Square Footage Studies

A significant amount of overhead costs are allocated using the square footage statistic. The payment impact of an accurate square footage statistic is often overlooked. While the statistic has a greater impact on any cost based provider or sub-provider, it can also affect the cost-to-charge ratio used in outlier payments of prospective payment systems. Regardless of the payment impact, it is critical that an accurate statistic is used to ensure the accuracy of the cost report.

Some providers opt to prepare their own statistic or request that we carry forward the statistic used on prior year cost reports often without knowledge of the origins of that statistic. Lately State Audit Contractors have been requesting complete supporting documentation for the square footage statistic reported on the cost report. Providers that prepare the statistic in-house or rely on a prior year statistic may not meet the audit requirements. We also feel the square footage statistic should only be performed by someone with a complete knowledge of cost allocation and apportionment principles and applicable rules and regulations.

A square footage study prepared by TFG Consulting, LLC will exceed audit requirements. Upon our engagement to prepare a square footage statistic, we will:

  • Provide your personnel with instructions on the methods of measurement.
  • Review floor plans and the related individual room and area measurements of which are provided by your personnel.
  • Summarize the information provided by your personnel, including but not limited to, individualized room area measurements, by cost center, for inclusion on worksheet B-1 of the Medicare Cost Report.
  • Create a report that will provide and auditable trail for the intermediary or state audit contractor to validate statistic reported on worksheet B-1 of the Medicare and Medicaid Cost Report.
  • If the provider is cost based or has a cost based sub-provider, we will test the impact of the new statistic on any “open” cost reports and suggest either amendment or reopening.
  • Update the square footage study for four years when there are any changes in the use of facility space without additional charge.