In a 2005 report, MedPAC reported that hospitals often charge much more than their cost for certain services, an indication that charges may not be a valid proxy for establishing DRG relative weights. Having confirmed these findings, CMS has endeavored to shift to cost-based DRG weights from charge-based DRG weights. In this transition CMS is striving to use Medicare hospital cost reports in a manner that they were not necessarily designed to accommodate. As a result CMS has encountered a number of issues with the Medicare cost report that limit the accuracy of using this data source for setting cost-based relative weights. During 2007, a project cost report workgroup was established comprised of expert staff, consultants and hospital leaders representing the American Hospital Association, the Association of American Medical Colleges and the Federation of American Hospitals. The cost report workgroup was charged with identifying potential changes to the Medicare cost report and/or other input source documents to improve the accuracy of DRG weights under the new CMS cost-based weights method. These recommendations may cause significant revisions to the Medicare hospital cost report form and instructions. During this Audio Webcast5 Kathy Reep, Vice President of Finance for the Florida Hospital Association, will discuss the key issues encountered during this transition. As a member of the cost report workgroup Kathy will also discuss the findings and recommendations of the workgroup. Dennis Fuller, Director of Reimbursement and Tax Accounting for Shands HealthCare, will provide feedback related to the findings and recommendations of the workgroup from the perspective of a provider cost report preparer.