicare cost report?
- Are there Medicare gap insurance plans at play, or are we missing follow-ups on claims?
- Is our bad debt log thorough and accurate?
- Are we following our billing policies to allow for proper write-offs of bad debts?
Taking a closer look at how bad debts are tracked and reported can lead directly to improved reimbursement outcomes.
2. Rate benchmarking: Are your rates aligned with the market?
Your cost report data can serve as a powerful benchmarking tool. Comparing Medicare, Medicaid, and private pay rates to industry norms can reveal areas for improvement or adjustment. Key points to consider when evaluating rates include:
- How do our Medicare reimbursement rates compare to industry benchmarks?
- If our Medicare rate is low, could that reflect insufficient Minimum Data Set (MDS) documentation on the clinical side?
- How do our Medicaid rates compare to state averages and peer groups? Can there be improvement in case-mix documentation?
- Have we evaluated our private pay rates recently? When was the last time we benchmarked these rates?
Rate benchmarking helps ensure your pricing reflects the true value of the care you provide.
3. Cost center analysis: Are your department costs in check?
Medicaid cost reports require breaking down expenses by department—nursing, dietary, housekeeping, maintenance and more. This detailed view can be used to benchmark spending and optimize cost management. When utilizing cost centers, consider:
- Are our departmental costs significantly higher than peer organizations?
- For outsourced services, how do our expenses compare to others using similar models?
- What trends emerge when we compare our cost centers to industry averages?
By analyzing these cost centers, providers can identify areas where they may be overspending and make informed decisions to optimize their operations.
How Baker Tilly can help
- Specialized guidance: Our team offers in-depth knowledge of Medicare and Medicaid cost reporting requirements, ensuring accuracy and compliance.
- Strategic insights: We help clients leverage cost report data to make informed decisions about rate adjustments, cost management and operational improvements.
- Customized solutions: We tailor services to meet the unique needs of each client, providing personalized support and actionable recommendations.
Modernize your financial foundation
Sage Intacct
With legacy systems like Dynamics Great Plains being phased out and the unique demands of HIPAA compliance and multilocation operations, effective cost reporting becomes a serious challenge when your finance technology is lagging behind.
If generating accurate financial reports takes multiple steps, workarounds or manual effort, it may be time to explore a more scalable solution. Sage Intacct is built to grow with your organization — offering the flexibility, automation and healthcare-specific functionality you need to support expansion, especially in high-growth areas like senior services.
Support where you need it most
Baker Tilly Advantage
At Baker Tilly, we help healthcare providers reduce back-office strain so they can refocus on delivering quality care and scaling sustainably. Whether your tax, accounting, HR, or payroll functions are in transition, falling behind or simply need a strategic lift, Baker Tilly Advantage offers the support you need — when and how you need it.
Advantage combines deep industry experience with scalable, turnkey services to meet your evolving back-office demands. From day-to-day operations to long-term planning, we provide the right mix of tools, insights and talent to keep your business running efficiently.
Cost reporting recap: Key takeaways
No matter where you are in your journey to streamline the back office and unlock value through cost reporting, these best practices can help you take the next step:
- Accurately document: Thoroughly record all reimbursable expenses — especially Medicare bad debts — to maximize your reimbursement potential.
- Benchmark regularly: Compare rates and costs to industry standards to identify areas for improvement.
- Analyze cost centers: Break down expenses by department to uncover inefficiencies and better manage spending.
- File on time: Adhere to deadlines to secure timely reimbursements.
- Seek help: Working with experienced advisors, like Baker Tilly, can make navigating the complexities of cost reporting more manageable and more impactful.
Cost reporting is more than a compliance checkbox — it’s a strategic tool for improving financial health and operational efficiency. Let Baker Tilly help you turn your data into action and ensure you're capturing every dollar you're entitled to.
Ready to make your cost reports work harder for you? Contact us today to learn how we can help.