The Influence of Regulatory Change on Hospital Medicare Cost Reporting

Hospitals function within an environment in which regulation influences their daily operation, reporting, and reimbursement. This study tests whether regulatory reporting is affected by significant regulatory change. To examine whether this relationship exists, we utilize a comprehensive sample of more than 22,000 Medicare cost reports (MCRs) and corresponding MCR status changes spanning 2007–2014, surrounding the passage of the Patient Protection and Affordable Care Act of 2010 (‘‘ACA’’). We find that hospitals restate more Medicare cost reports in the post-ACA (2012–2014) period suggesting that regulatory reporting accuracy declines overall. The analysis is expanded to examine reporting accuracy across hospital types. There is an increase in MCR restatements by all hospitals following the ACA, but the timing varies. Further analysis reveals that the increase in restatements following the ACA is due to an increase in amended returns that outweighs a decline in MCRs that are reopened following their settlement.