Title: Section 446.3 - Reclassification for cost finding purposes
446.3 Reclassification for cost finding purposes. (a) Reclassifications for Medicaid cost finding purposes.
(1) In many instances the reclassifications made to conform to the principles of functional reporting (see section 446.2 of this Part) are not conducive to the proper allocation of cost during the cost finding process. For example, nonroutine maintenance must be assigned to the Plant Maintenance (account 8400) cost center to accomplish the functional reporting of expense. The basis to be used for cost finding is Net Square Feet. If the cost of nonroutine maintenance is allocated on the basis of Net Square Feet, the resulting distribution of this expense would include cost centers for which no nonroutine maintenance was performed. A better allocation of the cost of nonroutine maintenance would be accomplished by reclassifying this cost out of the functional cost center to the cost centers for which nonroutine maintenance was performed, prior to utilizing Net Square Feet to allocate the remaining cost to the other appropriate functional cost centers.
(2) Therefore, reclassifications of the direct expenses of functional cost centers may be made to other functional cost centers for cost finding purposes when that direct expense is obtainable. Estimates, time studies, sampling or other means may not be used as a basis for reclassification. The required Cost Allocation statistics must be used to allocate costs remaining in the functional cost centers after reclassifications are made.
(b) Reclassifications for Medicare cost finding purposes. (1) Other Health Profession Education (account 8260). This expense account consists of the direct costs of organized educational programs such as school of medical technology, school of X-ray technology, administrative intern program, etc. The total direct expenses included in Other Health Profession Education must be reclassified to the costs centers directly affected by the educational programs; for example, the cost of the school of X-ray technology must be reclassified to the appropriate radiology cost centers.
(2) Medical Care Review (account 8740). This expense account consists of the costs incurred in providing peer review, quality assurance, utilization review, professional standards review, and medical care evaluation functions. Only utilization review costs of the hospital-based skilled nursing facility should be reclassified as follows: If the scope of the review covers all patients, all allowable costs should be reclassified in this column to Other Administrative and General. If the scope of the review covers only Medicare patients or Medicare title V and title XIX patients, reclassify to Other Administrative and General all allowable costs other than physicians' compensation. The reasonable compensation paid to the physicians for their services on utilization review committee is to be allocated 100 percent to the health care programs. The reasonable compensation paid to the physicians will be adjusted out by the Worksheet--Adjustment Prior to Cost Finding, and will be included on the Worksheet--Computation of Net Cost of Covered Services.
(3) Insurance--Hospital and Professional Malpractice (account 8840). This expense account consists of the direct costs incurred by the provider for hospital and professional malpractice insurance. This provides for reclassifying the general and administrative expense directly related to malpractice losses. All allowable and non-allowable uninsured malpractice losses and related expenses, either through deductible or coinsurance provision, or as a result of an award in excess of reasonable coverage limits, or as a governmental provider, must be reclassified to the malpractice insurance account.
(4) Insurance--Other (account 8850). This expense account consists of expenses incurred in maintaining insurance policies, except for professional and hospital malpractice insurance and employee benefit insurance. Insurance cost applicable to fixed assets and movable equipment must be reclassified to the applicable cost center. Any insurance expense which cannot be identified to a specific cost center will be reclassified to Administrative and General.
(5) Licenses and Taxes (other than income taxes) (account 8860). This expense account consists of the business license expense and tax expense incidental to the operation of the hospital. Licenses and taxes (other than income taxes) applicable to fixed assets and movable equipment must be reclassified to the applicable cost center. Any licenses and taxes which cannot be identified to a specific cost center and are related to the general overall operation of the hospital must be reclassified to the Administrative and General account.
(6) Interest Short-Term (account 8870). This expense account consists of interest expense related to borrowings for hospital operations. The full amount of cost must be reclassified to Administrative and General. (7) Interest Long-Term (account 8880). This expense account consists of all interest incurred on capital, mortgages and other loans for the acquisition of property, plant and equipment. Interest on Mortgage Loans will be reclassified to Depreciation, Amortization, Fixed Assets. Interest on Movable Equipment will be reclassified to Depreciation, Amortization, Movable Equipment.
VOLUME C (Title 10)