The Medicare Cost Report (MCR) is a detailed financial document that healthcare providers participating in the Medicare program are required to submit annually to the Centers for Medicare and Medicaid Services (CMS). It provides insight into utilization of home health services along with provider costs and reimbursement related to the delivery of care to Medicare beneficiaries. The MCR is used by CMS to ensure provider compliance with Medicare regulations.
Data submitted by providers on their home health Medicare Cost Reports also offers CMS insight into provider profit margins, which CMS aggregates to determine overall profit margins for the sector. Based upon our self-reported data, MedPAC has recommended and CMS has implemented reductions in home health provider reimbursement year after year, most recently in the 2025 final rule.
The dilemma of the cost report reflecting only traditional Medicare expenses and reimbursement have plagued home health providers who are currently accepting a greater percentage of patients under Medicare Advantage and other commercial payers. Home health providers argue that when considering all payers, their actual profit margins are much lower, somewhere in the zero to five percent range.
Axxess recently held a webinar discussing these challenges and why accuracy of provider cost reporting is crucial as the industry advocates for change to the cost report document and reimbursement methodology.
The conversation was moderated by Axxess Senior Vice President of Public Policy Deborah Hoyt with panelists Steve Landers, MD, MPH, Chief Executive Officer of the National Alliance for Care at Home; Mark Sharp, CPA, Partner – Home Care & Hospice of Forvis Mazars; and Jennifer F. Sheets, RN, MSN, MBA, Acute and Post-Acute Healthcare Strategy Executive Board Member for the National Alliance for Care at Home and Board Chair for the Research Institute for Home Care.
The Need for Systemic Change
The panelists discussed the serious implications for the entire sector of not completing Medicare Cost Reports accurately. They examined the “traditional Medicare only” versus “all payer” interpretation by MedPAC and highlighted ongoing advocacy efforts to consider all payers in the report to provide a more accurate representation of the financial reality home health providers are experiencing.
While acknowledging the flawed methodology and interpretation, Sheets urged organizations to leverage these reports to the best of their ability to tell their true financial picture, paying close attention to completeness and accuracy.
“While … we know the methodology is flawed and we’re fighting that, these reports are what we have,” said Sheets. “They are one of the very few tools that we have to tell our industry’s story, so inaccurate or incomplete data just further weakens our ability to push for change. So, by ensuring the data is complete and reflective of reality … we’re really helping to build a foundation for advocacy and change while also protecting individual agencies from compliance risk and audits.”
She laid out the following key steps that organizations can take to ensure their cost reports are as accurate and complete as possible.
Understand the Guidelines
Sheets identified understanding the CMS guidelines as the first step in ensuring complete and accurate MCRs.
“Make sure that your team, whoever is responsible for cost reporting, stays updated on not only the requirements but any changes,” said Sheets. “CMS guidelines can be complex … but [they’re] really important and understanding them is key to really avoiding mistakes.”
Invest in Training and Resources
She urged organizations to invest in cost report training and consider external consultation and technology systems that streamline cost reporting.
“Provide your staff with training on cost report preparation that ensures that they know what data is needed and how to compile it accurately,” said Sheets. “And if resources allow, I think you should always consider consulting with experts … or utilizing software that can simplify and standardize the process.”
Track All Costs Completely
Highlighting a common pitfall in cost reporting, Sheets stressed the importance of tracking all costs completely.
“Many inaccuracies actually come from under-recording, in my experience,” said Sheets. “So you need to ensure that you’re capturing all of your allowable costs, including administrative expenses and clinician travel and indirect costs like training or technology investments. … For rural providers, for example, travel costs for clinicians are often overlooked but can significantly impact the accuracy of your financial picture.”
Maintain Organized Records
She emphasized the value of maintaining organized financial records year-round to make the cost reporting preparation process seamless.
“If you keep detailed and organized financial records throughout the year, when it comes [time] to [prepare] cost reporting, then it’s not a last-minute ‘oh let me hurry and get this in so I don’t get dinged;’ it’s just a flow to the report,” said Sheets. “So, if you have not already, implement processes for regular review of your expenses, talk about what’s allowable and what’s not, and have that ready to go when you get ready to do your cost report.”
Leverage Your Peer Network and Professional Associations
Sheets encouraged tapping into the collective knowledge and expertise of colleagues and professional groups to enhance cost reporting practices.
“Collaborate with … others for best practice and additional guidance,” Sheets said. “We are all in this together, so learning from others who have navigated similar challenges, who are doing very accurate and effective cost reporting, can really save time and reduce errors.”
Conduct Regular Internal Audits
As her final tip for ensuring accurate and complete cost reports, Sheets underscored the need to conduct regular internal audits to verify the accuracy of data. She urged organizations to get a second set of eyes on the report and ask themselves, “Does this really tell the right picture?”
“If you put yourself in the shoes of the decision-makers, if you’re saying to them, ‘Here [are] my margins,’ why wouldn’t they believe that those are our margins?” Sheets pointed out. “So make sure that you’re looking at your cost report before you submit it. Get a second set of eyes or even an external review, if you can, to catch things that you might miss.”
Sheets asserts that by implementing these key steps, home health providers can improve the accuracy and completeness of their Medicare Cost Reports, leading the industry to meaningful reform in how home healthcare is reimbursed.
“By taking [these] steps, providers can really improve the accuracy of their cost report, which not only … benefits their own compliance and reimbursement, but it also contributes to a more accurate industry-wide picture,” Sheets said. “That collective accuracy strengthens our advocacy [and] helps us to ensure reimbursement policies … truly reflect the cost and the value of home-based care.”
Axxess Home Health, a cloud-based home health software, empowers healthcare organizations with a chart of accounts feature and a suite of detailed financial reports, streamlining data collection and facilitating seamless financial operations.