HFMA
CERTIFIED HOSPITAL COST REPORT
SPECIALIST (CHCRS)
Exam Elaborations Questions & Answers
2026
True or False: On Worksheet A-8, an adjustment to "Reduce Expenses" implies that the underlying
,cost is unallowable for Medicare reimbursement purposes or that the cost has been recovered
through a related income offset.
Answer: True.
Rationale: Worksheet A-8 is the mechanism for adjusting trial balance expenses to meet Medicare's
definition of allowable costs. Offsetting miscellaneous income against related costs is a primary
function of this worksheet.
Fill in the blank: The statistical basis most commonly utilized on Worksheet B-1 to allocate
Administrative and General (A&G) costs is ________.
Answer: Accumulated Cost.
Rationale: While providers can request alternative fragments or bases, the standard CMS-approved
methodology for A&G is the accumulated cost of the centers receiving the allocation.
A hospital with a Critical Access Hospital (CAH) designation is completing its Medicare Cost
Report. How does the reimbursement methodology differ for a CAH compared to a standard IPPS
hospital?
A. CAHs are paid based on a fixed rate per discharge using DRGs.
B. CAHs receive 101 percent of reasonable costs for most inpatient and outpatient services.
C. CAHs are reimbursed based on a percentage of total billed charges without limits.
D. CAHs are paid via the Ambulatory Payment Classification system only.
Answer: B.
Rationale: The CAH program was designed to support small rural hospitals. Their payment
methodology is a departure from the prospective payment system and focuses on cost-based
reimbursement to ensure financial stability in low-volume areas.
When auditing Worksheet S-3, Part II, a reimbursement specialist identifies contract labor costs for
the Emergency Department. What documentation is required to include these costs in the Wage
Index calculation?
A. Only the total dollar amount paid to the agency is required.
B. The provider must have documentation of both the total dollars paid and the specific hours
worked.
C. Contract labor is never allowed in the Wage Index calculation.
D. The provider must include the personal tax returns of the contracted individuals.
Answer: B.
Rationale: For the Wage Index to be accurate, CMS requires both the expense and the associated
hours. Without documented hours, the Medicare Administrative Contractor (MAC) will remove the
cost from the calculation because an hourly rate cannot be determined.
True or False: On Worksheet B Part 1, the "Step-Down" method allows for the reciprocal
allocation of costs between two service cost centers that provide services to each other.
Answer: False.
Rationale: The Medicare cost report uses a non-recursive step-down method. Once a cost center's
expenses have been allocated, it is effectively "closed" and cannot receive any subsequent
allocations from other departments.
Fill in the blank: The report generated by CMS that summarizes all claims data for a provider
during a specific fiscal year and is used to populate Worksheets D and E is known as the ________
report.
Answer: PS&R (Provider Statistical and Reimbursement).
Rationale: The PS&R is the official source of data for Medicare patient days, charges, and
payments. It is the primary document used to reconcile the cost report with actual claims activity.
A hospital is evaluating the financial impact of its "Provider-Based" Rural Health Clinic (RHC).
What is a primary strategic advantage of a clinic having Provider-Based status?
A. It allows the clinic to avoid all Medicare billing regulations.
B. It permits the clinic to be reimbursed under the Physician Fee Schedule at a higher rate.
2
, C. It allows for the allocation of hospital overhead costs to the clinic through the Cost Report.
D. Provider-Based clinics are exempt from filing a cost report.
Answer: C.
Rationale: Provider-Based clinics are considered a department of the hospital. This status allows a
portion of the hospital’s A&G and capital costs to be allocated to the clinic, which can improve the
overall reimbursement under the RHC cost-based encounter rate system.
Which worksheet is used to calculate the "Ratio of Cost to Charges" (RCC) for each hospital
department?
A. Worksheet B-1
B. Worksheet C, Part I
C. Worksheet D-3
D. Worksheet G
Answer: B.
Rationale: Worksheet C is where total costs (from Worksheet B) are divided by total charges (from
the provider's records) to determine a ratio for each department. This ratio is then used to convert
Medicare charges into Medicare costs.
True or False: Adjustments made on Worksheet A-8-1 are specifically designed to handle
transactions between "Related Organizations" to ensure that the cost reported does not exceed what
the provider would have paid in an arm's length transaction.
Answer: True.
Rationale: Medicare regulations prevent providers from "padding" costs by purchasing services or
supplies from a company they own or control at inflated prices. A-8-1 limits the allowable cost to
the actual cost to the related organization.
Fill in the blank: The ________ is a geographic adjustment factor used to account for regional
differences in hospital labor costs and is updated annually by CMS primarily using data from
Worksheet S-3.
Answer: Wage Index.
Rationale: The Wage Index is a critical component of the IPPS payment formula. It ensures that
hospitals in high-cost labor markets, like New York City, receive higher base payments than those
in lower-cost markets.
What is the standard deadline for a hospital to submit its completed Medicare Cost Report (CMS-
2552-10) to the MAC?
A. 30 days after the end of the fiscal year.
B. Five months after the end of the fiscal year.
C. One year after the end of the fiscal year.
D. December 31st of every year.
Answer: B.
Rationale: Standard CMS regulations require the cost report to be filed by the last day of the fifth
month following the close of the provider’s fiscal year. Late filings result in the immediate
suspension of Medicare payments.
A specialist is reviewing Worksheet A-8-2 regarding physician remuneration. What is the primary
purpose of this worksheet?
A. To report the total income of all physicians in the community.
B. To separate physician professional fees from the hospital's allowable clinical costs.
C. To calculate the payroll taxes for the hospital's surgeons.
D. To determine the number of patients seen by each doctor.
Answer: B.
Rationale: Physicians are generally paid for professional services under Part B. Worksheet A-8-2
ensures that these professional components are "carved out" of the hospital's Part A allowable
costs, leaving only the "provider component" (administrative or teaching duties) as an allowable
3
CERTIFIED HOSPITAL COST REPORT
SPECIALIST (CHCRS)
Exam Elaborations Questions & Answers
2026
True or False: On Worksheet A-8, an adjustment to "Reduce Expenses" implies that the underlying
,cost is unallowable for Medicare reimbursement purposes or that the cost has been recovered
through a related income offset.
Answer: True.
Rationale: Worksheet A-8 is the mechanism for adjusting trial balance expenses to meet Medicare's
definition of allowable costs. Offsetting miscellaneous income against related costs is a primary
function of this worksheet.
Fill in the blank: The statistical basis most commonly utilized on Worksheet B-1 to allocate
Administrative and General (A&G) costs is ________.
Answer: Accumulated Cost.
Rationale: While providers can request alternative fragments or bases, the standard CMS-approved
methodology for A&G is the accumulated cost of the centers receiving the allocation.
A hospital with a Critical Access Hospital (CAH) designation is completing its Medicare Cost
Report. How does the reimbursement methodology differ for a CAH compared to a standard IPPS
hospital?
A. CAHs are paid based on a fixed rate per discharge using DRGs.
B. CAHs receive 101 percent of reasonable costs for most inpatient and outpatient services.
C. CAHs are reimbursed based on a percentage of total billed charges without limits.
D. CAHs are paid via the Ambulatory Payment Classification system only.
Answer: B.
Rationale: The CAH program was designed to support small rural hospitals. Their payment
methodology is a departure from the prospective payment system and focuses on cost-based
reimbursement to ensure financial stability in low-volume areas.
When auditing Worksheet S-3, Part II, a reimbursement specialist identifies contract labor costs for
the Emergency Department. What documentation is required to include these costs in the Wage
Index calculation?
A. Only the total dollar amount paid to the agency is required.
B. The provider must have documentation of both the total dollars paid and the specific hours
worked.
C. Contract labor is never allowed in the Wage Index calculation.
D. The provider must include the personal tax returns of the contracted individuals.
Answer: B.
Rationale: For the Wage Index to be accurate, CMS requires both the expense and the associated
hours. Without documented hours, the Medicare Administrative Contractor (MAC) will remove the
cost from the calculation because an hourly rate cannot be determined.
True or False: On Worksheet B Part 1, the "Step-Down" method allows for the reciprocal
allocation of costs between two service cost centers that provide services to each other.
Answer: False.
Rationale: The Medicare cost report uses a non-recursive step-down method. Once a cost center's
expenses have been allocated, it is effectively "closed" and cannot receive any subsequent
allocations from other departments.
Fill in the blank: The report generated by CMS that summarizes all claims data for a provider
during a specific fiscal year and is used to populate Worksheets D and E is known as the ________
report.
Answer: PS&R (Provider Statistical and Reimbursement).
Rationale: The PS&R is the official source of data for Medicare patient days, charges, and
payments. It is the primary document used to reconcile the cost report with actual claims activity.
A hospital is evaluating the financial impact of its "Provider-Based" Rural Health Clinic (RHC).
What is a primary strategic advantage of a clinic having Provider-Based status?
A. It allows the clinic to avoid all Medicare billing regulations.
B. It permits the clinic to be reimbursed under the Physician Fee Schedule at a higher rate.
2
, C. It allows for the allocation of hospital overhead costs to the clinic through the Cost Report.
D. Provider-Based clinics are exempt from filing a cost report.
Answer: C.
Rationale: Provider-Based clinics are considered a department of the hospital. This status allows a
portion of the hospital’s A&G and capital costs to be allocated to the clinic, which can improve the
overall reimbursement under the RHC cost-based encounter rate system.
Which worksheet is used to calculate the "Ratio of Cost to Charges" (RCC) for each hospital
department?
A. Worksheet B-1
B. Worksheet C, Part I
C. Worksheet D-3
D. Worksheet G
Answer: B.
Rationale: Worksheet C is where total costs (from Worksheet B) are divided by total charges (from
the provider's records) to determine a ratio for each department. This ratio is then used to convert
Medicare charges into Medicare costs.
True or False: Adjustments made on Worksheet A-8-1 are specifically designed to handle
transactions between "Related Organizations" to ensure that the cost reported does not exceed what
the provider would have paid in an arm's length transaction.
Answer: True.
Rationale: Medicare regulations prevent providers from "padding" costs by purchasing services or
supplies from a company they own or control at inflated prices. A-8-1 limits the allowable cost to
the actual cost to the related organization.
Fill in the blank: The ________ is a geographic adjustment factor used to account for regional
differences in hospital labor costs and is updated annually by CMS primarily using data from
Worksheet S-3.
Answer: Wage Index.
Rationale: The Wage Index is a critical component of the IPPS payment formula. It ensures that
hospitals in high-cost labor markets, like New York City, receive higher base payments than those
in lower-cost markets.
What is the standard deadline for a hospital to submit its completed Medicare Cost Report (CMS-
2552-10) to the MAC?
A. 30 days after the end of the fiscal year.
B. Five months after the end of the fiscal year.
C. One year after the end of the fiscal year.
D. December 31st of every year.
Answer: B.
Rationale: Standard CMS regulations require the cost report to be filed by the last day of the fifth
month following the close of the provider’s fiscal year. Late filings result in the immediate
suspension of Medicare payments.
A specialist is reviewing Worksheet A-8-2 regarding physician remuneration. What is the primary
purpose of this worksheet?
A. To report the total income of all physicians in the community.
B. To separate physician professional fees from the hospital's allowable clinical costs.
C. To calculate the payroll taxes for the hospital's surgeons.
D. To determine the number of patients seen by each doctor.
Answer: B.
Rationale: Physicians are generally paid for professional services under Part B. Worksheet A-8-2
ensures that these professional components are "carved out" of the hospital's Part A allowable
costs, leaving only the "provider component" (administrative or teaching duties) as an allowable
3
