| (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.
(B) The HHSC Rate Analysis Department will forward
its written decision to the contracted provider within 45 days of
its receipt of the original written request. If sufficient documentation
is not provided by the provider to verify the acceptability of the
allocation method, 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.
(3) When a building is shared and the building usage
is separate and distinct for each entity using the building, the building
costs, identified as building and facility cost categories on the
cost report, should be allocated based upon square footage and may
not be allocated with other indirect costs as a pool of costs. When
the same building space is shared by various entities, the shared
building costs, identified as building and facility cost categories
on the cost report, should be allocated using a reasonable method
which reflects the actual usage, such as an allocation based on time
in shared activity areas or a functional study of shared dietary costs
related to shared dining and kitchen areas.
(4) Where costs are shared, are not directly chargeable
and are allocated as a pool of costs, the following allocation methods
are acceptable for cost-reporting purposes.
(A) If all the business components of a contracted
provider have equivalent units of equivalent service, indirect costs
must be allocated based upon each business component's units of service.
For example, if a provider had two nursing facilities, indirect costs
requiring allocation as a pool of costs must be allocated based upon
each nursing facility's units of service, since the units of service
are equivalent units and the services are equivalent services. If
a provider had a nursing facility and a residential care program,
indirect costs requiring allocation as a pool of costs could not be
allocated based upon units of service because even though the units
of service for a nursing facility and a residential care facility
are equivalent units, the services are not equivalent services. If
a home health agency has indirect costs requiring allocation as a
pool of costs across its Medicare home health services and its Medicaid
primary home care services, it could not use units of service to allocate
those costs, since neither the units of service nor the services are
equivalent.
(B) If all of a contracted provider's business components
are labor-intensive without programmatic residential facility or residential
building costs, the contracted provider must allocate its indirect
costs requiring allocation as a pool of costs based either on each
business component's pro rata share of salaries or labor costs or
on a cost-to-cost basis.
(i) For cost-reporting cost allocation purposes, the
term "salaries" includes wages paid to employees directly charged
to the specific business component. The term "salaries" also includes
fees paid to contracted individuals, excluding consultants, who perform
services routinely performed by employees, which are directly charged
to the specific business component. The term "salaries" does not include
payroll taxes and employee benefits associated with the wages of employees.
(ii) For cost-reporting cost-allocation purposes, the
term "labor costs" includes salaries as defined in clause (i) of this
subparagraph, plus the payroll taxes and employee benefits associated
with the wages of the employees.
(iii) The cost-to-cost method allocates costs based
upon the percentage of each business component's directly-charged
costs to the total directly-charged costs of all business components.
(C) If a contracted provider's business components
are mixed, with some being labor-intensive and others having a programmatic
residential or institutional component, the contracted provider must
allocate its indirect costs requiring allocation as a pool of costs
either:
(i) based upon the ratio of each business component's
total costs less that business component's facility or building costs,
as related to the contracted provider's total business component costs
less facility or building costs for all the contracted provider's
business components, with "facility or building costs" referring to
those cost categories as identified on the cost report; or
(ii) based upon the labor costs method stated in subparagraph
(B)(ii) of this paragraph.
(D) In order to achieve a more accurate and representative
reporting of costs than results from allocating shared indirect costs
as a pool of costs, a provider may choose to allocate its indirect
shared expenses on an appropriate and reasonable functional basis.
If allocating shared direct client care costs, a provider may use
an appropriate and reasonable functional method. For example, costs
of a central payroll operation could be allocated to all business
components based on the number of checks issued; the costs of a central
purchasing function could be allocated based on the number of purchases
made or requisitions handled; payroll costs for an administrative
employee working across business components could be directly charged
based upon that employee's time sheets and/or allocated based upon
a documented time study; food costs could be allocated based upon
a functional study of shared dietary costs; transportation equipment
costs could be allocated based upon mileage logs; and shared laundry
costs could be allocated based upon a functional study of the number
of pounds/loads of laundry processed. Providers choosing to allocate
allowable employee-related self-insurance paid claims in accordance
with §355.103(b)(13)(B)(ii) of this title should base the allocation
on percentage of salaries of employees benefiting from the coverage
for fully self-insured situations or on percentage of premiums of
covered employees for partially self-insured situations since purchased
premiums must be directly charged.
(E) Because the determination of reimbursement is based
on cost data, allocation methods based upon revenue streams are inappropriate
and unallowable.
(k) Net expenses. Net expenses are gross expenses less
any purchase discounts or returns and allowances. Purchase discounts
are cash discounts reducing the purchase price as a result of prompt
payment, quantity purchases, or for other reasons. Purchase returns
and allowances are reductions in expenses resulting from returned
merchandise or merchandise which is damaged, lost, or incorrectly
billed. Only net expenses may be reported on the cost report. Expenses
reported on the cost report must be adjusted for all such purchase
discounts or returns and allowances.
|
| Source Note: The provisions of this §355.102 adopted to be effective September 1, 1996, 21 TexReg 7866; duplicated effective September 1, 1997, as published in the Texas Register October 17, 1997, 22 TexReg 10311; amended to be effective December 29, 1997, 22 TexReg 12485; amended to be effective June 26, 2000, 25 TexReg 6089; amended to be effective October 1, 2000, 25 TexReg 9924; amended to be effective August 31, 2004, 29 TexReg 8093; amended to be effective January 8, 2006, 30 TexReg 8854; amended to be effective October 28, 2007, 32 TexReg 7461; amended to be effective September 1, 2011, 36 TexReg 4795; amended to beeffective January 1, 2015, 39 TexReg 9193; amended to be effective March 1, 2018, 43 TexReg 339; amended to be effective January 1, 2019, 43 TexReg 8581 |
