cost report pitfalls

kirk delperdang, healthcare director


Matching Principle for Cost and Charges, including Updating Revenue Code Crosswalk

A guiding principle of Medicare cost report preparation is matching – comparing Medicare charges by revenue code to total revenues recorded in the general ledger to the expenses incurred in providing the services generating these revenues. The Medicare cost report must be prepared by matching costs and charges by cost report cost center. Essentially, the department used to record the revenues from a service provided needs to match the same department in which the expenses are recorded.

One useful tool to assist in this process is to review and update your Revenue Code Crosswalk on an annual basis. The crosswalk is a list of all revenue codes utilized to bill for services provided during the year and the department in which the charge is recorded on the general ledger. As simple as this may sound, it can get complicated on the cost report. How do you account for the expenses related to a single revenue code that is recorded in several departments? How do you ensure expenses are being recorded to the same department as the revenue?

If there is a situation in your general ledger in which costs do not match revenues, this will result in either an A-6 expense reclassification or a reclassification of charges on worksheet C, or both. In the world of Medicare cost reports and reimbursement, this is the ultimate matching game.    



It’s that time of year for facilities to fill out the required information to retain their exemption to the Certified Registered Nurse Anesthetist (CRNA) Fee Schedule and remain cost reimbursed. Be sure to meet the deadline mentioned in your letter and retain proof the documentation was sent in on or before the December 31st deadline.

Under the provisions at 42 CFR 412.113(c), “Payment is determined on a reasonable cost basis for anesthesia services provided in the hospital or CAH by qualified nonphysician anesthetists (certified registered nurse anesthetists and anesthesiologist’s assistants) employed by the hospital or CAH or obtained under arrangements”. It is the CAH’s responsibility to supply all supporting documentation to determine if the qualifications are met.


  1. Employ or contract with a qualified nonphysician anesthetist(s) to perform services in that hospital/CAH that does not exceed one FTE per year.
  2. The volume of surgical procedures with anesthesia services does not exceed 800 procedures.
  3. In writing, each qualified nonphysician anesthetist has agreed not to bill on a fee schedule basis for the patient care to Medicare beneficiaries.

If the MAC completes an audit of the nonphysician anesthetist reimbursement and the hospital has not met the requirements during the cost reporting period, the MAC will exclude all costs, charges, and Medicare charges related to CRNA services, disallowing all cost reimbursement for CRNA services in that period.

Examples of CRNA documentation that may need to be submitted include copies of CRNA contracts, documentation of total hours worked at the hospital, a log of all surgical procedures performed during the specified time period, and a signed agreement by each CRNA not to bill on a fee schedule basis for patient care.

Also, if your facility qualifies for the CRNA exemption services, these charges are submitted on the UB-04 using revenue code 964 and the appropriate CPT code for the service rendered.


Allocation of Physician Time and RHC (Rural Health Clinic) Time Tracking

Accurate and complete timekeeping for practitioners (MDs, PAs, NPs) is of the utmost importance in a CAH/RHC environment. Shoddy and improper records can cost you reimbursement on the Medicare cost report. Auditable records must be kept to allocate the time for these practitioners amongst the various services they are providing.  These hours are directly tied to Medicare reimbursement dollars in an RHC environment when you consider the CMS productivity standards that must be met. If not met, your RHC is leaving Medicare dollars on the table.


Provider-Based Physicians

On the Medicare cost report, the time and cost physicians spend in direct patient care activities must be offset on worksheet A-8-2 and removed from allowable costs. These situations require either actual time records or valid time studies in addition to a written allocation agreement. Conducting a valid time study in this scenario helps facilities track how much time the providers are spending directly related to patient care. Absent these items, Medicare may offset the entire ER physician cost instead of only the cost associated with time directly related to patient care. This issue is an area of emphasis from CMS and the MACs. Work with your cost report preparer to ensure you are properly prepared to submit this data on your cost report.

If you have any questions, please contact us learn more about our healthcare services.





Kirk Delperdang is a Healthcare Director at Lutz with over 28 years of experience. He provides healthcare enrollment services to clients with a focus on Medicare providers and reimbursement analyses. In addition, he is responsible for leading Lutz's cost report service line.

  • Healthcare Financial Management Association - Nebraska Chapter, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
  • BA in Accounting, University of Northern Iowa, Cedar Falls, IA
  • St. Vincent de Paul, Knights of Columbus, Member
  • Active in various youth sports leagues: Aldrich Elementary, Millard Athletic Association, Millard North Schools, Omaha FC, Skutt Catholic High School and YMCA


We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

About UsOur Team | Events | Careers | Locations

Toll-Free: 866.577.0780Privacy Policy | All Content © Lutz & Company, PC 2021