If your nursing home runs on a calendar-year fiscal cycle, the clock is officially ticking. CMS rolled out major updates to the Medicare cost report. This is the biggest shift since PDPM, and what you need to do depends on when your reporting period ends. Since cost reports are due five months after year-end, anyone closing the books on December 31 has a May deadline. That makes right now your prime window to get everything in place and stay ahead of the Medicare 2025 cost reporting changes.
If your facility follows a different fiscal year, the same prep steps apply. Just be sure to shift the timeline to match your reporting cycle.
These changes aren’t just paperwork. They’re part of CMS’s push to get a clearer picture of the real cost of care under value-based reimbursement and the SNF payment system. Mistakes can lead to audits or even reimbursement takebacks, so getting this right matters.
Contract Labor Reporting Is More Complicated
The biggest change? How contract labor costs are reported. And it’s not just about nursing staff.
CMS has significantly enhanced contract labor reporting requirements, demanding more detailed breakouts of temporary worker costs across all departments—from nursing and therapy to housekeeping, dietary, and administrative functions. The level of detail and documentation now required goes well beyond what facilities managed in the past.
This expansion creates a few challenges. Your therapy staffing agency probably already bills you with detailed hourly breakouts. But what about your housekeeping contractor? Many non-clinical vendors send invoices that bundle labor costs with supplies and materials. Before your fiscal year closes, you need to contact these vendors and request itemized billing that separates hourly rates from everything else. Trying to reconstruct this information months later during filing season may not cut it.
Payer Categories Need More Granular Tracking
Here’s another significant shift: remember how you used to report Medicare Advantage and Medicaid managed care patients together as “other” long-term care residents? That’s over.
Each payer category now needs its own line item in your cost report. CMS basically wants a clean view of your census days, revenue, and cost coverage for every managed care program your facility works with. The idea is more transparency, but actually doing it means you’ll need solid record-keeping all year or analytics tools that can break down your data after the fact.
If you’re piecing this together manually at year-end, expect some late nights. Facilities using platforms with payroll, record-keeping, and reporting all connected will have a much easier time pulling these reports when the time arrives.
Your Technology Stack Might Not Be Ready
These new requirements shine a harsh light on disconnected systems. Meeting the updated standards successfully means you need:
A general ledger that tracks departmental contract labor with the level of detail CMS now expects. Many facilities will discover they need new GL codes or completely restructured account hierarchies.
Time and attendance systems that capture everyone, not just clinical staff. When CMS wants to know about temporary workers in dietary or maintenance, you’ll want a system that accurately tracked those hours all year long.
Vendor management processes that standardize invoicing. Every contracted service provider needs to understand your new requirement for hourly rate breakouts. Make this a non-negotiable part of your vendor relationships moving forward.
Analytics that actually keep up. If you’re waiting until year-end to sort out how many days each group of residents or services accounts for, you’re setting yourself up for a stressful scramble and a much higher risk of errors. Real-time (or close to it) insights make everything smoother and far less exhausting.
What does this mean? These systems need to talk to each other. When your payroll, timekeeping, and financial systems operate in silos, you end up with staff manually copying data between spreadsheets, which can be a recipe for errors and compliance headaches.
Why You Can't Afford to Wait
December may be your last realistic opportunity to implement the operational changes needed before your fiscal year closes. And the stakes are higher than you might think: improper cost reporting can trigger Medicare Administrative Contractor (MAC) audits and lead to significant reimbursement recoupment. With CMS increasingly focused on payment accuracy under PDPM, your cost report data is under more scrutiny than ever before.
Here’s our proposed action plan:
- Get clear with your vendors. Anyone who provides services to your facility needs to know exactly what you expect on their invoices going forward. For anything left to be billed in 2025, ask for the detailed breakdowns now. Then make those details a standard requirement in every 2026 contract.
- Take a fresh look at your chart of accounts. Sit down with your finance team and walk through how your GL is set up. If you can’t easily see contract labor by department, it’s time to add the right codes and make sure your team knows how to use them before January hits.
- Be honest about your tech. Do your systems actually talk to each other? If you’re pulling data from multiple places just to prep for this report, that’s a sign your setup needs attention.
- Strengthen your analytics. Whether you upgrade what you have or lean on a more specialized platform, you’ll want tools that can break down your census and workforce data automatically, without manual number-crunching.
An Integrated Approach Makes All the Difference
Rather than viewing these requirements purely as compliance obligations, look at them as opportunities to gain operational intelligence you should have had all along.
A comprehensive payroll and workforce management platform like Empeon provides the integrated infrastructure that turns what could be a reporting nightmare into a streamlined process. When your time tracking, payroll processing, vendor management, and financial reporting all work together, you’re not just checking boxes for CMS; you’re gathering insights that drive better workforce decisions year-round.
The Time to Act Is Now
The facilities that will have the smoothest filing season are the ones that start preparing early. When you give yourself a little runway, vendors have time to adjust their invoices, your team isn’t rushing to recreate old data, and everyone avoids the last-minute scramble.
Think of December as your setup month. Get your systems talking to each other, make sure your vendors know what you need, and document the steps so your team heads into January ready to capture everything automatically. By the time May comes around, you’ll be in great shape rather than playing catch-up.
The nursing homes that lean into these changes will come out with stronger data, cleaner processes, and better visibility into their operations that lasts well beyond this year’s cost report.
➜ Need help getting everything in place? Our team is here to support you.
