Cost Reporting for FQHCs: What You Need to Know

Your health center serves thousands of patients each year, providing critical care to underserved communities. Behind every visit sits a complex web of financial reporting that directly affects your center’s sustainability. Filing your FQHC cost report correctly can mean the difference between healthy reimbursement rates and leaving money on the table.

Understanding the FQHC Cost Report

Since October 2014, FQHCs have operated under Medicare’s Prospective Payment System. Under this system, your reimbursement depends partly on the cost data you report annually to the Centers for Medicare & Medicaid Services through Form CMS-224-14. Your Medicare Administrative Contractor uses this information to calculate payments for services like bad debt reimbursement, vaccines and administrative costs.

Cost reports are due on or before the last day of the fifth month following the close of your reporting period. For cost reports ending on a day other than the last day of the month, you have 150 days after your fiscal year ends to file. Missing these deadlines affects your reimbursement and can create cash flow problems that ripple through your operations.

The report contains multiple worksheets covering facility characteristics, utilization data, cost and charges by cost center, and financial statement data. You must submit your cost report electronically through your contractor in accordance with federal regulations. Each section connects to create a complete picture of your center’s financial operations for Medicare purposes.

How Cost Reports Affect Your Reimbursement

Your cost report data feeds into calculations that determine future payment rates. While Medicare’s PPS uses a national base rate adjusted for geographic factors, the cost report provides critical information for interim payments and settlements. The report measures your cost per visit per practitioner for both medical and mental health visits.

These figures matter because they establish the baseline for various adjustments and reconciliations throughout the year. When you file inaccurate data or miss reporting deadlines, you risk underpayment for services already provided to your patients.

Medicare reimburses FQHCs at 80 percent of the lesser of actual charges or the PPS rate. Through your annual cost report, you receive interim payments for specific items that fall outside the standard PPS calculation. This includes Medicare bad debt, which requires careful documentation and proper classification in your cost report to receive appropriate reimbursement.

Common Cost Reporting Mistakes

Filing delays remain one of the most frequent problems FQHCs face. When you submit your report late, it directly affects your reimbursement timeline and can trigger penalties. Centers often underestimate the time needed to gather documentation, reconcile financial data and complete the multiple worksheets required.

Incorrect cost allocation creates another common pitfall. You must properly classify costs between allowable and unallowable expenses according to CMS Provider Reimbursement Manual guidelines. Mixing these categories or failing to adequately support cost classifications leads to report rejections or adjustments that reduce your reimbursement.

Documentation gaps cause significant issues during the desk review process. Your contractor performs an initial review of your cost report and supporting schedules to determine if additional information is needed. When you cannot provide the requested documentation within the required 30-day timeframe, it delays final approval of your rates and can result in disallowed costs.

Missing or incomplete worksheets also trigger problems. Each worksheet serves a specific purpose in the cost reporting process. Skipping required sections or failing to properly complete them creates red flags during contractor review.

Build Strong Cost Reporting Practices

Maintaining organized financial records throughout the year makes cost report preparation significantly easier. Rather than scrambling at deadline time, establish systems that track relevant costs and statistics on an ongoing basis. Your accounting software should classify expenses in ways that align with cost report requirements.

Conducting internal reviews before submission catches errors while you still have time to fix them. Assign someone to review completed worksheets against source documents and verify that calculations roll forward correctly. This extra step prevents simple mistakes from becoming costly problems after submission.

Training your finance team on cost report requirements pays dividends over time. Staff turnover can create knowledge gaps that lead to reporting errors. Regular training ensures your team understands which costs are allowable, how to properly allocate shared expenses and what documentation contractors expect to see.

Staying current with regulatory changes also helps you avoid compliance issues. CMS periodically updates cost report forms and instructions. Recent updates include clarifications to existing instructions and changes stemming from the Consolidated Appropriations Act of 2023. Reading transmittals from CMS and attending industry training sessions keeps you informed about requirements affecting your next filing.

Strengthen Your Financial Foundation

Accurate cost reporting supports more than just Medicare reimbursement. The discipline required to maintain proper financial records and documentation strengthens your overall financial management. When your finance team understands cost behavior and allocation methodologies, they can provide better information for operational decision-making throughout the year.

Your cost data also informs rate negotiations with other payers and supports grant applications that require detailed financial information. The time invested in proper cost reporting creates benefits that extend well beyond Medicare compliance. Strong financial practices give leadership confidence in the numbers driving strategic decisions about service expansion, workforce planning and facility investments.

Cost reporting for FQHCs requires attention to detail, thorough documentation and understanding of complex Medicare regulations. Getting it right protects your reimbursement and supports your mission to serve your community. When you need guidance with FQHC cost reporting requirements or want to strengthen your financial management practices, contact a James Moore professional to discuss how we can support your health center’s success.

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