Hospice Cost Report Preparation for Illinois Agencies: A 2026 Guide

Every Medicare-certified hospice agency in Illinois has the same yearly obligation: file Form CMS-1984-14 with the Medicare Administrative Contractor within five months of the close of the fiscal year. Skip the deadline and you're looking at payment holds. Miss the PS&R reconciliation and you're explaining numbers to your MAC instead of caring for patients. Misreport level-of-care costs and the aggregate cap math doesn't work later when you need it.

Our firm has prepared hospice cost reports for Illinois agencies for years, and the issues come up in the same order every year — not because hospice administrators are careless, but because the form is genuinely intricate and the rules have moved with each rate update. With CMS finalizing a 2.6% hospice payment update for FY 2026, this is a year where clean cost reporting carries forward into clean cap calculations and clean financial planning.

This guide walks through what hospice cost reporting requires in 2026, where the common errors hide, and how Illinois agencies should approach the filing. If you want a CPA firm that handles this work for hospice agencies, reach out for a free consultation.

What the Hospice Cost Report Is

The Medicare hospice cost report is the annual financial reconciliation each Medicare-certified hospice files with its MAC. For Illinois agencies, that MAC is CGS Medicare for most providers in the region. The form documents the actual cost of providing hospice care during the reporting period, compares it against the payments Medicare made, and supports calculations that affect future rate decisions and your aggregate cap status.

The current form is CMS-1984-14, required for all freestanding hospices for cost reporting periods beginning on or after October 1, 2014. Reports must be submitted electronically through CMS's Healthcare Provider Cost Reporting Information System (HCRIS). The filing deadline is the last day of the fifth month following the close of the fiscal year — for a September 30 fiscal year end, that's the last day of February.

Late filing exposes the agency to payment suspension. Inaccurate filing exposes the agency to MAC review, audit, and rework. Either outcome wastes more time than getting the filing right the first time. The Form CMS-1984-14 Structure

The hospice cost report is organized into worksheets, each capturing a different dimension of operations.

The ones most Illinois hospice administrators need to understand:

Worksheet S — Identifying and statistical data. Days of care by level (routine home care, continuous home care, inpatient respite, general inpatient), unduplicated patient counts, and certification information. Errors here ripple into every downstream calculation.

Worksheet A — Reclassification and adjustment of trial balance. Your general ledger gets mapped to CMS-recognized cost centers. If your chart of accounts wasn't designed with hospice cost reporting in mind, this is where the most manual work happens.

Worksheet B — Cost allocation across service categories using CMS-prescribed allocation statistics. Administrative and general overhead is distributed to direct care cost centers here.

Worksheets K-1 through K-4 — Analysis of hospice costs by level of care for SNF-based hospices. Freestanding hospices use comparable worksheets to allocate costs across the four levels of care.

Worksheet O series — Calculation of reimbursement settlement. This is where the cost data meets the payment data and the math either reconciles or it doesn't.

The level-of-care reporting matters more than most agencies treat it. Medicare pays four different per diem rates depending on whether the patient is receiving routine home care, continuous home care, inpatient respite, or general inpatient care. Your cost report has to allocate cost to each level accurately, because the data feeds CMS's annual rebasing decisions and your agency's own cap calculations.PS&R Reconciliation: The Foundation of a Clean Filing

The Provider Statistical and Reimbursement report is CMS's official record of every claim paid to your agency during the reporting period. Your hospice cost report must tie to that data. When the cost report and the PS&R disagree, PS&R wins by default — and your agency carries the burden of proving otherwise.

The common reconciliation issues our firm sees for Illinois hospices:

Days of care misalignment. Your internal records may report patient days on a different basis than CGS records, especially across patient transfers, revocations, and discharges. Reconciling at the level-of-care detail, not just total days, is what catches the discrepancies before they become audit findings.

Claim adjustments not reflected internally. If Medicare adjusts a claim after your billing team closes the books on a month, the agency's records show the original payment but the PS&R shows the adjusted figure. Without a written reconciliation process, that gap goes unexplained.

Cap-related payments handled outside reconciliation. Cap recoupments and self-determined cap report adjustments need to flow through both the PS&R and the cost report cleanly. Agencies that handle these as one-off entries instead of through a defined process create reconciliation gaps every year.

Fiscal year cutoffs. Patients whose hospice election crosses your fiscal year end create timing differences if internal accounting doesn't apply consistent cutoff rules. The PS&R will reflect the dates of service; your internal records need to match.

Our firm runs the PS&R reconciliation as the first step of cost report prep — not the last — because every other worksheet depends on the day counts and revenue figures being right.

Level-of-Care Cost Allocation

The four levels of care in hospice — routine home care, continuous home care, inpatient respite, and general inpatient — each have their own per diem rate and their own cost characteristics. The cost report requires you to allocate direct and indirect costs to each level.

Where this gets expensive: agencies that don't have a labor distribution system tied to level of care end up estimating, and estimates rarely survive a MAC review. Skilled nursing visits, social worker visits, chaplaincy, home health aide hours, and medical director time all need to be traceable to the level of care they supported.

The practical fix is operational, not accounting. The clinical documentation system needs to flag the level of care for every visit and the payroll system needs to tag time entries to those visits. Once those two systems talk to each other, the cost allocation on Worksheets B and K writes itself.

Agencies that don't have this discipline tend to lump cost into routine home care because that's where the highest day count sits. That approach distorts every downstream number — the cap math, the per diem cost analysis, the year-over-year financial comparisons.

The FY 2026 Hospice Payment Update

CMS finalized the FY 2026 Hospice Wage Index and Payment Rate Update with a 2.6% payment rate update, effective October 1, 2025. For Illinois agencies, the wage index applied to your geographic area is the variable that determines how much of that 2.6% reaches your per diem.

Practically, the FY 2026 update means:

• Higher per diem rates across all four levels of care, with the dollar increase depending on wage index

• Updated hospice cap amount for the cap year, which Illinois agencies need to model against current census and length-of-stay trends

• Continued Hospice Quality Reporting Program requirements, with public reporting tied to data submission compliance

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The rate update affects cost reporting in two ways. First, the revenue side of your settlement worksheet has to match the new rates correctly for the portion of the fiscal year after October 1, 2025. Second, the cap calculation that runs alongside the cost report uses the updated cap amount.

For agencies whose fiscal year ends mid-year, the cost report straddles two CMS rate periods. Splitting the day counts and the payment rates correctly across the transition date is a common source of errors.

Aggregate Cap Coordination

The hospice aggregate cap is a separate calculation, but it lives in the same ecosystem as the cost report. CMS limits total Medicare reimbursement per agency, per cap year, based on a per-beneficiary cap amount multiplied by the agency's unduplicated Medicare beneficiary count.

Agencies near or over the cap face recoupment. Agencies far below the cap have margin for clinical growth. Either way, the data that drives the cap calculation comes from the same source records that feed the cost report — claims, days of care, patient counts. Doing the work twice is wasteful. Building one process that produces both the cost report and the cap analysis is how the well-run agencies handle it.

For Illinois agencies that want to coordinate cost reporting with cap planning, our firm provides hospice accounting services that handle the cost report, the cap modeling, and the cash flow planning as one workstream. A Pre-Filing Checklist for Illinois Hospice Cost Reports

Sixty days before your filing deadline, work through this checklist:

• Pull your PS&R for the full reporting period from the CGS portal

• Reconcile total Medicare payments to your general ledger Medicare revenue

• Reconcile days of care by level to your clinical documentation system

• Verify your chart of accounts maps cleanly to CMS cost centers

• Confirm wage index data applied to the correct portion of the fiscal year

• Document any cap-related recoupments or self-determined adjustments

• Pull and verify unduplicated Medicare beneficiary counts

• Cross-check your cost allocation methodology against prior year MAC feedback

A clean filing usually means no MAC questions, no audit, and no rework. A rushed filing usually means three more months of back-and-forth with CGS.

Frequently Asked Questions

When is the hospice cost report due?

The hospice cost report is due on the last day of the fifth month following the close of the fiscal year. For a September 30 fiscal year end, the filing deadline is the last day of February. For a December 31 fiscal year end, it's May 31. Extensions are rarely granted and late filings can trigger Medicare payment suspension.

What form do Illinois hospice agencies file?

Freestanding hospices file Form CMS-1984-14 for cost reporting periods beginning on or after October 1, 2014. Submission is electronic through CMS's HCRIS portal. For Illinois agencies, the Medicare Administrative Contractor is generally CGS Medicare.

How does the FY 2026 hospice rate update affect my cost report?

CMS finalized a 2.6% hospice payment rate update for FY 2026, effective October 1, 2025. If your fiscal year straddles that date, the cost report has to split the year between the prior and updated rate periods. The wage index applied to your geographic area determines how much of the 2.6% reaches your specific per diem.

What happens if my PS&R doesn't match my internal records?

PS&R is treated as the authoritative source by the MAC. If your internal records don't match, the cost report has to either reconcile to PS&R or document the variances clearly. Unexplained differences trigger MAC questions and can delay settlement. Reconciling before the cost report is filed is significantly faster than reconciling after.

Should our hospice agency outsource cost report preparation?

It depends on internal expertise. Hospice cost reporting is technical, the rules update annually, and a single error on cost allocation or PS&R reconciliation can cost more in rework than the entire engagement fee. Agencies without dedicated reimbursement staff usually benefit from outside help; agencies with deep in-house expertise can manage internally but often still use a CPA firm for review.

Should I work with a CPA firm?

Our firm prepares hospice cost reports for Illinois agencies and coordinates the filing with cap modeling and cash flow planning. If you want a clean cost report this year and a real plan for the cap going forward, schedule a free consultation.

Soriaga & Associates CPA — Lisle, IL