N.Y. Comp. Codes R. & Regs. tit. 10 § 454.2

Current through Register Vol. 46, No. 51, December 18, 2024

Section 454.2 - Concepts for functional reporting

(a) In order to comply with the reporting requirements of the New York State Department of Health, residental health care facilities must adhere to the following basic concepts.

(1) Residential health care facilities must follow the uniform accounting policies and practices as specified in Part 452 of this Article. Items such as methods of capitalization and depreciation of assets and direct charging of maintenance repairs, and payroll-related benefits to using centers are examples of important policies which must be adhered to for the annual uniform financial report.

(2) The principles and concepts utilized in the preparation of the annual uniform financial report will be based upon a portrayal of the activities on a functional basis regardless of third-party reimbursement practices.

(3) Another concept affecting the preparation of the annual uniform financial report is the requirement that costs will be measured at a level where uniformity can be obtained and a standard statistical measurement applied. For purposes of reporting, it was determined that standard units of measure would not be applied to certain nonrevenue or general support services; however, their total cost would be identifiable. The application of standard units of measure for some support services and ancillary revenue centers and all program centers would occur at the direct cost level. Standard units of measure may also be applied to support services, ancillary revenue and program service centers after cost allocation.

(4) Uniform financial reporting for revenue and expense categories is divided into three categories, as follows:

(i) nonrevenue support services centers--includes those reporting centers which do not normally produce patient service revenue and which tend to support the activities and services provided by the patient care services or special education, research or auxiliary programs. Reporting centers representing functions not necessarily associated with services would also be included in this category, such as insurance, etc;

(ii) ancillary service centers--includes those reporting centers which provide diagnostic and treatment services for inpatient and outpatient care; and

(iii) program and auxiliary service centers--includes those patient care, education, research and auxiliary programs for which the residential health care facility is ultimately organized to provide. All effort within the facility is ultimately related to these final program centers.

(b) Conversion from responsibility to functional reporting.

(1) A fundamental aspect of the uniform financial reporting program is the portrayal of revenue and expenses on a functional basis rather than following the organizational pattern of the specific residential health care facility.

(2) The need for uniform functional reporting practices occurs from the fact that facilities will identify costs and revenue according to responsibility centers; that is, the reporting of costs according to the operating units such as departments. Because of the significant variation of the size and scope of residential health care facilities, there may be variation in the assignment of costs within each chart of accounts. Therefore, for uniform functional reporting of revenue and expenses, there may be a need for reclassifications to convert costs from the responsibility reporting format to a functional reporting format. Functional reporting may be defined as the reporting of costs according to the type of activities.

(3) Certain facilites will be required to reclassify certain revenue and expenses to meet the specifications for uniform reporting. Without this conversion from responsibility to functional reporting, residential health care facilities would not be reporting costs in a uniform manner, thus defeating the purposes of the uniform financial reporting requirements within the State.

(4) To achieve uniform functional reporting, all facilities will be required to reclassify revenue, expenses and statistics according to the definition of the functional centers discussed in Part 455 of this Article.

(i) Reclassifications, as discussed in this Part are of two types:

(a) To obtain the required level of reporting. This type of reclassification may be necessary to reach the required level of reporting because the facility has combined several departments. For instance, smaller facilities may be combining the costs of housekeeping and maintenance in one reporting center. In such cases, it is necessary to reclassify the total direct costs into the reporting centers relating to these two types of services.

(b) To correct accumulation of costs. This type of reclassification would be necessary when the expense associated with a particular function is recorded in a reporting center different from the functional description specified in this section. For instance, a reclassification would be required if the Patient Food Services Department recorded the costs associated with hand-feeding of patients, because these costs should have been recorded in the nursing reporting center relating to that patient program.

(ii) These reclassifications may be computed on any one of the following bases:

(a) analysis of direct expense, including time and cost studies;

(b) ratio of total charges to charges of a specific cost center; or

(c) ratio of total units of service to units of service reclassified in a specific reporting center.

(iii)

(a) Reclassifications must be made for significant amounts of misplaced costs. Significant is defined, for the purposes of this section, as an amount in excess of:

(1) one full-time equivalent employee within the functional center transferred to or from for salary costs; or

(2) 10 percent of the direct costs or $1,000, whichever is greater, of the functional center transferred to or from, for other than salary costs.

(b) For the purposes of this Part, an estimate may be utilized to determine the limination for salary costs. This estimate should be based on an approximation of one employee's total paid working hours during the year; e.g., 2,000 hours representing one full-time employee.

(c) Pursuant to the above criteria, the determination of the necessity for reclassification of salary costs may be made based on time studies. A time study must be made of employees who are performing activities related to more than one function. Time studies would be performed for such employees for a two-week period per quarter, for all four quarters in a year. The time study would result in a percentage of employees' hours worked, by function, to total hours worked. These percentages would, for each quarter, be applied to total hours paid for the same employees to arrive at hours paid by function. The results would be totaled for all four quarters and then compared to the estimate of one full-time equivalent of 2,000 hours to determine whether or not a reclassification is required.

(d) When reclassifying full-time equivalent employees between cost centers, non-work hours, i.e., vacation, sick pay, etc., will also be reclassified.

(e) The tests of significance indicated above do not apply to the areas described in section 453.4 of this Article. These allocations must be classified as described in that section. Also, in determining the segregation of costs between the Cafeteria and Patient Food Service Reporting Centers, where joint kitchen facilities are used, the criteria described in those functional reporting centers is to be utilized.

N.Y. Comp. Codes R. & Regs. Tit. 10 § 454.2