Download:
pdf |
pdf09-05
FORM CMS-287-05
3901
3900. HOME OFFICE COSTS - CHAIN OPERATIONS
For Medicare and/or Medicaid purposes, a chain organization consists of a group of two or more
health care facilities or at least one health care facility and any other business or entity owned,
leased, or, through any other device, controlled by one organization. Chain organizations
include, but are not limited to, chains operated by proprietary organizations and chains operated
by various religious, charitable, and governmental organizations. A chain organization may also
include business organizations engaged in other activities not directly related to health care. (See
CMS Pub. 15-I, chapter 10 for definitions of common ownership and control.)
Home offices of chain organizations vary greatly in size, number of locations, staff, mode of
operations, and services furnished to the facilities in the chain. The home office of a chain is not
in itself certified by Medicare. Therefore, its costs may not be directly reimbursed by Medicare.
The relationship of the home office to Medicare is that of a related organization to participating
providers. Home offices usually furnish central management and administrative services, e.g.,
centralized accounting, purchasing, personnel services, management direction and control, and
other services. To the extent that the home office furnishes services related to patient care to a
provider, the reasonable costs of such services are included in the provider’s cost report and are
reimbursable as part of the provider’s costs. If the home office of the chain provides no services
related to patient care, neither the costs nor the equity capital of the home office may be
recognized in determining the allowable costs of the providers in the chain.
Often the home office of a chain organization charges a management fee to the providers in the
chain for the services the home office furnishes. Management fees charged between related
organizations are not allowable costs except as provided in CMS Pub. 15-I, Chapter 10. Such
fees must be deleted from the provider’s cost report. However, when management fees between
related organizations are disallowed, the home office’s reasonable costs for providing the
services related to patient care are included as allowable costs of the provider.
3901.
DETERMINATION OF ALLOWABLE COSTS
A. General.--Home office costs directly related to those services performed for individual
providers and which relate to patient care plus an appropriate share of indirect costs (e.g.,
overhead, rent for home office space, administrative salaries) are allowable to the extent they are
reasonable. Home office costs that are not otherwise allowable costs when incurred directly by
the provider are not allowable as home office costs to be allocated to providers. For example,
certain advertising costs, some franchise taxes and other similar taxes, costs of non-competition
agreements, certain life insurance premiums, certain membership costs, and those costs related to
nonmedical enterprises are not considered allowable home office costs. (See CMS Pub. 15-I,
chapter 21 for further discussion of these costs.)
In addition, when an owner (as defined in CMS Pub. 15-I, chapter 9) received compensation for
services provided by the home office, the compensation is allowable only to the extent that it is
related to patient care and to the extent that it is reasonable.
Rev. 1
39-3
3901 (Cont.)
B.
FORM CMS-287-05
09-05
Organization, Startup, and Other Corporate Costs.--
1. Organization Costs.--The organization costs of a home office (except those
referred to in paragraphs 2 and 3) are considered allowable costs and must be amortized in
accordance with the provisions in CMS Pub. 15-I, §2134ff. Section 2134.1B describes costs
which are not considered allowable organization costs. In addition, reorganization costs (see
CMS Pub. 15-I, §2134.10) and stockholder servicing costs (see CMS Pub. 15-I, §2134.9) are not
allowable organization costs. These unallowable organization costs are excluded from the
computation of the home office equity capital.
2. Startup Costs.--Startup costs of a home office are considered allowable costs and
must be amortized in accordance with the provisions of CMS Pub. 15-I, §2132ff.
3. Costs of Corporate Acquisitions.--Costs related to the acquisition of the capital
stock of a provider (whether such facilities participate or subsequently will participate in the
Medicare program) are not allowable. (See CMS Pub. 15-I, §2134.11.) Additionally, costs
connected with the transfer of assets to a chain are not allowable as organization costs but instead
must be capitalized as part of the cost of the asset. (See CMS Pub. 15-I, §2150.2B3.)
C. Interest on Loans Between Home Office and Components of Chain.--When the home
office makes a loan to, or borrows money from, one of the components of the chain, the interest
paid is generally not an allowable cost and the interest income earned from such a loan is not
used to reduce allowable interest expense. (See CMS Pub. 15-I, §218 for the general rule and
§§218.2 and 220 for exceptions to the general rule.) Treat interest income from other sources, as
well as the interest income received by the home office if interest expense is allowed under the
exceptions of CMS Pub. 15-I, §§218.2 and 220, according to the provisions of CMS Pub. 15-I,
§§202.2 and 202.3.
D. Interest on Loans From Unrelated Sources.--Interest expense (see CMS Pub. 15-I,
§§200 and 202.1) is allowable to the extent that the proceeds of the related loan, mortgage, bond
issue, etc., are used either to acquire assets for use in patient care activities or to provide funds
for operations related to patient care. When proceeds of a loan, mortgage, bond issue, etc., are
used to acquire stock ownership (as opposed to assets and liabilities) of additional facilities, the
interest expense is not allowable.
E.
Home Office Planning Costs.--
1. Expanding, Rebuilding, or Relocating Existing Providers.--When a home office
incurs planning costs as described in CMS Pub. 15-I, §§2154.1 and 2154.2 to purchase or
construct a new facility in order to expand, rebuild, or relocate a provider which is a member of a
chain organization, such costs are allowable if:
39-4
o
They are reasonable and prudent as defined in CMS Pub. 15-I, §2103;
o
They have been included in the historical cost of the completed facility; and
o
The facility has been certified to participate in Medicare.
Rev. 1
09-05
FORM CMS-287-05
3901 (Cont.)
Any planning costs incurred to purchase land become part of the historical cost of the land and
are not included in the historical cost of the depreciable assets of the completed facility. If a
home office incurs planning costs for both land and a facility and such costs cannot be
specifically identified with either the land or facility, the planning costs must be allocated
between the land and facility based on the cost of each to the total cost.
Abandoned planning costs are treated according to the provisions of CMS Pub. 15-I, §2154.4.
Any allowable abandonment costs must be directly allocated to the appropriate provider.
2.
Expansion of the Chain Operation.--
a. Allowable.--If a home office incurs planning costs to construct a new facility
or to purchase an existing facility (excluding land) to expand a chain organization and not to
expand an existing provider, such costs are recognized when the requirements enumerated in
subsection 1 are met.
b. Non-allowable.--If a home office abandons plans described in subsection a,
the costs of the abandoned plans are considered an investment loss and are not allowable. Also,
when plans involving the acquisition of land are abandoned, the costs of such plans are not
allowable.
F. Malpractice and Comprehensive General Liability, Unemployment and Workers’
Compensation Insurance Coupled with Second Injury Coverage.--Payments by a home office of
a chain for its providers or payments made individually by members of a chain to an independent
fiduciary for malpractice, comprehensive general liability insurance coverage, unemployment
and workers’ compensation coupled with second injury coverage are recognized if made to a
fund established in accordance with the requirements in CMS Pub. 15-I, §2162ff.
Rev. 1
39-5
3902
FORM CMS-287-05
09-05
3902. ALLOCATION OF HOME OFFICE COSTS TO COMPONENTS IN CHAIN
A. Procedure.--Starting with its total costs (including those costs paid on behalf of
providers or other components in the chain), the home office must delete all costs which are not
allowable in accordance with program instructions. The remaining costs (total allowable costs)
must then be identified as capital-related costs (old and new) and non-capital-related costs and
allocated as stated below to all of the components (both providers and non-providers) in the
chain which received services from the home office. When the home office incurs costs for
activities not related to patient care in the chain’s participating providers, the allocation bases
used must provide for the appropriate allocation of costs such as rent, administrative salaries,
organization costs, and other general overhead costs which are attributable to non-patient care
activities as well as to patient care activities. All activities and functions in the home office must
bear their allocable share of home office overhead and general administrative costs.
B. Costs Directly Allocable to Components.--The initial step in the allocation of
allowable home office costs to components in the chain is the direct allocation of certain costs.
Directly allocate allowable costs incurred for the benefit of, or directly attributable to, a specific
provider or non-provider activity to the chain entity for which they were incurred. For example,
when such costs are paid by the home office, interest expense is allocated to the facility for
which the loan was made. Salaries are allocated to the facility to whose employees they apply.
Rent is allocated when the home office rents space for a specific provider, etc. Home offices
may simplify the allocation of costs to the chain components in the cost finding process by
transferring the costs, which are directly allocable to the components through the inter-company
accounts. The transfers must be made at the time the costs are incurred.
C. Costs of Home Office Operations.--Allocate among the providers the allowable costs
not directly allocable on a basis designed to equitably allocate the costs over the chain
components or activities receiving the benefits of the costs and in a manner reasonably related to
the services received by the entities in the chain. Chain home offices may provide certain
centralized services, e.g., central payroll or central purchasing, to the chain components. Where
practical and the amounts are material, allocate these costs on a functional basis. For example,
costs of a central payroll operation could be allocated to the chain components based on the
number of checks issued. The costs of a central purchasing function could be allocated based on
purchases made or requisitions handled. Otherwise, these costs may be appropriately included in
the pooled costs and allocated as described in subsection D. The functions or cost centers used
to allocate home office costs and the unit bases used to allocate the costs (including those for the
pooled costs described in subsection D) must be used consistently from one home office
accounting period to another.
D. Pooled Costs in Home Office.--In each home office, there is a residual amount, or pool
of costs incurred for general management or administrative services which cannot be allocated
on a functional basis.
Pooled costs are allocated between chain components on a reasonable allocation basis. Pooled
costs must be allocated first between health care and non-health care component groups based on
costs. After this initial allocation, the pooled costs allocated to the health care facilities are based
on inpatient days, or total costs in accordance with CMS Pub. 15-1, §2150.3.D.2. (See §3917.A.)
Statistics must be gathered from each component for the period concurrent with that of the home
office and must be separately identified. The statistics are based on unadjusted cost (including
direct home office costs) and exclude previously allocated home office pooled and functional
costs.
39-6
Rev. 1
09-05
FORM CMS-287-05
3902 (Cont.)
E. Allocation of Interest Expense and Investment Income of Chain Operations.--Interest
expense incurred by the home office must be appropriately assigned and/or allocated in
accordance with subsections §3904.A-D. As required in §3904.A, interest expense must be
separately identified between capital-related and non-capital-related. Similarly, all home office
investment income which is subject to offset against allowable interest expense must be
appropriately assigned and/or allocated in accordance with the methodology of subsections
3904.A-D and separately identified between capital-related and non-capital-related. The net
amount of capital-related interest expense and investment income (whether positive or negative),
so determined at the home office level for each chain provider, must be appropriately included
with that chain provider’s costs as described in subsection F.
F. Inclusion in Provider Costs.--Include home office costs directly allocated to the
providers in each appropriate account in the provider’s trial balance. Then allocate the costs
through the provider’s cost finding process. Home office capital-related costs which are not
directly allocated to the provider but are allocated on a functional or pooled basis must be
included in the corresponding providers§ capital-related cost centers, i.e., old buildings and
fixtures, new buildings and fixtures, old major movable equipment, new major movable
equipment, or other capital (for insurance, taxes and other capital costs). Lease cost is included
with depreciation and is not classified as other capital. Include home office non-capital-related
costs, which are not directly allocated to the provider but are allocated on a functional or pooled
basis in the provider’s cost report as part of the provider’s administrative and general cost. Enter
the allocated costs as one amount; designated under an appropriately descriptive heading, e.g.,
"home office costs."
NOTE: Non-PPS chains and chain components report all capital costs as new. A home office
must make the split between old and new capital when any component of the chain is
subject to PPS capital.
Although the share of the home office costs allocated to each provider may become allowable
costs under the program, the allowed costs of providers in a chain must not exceed the cost
allowed for similar institutions not so affiliated. Thus, the costs of a chain provider (including
any allowable home office costs) are not recognized or allowed to the extent they are found to be
out of line with similar institutions in the same area. (See CMS Pub. 15-I, §2102ff.)
G. Interperiod Allocation of Home Office Costs.--When the home office accounting period
differs from the cost reporting period of a chain provider, include the allowable home office
costs of the provider for the period covered by the home office cost statement included in the
provider’s cost report as indicated above. Then allocate the costs through the cost finding
process. Tentatively project an amount of allowable home office costs and equity capital for the
provider for the portion of its reporting year not covered by the home office statement at a rate
not in excess of the previous year’s home office costs and equity capital as set forth in the
applicable home office cost statement.
Rev. 1
39-7
3902 (Cont.)
EXAMPLE:
FORM CMS-287-05
09-05
The home office has an accounting year ending August 31, 2006. For that year,
home office costs of $120,000 are allocated to Provider A and $84,000 to
Provider B. Provider A’s reporting year ends on December 31. Provider B’s
reporting year ends on March 31.
Of the $120,000 costs allocated to Provider A, $40,000 applies to its reporting
year ending December 31, 2005, covering the period from September 1, 2005, to
December 31, 2005. Eighty thousand dollars applies to its reporting year ending
December 31, 2006, covering the period from January 1, 2006, to August 31,
2006. Therefore, in its cost report for the year ending December 31, 2006,
Provider A may include home office costs of $40,000 projected for the period
September 1, 2006, to December 31, 2006, which is not covered by the home
office cost statement ($10,000 per month x 4 months).
Of the $84,000 allocated to Provider B, $49,000 applies to its reporting year
ending March 31, 1992, covering the period from September 1, 2005, to March
31, 2006. $35,000 applies to its reporting year ending March 31, 2007, covering
the period from April 1, 2006, to August 31, 2006. Therefore, in its cost report
for the year ending March 31, 2007, Provider B may include home office costs of
$49,000 projected for the period September 1, 2006, to March 31, 2007, which is
not covered by the home office cost statement ($7,000 per month x 7 months).
39-8
Rev. 1
09-05
3903.
FORM CMS-287-05
3903
HOME OFFICE COST STATEMENT
Form CMS-287-05 was developed for the use of home offices of chain organizations in reporting
the information necessary for the determination of Medicare reimbursement to components of
chain organizations. This form was developed to meet the specifications for reporting and
allocating costs explained previously in this chapter. In order to provide sufficient flexibility to
meet the needs of individual home offices, alternative reporting formats may be used, subject to
approval, as long as they furnish at least the applicable information contained in Form CMS-28705 and fulfill the cost and allocation objectives and specifications explained in this chapter. Any
alternative to Form CMS-287-05 must be reviewed and approved by the home office fiscal
intermediary and CMS prior to its use.
The instructions contained in this chapter are effective for the first cost statement period, which
includes any part of a provider’s cost reporting period, which is affected by PPS capital and for
cost reporting periods ending on or after September 30, 2005.
If you wish to use an alternative to Form CMS-287-05, make a written request to your
intermediary for approval and submit reasonable justification for such an alternative 90 days
prior to the end of the home office-reporting period for which the approval applies. The
effective date of the approval is the beginning of the cost reporting period for which the request
is made. Approvals once granted are effective until Form CMS-287-05 is revised or the chain
has a change in applicable circumstances.
If the home office fails to file a home office cost statement, it is not allowed to claim home office
cost on their respective provider’s cost reports.
When the home office operates distinct regional offices, the home office cost statement may be
used to allocate home office costs to the chain components and regional offices. Home office
costs allocated to the regional offices are subsequently allocated to the regional components on
separate regional office home office cost statements. The regional office cost statement also
allocates direct regional office costs. When separate cost statements for regional offices are
prepared, a combined package including the home office and all regional office cost statements
must be filed with the designated home office intermediary. CMS approval is required for
separate regional office cost statements, as outlined above.
Rev. 1
39-9
3904
3904.
FORM CMS-287-05
09-05
DISCLOSURE OF HOME OFFICE COST STATEMENT
The home office cost statement is not an integral part of the provider’s cost report. Therefore, it
is not affected by 20 CFR 422.435(c), which requires disclosure of providers’ cost reports. Any
request received under the Freedom of Information Act (FOIA) regarding a home office cost
statement is subject to a case-by-case determination of whether to withhold the information in
whole or in part. In most cases, since the home office cost statements contain information the
disclosure of which may result in a competitive disadvantage for many provider chains, the
exemption from disclosure provided in 5 USC, §552(b)(4) applies.
3905.
RECOMMENDED SEQUENCE FOR COMPLETING FORM CMS-287-05
Step No. Worksheet
1
Schedule A
Complete Part I - General Information.
2
Schedule B
Complete column 1.
3
Schedule B-2
Complete entire schedule.
4
Schedule B-1
Complete entire schedule.
5
Schedule B
Complete columns 2 and 3.
6
Schedule D
Complete entire schedule.
7
Schedule C
Complete entire schedule.
8
Schedule B
Complete columns 4 and 5.
9
Schedule E
Complete entire schedule.
10
Schedule E-1
Complete entire schedule.
11
Schedule B
Complete column 6.
12
Schedule F
Complete statistics on Part 2.
13
Schedule F-1
Complete statistics on Part 2.
14
Schedule F
Complete Part 1.
15
Schedule F-1
Complete Part 1.
16
Schedule B
Complete columns 7 and 8.
17
Schedule G
Complete entire schedule.
18
Schedule I
Complete entire schedule.
19
Schedule J
Complete columns 1.
20
Schedule A
Complete Part II - Certification.
39-10
Rev. 1
09-05
3906.
FORM CMS-287-05
3906.1
SCHEDULE A - GENERAL INFORMATION, CERTIFICATION AND LISTING
OF CHAIN COMPONENTS
3906.1 Part I - General Information.--Part I of Schedule A provides necessary information
about the chain home office and the cost statement being filed.
Line 1--Enter the home office name. If there was a change in name during the reporting period,
indicate the former name in parentheses.
Line 2--Enter the chain code number either assigned by CMS or provided by the designated
intermediary.
Line 3--Enter the present address of the home office.
Line 4--Enter the date the home office began operation.
Line 5--Enter the name, title, and telephone number of the person responsible for the preparation
of the cost statement.
Line 6--Enter the period covered by the cost statement. This indicates whether a full year or
lesser period cost statement is submitted.
Line 7--Check the appropriate box to indicate whether or not audited financial data was used on
Schedule B.
Line 8--Check the appropriate item to indicate the type of chain organization.
All chain organizations must furnish information pertaining to home office costs, such as the
information on Schedules B through J.
Line 9--Enter the names and titles of key officers of the home office. If more space is required,
attach an additional listing immediately after this schedule.
3906.2 Part II - Certification by Officer of Home Office.--This certification statement must be
completed on all home office cost statements submitted. An officer or director of the home
office must read, sign, and date this statement. An original signed copy of the certification
statement must be submitted.
Rev. 1
39-11
3906.3
FORM CMS-287-05
09-05
3906.3 Part III - Listing of Chain Components.--Reference the Medicare providers by fiscal
year end, Medicare provider number, and the local Medicare intermediary. Also indicate if the
provider participates in the Medicaid program by placing a check mark (X) under the
corresponding column.
Health Care Components - Lines 1 through 19
Column 1--Enter the name of each provider component that is part of the chain.
Column 2--Enter the Medicare provider number for each provider component that is certified for
participation in title XVIII.
Column 3--Enter the beginning date of the provider’s cost reporting period. When the fiscal year
end of the provider differs from that of the home office, enter the beginning dates of the cost
reporting periods covered by the cost statement.
Column 4--Enter the ending date of the provider’s cost reporting period. When the fiscal year
end of the provider differs from that of the home office, enter the ending dates of the cost
reporting periods covered by the cost statement.
Column 5--Enter the date during the period covered by the home office cost statement on which
the provider was acquired by the home office (if applicable).
Column 6--Enter the date during the period covered by the cost statement on which the provider
was sold or closed (if applicable).
Columns 7--Indicate whether the provider participates in State Medicaid program(s).
Column 8—Indicate how the facility is reimbursed. Enter the following for each category: “N”
for not reimbursed through the cost report (Hospice, End Renal Stage Dialysis etc.), “O” for
other cost (Critical Access Hospitals), “T” for TEFRA, and “P” for PPS (General Acute
Hospital, LTCH, Rehabilitation Hospitals, Skilled Nursing Facilities and Home Health
Agencies).
Columns 9-10--Identify the servicing Medicare and Medicaid intermediaries for each provider.
Where a change of intermediary has occurred during the cost statement reporting period, identify
the incoming and outgoing intermediaries.
3906.4
Part IV - Listing of Other (Non Provider) Chain Components.--
Column 1--Enter the name of each other (non-provider) component which is part of the chain.
Column 2--Enter the beginning date of each other component’s fiscal period covered by the cost
statement.
Column 3--Enter the ending date of each other component’s fiscal period covered by the cost
statement.
Column 4--Enter the date each other component was acquired by the home office.
Column 5--Enter the date during the period covered by the cost statement on which each other
component was sold or closed (if applicable).
39-12
Rev. 1
09-05
3906.5
FORM CMS-287-05
3906.5
Part V - Listing of Regions or Divisions.--
Column 1--Enter the name of each region or division that is part of the chain.
Column 2--Enter the name of the city in which each region or division is located.
Column 3--Enter the name of the State in which each region or division is located.
Columns 4---Indicate whether region or division cost is included in the cost statement.
Columns 5-6--Indicate whether a separate cost statement is filed for each region or division.
Column 7--Identify the designated intermediary responsible for the audit and settlement of the
separate cost statements filed by the regions or divisions.
Rev. 1
39-13
3907
3907.
FORM CMS-287-05
09-05
HOME OFFICE COSTS - SCHEDULES B THROUGH I
The section pertaining to home office costs consists of Schedules B through I and provides:
o
A detailed analysis of allocable home office costs beginning with the trial balance of
expenses (Schedule B);
o
Medicare reclassifications to those costs (Schedule B-1);
o
Medicare adjustments to those costs (Schedule C);
o
A statement of costs from related organizations (Schedule D);
o
Allocation of the direct, functional, and pooled home office costs (Schedules E, E-1, F,
G, ; and
o
A statement of revenue and expenses (Schedule I).
The determination of allowable costs of the home office:
o
Begins with the total costs of the home office, by cost centers, as shown by the home
office general ledger trial balance;
o
Shows reclassifications of those costs between cost centers for proper reporting;
o
Shows the reductions for those costs which are not allowable; and
o
Then shows the adjusted trial balance of total allowable costs.
The reclassifications are identified and explained on Schedule B-1. The reductions for
unallowable costs are identified and explained on Schedule C.
Schedules E through G provide for the allocation of the allowable costs to all of the entities
serviced by the home office. All related entity costs in the chain and the home office costs
allocated to each related entity are based on the procedures set forth in §3902. When services are
provided by the home office to non-related entities, i.e., to hospitals serviced under management
contracts, the allocations of costs for these entities may be consolidated on the cost statement.
However, detailed working papers must be maintained by the home office to support the
allocations of costs consolidated on the statement. The costs allocated to each provider are then
included in the provider’s cost report for reimbursement by the Medicare program.
When the home office has departmentalized its home office costs by functions, e.g., accounting,
personnel, purchasing, and allocates such costs on an appropriate unit basis, the home office cost
statement must contain a full explanation of the unit basis used in each case.
39-14
Rev. 1
09-05
3908.
FORM CMS-287-05
3908
SCHEDULE B - STATEMENT OF ALLOWABLE COSTS
Schedule B consists of three pages, all of which must be completed. Enter the home office name
and the period covered by the cost statement.
NOTE: If the home office operates distinct regional offices, the home office cost statement
must be used to allocate home office costs to the chain components and regional
offices. Home office costs are allocated to the regional components on separate
regional office home office cost statements. When completing Schedule B for the
home office, only direct home office costs must be reported in column 1. When
completing Schedule B for the regional offices, only the direct regional office costs
must be reported in column 1. Allocations from the home office must be reported on
Schedule C and incorporated into the regional office costs in column 4. Prior CMS
approval through your intermediary is required for the filing of separate cost
statements for regional offices.
In addition to Schedule B, the financial statements and the working trial balance of the chain
home office must be submitted with the report. A working trial balance is a listing of the
balances of the accounts in the general ledger to which adjustments are appended in
supplementary columns and is used as a basic summary for financial statements.
Column 1--Enter the home office expenses as shown in the home office general ledger year end
account balances. Use audited data if available.
Lines 1-2--Enter the home office capital-related depreciation, amortization and lease expenses as
shown on the home office records before Medicare adjustments or reclassification.
NOTE: Chains and chain components which are not subject to PPS capital, must report all
capital-related costs as new capital. A home office must make the split between old
and new capital when any component of the chain is subject to PPS.
Capital-related interest expense must initially be reported on line 30 and subsequently
reclassified to the subscripts of the appropriate capital-related cost centers on line 1, 2,
4, or 5. Other capital-related costs must be initially reported on lines 7, 8 and 9 as
applicable. The pooled and functional other capital-related costs are reclassified on
Schedule B-1.
Old capital costs are defined as allowable capital-related costs for land and depreciable assets
that were put into use for patient care on or before December 31, 1990, with additional
recognition of costs for capital-related items and services that are legally obligated by an
enforceable contract entered into on or before December 31, 1990, and put into patient use on or
before October 1, 1994 (subject to exceptions as explained below). Old capital costs include the
following:
1. Allowable depreciation on assets based on useful life guidelines to determine
depreciation expense for chain home office old capital (these useful lines may not subsequently
be changed).
Rev. 1
39-15
3908 (Cont.)
FORM CMS-287-05
09-05
2. Allowable capital-related interest expense. Except as provided below, the amount of
allowable capital-related interest expense that is recognized, as old capital is limited to the
amount the hospital was legally obligated to pay as of December 31, 1990. Any allowable
interest expense in excess of this limitation is recognized as new capital.
a. An increase in interest expense is recognized if the increase is due to periodic
fluctuations of rates in variable interest rate loans or at the time of conversion from a variable
rate loan to a fixed rate loan when no other changes in the terms of the loan are made.
b. If the terms of a debt instrument are revised after December 31, 1990, the amount
of interest recognized as old capital during the transition cannot exceed the amount that would
have been recognized during the same period prior to the revision of the debt instrument.
c. If short term financing was used to acquire old capital assets and the debt is
extended or rolled-over, a portion of the extended debt is recognized as old capital. The portion
equals the ratio of the net book value as of the beginning of the applicable cost reporting period
for depreciable assets that were in use in the base year to the net book value as of the beginning
of the base year cost reporting period for those assets. Do not adjust the net book value for the
base year to exclude assets that have been fully depreciated or removed from service since the
base year. If the debt is related to specific assets, determine the ratio based on the values for
those assets. The ratio excludes assets acquired with other identifiable debt instruments. For
purposes of this paragraph, short term financing is a debt that becomes due in no later than the
earlier of 5 years or half of the average useful life of the assets to which the debt is related.
d. If old capital debt is commingled with new capital debt, the allowable interest
expense is apportioned to old capital costs, based on the ratio of the loan principal related to old
capital indebtedness to the total loan principal.
e. Investment income, excluding income from funded depreciation accounts and
other exclusions from investment income offset described in CMS Pub. 15-1, §202.2, is used to
reduce old capital interest expense, based on the ratio of total old capital interest expense to total
allowable interest expense in each cost reporting period.
3. Allowable capital-related lease and rental costs for land and depreciable assets that
were obligated as of December 31, 1990.
a. The cost of lease renewals and the acquisition of assets continuously leased (e.g.,
capitalized leases) up to the annual lease payment level obligated as of December 31, 1990, are
recognized provided the same asset remains in use, the asset has a useful life of at least 3 years,
and the annual lease payment is $1000 or more for each item.
b. If an asset is sold or given to another party and that same asset is then leased back,
the amount of allowable capital-related costs recognized as old capital costs is limited to the
amount allowed for that asset in the last cost reporting period that it was owned.
39-16
Rev. 1
09-05
FORM CMS-287-05
3908 (Cont.)
4. The portion of allowable costs for other capital-related expenses which are allocated on
a pooled or functional basis (including but not limited to taxes, insurance, license and royalty
fees on depreciable assets) resulting from applying the ratio of the home office’s gross old asset
value to total asset value in each cost reporting period. (See instructions for lines 7 through 9.)
5. The appropriate portion of the capital-related costs of related organizations under the
42 CFR 413.17 that is recognized as old capital costs if these costs are incurred directly by the
home office.
6. Obligated capital costs that are recognized as old capital costs in accordance with the
provisions discussed in the following paragraph.
Capital-related costs attributable to assets that are put in use after December 31, 1990 may be
recognized as old capital costs under the conditions described below. Any allowable capitalrelated costs for these assets that are not recognized as old capital costs are recognized as new
capital costs. If the home office has a multiphase capital project, the provisions of this section
apply independently to each phase of the project.
A. Fixed Asset.--The costs of capital-related items and services defined in 42 CFR 413,
Subpart G for which there was a contractual obligation entered into by a home office or related
party with an outside, unrelated party for the construction, reconstruction, lease, rental, or
financing of a fixed asset may be recognized as old capital costs if all the following conditions
are met:
o
The obligation must arise from a binding written agreement that was executed on
or before December 31, 1990 and that obligates the home office on or before December 31,
1990.
o
The capital asset must be put in use for patient care before October 1, 1994. CMS
may extend the deadline under which an asset must be put in use for patient care before October
1, 1994 to no later than September 30, 1996 for extraordinary circumstances beyond the home
office’s control. Extraordinary circumstances include, but are not limited to, a construction
strike or atypically severe weather that significantly delays completion of a construction project.
Normal construction delays do not constitute extraordinary circumstances.
o
The capital asset must be put in use for patient care before October 1, 1994 except
as provided below.
o
The home office notifies the designated intermediary of the existence of obligated
capital costs. (See 42 CFR 412.302(c).)
o
The amount that is recognized as old capital cost is limited to the lesser of the
actual allowable costs when the asset is put in use or the estimated costs of the capital
expenditure at the time it was obligated.
B. Moveable Equipment.--Moveable equipment is recognized as old capital only if all of
the following conditions are met:
o
The obligation must arise from a binding written agreement that was executed on
or before December 31, 1990 and that obligates the home office on or before December 31,
1990.
o
The home office notifies the designated intermediary of the existence of obligated
capital costs. (See 42 CFR 412.302(c).)
o
The amount recognized as old capital cost is limited to the lesser of the actual allowable
costs when the asset is put in use or the estimated costs of the capital expenditure at the time it
was obligated.
Rev. 1
39-17
3908 (Cont.)
FORM CMS-287-05
09-05
In addition, one of the following conditions must be met:
o
There was a binding contractual agreement for the lease or purchase of the item of
equipment on or before December 31, 1990.
o
There was a binding contractual agreement for financing the acquisition of the
equipment prior to January 1, 1991, the item of equipment costs at least $100,000, and the item
was specifically listed in an equipment purchase plan approved by the Board of Directors on or
before December 31, 1990. The amount recognized as old capital costs cannot exceed the
estimated cost identified in the equipment purchase plan approved by the home office’s Board of
Directors.
C. Lengthy Certificate of Need Process.--If a home office does not meet the criteria under
the fixed asset or moveable equipment provisions above but meets all of the following criteria,
the estimated cost for the project as of December 31, 1990 may be recognized as old capital
costs:
o
The home office is required under State law to obtain preapproval of the capital
project or acquisition by a designated State or local planning authority in the State in which it is
located;
o
The home office filed an initial application for a certificate of need on or before
December 31, 1989 that includes a detailed description of the project and its estimated cost and
had not received approval or disapproval on or before September 30, 1990;
o
The home office expended the lesser of $750,000 or 10 percent of the estimated
cost of the project on or before December 31, 1990; and
o
The home office put the asset into patient use on or before the earlier of
September 30, 1996 or 4 years from the date the certificate of need was approved.
D. Construction in Process.--If a home office that initiates construction on a capital
project does not meet the requirements under the fixed asset, moveable equipment, or lengthy
certificate of need provisions above, the project costs may be recognized as old capital costs if all
the following conditions are met:
o
The home office received any required certificate of need approval on or before
December 31, 1990;
o
The home office’s Board of Directors formally authorized the project with a
detailed description of its scope and costs on or before December 31, 1990;
o
The capitalized cost incurred for the project as of December 31, 1990, exceeded
the lesser of $750,000 or 10 percent of the estimated project cost;
o
The home office began actual construction or renovation (ground breaking) on or
before March 31, 1991; and
o
39-18
The project is completed before October 1, 1994.
Rev. 1
09-05
FORM CMS-287-05
3908 (Cont.)
E. Capital Expenditures Not Recognized.--Agreements for planning, design or feasibility
that do not commit the home office to undertake a project are not recognized as obligating capital
expenditures.
F. Cost Limitation - Leases, Rentals, or Purchases.--The amount of obligated capital costs
recognized as old capital costs cannot exceed the amount specified in the lease, rental, or
purchase agreement.
G. Cost Limitation - Construction Contracts.--The amount of obligated capital costs
recognized as old capital costs cannot exceed the estimated construction costs for the project as
of December 31, 1990. Additional costs are recognized as old capital costs only if the additional
costs are directly attributable to changes in life-safety codes or other building requirements
established by government ordinance that occurred after the project was obligated.
H. Cost Limitation - Financing Costs.--The amount of obligated interest expense
recognized as old capital costs cannot exceed the amount for which the home office was legally
obligated as of December 31, 1990 or, in the case of financing that is arranged after December
31, 1990, for a capital acquisition that was legally obligated as of December 31, 1990, the
amount specified in a detailed financing plan approved by the home office’s Board of Directors
prior to January 1, 1991.
I. Allowable Asset Cost.--The actual amount recognized as old capital costs is based on
the lesser of the allowable costs for the asset when it is placed in service or the amounts
determined under the cost limitations above.
For cost reporting periods beginning on or after October 1, 1991, and before October 1, 2001, the
home office must follow consistent cost finding methods for classifying and allocating capitalrelated costs.
Unless there is a change of ownership, the home office must continue its practices for the direct
assignment of old capital-related costs in effect during the home office’s first cost reporting
period in which a hospital was subject to PPS capital.
Line 3--Adjust the amounts in column 1 by the amounts (increase or decrease) in column 2, and
extend the net amount to column 3.
Lines 4-5--Enter the home office capital-related depreciation, amortization and lease expense as
shown on the home office records before Medicare adjustments or reclassifications. New capital
costs are defined as all allowable Medicare capital-related costs that do not meet the definition of
old capital costs.
NOTE: Capital-related interest expense is initially reported on line 30 and subsequently
reclassified to the subscripts of the appropriate cost centers. Other capital-related costs
must be initially reported on lines 7, 8 and 9 as applicable. The pooled and functional
other capital-related costs are reclassified on Schedule B-1.
Line 6--Enter the sum of the amounts on lines 4 and 5.
Lines 7-9--Enter on these lines other capital-related expenses (including but not limited to taxes,
insurance, license and royalty fees on depreciable assets). The determination of the old/new
portion of other capital-related expenses is made at the provider level.
Rev. 1
39-19
3908 (Cont.)
FORM CMS-287-05
09-05
Line 10--Enter the sum of the amounts on lines 7 through 9.
Lines 11-29 and 31-35--Enter the home office non-capital-related expenses as shown on the
home office records before Medicare adjustments or reclassification.
Line 30--Enter all of the interest expense (capital-related expenses and working capital) of the
home office. The capital-related expense must be reclassified to the subscripts for lines 1, 2, 4
and 5 as applicable. If investment income is to be offset against interest expense at the
provider’s level, then line 30 will be followed by the subscripts identifying the various
investment incomes. If investment income is to be offset at the home office level, then the
amounts of the offset against the appropriate capital-related interest accounts must be
reclassified to the subscripts for lines 1, 2, 4, and 5.
Line 36--Enter the sum of the amounts on lines 11 through 35.
Column 2--Complete Schedule B-1. Enter the Medicare reclassification from Schedule B-1 as
appropriate. When more than one reclassification pertains to the same expense, summarize and
carry forward the adjustments to Schedule B. Line 100 must equal zero.
Column 3--Enter the sum of the amounts in column 1 and 2.
Column 4--Complete Schedule C. Enter the Medicare adjustment from Schedule C, column 1 as
appropriate. When more than one adjustment pertains to the same expense, summarize and carry
forward the adjustments to Schedule B. Line 100 must agree with Schedule C, column 1, line
28.
Column 5--Enter the adjusted balance by subtracting column 4 from column 3.
Column 6--Complete Schedules E and E-1.
Lines 1-2--Enter the direct allocations of home office old capital-related expenses to the chain
components (from Schedule E, columns 1 and 2) as appropriate.
Line 3--Enter the sum of the amounts on lines 1 and 2.
Lines 4-5--Enter the direct allocations of home office new capital-related expenses to the chain
components (from Schedule E, columns 5 through 7) as appropriate.
Line 6--Enter the sum of the amounts on lines 4 and 5.
Lines 7-9--Enter the direct allocations of home office other capital-related expenses to the chain
components (from Schedule E, columns 5 through 7) as appropriate. You may not reclassify
these amounts to the subscripts for lines 1, 2, 4, or 5 for the interest expense.
Line 10--Enter the sum of the amounts on lines 7 through 9.
Lines 11-35--Enter the direct allocations of home office non-capital-related expenses to the chain
components and regional offices (from Schedule E-1, columns 1 through 9) as appropriate.
39-20
Rev. 1
09-05
FORM CMS-287-05
3909
Line 36--Enter the sum of the amounts on lines 11 through 35.
Column 7--Complete Schedules F and F-1. Enter the functional allocations of expenses to the
chain components and regional offices as appropriate.
Lines 1-2--Enter the functional allocations of home office old capital-related expenses to the
chain components (from Schedule E, columns 1 and 2) as appropriate.
Line 3--Enter the sum of the amounts on lines 1 and 2.
Lines 4-5--Enter the functional allocations of home office new capital-related expenses to the
chain components (from Schedule E, columns 5 through 7) as appropriate.
Line 6--Enter the sum of the amounts on lines 4 and 5.
Lines 7-9--Enter the functional allocations of home office other capital-related expenses to the
chain components (from Schedule E, columns 5 through 7) as appropriate.
Line 10--Enter the sum of the amounts on lines 7 through 9.
Lines 11-31--Enter the functional allocations of home office non-capital-related expenses to the
chain components and regional offices (from Schedule F, columns 1 through 9) as appropriate.
Line 36--Enter the sum of the amounts on lines 11 through 35.
Column 8--Enter the pooled allocable costs by subtracting the sum of the amounts in columns 6
and 7 from the amounts in column 5.
3909.
SCHEDULE B-1 - RECLASSIFICATION OF HOME OFFICE EXPENSES
This schedule reclassifies home office expenses, both capital-related and non-capital-related, in
order to properly reflect these expenses in the appropriate cost centers for allocation to the
regions and chain components. This schedule may be expanded as necessary to accommodate
additional reclassification. Enter the home office name and the period covered by the cost
statement.
Column 1--Enter a letter (A, B, etc.) to identify each reclassification. If a reclassification is made
to several different cost centers on Schedule B, use one letter to identify the reclassification as a
single reclassification.
Column 2--Enter the name of the Schedule B cost center which is being increased by the
reclassification.
Column 3--Enter the line number of the Schedule B cost center which is being increased by the
reclassification.
Column 4--Enter the amount of the reclassification increase to the Schedule B cost center noted
in column 2. Transfer these amounts to Schedule B, column 2 as appropriate. If more than one
reclassification is made to a single Schedule B cost center, summarize the amounts reclassified
and transfer that amount to the Schedule B, column 2 cost center.
Column 5--Enter the name of the Schedule B cost center which is being decreased by the
reclassification.
Rev. 1
39-21
3909 (Cont.)
FORM CMS-287-05
09-05
Column 6--Enter the line number of the Schedule B cost center which is being decreased by the
reclassification.
Column 7--Enter the amount of the reclassification decrease to the Schedule B cost center noted
in column 5. Transfer these amounts to Schedule B, column 2 as appropriate. If more than one
reclassification is made to a single Schedule B cost center, summarize the amounts reclassified
and transfer that amount to the Schedule B, column 2 cost center.
The amount on line 100, column 4 must equal the amount on line 100, column 7.
39-22
Rev. 1
09-05
3910.
FORM CMS-287-05
3910
SCHEDULE B-2 - ANALYSIS OF CHANGES IN CAPITAL ASSET BALANCES
This worksheet consists of Part I - Analysis of Changes in Old Capital Asset Balances, Part II Analysis of Changes in New Capital Asset Balances, and Part III - Computation of Old Capital
for Insurance, Taxes, and Other Capital-Related Costs. See the instructions for Schedule A for a
definition of old and new capital. A non-PPS provider does not have to complete Part I.
NOTE: Include assets which are directly allocated to the provider from the home office or
related organization and the related other capital costs in Parts I, II, and III of this
worksheet.
A. Part I - Analysis of Changes in Old Capital Asset Balances and Part II - Analysis of
Changes in New Capital Asset Balances.--These parts enable the Medicare program to analyze
the changes that occurred in your capital asset balances during the current reporting period. This
worksheet is completed only once for the home office. However, only include in Part I and Part
II assets that relate to home office and are not directly assigned.
Columns 1 and 6--Enter the balance recorded in your books of accounts at the beginning of your
cost reporting period (column 1) and at the end of your cost reporting period (column 6). The
sum of Parts I and II, column 6, line 9, must equal the sum of the total fixed assets on Schedule J
and any directly allocated assets from the home office or related organization.
NOTE: The asset value of a lease which is a capital lease under generally accepted accounting
principles (GAAP) or which is recognized by Medicare as a capital-related cost under
42 CFR 413.130, for which the provider also pays other capital-related costs such as
insurance and taxes, is included in Parts I and II, lines 1 through 6, as appropriate.
Columns 2 through 4--Enter the cost of capital assets acquired by purchase in column 2 and the
fair market value at date acquired of donated assets in column 3. Enter the sum of the amounts
in columns 2 and 3 in column 4.
NOTE: The amounts in Part I, column 2 represent transfers from obligated capital and/or a
transfer of assets on a change of ownership.
Column 5--Enter the cost or other approved basis of all capital assets sold, retired or disposed of
in any other manner during the provider’s cost reporting period.
The sum of the amounts in columns 1 and 4 minus the amount in column 5 equals the amount in
column 6.
Column 7--Enter the gross book value of fully depreciated assets still in use at the end of the cost
reporting period.
Line Descriptions
Line 8--If you have capitalized a lease in accordance with GAAP and included it in the assets
reported on Schedule G, you must exclude those amounts from the values reported on lines 1
through 7 and include them on line 8. Similarly, the excess of amounts paid for the acquisition
of assets over their fair market values or the amount recognized under §2314 of DEFRA for
transactions after July 18, 1984, must also be recorded on line 8 rather than on lines 1 through 7.
Assets, which are directly allocated to components and construction in progress at the end of the
cost report period, are reported on line 8.
Rev. 1
39-23
3910 (Cont.)
FORM CMS-287-05
09-05
NOTE: If you pay other capital-related costs, such as insurance and taxes, on capitalized leases
in accordance with GAAP, do not enter the asset value of these leases on this line.
Line 9--Enter line 7 less line 8.
B. Part III - Reconciliation of Capital Cost Centers.--Use this part to allocate insurance,
taxes, and other capital expenditures (not including depreciation, lease, and interest expense) to
the capital-related cost centers. This Part also summarizes the amounts in the capital-related cost
centers on Schedule B, lines 1, 2, 4, and 5, sum of columns 7 and 8.
Lines 1-4--In accordance with 42 CFR 412.302(b)(5), allowable costs for other capital-related
expenses (including but not limited to, taxes, insurance, license and royalty fees on depreciable
assets) are apportioned to old capital by applying the ratio of the chain home office gross old
asset value to total asset value. These lines compute the appropriate gross asset ratios to be used
in allocating other capital-related costs on columns 5 through 7.
Line 5--Enter the sum of the amounts on lines 1 through 4. Line 5 column 4 must equal
1.000000.
Columns 1-4, lines 1-4--Use these lines to compute ratios of new and old gross asset values to
total gross asset values. Use these ratios on lines 1 through 4 column 4 to allocate other capital
costs (insurance, taxes, and other) to the capital-related cost center lines (Schedule B, lines 1, 2,
4, and 5).
NOTE: Gross asset value is defined as the value of the asset before deducting accumulated
depreciation.
Column 1--Enter on line 1 your gross asset value for old buildings and fixtures (assets for which
depreciation was reported on Schedule B, line 1). Enter on line 2 your gross asset value for old
movable equipment (assets for which depreciation was reported on Schedule B, line 2). Enter on
line 3 your gross asset value for new buildings and fixtures (assets for which depreciation was
reported on Schedule B, line 4). Enter on line 4 your gross asset value for new movable
equipment (assets for which depreciation was reported on Schedule B, line 5).
Column 2--Enter any gross asset amounts reported in column 1 relating to capitalized leases and
enter any directly allocated assets. The amount computed in column 2, lines as appropriate, must
agree with the sum of Part I and II, column 1, line 8.
Column 3--Enter the amount in column 1 less the amount in column 2.
Column 4--Enter on lines 1 through 4 the amount in column 3, line 3, divided by the amount in
column 3, line 5. Round the resulting ratio to six decimal places.
Columns 5-7--These columns, net of other capital-related costs directly allocated to components
of the chain provide for the allocation of other capital-related costs (taxes, insurance, and other)
from Schedule B, lines 7 through 9, column 1 to the capital-related cost center lines 1 through 4.
NOTE: Other capital-related costs directly allocated to components of the chain must be
supported by the workpapers and subtracted from the amount on Schedule B, lines 7
through 9, column 1. The net amount is allocated in columns 5 through 7. The
supporting work papers must be submitted to the fiscal intermediary along with the
cost statement.
39-24
Rev. 1
09-05
FORM CMS-287-05
3910 (Cont.)
Line 5--Enter in column 5 capital expenditures relating to insurance. Enter in column 6 capital
expenditures relating to taxes. In addition, enter in column 6 the assessments and other
payments made in lieu of taxes on property and equipment. Enter in column 7 other capital
expenditures (not including taxes, insurance, depreciation, lease, and interest expense). Enter in
column 8 the sum of the amounts reported in columns 5 through 7. The amount in column 8
must equal the amount on Schedule B, column 1, line 10 net of the other capital-related costs
directly allocated to components of the chain.
Lines 1-4--Apply the ratios developed on column 4, lines as applicable, to allocate the other
capital costs reported in column 3.
Column 8--You must report an entry on Worksheet B-1 which reflects the reclassification of
insurance, taxes, and other capital expenditures reported on Schedule B, line 10, column 2 (and
reported on line 5, column 8 of this schedule) to the capital-related cost centers reported on
Schedule B, lines 1, 2, 4, and 5 (amounts as determined on lines 1 through 4, column 8).
Columns 9-15--These columns summarize the amounts in the capital-related cost centers
(Schedule B, lines 1, 2, 4, 5, 7, 8, and 9, sum of columns 7 and 8).
Column 9--Enter the portion of the amount on Schedule B, column 7 and 8, lines 1, 2, 4, and 5,
relating to depreciation expense.
Column 10--Enter the portion of the amount on Schedule B, columns 7 and 8, lines 1, 2, 4, and 5,
relating to capital-related lease expense in accordance with CMS Pub. 15-1, §2806.1. Report
insurance, taxes, license and royalty fees associated with leased assets in columns 12, 13, and 14
of this schedule, respectively.
Column 11--Enter the portion of the amount on Schedule B, columns 7 and 8, lines 1, 2, 4, and 5,
relating to capital-related interest expense. Total interest expense is reported on Schedule B,
column 1, line 30. Capital-related interest expense is reclassified to the appropriate capitalrelated cost centers (Schedule B, lines 1, 2, 4, and 5). The non-capital-related interest is the sum
of Schedule B columns 6, 7, and 8.
Column 12--Enter the portion of the amount on Schedule B, columns 7 and 8, lines 1, 2, 4, and 5,
relating to capital-related insurance costs. Transfer this amount from column 5 of this schedule,
lines 1 through 4, as applicable.
Column 13--Enter the portion of the amount on Schedule B, columns 7 and 8, lines 1, 2, 4, and 5,
relating to capital-related tax costs. Transfer this amount from column 6 of this worksheet, lines
1 through 4, as applicable.
Column 14--Enter the portion of the amount on Schedule B, columns 7 and 8, lines 1, 2, 4, and 5,
relating to other capital-related costs. Transfer this amount from column 7 of this schedule, lines
1 through 4, as applicable.
Column 15--Enter the sum of the amounts in columns 9 through 14. The amounts from column
15, lines 1 through 4 must equal the amounts on Schedule B, lines 1, 2, 4, and 5, sum of columns
7 and 8.
Rev. 1
39-25
3911 (Cont.)
FORM CMS-287-05
09-05
3911. SCHEDULE C - MEDICARE ADJUSTMENTS TO HOME OFFICE EXPENSES
The purpose of this schedule is to adjust home office expenses. Types of adjustments entered on
this worksheet include (1) those needed to adjust expenses to reflect actual expenses incurred, (2)
those items which constitute recovery of expenses through sales, charges, fees, etc., and (3) those
items needed to adjust expenses in accordance with the Medicare principles of reimbursement.
(See CMS Pub. 15-1). This schedule may be expanded as necessary to accommodate additional
adjustments.
Enter the home office name and period covered by the cost statement.
Basis of Adjustment.--Enter in the column marked with an asterisk (*) the basis for each
adjustment listed. Use a letter "A" if the basis is costs (non patient care related). Use a letter "B"
if revenue received is used as a cost recovery of related expenses.
Make all adjustments on the basis of costs rather than revenue offset. If related costs are
unknown or the amounts immaterial, use revenue offset.
Submit with the cost statement a copy of any working papers used to compute a cost adjustment.
Column 1--Enter the amount of each adjustment to be made to expenses reported on Schedule B,
column 1. Complete Schedule D and enter adjustments pertaining to costs from related
organizations.
When an adjustment affects two or more expense accounts, reconciliation must be attached
showing the distribution of the adjustment to various cost centers. Alternatively, if the cost
statement is prepared using a computer, place the Schedule C lines in subscripts, e.g., 13.01,
13.02, to allow the identification of all affected cost centers.
Line 28 must agree with Schedule B, column 4, line 100.
Column 2--Indicate the applicable line number of the expense account from Schedule B to which
the adjustment amount is to be added or subtracted.
Column 3--Indicate the cost center from Schedule B to which the adjustment amount is to be
added or subtracted.
NOTE:
39-26
Where the home office operates distinct regional offices, use the home office cost
statement to allocate home office costs to the chain components and regional
offices. Home office costs allocated to the regional offices are subsequently
allocated to the regional components on separate regional office home office cost
statements. When completing Schedule B for the regional offices, report
allocations from the home office on Schedule C and incorporate them into the
regional office costs in column 4.
Rev. 1
09-05
3912.
FORM CMS-287-05
3912
SCHEDULE D - STATEMENT OF COSTS OF SERVICES FROM RELATED
ORGANIZATIONS
Schedule D consists of two pages, both of which must be completed. Enter the home office
name and period covered by the cost statement. Schedule D requires information regarding the
existence of any home office costs that resulted from transactions with related organizations.
(See 42 CFR 405.427.)
Part A--Check the applicable "yes" or "no" block to indicate whether transactions with related
organizations resulted in home office costs to be allocated to the chain components.
If "no," do not complete Parts B and C. If "yes," complete Parts B and C.
Part B--This part identifies expenses resulting from a transaction with a related organization.
Column 1--Enter the applicable line number from Schedule B, column 1 for the expenses to be
explained in this section.
Column 2--Enter the expense account description corresponding to the applicable line number.
Column 3--Enter the amount of expense resulting from transactions with related organizations.
Column 4--Enter the Medicare allowable portion of the listed expense.
Column 5--Enter the net adjustment amount representing the difference between the amounts in
columns 3 and 4. The net adjustment amount for each type of expense must be transferred to
Schedule C, column 1, lines as applicable.
Part C--This part identifies the relationship of the chain home office to the related organizations.
Column 1--Enter the name of the related organization.
Column 2--Describe the business activities of the related organization that are transacted with the
home office or the chain components.
Column 3--Indicate whether the relationship between the chain and the related organization is
through ownership or control.
Column 4--Explain in detail the relationship e.g., percentage of ownership, partnership
arrangements, joint board of directors. Also note whether the exception to the related
organization rule (see CMS Pub. 15-I, §1010) is applicable.
Rev. 1
39-27
3913
3913.
FORM CMS-287-05
09-05
SCHEDULE E - DIRECT ALLOCATION OF HOME OFFICE CAPITAL COSTS
TO CHAIN COMPONENTS
Schedule E identifies home office capital-related costs that are directly allowable to specific
chain components and/or regional offices. Direct allocations to the chain components, when
transferred to the provider cost report, are included in the provider’s trial balance.
NOTE: When the home office operates distinct regional offices, use this schedule to directly
allocate home office costs to the chain components and regional offices. Home office
costs directly allocated to the regional offices are subsequently allocated to the regional
components on a separate regional office home office cost statement.
Enter the home office name and the period covered by the cost statement.
Enter the name and Medicare provider number of each chain provider on lines 1 through 16, the
name of each other component on lines 18 through 26, and the name of each regional office on
lines 28 through 31.
NOTE:
On Schedules E, E-1, F, and G, use subscripts for lines as necessary to accommodate
additional chain components where space is inadequate. Carry forward to the
subsequent schedules the sequence of subscripts and order of chain components
selected on Schedule E. Subscript lines are numbered, e.g., 1.01, 1.02.
Column headings on Schedule E correspond to the lines on Schedule B. Use subscripts for
columns on this schedule, as appropriate, to correspond with Schedule B line numbers for the
column numbers. The column numbers would then be 1, 2, 3, 4, 5, 6, 7, 8, and 9.
Show the distribution of the amount of direct cost to each chain component and/or regional
office. When the accounting period of the home office is not concurrent with the accounting
period of the component to which costs are directly allocated, each expense allocated to such a
component must be separated and identified as to the accounting period of the component to
which the expense is allocated.
Column 1--Enter the allocation of direct old capital costs for building and fixtures to the chain
components and regional offices. Any old capital costs directly allocated to regional offices
must be allocated to chain components on a subsequent regional office cost statement. Line 33
must agree with Schedule B, line 1, column 6.
Column 2--Enter the allocation of direct old capital costs for movable equipment to the chain
components and regional offices. Any old capital costs directly allocated to regional offices
must be allocated to chain components on a subsequent regional office cost statement. Line 33
must agree with Schedule B, line 2, column 6.
Column 3--Enter the allocation of direct new capital costs for building and fixtures to the chain
components and regional offices. Any new capital costs directly allocated to regional offices
must be allocated to chain components on a subsequent regional office cost statement. Line 33
must agree with Schedule B, line 4, column 6.
Column 4--Enter the allocation of direct new capital costs for movable equipment to the chain
components and regional offices. Any new capital costs directly allocated to regional offices
must be allocated to chain components on a subsequent regional office cost statement. Line 33
must agree with Schedule B, line 5, column 6.
39-28
Rev. 1
09-05
FORM CMS-287-05
3913(Cont.)
Columns 5-7--Enter the allocation of direct other capital costs to the chain components and
regional offices. Any other capital costs directly allocated to regional offices must be
subsequently allocated to chain components on a subsequent regional office cost statement. Line
33 must agree with Schedule B, column 6, lines 7 through 9 as appropriate.
Column 8 --Enter the total of columns 1 through 7.
Ensure that, in cases of nonconcurring year-ends, the direct allocations are identified in the
proper reporting period.
3914.
SCHEDULE E-1 - DIRECT ALLOCATION OF HOME OFFICE NON CAPITALRELATED EXPENSES TO CHAIN COMPONENTS
This schedule identifies home office costs (other than capital-related costs) directly assignable to
specific chain components and/or regional offices. Direct allocations to the chain components,
when transferred to the provider cost report, are included in the provider’s trial balance.
NOTE: If the home office operates distinct regional offices, use this schedule to directly
allocate home office costs to the chain components and regional offices. Home office
costs directly allocated to the regional offices are subsequently allocated to the regional
components on a separate regional office home office cost statement.
Enter the home office name and period covered by the cost statement.
Enter the name and Medicare provider number of each chain provider on lines 1 through 4, the
name of each other component on lines 6 through 9, and the name of each regional office on
lines 12 through 15. Use subscripts as necessary for these lines to accommodate additional chain
components if space is inadequate.
Columns 1-9--Column headings on Schedule E-1 have not been predetermined. Enter the
expense account title for each group of costs to be directly allocated above each column.
Additional columns may be added as necessary.
Show the distribution of the amount of direct cost to each chain component and/or regional
office. When the accounting period of the home office is not concurrent with the accounting
period of the component to which costs are directly allocated, each expense allocated to such a
component must be separated and identified as to the accounting period of the component to
which the expense is allocated. Any costs directly allocated to regional offices must be allocated
to chain components on a subsequent regional office cost statement. Line 17 must agree with
Schedule B, column 6, line 36.
Column 10--Enter the total of columns 1 through 9.
Ensure that, in cases of nonconcurring year ends, the direct allocations are identified in the
proper reporting period.
Rev.1
39-29
3915
3915.
FORM CMS-287-05
09-05
SCHEDULE F - PARTS I AND II - FUNCTIONAL ALLOCATION OF HOME
OFFICE CAPITAL-RELATED EXPENSES TO CHAIN COMPONENTS
Schedule F consists of two parts, both of which must be completed when costs are allocated on a
functional basis. Enter the home office name and period covered by the cost statement. This
schedule identifies home office non-capital-related costs which may be allocated to the chain
components and/or regional offices by function. Statistics are accumulated on Part II and the
allocation of cost is made on Part I.
NOTE: If the home office operates distinct regional offices, use this schedule to functionally
allocate home office costs to the chain components and regional offices. Home office
costs allocated to the regional offices are subsequently allocated to the regional
components on a separate regional office home office cost statement.
Enter the name and Medicare provider number of each chain provider on lines 1 through 16, the
name of each other component on lines 18 through 26, and the name of each regional office on
lines 29 through 32. Use subscripts for lines as necessary to accommodate additional chain
components if space is inadequate.
Column headings on Schedule F correspond to the lines on Schedule B. Use subscripts for
columns on this schedule, as appropriate, to correspond with Schedule B, lines 1 through 10.
Columns 1-5--Enter the statistics for the allocation of the costs for each expense account on lines
1 through 33, computing subtotals where indicated. When the accounting period of the home
office is not concurrent with the accounting period of the component, the statistics must be
identified and grouped according to the reporting period of the component to which the expense
applies.
Enter the total of statistics on line 34. On line 35, enter the total functional expense to be
allocated. Line 35 must agree with Schedule B, column 7, as appropriate, and must be carried
forward to Schedule F, Part I, line 34.
On line 35, compute the unit cost multiplier by dividing the cost to be allocated (line 34) by the
total statistics (line 33).
3916.
SCHEDULE F-1 - PARTS I AND II - FUNCTIONAL ALLOCATION OF HOME
OFFICE NON-CAPITAL-RELATED EXPENSES TO CHAIN COMPONENTS
Schedule F-1 consists of two parts, both of which must be completed when costs are allocated on
a functional basis. Enter the home office name and period covered by the cost statement. This
schedule identifies home office non-capital-related costs which may be allocated to the chain
components and/or regional offices by function. Statistics are accumulated on Part II and the
allocation of cost is made on Part I.
NOTE: If the home office operates distinct regional offices, use this schedule to
functionally allocate home office costs to the chain components and regional offices.
Home office costs allocated to the regional offices are subsequently allocated to the
regional components on a separate regional office home office cost statement.
39-30
Rev.1
09-05
FORM CMS-287-05
3916 (Cont.)
Functional allocations to the chain components, when transferred to the provider cost report, are
included in the administrative and general cost center or in a cost center appropriate to the
function, e.g., data processing, when this is a separate cost center and is appropriate to the
function.
NOTE: The amount of interest expense and investment income included in the amount of
pooled allocation must be separately identified in order to comply with the PRM-I,
§202.1 relating to interest. Section 202.1 states that in order for interest to be
allowable it must be necessary and proper for the operation, maintenance, or
acquisition of the provider’s facilities. The interest expense must be segregated
between old and new capital and non-capital expense.
Where the provider is a hold harmless provider for PPS capital, the treatment in the
provider’s cost report of functional allocation of costs (including investment income
and interest expense) must be consistent with that used in the last cost reporting period
ending on or before October 1, 1991.
In any case, the capital-related component of the functionally allocated costs must be
included on Worksheet B, Parts II or III, column zero, as appropriate, for old and new
capital respectively.
Enter the name and Medicare provider number of each chain provider on lines 1 through 16, the
name of each other component on lines 18 through 26, and the name of each regional office on
lines 28 through 31. Use subscripts for lines as necessary to accommodate additional chain
components if space is inadequate.
Column headings on Schedule F-1 have not been predetermined. Enter the expense account title
for each group of costs to be functionally allocated above each column. Additional columns may
be added as necessary. Also indicate the allocation base to be used to compile statistics from the
chain components and/or regional office for each expense account.
Columns 1-9--Enter the statistics for the allocation of the costs for each expense account on lines
1 through 32, computing subtotals where indicated. When the accounting period of the home
office is not concurrent with the accounting period of the component, the statistics must be
identified and grouped according to the reporting period of the component to which the expense
applies.
Enter the total of statistics on line 33. On line 34, enter the total functional expense to be
allocated. Line 34 must agree with Schedule B, column 8, as appropriate and must be carried
forward to Schedule F, Part I, line 34.
On line 36, compute the unit cost multiplier by dividing the cost to be allocated (line 35) by the
total statistics (line 34).
Column 10--Enter the total of columns 1 through 9.
Ensure that, in cases of nonconcurring year-ends, the direct allocations are identified in the
proper reporting period.
Rev. 1
39-31
3917
3917.
FORM CMS-287-05
09-05
SCHEDULE G - ALLOCATION OF POOLED COSTS TO CHAIN COMPONENTS
This schedule provides for the identification and allocation of home office pooled expenses
(capital-related buildings and fixtures, moveable equipment, other capital and non capital-related
expenses) to the various types of health care facilities and the other chain components.
Pooled costs represent expenses that cannot be directly or functionally allocated to the chain
components. Schedules E, E-1 and F must be completed, when appropriate, prior to completion
of Schedule G.
Pooled costs are allocated to the chain components as follows.
A. Where Chain Consists Solely of Health Care Facilities.--The pooled costs allocated to
the health care facilities as a group are allocated to the individual components on the basis of
inpatient days, or total costs. The statistics must be gathered from each component for the period
concurrent with that of the home office and separately identified throughout Schedule G.
NOTE: Inpatient days may only be used when all of the components of the chain are the same
type, e.g., short term acute hospitals.
B. Where Chain Consists of Both Health Care Facilities and Other Business
Organizations.--The pooled costs must be first allocated among these two groups on an
appropriate basis, depending on the organization of the chain. After this initial allocation, the
pooled costs allocated to the health care facilities as a group are again allocated to the individual
components as set forth in subsection A.
Chains may also file a step-down method of allocation by which home office costs are
distributed to regional offices and by which regional office costs are distributed to the
corresponding providers.
If the double allocation method must be used, both Parts I and II of Schedule G must be
completed. For the single allocation method, only Part II of Schedule G must be completed.
Enter the home office name and period covered by the cost statement.
Part I - The Double Allocation Method
Column 1--Enter the allocation base (costs) and the allocation statistics used to allocate total
pooled expenses. The allocation-based cost is allocated into three categories: health care
facilities, other components, and certain home office or regional costs requiring home office
region overhead allocation.
Column 1A--Enter the computed ratios of allocation. The allocation is computed as the ratio of
health care facilities and other component to the total pooled costs.
Column 2--Enter the pooled expenses to be allocated on line 4. This figure must agree with
Schedule B, column 8, line 1.
Column 3--Enter the pooled expenses to be allocated on line 4. This figure must agree with
Schedule B, column 8, line 2.
Column 4--Enter the pooled expenses to be allocated on line 4. This figure must agree with
Schedule B, column 8, line 4.
39-32
Rev. 1
09-05
FORM CMS-287-05
3917 (Cont.)
Column 5--Enter the pooled expenses to be allocated on line 4. This figure must agree with
Schedule B, column 8, line 5.
Column 6--Enter the pooled expenses to be allocated on line 4. This figure must agree with
Schedule B, column 8, line 36.
In order to tie in column 6 to Schedule B column 8 memo columns should be added to Schedule
G in order to tie to lines 30 and 30.01. This would be accomplished through an added schedule
off of the cost report in order to tie to those lines.
Columns 2-6--Multiply the total pooled costs (line 4, columns 2 through 6) by the ratios
computed in column 1A. Enter the respective totals in lines 1, 2 and 3 of columns 2 through 6.
Transfer these amounts to Schedule G, Part II, columns 2 through 6, lines 18, 28, and 33, as
applicable.
Column 7--Column 7, line 4 must agree with Schedule B, column8, line 30 plus any subscripts
of line 30.
Part II - Allocation to Individual Chain Components
Enter the names of all chain components on the appropriate lines. Note the allocation bases
used.
Column 1--Enter the allocation base and the statistics used to allocate the home office pooled
expenses to the individual health care facilities, other components and regional offices.
Column 1A--Enter the ratio of lines 1 through 17 to line 18 as computed using the statistics in
column 1 if the double apportionment method is used. Enter the ratio of lines 1 through 32 to
line 34 as computed using the statistics in column 1 if the single apportionment method is used.
Columns 2-6--Enter the pooled expenses to be allocated on lines 18, 28, and 33. Enter the
pooled home office old and new capital-related buildings and fixtures, movable equipment, other
capital and non-capital-related expense allocated from Schedule G, Part I, columns 2 through 6
(as applicable).
NOTE: The amount of interest expense and investment income included in the amount of
pooled allocation must be separately identified in order to comply with the PRM-I,
§202.1 relating to interest. Section 202.1 states that in order for interest to be
allowable it must be necessary and proper for the operation, maintenance, or
acquisition of the provider’s facilities. The interest expense must be segregated
between old and new capital and non-capital expense.
Where the provider is a hold harmless hospital for PPS capital, the treatment in the
provider’s cost report of pooled costs including interest expense and investment
income must be consistent with that used in the last cost reporting period ending on or
before October 1, 1991.
The capital-related component of the pooled costs must be included on Worksheet B,
Parts II or III, column zero, as appropriate for old and new capital respectively.
The pooled allocations to the chain providers, when transferred to the providers cost
report, are included in the administrative and general cost center.
Rev. 1
39-33
3918
3118.
FORM CMS-287-05
09-05
SCHEDULE I - STATEMENT OF REVENUE AND EXPENSES
Schedule I consists of one page.
Enter the home office name and period covered by the cost statement. Schedule I must be
completed in its entirety and must agree with the home office working trial balance.
39-34
Rev. 1
09-05
3919.
FORM CMS-287-05
3919
SCHEDULE J - BALANCE SHEET FOR HOME OFFICE
Schedule J consists of six pages, all of which must be completed. Enter the home office name
and period covered by the cost statement.
NOTE: For cost reporting periods beginning or after October 1, 1993, equity capital is no
longer allowable for all participating Medicare providers. (See §13503 (c) of OBRA
1993.)
Columns 1
Lines 1 through 63--Enter the year end balance for assets, liabilities, and capital of the chain
home office. If the account descriptions do not conform to the accounts used by the home office,
the titles must be modified.
The amount on line 39 must agree with the amount on line 63.
Line 64--Enter the equity in assets leased from related organizations. This amount represents the
related organization’s assets and liabilities related to the assets leased by the chain home office.
A supporting schedule must be attached.
Line 65--Enter the home office’s proportionate share of allowable equity capital in related
organizations. This amount represents the related organization’s assets and liabilities which are
used in the provision of patient care. A supporting schedule must be attached to Schedule J.
Line 66--Enter the sum of the amounts on lines 63, 64 and 65. This amount represents the total
equity capital of the home office.
Rev. 1
39-35
09-05
FORM CMS-287-05
3990
EXHIBIT 1 - Form CMS-287-05 Worksheets
The following is a listing of the Form CMS-287-05 worksheets and the page number location.
Changes to worksheets are indicated by redline on this and the subsequent page for this
transmittal. Where only the page number changes, no redlining is indicated.
Worksheets
Page(s)
Wkst. A, Parts I & II
Wkst. A, Part III
Wkst. A, Parts IV & V
Wkst. B
Wkst. B-1
Wkst. B-2, Parts I & II
Wkst. B-2, Part III
Wkst. C
Wkst. D
Wkst. E
Wkst. E-1
Wkst. F, Part I
Wkst. F, Part II
Wkst. F-1, Part I
Wkst. F-1, Part II
Wkst. G, Parts I & II
Wkst. I
Wkst. J
39-103
39-104
39-105
39-106 - 39-108
39-109
39-110
39-111
39-112
39-113 - 39-114
39-115 - 39-116
39-117 - 39-118
39-119 – 39-120
39-121 – 39-122
36-123 – 39-124
39-125 – 39-126
39-127 – 39-129
39-130
39-131 - 39-135
Rev. 1
39-101
| File Type | application/pdf |
| File Title | 09-05 |
| Author | CMS |
| File Modified | 2014-04-17 |
| File Created | 2014-03-21 |