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Title: Section 452.4 - Specialized reporting areas

452.4 Specialized reporting areas. (a) Interdepartmental services. The following represent areas for which costs must be directly assigned to the functional reporting center operating such costs. The term interdepartmental services, for the purposes of this Article, is defined as the direct cost of utility provided by one residential health care facility department to another. The objective of accounting for interdepartmental services is to establish a proper distribution of direct costs prior to any cost allocation process.

(1) For the purposes of this Article, the following are costs which should be so treated:

(i) Plant maintenance. (a) All direct costs incurred in the routine maintenance, repair and service of buildings and equipment are included in the Plant Operation and Maintenance reporting center.

(b) However, the cost of noncapitalizable nonroutine maintenance and repairs directly assignable to a single reporting center (such as a major repair of an X-ray machine) must be transferred to the reporting center receiving the service. These costs include all direct expenses incurred by the Plant Operation and Maintenance cost center in performing such services.

(c) When such nonroutine maintenance and repairs are performed by nonfacility personnel, the cost related to these purchased services must be either transferred from Plant Operation and Maintenance or charged directly to the reporting center receiving the service. In the event that such costs are charged directly to the recipient reporting center, such costs must be segregated under the new natural classification provided, i.e., Repairs and Maintenance-- Purchased Services Directly Assignable.

(d) It is recommended that identification of direct costs be accomplished by developing a work order system. Written work orders identifying the requesting reporting center should be prepared upon receipt of the request for services. Upon completion of the service, the direct cost of labor and materials would be entered on the work order. Completed work orders should be sent to general accounting on a regular basis so that interdepartmental costs can be recorded.

(ii) Employee benefits. Employee benefits must be reported in the functional reporting centers which include the applicable employee's compensation. This can be accomplished by accumulating all fringe benefit costs in one account and assigning the expenses to the appropriate reporting center at year-end as a preliminary adjustment prior to cost finding. This assignment can be performed on an actual basis or upon the following basis:

(a) FICA and tuition refunds--actual expense by department.

(b) Pension and health insurance. (1) Union--gross salaries of participating individuals by department.

(2) Nonunion--gross salaries of participating individuals by department.

(c) All other benefits--the remaining benefits may be allocated to the various departments based upon gross salaries of the departments.

(iii) Major movable depreciation. Major movable depreciation must be reported in the reporting center established entitled, "Depreciation--Major Movable Equipment". Such depreciation must be assigned to the department (as a cost allocation basis later explained) where the equipment is located and utilized. However, those providers who are not able to allocate historical costs and depreciation for major movable equipment acquired prior to January 1, 1978 may use square feet, net, to allocate depreciation by department. All additions to major movable equipment as of January 1, 1978 and thereafter will be functionalized.

(b) Residential health care facility research and education costs. All direct costs incurred in conducting residential health care facility research and formal educational activities (as opposed to inservice education) must be reported in the appropriate unrestricted or restricted fund reporting center.

(c) Grant accountability. When separate accounting is required by law, grant, contract, or donation restricted for research and educational activities, such grants should be reported separately. Transfers from restricted funds to match the expenditures for these activities must also be segregated. Thus, accountability is maintained for all restricted research and educational activities. Grants that represent deficit financing should be reported as a reduction of the appropriate contractual allowances when used rather than, in the case of other grants, as other operating revenue.

(d) Grant overhead allocation. (1) No allocation of overhead should be made prior to cost finding unless such allocation is required by grant agreement. When a grant contract calls for the payment of direct costs plus an overhead factor, the overhead factor should be used in billing only. (2) If indirect overhead must, by grant contract, be recorded in the unrestricted fund cost centers used for the recording of the direct costs of the grant activity, the natural expense classification (other direct expenses) must be used. Such overhead allocations should be accumulated separately in the unrestricted fund. For reporting to the New York State Department of Health, this amount must be offset against grant activity costs, so such remaining costs are direct costs only.

(e) Overhead allocation between facilities. An allocation of overhead should be made prior to cost finding for facilities which share services or receive services from a service corporation. Statistical bases utilized for such allocation must be approved by the New York State Department of Health.

(f) Affiliated school contracts. Education costs incurred relative to affiliated school contracts, including salaries, wages and stipends paid to students on approved programs and fees paid to physicians involved primarily in approved education programs, must be reflected in the appropriate education reporting center in the Unrestricted Fund.

(g) In service education--nursing. (1) Nursing inservice education activities are defined as educational activities conducted within the residential health care facility for residential health care facility nursing personnel. The cost of time spent by nursing personnel as students in such classes and activities must remain in the reporting center in which their normal salary and wage costs are charged (i.e., the reporting center in which they work). However, the cost (defined as salary, wages and payroll-related fringe benefits) of time spent in such classes and activities by those instructing and administering the programs must be included in the Nursing Administration reporting center.

(2) If instructors do not work full-time in the inservice education program, the cost (as defined above) of the portion of time they spend working in the inservice education program must be included in the "Nursing Administration" reporting center. This may be accomplished by direct distribution of these costs (by natural classification of expense category) each payroll period, or by reclassification (based upon time spent) at year end.

(3) The costs of nursing inservice education supplies (such as cassettes, books, medical supplies, etc.) and outside lecturers must also be reflected in the Nursing Administration reporting center.

(h) Inservice education--other. All costs relative to nonnursing inservice education activities should be included in the reporting center to which they apply (e.g., Physical Therapy, Radiology, etc.), as such inservice education activities will rarely apply to more than one functional activity.

(i) Physician remuneration. Due to the numerous types of financial and work arrangements between residential health care facilities and physicians, comparability of costs between residential health care facilities may be significantly impaired. This section deals with the methods to be used in reporting costs and revenues related to the services of physicians.

(1) Financial arrangements. Although the variations in financial arrangements between residential health care facilities and physicians are endless, there are five general types of such arrangements:

(i) Attending physician. Under this arrangement, the physician bills both Medicare, part B, and patients in his name for professional services provided. The residential health care facility reflects no operating revenue or expense relative to the professional component.

(ii) House physician. The residential health care facility bills Medicare, part B, in its name and receives payment, or bills in the physician's name and receives payment from the physician. The physician is paid a salary by the residential health care facility which is included in the facility's expense. Amounts received by the residential health care facility from Medicare may be operating revenue to the facility or may be a liability to Medicaid or the patient, depending upon the extent of the reimbursement ceiling in effect.

(iii) Normal arrangement. The residential health care facility bills patients for the physician's contractual professional services, including this amount as facility revenue. All department expenses are paid by the residential health care facility. The residential health care facility remits a fee to the physician which is included in facility expense.

(iv) Rental department. The physician bills the patients for certain of the part A and part B component (as defined by Medicare) and incurs all substantial direct expenses. The physician remits a fee to recover certain residential heath care facility expenses. This fee is recorded an nonoperating revenue in the appropriate department. (v) Independent/separate department. The department functions are provided by an independent physician or group of physicians. Neither revenues nor expenses are incurred by the residential health care facility. The residential health care facility refers patients and/or specimens to the physician or group, which is usually located on separate premises. No costs are incurred and no revenue is received under this arrangement.

(2) Work arrangement. (i) The services provided by residential health care facility-based physicians may be categorized into five general types:

(a) professional component--providing direct patient care;

(b) education--teaching and supervising student activity in educational programs;

(c) research--working in research projects;

(d) administration--administering overall activities; and

(e) department supervision--supervising activities of the department.

(ii) When physicians are involved in more than one of the above functional activities, their remuneration, if any, should be recorded in the reporting center for which services they are paid. Prior to cost finding, their remunerations are to be reclassified to the appropriate reporting center on the residential health care facility's records.

(j) Periodic Interim Payments (PIP). Periodic interim payments are made biweekly to a residential health care facility on the PIP program and are based on the facility's estimate of applicable Medicare reimbursement for the current cost report period. When such payments are received, a cash account in the Unrestricted Fund is debited and a PIP clearing account is credited for the amount of the payment. When applicable, Medicare charges are billed to the intermediary, the PIP clearing account is debited and patient accounts receivable is credited. At year end, adjustments must be made to eliminate any remaining balance in the PIP clearing account and to reflect the amount receivable from, or due to, the Medicare intermediary.

(k) Patient trust funds. Patient trust funds consist of amounts deposited on behalf of the patient which are to be used for the personal care and expenditure of that patient. In most cases, these funds consist of social security funds which are received by the patient or by the residential health care facility on behalf of the patient. In most instances, the facility must give the patient an allowance each month out of these funds. Since patient trust funds are administered by a facility, these funds should be accounted for as agency funds by governmental and voluntary facilities. For proprietary facilities, these funds should be accounted for as noncurrent assets and noncurrent liabilities.


VOLUME D (Title 10)