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Importance of Cost Basis on the B-1 (2552-10) of the Medicare/Medicaid Cost Reports

The A-series worksheets identify the costs your facility is prepared to report on the Medicare and Medicaid cost reports. First, we start with the trial balance (A), continue to reclassification (A-6), detailing (A-7), and then go to adjustments (A-8/A-8-2). What happens next? At this point it is time to allocate your overhead costs (fixed and movable equipment, administrative, pharmaceutical, etc.) to your routine cost centers (medical-surgical, intensive care, etc.) and ancillaries (laboratory, emergency room, etc.). But in what proportion? This is where B-1 comes into play. It tells us that we can allocate costs based on patient or facility-type statistics. For instance, we may allocate fixed capital costs based on square footage or administrative costs based on allocated costs.

The process is generally pretty simple. Let’s say we have $100,000 in costs, which we will allocate to three direct service cost centers (i.e. patient care cost centers) in proportion to patient days.

1. Adults and Pediatrics: 75 patient days.
2. Skilled Nursing Facility: 50 patient days.
3. Subprovider (Inpatient Psychiatric Facility): 25 patient days.

———-
150 total patient days

We develop a cost basis statistic by dividing the costs by the number of patient days or $100,000 by 150. This gives us $666.66 per unit of patient days. We then multiply the cost statistic by the patient days for each cost center.

1. Adults and Pediatrics: 75 patient days * $666.66 = $50,000
2. Skilled Nursing Facility: 50 patient days. * $666.66 = $33,333
3. Subprovider (Inpatient Psychiatric Facility): 25 patient days * $666.666 = $16,666.50.

We then add these up to make sure we get $100,000. But for some rounding, this is precisely what we get.

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