The Department of Health and Human Services (DHHS) Centers for Medicare and Medicaid Services (CMS) announced in their Medicare Provider Reimbursement Manual an upcoming overhaul of the historical CMS 2540-10 Medicare cost report type for skilled nursing facilities (SNFs).
The new CMS 2540-24 report is designed to make reporting more transparent, gather relevant data, and may eventually feed into a potential SNF wage index calculation. Any SNF whose cost reporting period ends on or after September 30, 2025, will be required to file the CMS 2540-24 report for the upcoming cost report season.
CMS 2540-24 represents the most significant change in SNF Medicare cost reporting in nearly 15 years, introducing several logistical changes. Details can be found on cms.gov within the Provider Reimbursement Manual.
From a provider perspective, the key changes fall into three main categories:
- Payor Breakout
- Contract Labor Tracking
- New Expense Cost Centers
1. Payor Breakout
For both census reporting on Worksheet S-3 Part I and gross patient revenue reporting on Worksheet G-2, CMS now requires more detailed reporting between payors and revenue types.
Historically, the Medicare cost report reported census, admission, and discharge data on S-3 Part I using three categories: Medicare, Medicaid, and Other Payors. Under CMS 2540-24, these will expand to five payor categories, with Medicare and Medicaid split between Fee-for-Service and HMO/Advantage.
Facilities should verify that their tracking methodology and electronic revenue systems can produce this breakout accurately to avoid delays or inaccuracies during cost report season.
Similarly, gross patient revenue on Worksheet G-2 now requires a more detailed breakout between the same five payor groups and between Inpatient and Outpatient revenue. Ensuring GL tracking and coding captures this level of detail throughout the year will help providers remain compliant and provide valuable data for operational analysis.
2. Contract Labor Tracking
CMS 2540-24 introduces a new column on Worksheet A to report contract labor across all cost centers. Previously, only direct patient care contract labor was reported on Worksheet S-3 Part V. Now, providers must also report contract labor costs for:
- Administrative cost centers (Worksheet A)
- Direct patient care Home Office costs (Worksheet S-3 Part V)
To prepare, facilities should delineate labor-specific invoices or portions of invoices in their GL accounts. Note: Any vendor service that includes materials should not be included in this breakout; only labor costs belong in the new column.
3. New & Updated Expense Cost Centers
CMS has updated Worksheet A to better align costs with accurate department types. This includes:
- Removed obsolete cost centers
- Added/Updated key cost centers, such as:
- Activities (14)
- QA & Performance Improvement Program (15)
- Training and In-Service Education (16)
- Patient Transportation Part A (17)
- Radiology: Diagnostic (30) & Therapeutic/Chemotherapy (31)
- Audiology (38)
- Drugs: Charged to Patients (41) & IV Solutions (42)
- Appliances and Equipment (44)
- Blood and Blood Products (45)
- Blood Transfusion/Processing/Storage (46)
- Preventative Vaccines (80)
- Reorganized Outpatient and non-reimbursable categories
Providers should review internal expense tracking to ensure costs are properly categorized in these new cost centers to maintain compliance and avoid reporting issues.
Key Takeaways
CMS 2540-24 includes many other logistical updates, but the above represent the most significant changes for providers.
Action Steps for SNFs:
- Proactively review and enhance GL tracking for both revenue and expenses
- Ensure revenue and cost are recorded according to CMS 2540-24 specifications
- Start implementing changes now to get ahead before the first year of reporting
The future use of this newly broken-out data by CMS is not yet clear, so early preparation is essential.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
