Accounting for Patient Care Costs

Purpose of Guidelines

The purpose of these guidelines is to provide information about the identifying and allocating Patient Care cost as defined in Uniform Guidance 2 CFR 200 and the Cost Accounting Standard (CAS) 48 CFR 9905.502 to which the University of Florida must adhere.

Background

Uniform Guidance 2 CFR 200 establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions. According to Uniform Guidance 2 CFR 200 sections 200.402, “The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits.” The tests of allowability of costs under these principles in section 200.403 are:

  1. Be necessary and reasonable for the performance of the Federal award
  2. Be allocable thereto under these principles:
  3. Be Consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity
  4. Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.”

Cost Accounting Standard (CAS) 9905.501 requires consistency in estimating, accumulating, and reporting costs. The purposes of this standard are to make the cost accounting practices in estimating costs for its proposals consistent with those practices used in accumulating and reporting costs during contract performance, and to provide a basis for comparing such costs. (See University of Florida Policy on Charging Costs Directly to Sponsored Projects)

Cost Accounting Standard (CAS) 48 CFR 9905.502-40 requires consistency in allocating costs incurred for the same purpose. “All costs incurred for the same purpose, in like circumstances, are either direct costs only or indirect costs only with respect to final cost objectives. No final cost objective shall have allocated to it as an indirect cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included as a direct cost of that or any other final cost objective. Further, no final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included in any indirect cost pool to be allocated to that or any other final cost objective. See University of Florida Policy on Charging Costs Directly to Sponsored Projects.

This means there must be consistency in accounting campus-wide; all costs for similar circumstances must be charged the same.

Definitions

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Code of Federal Regulations Title 2: Grants and Agreements Part 200 (2 CFR 200).

Modified Total Direct Costs –MTDC (200.68)

  • MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subawards and subcontracts up to the first $25,000 of each subaward and subcontract (regardless of the period of performance of the subawards and subcontracts under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, participant support costs and the portion of each subaward and subcontract in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.

Allocation (9905.502-30.a.1)

  • To assign an item of cost, or a group of items of cost, to one or more cost objectives. This term includes both the direct assignment of cost and the reassignment of a share from an indirect cost pool.

Cost Objective (200.28)

  • Cost Objective means a program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc. A cost objective may be a major function of the non-Federal entity, a particular service or project, a Federal Award, or an indirect (Facilities & Administrative (F&A)) cost activity, as described in Subpart E-Cost Principles.

Direct Costs (200.413)

  • Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs.

Indirect (facilities & administrative (F&A)) costs (200.56)

  • Indirect (F&A) costs means those costs incurred for the common or joint purpose benefiting more than one cost objective, and not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved.

Guideline Issues

Uniform Guidance 2 CFR 200 (200.68). Identifies costs that are to be excluded from modified total direct cost for the purpose of charging indirect costs. Per 2 CFR 200 “Excluded costs include equipment, capital expenditures, charges for patient care and tuition remission, rental costs, scholarship and fellowships, participant support costs and the portion of each subaward and subcontract in excess of $25,000.

The costs associated with patient care and other major functions must be clearly and separately defined. Space, material and labor used jointly for patient care and other activities must be allocated equitably between those cost objectives.

For institutions which receive cost reimbursement from Federal research sponsors and Medicare/Medicaid, the allocation of costs between patient care and research, used as the basis for reimbursement, must be consistent (e.g., physician effort reported to Medicare must be consistent with effort reported to the National Institute of Health).

Although much of these guidelines have already been implemented, an effective date of December 26, 2014 is set to allow for university wide training at the department level so as to insure compliance and consistency.

Responsibility for Compliance

PIs/Departments are responsible for correctly recording any patient care costs that are directly charged to a sponsored project. Due care must be taken to insure these costs are allowable.

Responsibility for following these guidelines lies primarily with Contracts and Grants. The University of Florida administration is responsible for guidance and training and for insuring compliance through periodic internal and external audits.