In our last thought leadership, we gave an update on new pricing transparency rules. Within the same rule, CMS requires a new cost report worksheet that utilizes the new pricing transparency files. CMS has finalized the 2026 OPPS rule and introduced new cost report worksheets and reporting requirements alongside annual outpatient payment updates and pricing transparency changes.
What’s Changing
Medicare plans to transition MS-DRG relative weights from a cost-based system to a market-driven approach using negotiated rates from Medicare Advantage contracts. Full implementation begins in Federal Year 2029, but hospitals must begin reporting the data in cost reports with year-ends after January 1, 2026.
New Requirement:
- A new cost report worksheet (anticipated as S-12) will require hospitals to report Median Negotiated Charges by MS-DRG for all Medicare Advantage payers. In this instance, consider the language CMS uses for ‘negotiated charges’ to mean ‘negotiated payment rates’.
- CMS indicates that denied and unpaid accounts will be excluded, and to only focus on inpatient discharges paid under negotiated Medicare Advantage rates.
How to Prepare (and Data Sources needed):
- Take your hospital’s most recent Machine-Readable file (MRF) and review all Medicare Advantage payers and the negotiated rates or algorithms reported for Inpatient services.
- Create a list of Medicare Advantage discharges that were paid at negotiated inpatient rates for services incurred during your cost report year.
- For each MS-DRG, combine the negotiated rate from your MRF with Medicare Advantage discharges from your internal discharge listing. Identify the median rate and enter that into the cost report worksheet.
- Stay updated on cost report instructions as they are released by CMS for final reporting guidance.
Contact Us
Your team at Blue & Co. specializes in Managed Care Contracting, Pricing Transparency, and Cost Reporting. We’re ready to help you implement these changes efficiently.
Contact an expert today to discuss next steps or schedule a planning session.
