CMS Pub. 100-16, ch. mc86c17c, § 110

Costs

(Rev. 4, 10-01-01)

Administrative and General (A&G) costs other than those described in section 100 of this

chapter which bear a significant relationship to the services rendered are not apportioned

to Medicare directly. Instead, these costs are allocated or distributed to the components

of the cost-based HMO/CMP which, in turn, are then apportioned to Medicare in

accordance with the rules contained in this chapter. The allocation or distribution process

occurs in two steps:

1. The total allowable costs of a separate entity or department that performs

administrative services (e.g., centralized purchasing, accounting, data processing)

that can be quantitatively measured, should be allocated or distributed to each

component of the HMO/CMP in reasonable proportion to the benefits received by

that component.

2. Those remaining service-related administrative costs that cannot otherwise be

distributed or allocated in reasonable proportion to the benefits received by the

components must be allocated to the components on the basis of a ratio of total

incurred and distributed cost of the component to total incurred and distributed

cost to all components.