Schedule H
– Program Expense Allocation
Procedures
The purpose of Schedule H – Program Expense Allocation Procedures is to collect information related to provider operations and accounting procedures for allocation of expenses.
Expense allocations are needed for program expenses that cannot be directly assigned to a specific program or procedure code. This schedule contains questions about methods the provider used to allocate expenses to different expense categories, programs or procedure codes. The provider should be able to support the basis used in allocating these expenses. There are two areas of allocation the provider must provide an explanation for:
§ Expense allocation across the various procedure codes within the Waiver LOB.
§ Expense allocation procedures for providers who have expenses in Columns B through E of Schedule A (other LOBs, Base, fee schedule/outcomes-based or excluded non-allowable). Providers need to explain how expenses were allocated to the Waiver LOB versus these other expense categories. This will not apply for providers who only have expenses for the Waiver LOB.
Within each of these allocations, the provider must address the allocation basis used, which will likely differ depending upon the expense category. For example, depreciation may be allocated based upon square footage used, while Transportation may be allocated based upon mileage logs.
Examples of acceptable allocation bases are:
§ Salaries – Time studies or actual time spent.
§ Program supplies – Direct charges or usage (supply allocation may be made based on requisition from a central storeroom, etc.).
§ Transportation – Mileage logs.
§ Occupancy – Square footage occupied or proportional to direct care expenses.
§ Other – See below.
If the provider is using other methods to allocate expenses to all services and programs
(e.g., the percentage of individuals served within each program or service), the provider should be sure to specify the method and supply supporting justification.
If necessary, providers should use the Comments Page or upload supporting documentation to adequately describe methodologies used to allocate expenses between the different programs and services. If you upload a supplemental schedule, please include a note on the Comments Page to “see supplemental schedule ## of ##” as a means of facilitating the desk review. Recall from Section 2 of this document, supplemental schedules must not contain PHI. If expense allocation methods are not clearly explained, the Cost Report will not be approved in the desk review process. Any Cost Reports that do not pass the desk review will not be considered during the rate development process.
Providers are not required to upload a copy of their cost allocation plan as a supplemental schedule. However, providers are required to describe their cost allocation methodology within Schedule H. If deemed necessary, ODP may request a copy of the provider’s cost allocation plan during the desk review process. For providers subject to audit, a separate audit opinion specific to the cost allocation plan is not required; disclosure of the cost allocation plan in the notes to the financial statements as part of the overall financial statement presentation is sufficient.
Line Descriptions
(Line 1) Allocation Methodology Across Procedure Codes within Waiver LOB:
The expense categories from Schedule A have been listed in Column A of this schedule. For each expense category in Column A, use the drop-down box in Column B to identify whether the expenses for the procedure code(s) are allocated or actual. If you did not report expenses on Schedule A for a given expense category, select “Actual” from the drop-down menu.
For all expenses that are allocated, use the drop-down box in Column C to identify the basis for allocation. Options for basis of allocation include:
§ Time study – Time tracked over a period of time sufficient to represent what likely occurs over a broader period of time (e.g., a staff person spends 60% of his/her time providing Residential direct care services (procedure code W6090), so 60% of his/her wages and benefits is allocated to procedure code W6090).
§ Actual time spent or billed – Actual billings/time spent as noted on time sheets or some other method of capturing and billing.
§ Direct charge – Charge noted can be specifically attributed to a procedure code or cost area.
§ Usage – Allocated based upon degree of usage of an asset, as measured by some form of log or tracking.
§ Mileage log – Allocated based upon miles driven as measured by some form of a log (e.g., 40% of time mileage attributed to direct care so 40% of vehicle cost allocated as participant Transportation).
§ Square footage – Allocated based upon square footage of a building used to support a specific cost center or procedure code (e.g., 30% of the square footage of building used for administrative purposes so 30% of building costs allocated to administrative building costs).
§ Proportional to direct care expenses – Allocated based upon the percent of expenses attributed to direct care for a specific cost area or procedure code as compared to all direct care expenses (e.g., procedure code W6090 accounts for 10% of all direct care, so 10% of administrative costs are allocated to code W6090).
§ Other.
(Line 2) Description of Allocation Methodology for “Other” Allocation bases:
If any expense category in Line 1 indicated “other” as the allocation basis in Column C, please state the expense category, the allocation method and describe how the method results in a fair and equitable distribution of expenses. If more room is needed, please include additional
explanation on the Comments Page or via supplemental schedule. (Line 3) Allocation Methodology Across Lines of Business:
Describe the methodology used to allocate expenses across categories (other LOBs, Base, fee schedule, outcomes-based, excluded non-allowable, Waiver) on Schedule A, Columns B through F. Also describe how the method results in a fair and equitable distribution of expenses across LOBs.
(Line 4) Supporting Documentation Indication:
Using the drop down box, indicate “Yes” if additional documentation has been provided beyond the responses to Lines 2 and 3. Otherwise indicate “No”.
(Line 5) Change in Methodology Indication:
Using the drop down box, indicate “Yes” if the same allocation methodology is used from year to year. Otherwise indicate “No”. If ”No”, provide an explanation on the Comments Page.
(Line 6) Allocation Reasonable in Proportion to Benefit:
Using the drop down box, indicate “Yes” if the expenses allocated to different categories, programs and/or procedure codes are reasonable in proportion to the benefits associated with the expenses. Otherwise indicate “No”. If “No”, provide an explanation on the Comments Page.