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.