Step Down Cost Allocation Statistics

Providers may request to change their order of general cost allocation, or their allocation statistic. Requests for these changes must be made in writing to the Medicare Administrative Contractor (MAC)/Fiscal Intermediary (FI) 90 days prior to the end of the cost reporting period. The change must be shown to more accurately allocate the overhead or should demonstrate simplification in maintaining the changed statistics. If a change in statistics is requested, the provider must maintain both sets of statistics until an approval is made. If both sets are not maintained and the request is denied, the provider reverts back to the previously approved methodology. The provider must include with the request all supporting documentation and a thorough explanation of why the alternative approach should be used.

As an alternative approach to the cost finding methods identified in CMS Publication 15-I, 2306, the provider may request a simplified cost allocation methodology. This methodology reduces the number of statistical bases a provider maintains. It may result in reducing Medicare reimbursement. A comparison is recommended if the possible lost reimbursement is surpassed by the reduced costs of maintaining voluminous statistics. If a provider elects the simplified methodology, the following statistical bases must be used for purposes of allocating overhead cost centers. There can be no deviation of the prescribed statistics and it must be utilized for all the following cost centers.

Buildings and Fixtures Square Footage
Movable Equipment Square Footage
Maintenance and Repairs Square Footage
Operation of Plant Square Footage
Housekeeping Square Footage
Employee Benefits Salaries
Cafeteria* Salaries
Administrative and General Accumulated Costs
Laundry and Linen Patient Days
Dietary** Patient Days
Social Service Patient Days
Maintenance of Personnel Eliminated
Nursing Administration Nursing Salaries
Central Services and Supply Costed Requisitions
Pharmacy Costed Requisitions
Medical Records and Library Gross Patient Revenue
Nursing School* Assigned Time
Interns and Residents Assigned Time
Paramedical Education Assigned Time
Non-physician Anesthetists 100 percent to Anesthesiology

NOTE: If you are paid on a prospective payment basis, the capital consistency rules will apply. The election of the alternative method discussed above can not result in inappropriately shifting costs.

*Contract labor is not included and is not grossed up.
**If this is a meals on wheels program, a Worksheet A-8 adjustment is required to remove the costs of the program.

Once the simplified method is elected, the provider must continue to use this method for no less than 3 years, unless a change of ownership occurs.

In addition, the following overhead cost center statistics can be substituted for the recommended statistics printed on Worksheet B-1. The 90-day discussed above still applies, as well as capital consistency.

Housekeeping Square Footage
Cafeteria FTEs
Maintenance of Personnel Eliminated and moved to A & G
Medical Records Gross Patient Revenue

Page Last Updated: Monday, 18-Jul-2011 15:22:06 CDT