1. Direct costing of allowable costs must be used whenever possible. For a facility that cannot direct cost, the following allocation methods must be used: a. If a facility is combined with other residential or health care facilities, except for a nursing facility, the following allocation methods must be used:

(1) Resident care salaries that cannot be reported based on actual costs must be allocated using time studies. Time studies must be conducted at least semiannually for a two-week period or quarterly for a one-week period. Time studies must represent a typical period of time when employees are performing normal work activities in each of their assigned areas of responsibilities. Allocation percentages based on the time studies must be used starting with the next pay period following completion of the time studies or averaged for the report year. The methodology used by the facility may not be changed without approval by the department. If time studies are not completed, resident care salaries must be allocated based on revenues for resident services.

(2) Salaries for a director or supervisor of resident care or licensed health care professionals that cannot be reported based on actual costs or time studies must be allocated based on resident care salaries, licensed health care professional salaries or full-time equivalents of resident care staff, or licensed health care professional staff.

(3) Salaries for cost center supervisors must be allocated based on cost center salaries or full-time equivalents of supervised staff.

(4) Other resident care costs must be allocated based on resident days.

(5) Dietary and food costs must be allocated based on the number of meals served or in-house resident days.

(6) Laundry costs must be allocated on the basis of pounds of laundry or in-house resident days.

(7) Activity costs must be allocated based on in-house resident days.

(8) Social service costs must be allocated based on resident days.

(9) Housekeeping costs must be allocated based on weighted square footage.

(10) Plant operation costs must be allocated based on weighted square footage.

(11) Medical records costs must be allocated based on the number of admissions or discharges and deaths.

(12) Pharmacy costs for consultants must be allocated based on in-house resident days.

(13) Administration costs must be allocated on the basis of the percentage of total adjusted cost, excluding property, administration, chaplain, and utility costs, in each facility.

(14) Property costs must be allocated first to a cost center based on square footage. The property costs allocated to a given cost center must be allocated using the methodologies set forth in this section for that particular cost center.

(15) Chaplain costs must be allocated based on the percentage of total adjusted costs, excluding property, administration, and chaplain.

(16) Employment benefits must be allocated based on the ratio of salaries to total salaries.

b. If any of the allocation methods in subdivision a cannot be used by a facility, a waiver request may be submitted to the department. The request must include an adequate explanation as to why the referenced allocation method cannot be used by the facility.

The facility shall also provide a rationale for the proposed allocation method. Based on the information provided, the department shall determine the allocation method used to report costs.

1. c. Malpractice, professional liability insurance, therapy salaries, purchased therapy services, and resident care salaries and benefits costs for a facility combined with an optional Alzheimer's, dementia, special memory care or traumatic brain injury facility, or unit must be direct costed.
2. d. The costs of operating a pharmacy may not be included as facility costs.
3. e. For purposes of this subsection, 'weighted square footage' means the allocation of the facility's total square footage, excluding common areas, identified first to a cost category and then allocated based on the allocation method described in this subsection for that cost category.2. If a facility is combined with a nursing facility, the allocation methodologies, exceptions, and waivers set forth in chapter 75-02-06 must also be used for the facility.3. If a facility cannot directly identify salaries and employment benefits to a cost category, the following cost allocation methods must be used:- a. Salaries must be allocated using time studies. Time studies must be conducted semiannually for a two-week period or quarterly for a one-week period. Time studies must represent a typical period of time when employees are performing normal work activities in each of their assigned areas of responsibilities. Allocation percentages based on the time studies must be used starting with the next pay period following completion of the time studies or averaged for the report year. The methodology used by the facility may not be changed without approval by the department. If time studies are not completed, salaries must be allocated entirely to indirect care costs if any of the employee's job duties are included in this cost category.
4. b. Employment benefits must be allocated based on the ratio of salaries in the cost center to total salaries.4. A facility that operates or is associated with nonresident-related activities, such as apartment complexes, shall allocate all costs, except administration costs, in the manner required by subsection 1, and shall allocate administration costs as follows:- a. If total costs of all nonresident-related activities, exclusive of property, administration, chaplain, and utility costs, exceed five percent of total facility costs, exclusive of property, administration, chaplain, and utility costs, administration costs must be allocated on the basis of the percentage of total costs, excluding property, administration, chaplain, and utility costs.
5. b. If total costs of all nonresident-related activities, exclusive of property, administration, chaplain, and utility costs, are less than five percent of total facility costs, exclusive of property, administration, chaplain, and utility costs, administration costs must be allocated to each activity based on the percent gross revenues for the activity is of total gross revenues except that the allocation may not be based on a percentage exceeding two percent for each activity.
6. c. If the provider can document, to the satisfaction of the department, that none of the facility resources or services are used in connection with the nonresident-related activities, no allocation need be made.

d. The provisions of this subsection do not apply to the activities of health care facilities associated with a facility.

5. All costs associated with a vehicle not exclusively used by a facility must be allocated between resident-related and nonresident-related activities based on mileage logs.

History: Effective July 1, 1996; amended effective July 1, 1998; January 1, 2000; October 1, 2011; April 1, 2018.

General Authority: NDCC 50-06-16, 50-24.5-02(3)