Who this applies to: Those responsible for price transparency reporting, revenue cycle/registration, or contracting at an Inpatient Prospective Payment System (IPPS) hospital or in a reimbursement department at a healthcare facility.
The Centers for Medicare and Medicaid Services (CMS) introduced Worksheet S-12 to Form CMS-2552-10, adding a new reporting requirement for certain IPPS hospitals. Effective for cost reporting periods ending on or after January 1, 2026, applicable hospitals must report the weighted median Medicare Advantage Organization (MAO) payer-specific negotiated charge by Medicare Severity Diagnosis Related Group (MS-DRG) for inpatient discharges during the cost reporting period.
What Worksheet S-12 measures and why it matters
Although the worksheet refers to negotiated “charges,” the reported amount is better understood as the negotiated payment rate or estimated payment amount associated with a Medicare Advantage contract for a specific MS-DRG. These amounts generally do not tie directly to the actual payment received on each individual claim. Instead, the worksheet is intended to capture a standardized, discharge-weighted median negotiated amount for each applicable MS-DRG.
CMS created Worksheet S-12 to collect MS-DRG-specific payment data for use in developing a market-based MS-DRG relative weight methodology beginning in FY 2029. Because CMS has stated that they may refine this methodology through future rulemaking before implementation, hospitals should monitor future rules and related guidance for updates.
Who must complete Worksheet S-12?
Worksheet S-12 applies to subsection (d) hospitals, including applicable IPPS hospitals and subsection (d) Puerto Rico hospitals. The requirement does not apply to Critical Access Hospitals, inpatient psychiatric hospitals, inpatient rehabilitation hospitals, children’s hospitals, and cancer hospitals. CMS instructions also identify other limited exemptions, such as hospitals that do not negotiate payment rates and only receive non-negotiated payments, as well as hospitals paid under the Maryland Total Cost of Care Model during the model’s performance period.
Hospitals should carefully evaluate whether they are subject to the requirement before preparing the cost report. Failure to complete the worksheet may result in the cost report being rejected, making early assessment and data preparation important.
Core data needed to complete Worksheet S-12
- The hospital’s most recent Hospital Price Transparency Machine-Readable File (MRF) as of the hospital’s cost report filing date, which should include MAO payer-specific negotiated charges
- Detailed inpatient discharge data from the hospital’s Electronic Medical Record (EMR) or patient accounting system, organized by payer, plan, and MS-DRG
- Identification of capitated and non-capitated Medicare Advantage plans, because capitated arrangements are excluded from the weighted median calculation but may still be needed for reconciliation and audit support
- MS-DRG grouping or mapping information, particularly when negotiated charges are not identified directly at the MS-DRG level and must be cross-walked from another classification system
Why the MFRs matters
The Hospital Price Transparency MRF is central to Worksheet S-12 because it is the source for the MAO payer-specific negotiated charges. Hospitals should confirm that their file is available, complete, and formatted in a way that allows negotiated charges to be matched to MAO plans and MS-DRGs. If the file is incomplete or difficult to use, the hospital may face significant challenges preparing the worksheet accurately and timely.
Building the discharge detail file
The discharge detail file should be developed from the hospital’s EMR or patient accounting system and should include one line per inpatient discharge. The file should be based on discharge dates within the hospital’s fiscal year and should include inpatient bill types, such as 11x claims, while allowing the hospital to identify transfers, denied claims, outpatient accounts, and claims pending appeal.
- Account number or other unique discharge identifier
- Discharge date
- Discharge disposition or other indicator used to distinguish true discharges from transfers
- Financial class
- Payer plan name
- Payer plan code
- MS-DRG
- Capitation indicator
- Claim status, including indicators for denied claims, outpatient claims, and claims pending appeal
A clean discharge detail file is essential because the weighted median calculation depends on matching each applicable Medicare Advantage discharge to the correct negotiated charge. Each discharge should appear on a single line so that the data can be sorted, filtered, reconciled, and matched consistently.
How to calculate the weighted median negotiated charge
To calculate the weighted median Medicare Advantage payer-specific negotiated charge, the hospital should first isolate inpatient discharges associated with Medicare Advantage plans. The negotiated charge from the MFR should then be matched to each discharge based on the MAO payer and the applicable MS-DRG. If a discharge or negotiated charge is not already identified at the MS-DRG level, the hospital must perform an appropriate crosswalk or grouping process.
- Assign each Medicare Advantage inpatient discharge a payer-specific negotiated charge using the MAO plan and coded MS-DRG.
- If the discharge is not coded to an MS-DRG, map the applicable classification, such as an APR-DRG, to the appropriate MS-DRG for matching.
- Exclude capitated discharges and other accounts that should not be included in the calculation, while retaining them as needed for reconciliation and a solid audit trail.
- Sort the remaining records by MS-DRG and negotiated charge from lowest to highest.
- For each MS-DRG, identify the median negotiated charge. If the number of discharges is odd, use the middle value. If the number of discharges is even, average the two middle values.
- Enter the resulting median negotiated charge on Worksheet S-12 only for MS-DRGs that had applicable discharges during the fiscal year.
How to prepare for Worksheet S-12
Hospitals should begin preparing for Worksheet S-12 well before the cost report filing deadline.
Key steps to take now:
- Validate the hospital’s MRF.
- Confirm Medicare Advantage payer mappings.
- Develop a discharge-level data extract.
- Identify capitated arrangements.
- Test the median calculation process.
Early preparation can help reduce filing risk, support reconciliation, and avoid last-minute issues with cost report software edits.
Because Worksheet S-12 connects Hospital Price Transparency data, Medicare Advantage contracting information, and Medicare cost report reporting, the preparation process will likely require coordination among reimbursement, finance, revenue cycle, contracting, and information technology teams.
Key takeaways
- Determine whether your hospital is required to complete Worksheet S-12 before beginning Medicare cost report preparation.
- Validate the hospital’s MRF to confirm Medicare Advantage negotiated charge data is complete and usable.
- Build a discharge-level data file that connects Medicare Advantage inpatient discharges to payer plans and MS-DRGs.
- Exclude capitated arrangements and other non-applicable accounts from the weighted median calculation while retaining support for reconciliation.
- Coordinate across reimbursement, finance, revenue cycle, contracting, and IT teams to reduce filing risk and support timely reporting.
About BerryDunn
BerryDunn’s healthcare reimbursement team can help hospitals prepare for Worksheet S-12 by evaluating applicability, reviewing MRF readiness, developing discharge-level data extracts, mapping Medicare Advantage plans and MS-DRGs, and creating a defensible approach to the weighted median calculation. If your organization has questions about this new Medicare cost report requirement or needs support preparing for implementation, we can help. Learn more about our team and services.