| (C) The services, equipment, facilities, leases, or
supplies are those which commonly are obtained by entities such as
the contracted provider from other organizations and are not a basic
element of contracted client care ordinarily furnished directly to
clients by such entities. This requirement means that entities such
as the contracted provider typically obtain the services, equipment,
facilities, leases, or supplies from outside sources, rather than
producing them internally.
(D) The charge to the contracted provider is in line
with the charge of such services, equipment, facilities, leases, or
supplies in the open, competitive market and no more than the charge
made under comparable circumstances to others by the organization
for such services, equipment, facilities, leases, or supplies.
(6) Disclosure of all related-party information on
the cost report is required for all costs reported by the contracted
provider, including related-party transactions occurring at any level
in the provider's organization, (e.g., the central office level, and
the individual contracted provider level). The contracted provider
must make available, upon request, adequate documentation to support
the costs incurred by the related party. Such documentation must include
an identification of the related person's or organization's total
costs, the basis of allocation of direct and indirect costs to the
contracted provider, and other business entities served. If a contracted
provider fails to provide adequate documentation to substantiate the
cost to the related person or organization, then the reported cost
is unallowable. For further guidelines regarding adequate documentation,
refer to §355.105(b)(2) of this title (relating to General Reporting
and Documentation Requirements, Methods, and Procedures).
(7) When calculating the cost to the related organization,
the cost-determination guidelines specified in this section and in
§355.103 of this title apply.
(j) Cost allocation. Direct costing must be used whenever
reasonably possible. Direct costing means that allowable costs, direct
or indirect, (as defined in subsection (f)(3) - (4) of this section)
incurred for the benefit of, or directly attributable to, a specific
business component must be directly charged to that particular business
component. For example, the payroll costs of a direct care employee
who works across cost areas within one contracted program would be
directly charged to each cost area of that program based upon that
employee's continuous daily time sheets and the costs of a direct
care employee who works across more than one service delivery area
would also be directly charged to each service delivery area based
upon that employee's continuous daily time sheets. Health insurance
premiums, life insurance premiums, and other employee benefits must
be direct costed.
(1) If cost allocation is necessary for cost-reporting
purposes, contracted providers must use reasonable methods of allocation
and must be consistent in their use of allocation methods for cost-reporting
purposes across all program areas and business entities.
(A) The allocation method should be a reasonable reflection
of the actual business operations. Allocation methods that do not
reasonably reflect the actual business operations and resources expended
toward each unique business entity are not acceptable. Allocated costs
are adjusted if HHSC considers the allocation method to be unreasonable.
An indirect allocation method approved by some other department, program,
or governmental entity is not automatically approved by HHSC for cost-reporting
purposes.
(B) HHSC reviews each cost-reporting allocation method
on a case-by-case basis in order to ensure that the reported costs
fairly and reasonably represent the operations of the contracted provider.
If in the course of an audit it is determined that an existing or
approved allocation method does not fairly and reasonably represent
the operations of the contracted provider, then an adjustment to the
allocation method will be made consistent with subsection (f)(3) -
(4) of this section. A contracted provider may request an informal
review, and subsequently an appeal, of a decision concerning its allocation
methods in accordance with §355.110 of this title (relating to
Informal Reviews and Formal Appeals).
(C) Any allocation method used for cost-reporting purposes
must be consistently applied across all contracted programs and business
entities in which the contracted provider has an interest.
(D) Providers must use an allocation method approved
or required by HHSC. Any change in cost-reporting allocation methods
from one year to the next must be fully disclosed by the contracted
provider on its cost report and must be accompanied by a written explanation
of the reasons and justification for such change. If the provider
wishes to use an allocation method that is not in compliance with
the cost-reporting allocation methods in paragraphs (3) - (4) of this
subsection, the contracted provider must obtain written prior approval
from HHSC's Rate Analysis Department.
(i) Requests for approval to use an allocation method
other than those identified in paragraphs (3) - (4) of this subsection
or for approval of a provider's change in cost-reporting allocation
method other than those identified in paragraphs (3) - (4) of this
subsection must be received by HHSC's Rate Analysis Department prior
to the end of the contracted provider's fiscal year. Requests for
approval of allocation methods will not be acceptable as a basis for
the extension of the cost report due date.
(ii) The HHSC Rate Analysis Department will forward
its written decision to the contracted provider within 45 days of
its receipt of the provider's original written request. If sufficient
documentation is not provided by the provider to verify the acceptability
of the allocation method, then HHSC may extend the decision time frame.
However, an extension of the due date of the cost report will not
be granted. Written decisions made on or after the due date of the
cost report will apply to the next year's cost report. A contracted
provider may request an informal review, and subsequently an appeal,
of a decision concerning its allocation methods in accordance with
§355.110 of this title.
(iii) Failure to use an allocation method approved
or required by HHSC or to disclose a change in an allocation to HHSC
will result in the following.
(I) For nursing facilities, failure to disclose a change
in an allocation method or failure to use the allocation method approved
or required by HHSC may result in vendor hold as specified in §355.403
of this title.
(II) For ICF/IID, HCS, Service Coordination/Targeted
Case Management, Rehabilitative Services, and TxHmL programs, failure
to use the allocation method approved or required by HHSC constitutes
an administrative contract violation. In the case of an administrative
contract violation, procedural guidelines and informal reconsideration
and/or appeal processes are specified in §355.111 of this title.
(III) For SHARS, failure to use the allocation method
approved or required by HHSC constitutes an administrative contract
violation. In the case of an administrative contract violation, procedural
guidelines and informal reconsideration and/or appeal processes are
specified in §355.8443 of this title.
(IV) For all other programs, failure to disclose a
change in an allocation method or failure to use the allocation method
approved or required by HHSC constitutes an administrative contract
violation. In the case of an administrative contract violation, procedural
guidelines and informal reconsideration and/or appeal processes are
specified in §355.111 of this title.
(E) For small and large state-operated ICF/IID, designated
as Bond Homes and State Supported Living Centers for cost reporting
purposes, these facility types may use an allocation method other
than those identified in paragraphs (3) - (4) of this subsection in
order to represent indirect costs that are a reasonable reflection
of the actual business operations. If an allocation method other than
those identified in paragraphs (3) - (4) of this subsection is used
for indirect costs, the allocation method must adhere to Generally
Accepted Accounting Principles.
(2) Cost-reporting methods for allocating costs must
be clearly and completely documented in the contracted provider's
workpapers, with details as to how pooled costs are allocated to each
segment of the business entity, for both contracted and noncontracted
programs.
(A) If a contracted provider has questions regarding
the reasonableness of an allocation method, that contracted provider
should request written approval from the HHSC Rate Analysis Department
prior to submitting a cost report utilizing the allocation method
in question. Requests for approval must be received by the HHSC Rate
Analysis Department prior to the end of the contracted provider's
fiscal year. Requests for approval of allocation methods will not
be acceptable as a basis for the extension of the cost report due
date.
Cont'd... |
