N.Y. Comp. Codes R. & Regs. tit. 10, § 446.2 – Reclassification for reporting purposes.

(a) Reclassifications are necessary to adjust the financial data contained in the hospital's records to the reporting requirements in this Article where they are not recorded on a functional basis. The reclassifications must be completed prior to preparing the required reporting forms and must be maintained as part of the hospital's books and records.
(b) There are two types of reclassifications:
1. (1) reclassifications to obtain the required level of reporting; and
2. (2) reclassifications to correct accumulation of costs and revenues.
(c) The first type of reclassification may be necessary to reach the required level of reporting because the hospital has combined several cost or revenue centers. For instance, a hospital may be combining the costs of diagnostic radiology with therapeutic radiology. In such cases, it is necessary to reclassify the total direct costs by natural classification of expense incurred for the two different types of services into two specific cost centers relating to these two types of services.
(d) The second type of reclassification, to correct the accumulation of costs and revenues, would be necessary when the expense and/or revenue associated with a particular function is recorded in a cost center different from the functional description specified in this Manual. For instance, a reclassification would be required if the Surgery Services cost/revenue center included the costs and revenues associated with the sale of prostheses and appliances because these costs and revenues must be reported in the Medical Supplies Sold cost/revenue centers rather than the Surgery Services cost/revenue centers.
(e) If expenses and revenues related to the functions as defined by this Manual have not been included in the direct costs or revenues of the indicated cost center, a reclassification is required, if significant. In no instance shall an amount be considered insignificant if, in any year for any cost center, the aggregate amount of misplaced costs or revenues is equivalent to the lesser of:
1. (1) three percent of the direct costs of the functional center transferred to or from; or
2. (2) one quarter of one percent of the total annual operating expenses.
(f) However, in no case is a reclassification necessary if the aggregate amount of misplaced cost per cost center is less than $1,000.
(g) These reclassifications may be computed on any one of the following bases:
1. (1) analysis of direct expense, including time and cost studies;
2. (2) ratio of total charges to charges of a specific cost center; or
3. (3) ratio of total units of service to units of service being reclassified in a specific cost center.
(h) Activities common to most functional reporting centers, such as planning, appraising, analyzing, preparing staffing schedules, meeting legal requirements and sanitary standards, keeping abreast of applicable fields, clerical work incidental to the activities of the functional reporting center, documenting work performed, initiating requisitions, the provision for and receipt of in-service education, educating patients for self-care, maintaining specialized libraries, preparing budgets, evaluating assigned personnel and attending meetings, shall be assigned to the functional reporting center in which the activity is performed. The operation of equipment includes preventive maintenance such as cleaning, oiling and calibration.
(i) Other activities are unique (as herein defined) and their cost must be reported per the cost center functional descriptions. If the cost of these activities are accumulated in a different cost center, they must be reclassified. To assist in the identification of these, a sample list of functions whose costs must occasionally be reclassified is included in the following Functional Reclassification Matrix along with the centers to which they must be reclassified if they are significant.