Which method does CMS require for financial reports from inpatient providers?

The correct method required by CMS for financial reports from inpatient providers is the accrual method. This method recognizes financial transactions when they are incurred rather than when cash changes hands.

By using the accrual method, providers can accurately match revenues with the expenses incurred to produce those revenues, providing a clearer picture of the financial health of the organization. This is particularly important for healthcare providers, as it allows them to account for services rendered and the related costs, even if payment has not yet been received. This method aligns well with the financial reporting needs of inpatient facilities, which often deal with delayed reimbursements from insurers and government payers.

In contrast, the cash-based accounting method recognizes income and expenses when cash is received or paid, which may not provide an accurate representation of ongoing financial obligations and revenues that are due. The modified cash basis combines elements of both cash and accrual accounting but is not specified by CMS for inpatient providers. Hybrid accounting, while potentially useful in some contexts, is not the standard that CMS mandates for these financial reports. Therefore, the accrual method is the most suitable and preferred approach in this context.