Each year, school districts across the country are tasked with compiling and submitting cost reports to their state Medicaid agencies. This isn’t just a bureaucratic hurdle—it’s a vital process that ensures schools are reimbursed fairly for the services they provide. At Relay, we recently hosted a webinar to demystify this process and share five essential tactics every school Medicaid leader should know.
What Is Cost Reporting?
Cost reporting is a yearly report submitted by school districts—or their intermediaries—that outlines the actual costs of delivering Medicaid-eligible services. This includes:
- Direct service staff costs (e.g., salaries and benefits)
- Administrative costs
- Transportation costs (if applicable)
- Indirect costs (using an approved rate)
The goal is simple: document what your district actually spent to support Medicaid services.
What Is Cost Settlement?
Cost settlement is the process of reconciling interim payments—usually paid via fee-for-service or encounter-based models—with the actual costs submitted in the cost report.
- If the district was underpaid, it receives additional reimbursement.
- If it was overpaid, funds must be returned.
This process ensures that reimbursements reflect real, allowable costs, not just estimates.
What Is Cost-Based Reimbursement?
Cost-based reimbursement is a model where payment is ultimately tied to actual costs, not fixed rates. Typically, districts receive interim payments throughout the year, which are then “trued up” during cost settlement. This model, guided by CMS, is used in many states to ensure Medicaid reimbursements match real-world service delivery costs.
5 Tactical Best Practices for Stronger Cost Reporting
1. Staffing and Time Tracking
- Maintain Job Descriptions: Clearly define roles for both direct service providers and administrative staff involved in Medicaid services.
- Track Time Accurately: Use Random Moment Time Study (RMTS) or time studies to allocate staff time between Medicaid and non-Medicaid duties.
- Ensure RMTS Participation: Only staff who participate in RMTS can be included in the cost report.
2. Service Documentation and Billing
- Use Detailed Service Logs: Document service type, date, time in/out, student name, and provider signature—specifics vary by state.
- Ensure IEP Alignment: All billed services must be reflected in the student’s IEP as Medicaid-eligible.
- Verify Medicaid Enrollment: All providers must be enrolled as Medicaid providers or as OPRs (Ordering, Referring, Prescribing), as required.
3. Financial and Cost Tracking
- Track Actual Costs: Capture all expenses related to service delivery, including salaries, benefits, and contracted costs.
- Use Proper Coding: Payroll and expense codes should distinguish Medicaid-eligible costs from others.
- Apply Approved Indirect Cost Rates: Only use rates approved by the state or federal authorities.
4. Data Management and Recordkeeping
- Track Medicaid Eligibility: Keep student Medicaid status current to support claim validity.
- Retain Records for Audits: Maintain documentation—including logs, reports, and time studies—for 5–7 years, per state/federal guidelines.
- Ensure Data Security: Follow FERPA and HIPAA-compliant procedures for all Medicaid-related data.
5. Compliance and Oversight
- Conduct Internal Reviews: Regularly audit service logs and time study participation.
- Train Staff Regularly: Provide annual training for all relevant staff on Medicaid billing and compliance.
- Appoint a Medicaid Coordinator: Designate a point person or team to manage reporting, compliance, and communication with the state.
- Know Your Timelines: Understand and track all submission, adjustment, and appeal deadlines.
Cost Reporting for School-Based Medicaid
Cost reporting is more than an administrative requirement—it’s a critical tool for ensuring your district receives the funding it deserves. By focusing on documentation, compliance, and proactive planning, your team can submit accurate reports that reflect the true cost of supporting student health. Need help navigating cost reporting or preparing for audits? Reach out to the Relay team—we’re here to support you every step of the way.
Interested in finding out how to start incorporating these services into your district Medicaid program? Reach out to Relay—your School Medicaid Billing Software specialists.
