New uncompensated care reporting requirements

Eric Busch, Amy Duncan, Nick West
| 2/9/2023
New uncompensated care reporting requirements

CMS released significant changes to the Medicare bad debt cost reporting instructions. Are you prepared?

Managing uncompensated care reporting can be a burdensome, resource-intensive process for healthcare providers. On Dec. 29, 2022, the Centers for Medicare & Medicaid Services (CMS) released new changes to the Medicare bad debt cost reporting instructions, specifically to Worksheet S-10. Healthcare provider organizations need to have a good understanding of these changes and should update their reporting processes where necessary to stay compliant with requirements.

Following are highlights of the recently released changes and tips for getting started with successfully implementing new reporting processes.

Medicare cost report changes: Highlights

These changes are for Medicare bad debt cost reporting periods beginning on or after Oct. 1, 2022. Because hospitals file reports based on when their fiscal years end, the first hospitals to be affected by these new guidelines will be those that end their fiscal year on Sept. 30, 2023.

  • Organizations must complete new forms for reporting charity care and total bad debt. The revised S-10 worksheet now includes Exhibit 3B, a new form for reporting charity care on the cost report. In addition, CMS has included Exhibit 3C, in which provider organizations will be required to provide a detailed listing of their total bad debt. Both new exhibits will require significant amounts of data.
  • Hospitals must report uncompensated care costs for the entire hospital complex. CMS is now requiring that for cost reporting periods “beginning on or after October 1, 2022, Worksheet S-10 is Worksheet S-10, Part 1; and, effective for cost reporting periods beginning on or after October 1, 2022, Worksheet S-10, Part II, provides for the collection of uncompensated and indigent care data for inpatient and outpatient services billable under the hospital [CMS certification number].”1
  • “Contractual relationship” has been redefined. The revised CMS guidelines have changed such that a “contractual relationship between an insurer and a provider will be inferred where a provider accepts an amount from an insurer as payment, or partial payment, on behalf of an insured patient (for example, payments from workman’s compensation funds, payments from an automobile insurer for medical benefits, or payments from an insurer for out-of-network services).”2
  • Line 25.01 has been added to capture noncovered portions for patients who are insured. The CMS guidelines now state that “charges, or the portion of charges, other than deductible, coinsurance, and copayment amounts that represent the insured patient’s liability for medically necessary hospital services” are subject to the cost-to-charge ratio and must be included on line 25.01. According to CMS, “these charges include a patient’s liability from a contractual or inferred contractual relationship between a public program or private insurer and the provider.”3 The guidelines include new instructions for calculating the information that must be entered on line 25.01.
  • Converting from Exhibit 2 to Exhibit 2A for reporting Medicare bad debt is more involved than adding 14 columns.4 Hospital systems cannot rely on previously used queries to extract “starting point” queries, as Exhibit 2A requires additional, calculated fields. It might be challenging to extract legacy patient accounting system data on self-pay returns in the current year.
  • The additional columns, including secondary remittance date, return from collection date, and collection ceased date, should result in “smarter” audits. Auditors will be able to perform in-worksheet calculations (timely billing, minimum collection days, and more) without requesting hundreds of pages of documentation. Ideally, only the nonhomogenous accounts would be targeted for additional information, resulting in more accurate extrapolation.

Implementing the Medicare cost report changes

Due to the extensive nature of the changes to the Medicare cost report, most healthcare provider organizations likely will not be able to rely on their past uncompensated care reporting processes. To remain compliant with their Worksheet S-10 and Medicare bad debt listings for cost report filing going forward, organizations will need to make some changes.

Before implementing new processes, it’s important that an organization has its uncompensated care data in a manageable format that is easy to access, use, and interpret. An organization with particularly limited resources might benefit from assistance from specialists in this area who can help format the data to be easily accessed and modified.

Organizations that have the resource capacity might be able to build their own processes to address the new cost reporting rules. For those that don’t, qualified uncompensated care specialists can work with them to navigate these updates and implement processes that can ease the burden of uncompensated care reporting – and help minimize risk of noncompliance.

In addition, healthcare provider organizations should note that these changes also will affect the audit climate. This creates a second pain point for hospitals: Not only are hospitals dealing with compliance for their cost report filing, but auditors, too, will be navigating the new processes. Approximately five years ago, when CMS first introduced the S-10 worksheet, provider organizations witnessed a lot of mistakes in auditors’ reports. Fast forward to today, and these newest changes to the Medicare cost report could result in similar consequences as providers and auditors alike adjust to the new requirements.

Working with uncompensated care specialists can help healthcare providers watch out for audit errors and contribute to overall compliance.

1 “Provider Reimbursement Manual: Part 2, Provider Cost Reporting Forms and Instructions, Chapter 40, Form CMS-2552-10, Transmittal 18,” Department of Health and Human Services, Centers for Medicare & Medicaid Services, Dec. 29, 2022, p. 40-76.2,
2 Ibid, p. 40-77.
3 Ibid, pp. 40-80.2, 40-80.5.
4 Ibid, pp. 40-49, 40-50, 40-51, 40-52.

Contact us

Eric Busch
Eric Busch
Partner, Healthcare Consulting