GAAP Episode 011 - Healthcare Allocation Statistics

GAAP Episode 011 - Healthcare Allocation Statistics


This week, we sit down with managing shareholder Mark Lyons to discuss the ins-and-outs of allocation statistics and how they can impact healthcare cost reports. Listen in to learn more!

0:00 Intro
1:45 What are cost reports?
2:24 What are allocation statistics?
3:23 How often do statistics and requirements change?
4:52 Equipment depreciation
8:00 Requesting changes in allocation
10:49 Affected facilities
11:45 Cost report averages and best practices
14:17 Responsibilities and communication
15:47 Worksheet B-1
19:55 Cafeteria costs
22:47 Typical tricky statistics
26:38 Maximizing reimbursements and patient care
29:04 Outro
30:00 Joke


Cost reports are an important piece of reimbursements for Medicare-certified healthcare facilities.

According to the Centers for Medicare & Medicaid Services, those facilities have to submit an annual cost report to a Medicare Administrative Contractor. MACs work as a kind of intermediary between healthcare facilities and CMS.

Cost reports contain provider information such as:

  • Facility characteristics
  • Utilization data
  • Cost and charges by cost center
  • Medicare settlement data
  • Financial statement data

CMS maintains the cost report data in the Healthcare Provider Cost Reporting Information System.

Below are some high-level questions you can ask yourself when you’re gathering allocation statistics and filing out a cost report.

Questions when filing out Worksheet B-1:

  • Does housekeeping clean all the areas with a stat?
  • Are offsite locations (potential examples: Therapy, RHC, HHA, etc.) receiving an allocation from the cafeteria, housekeeping, or another supporting area they don’t use?
  • Are there better ways to allocate A&G costs (i.e., segmentation)?
  • Does central supply/purchasing order for all departments, or do some departments do their own ordering (e.g., lab, pharmacy, etc.)?
  • Does maintenance provide services to leased buildings?
  • Why are the non-reimbursable areas receiving allocations? Are those correct? If so, is there a way to limit the allocations?
  • Is there a way to deflect costs from non-cost based/nonallowable cost centers?
  • Can you direct cost certain costs for specific areas versus using allocation statistics?

When was the last time you updated your square-footage statistics? If it’s been more than a year, it’s a good idea to make sure the square-footage stats are up to date.


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