Surplus or (shortfall)

DISCUSSION: The IRS instructions limit hospitals to reporting only those Medicare costs included in the Medicare Cost Report (Cost Report). The rationale was that the Cost Report would provide an independent basis for verification. There are significant Medicare-related costs beyond those reflected on the Cost Report that can be disclosed in Part VI, line 1. Please be aware that the amount reported in this section are unlikely to accurately reflect the full unreimbursed cost of Medicare and, therefore, may show a surplus when there is actually a shortfall.

A "TIP" in the instructions provides further clarification: Lines 5, 6 and 7 do not include certain Medicare revenues and costs ... [t]he organization may describe in Part VI the amounts of any Medicare revenues and costs not included in its Medicare Cost Report(s) for the year (for example, revenues and costs for freestanding ambulatory surgery centers, physician services billed by the organization, clinical laboratory services and revenues and costs of Medicare Part C and Part D programs).

It is recommended the filing organization disclose the total Medicare shortfall.

The instructions include an optional worksheet (Worksheet B) to aid in making the calculation required for this question.

NARRATIVE REQUIRED: Yes, Part VI, line 1, to disclose Medicare costs beyond those reflected on the Cost Report.


The actual cost for Medicare patients when all costs to the organization are included is $X which amounts to an actual $X shortfall between payments and costs.

The total revenues and costs associated with Medicare services are respectively $X and $X. This results in a total Medicare shortfall of $X.

Medicare Cost Reports that hospitals are required to file do not include all of the costs required to treat Medicare patients. Therefore the amount reflected on the Cost report will likely differ from actual costs which may be reflected in the community benefit report and on this form.

To access the instructions for Schedule H click here.

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