| (a) General reporting. Except where otherwise specified
under this title, the Texas Health and Human Services Commission (HHSC)
follows the requirements, methods, and procedures set forth in this
section to determine costs appropriate for use in the reimbursement
determination process.
(b) Cost report requirements. Unless specifically stated
in program rules or excused as described in paragraph (4)(D) of this
subsection, each provider must submit financial and statistical information
on cost report forms provided by HHSC, or on facsimiles that are formatted
according to HHSC specifications and are pre-approved by HHSC staff,
or electronically in HHSC-prescribed format in programs where these
systems are operational. The cost reports must be submitted to HHSC
in a manner prescribed by HHSC. The cost reports must be prepared
to reflect the activities of the provider while delivering contracted
services during the fiscal year specified by the cost report. Cost
reports or other special surveys or reports may be required for other
periods at the discretion of HHSC. Each provider is responsible for
accurately completing any cost report or other special survey or report
submitted to HHSC.
(1) Accounting methods. All financial and statistical
information submitted on cost reports must be based upon the accrual
method of accounting, except where otherwise specified in §355.102
and §355.103 of this title (relating to General Principles of
Allowable and Unallowable Costs and Specifications for Allowable and
Unallowable Costs) and in the case of governmental entities operating
on a cash or modified accrual basis. For cost-reporting purposes,
accrued expenses must be incurred during the cost reporting period
and must be paid within 180 days after the end of that cost reporting
period. In situations where a contracted provider, any of its controlling
entities, its parent company/sole member, or its related-party management
company has filed for bankruptcy protection, the contracted provider
may request an exception to the 180-day requirement for payment of
accrued allowable expenses by submitting a written request to the
HHSC Provider Finance Department. The written request must be submitted
within 60 days of the date of the bankruptcy filing or at least 60
days prior to the due date of the cost report for which the exception
is being requested, whichever is later. The contracted provider will
then be requested by the HHSC Provider Finance Department to provide
certain documentation, which must be provided by the specified due
date. Such exceptions due to bankruptcy may be granted for reasonable,
necessary and documented accrued allowable expenses that were not
paid within the 180-day requirement. Accrued revenues must be for
services performed during the cost reporting period and do not have
to be received within 180 days after the end of that cost reporting
period in order to be reported as revenues for cost-reporting purposes.
Except as otherwise specified by the cost determination process rules
of this chapter, cost report instructions, or policy clarifications,
cost reports should be prepared consistent with generally accepted
accounting principles (GAAP), which are those principles approved
by the American Institute of Certified Public Accountants (AICPA).
Internal Revenue Service (IRS) laws and regulations do not necessarily
apply in the preparation of the cost report. In cases where cost reporting
rules differ from GAAP, IRS, or other authorities, HHSC rules take
precedence for provider cost-reporting purposes.
(2) Recordkeeping and adequate documentation. There
is a distinction between noncompliance in recordkeeping, which equates
with unauditability of a cost report and constitutes an administrative
contract violation or, for the Nursing Facility program, may result
in vendor hold, and a provider's inability to provide adequate documentation,
which results in disallowance of relevant costs. Each is discussed
in the following paragraphs.
(A) Recordkeeping. Providers must ensure that records
are accurate and sufficiently detailed to support the legal, financial,
and other statistical information contained in the cost report. Providers
must maintain all workpapers and any other records that support the
information submitted on the cost report relating to all allocations,
cost centers, cost or statistical line items, surveys, and schedules.
HHSC may require supporting documentation other than that contained
in the cost report to substantiate reported information.
(i) For contracted providers subject to 40 TAC Chapter
49, each provider must maintain records according to the requirements
stated in 40 TAC §49.307 (relating to Record Retention and Disposition)
and according to the HHSC's prescribed chart of accounts, when available.
(ii) If a contractor is terminating business operations,
the contractor must ensure that:
(I) records are stored and accessible; and
(II) someone is responsible for adequately maintaining
the records.
(iii) For nursing facilities, failure to maintain all
workpapers and any other records that support the information submitted
on the cost report relating to all allocations, cost centers, cost
or statistical line items, surveys and schedules may result in vendor
hold as specified in §355.403 of this title (relating to Vendor
Hold).
(iv) For all other programs, failure to maintain all
workpapers and any other records that support the information submitted
on the cost report relating to all allocations, cost centers, cost
or statistical line items, surveys and schedules 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 (relating to Administrative
Contract Violations).
(B) Adequate documentation. To be allowable, the relationship
between reported costs and contracted services must be clearly and
adequately documented. Adequate documentation consists of all materials
necessary to demonstrate the relationship of personnel, supplies,
and services to the provision of contracted client care or the relationship
of the central office to the individual service delivery entity level.
These materials may include, but are not limited to, accounting records,
invoices, organizational charts, functional job descriptions, other
written statements, and direct interviews with staff, as deemed necessary
by HHSC auditors to perform required tests of reasonableness, necessity,
and allowability.
(i) The minimum allowable statistical duration for
a time study upon which to base salary allocations is four weeks per
year, with one week being randomly selected from each quarter so as
to assure that the time study is representative of the various cycles
of business operations. One week is defined as only those days the
contracted provider is in operation during seven continuous days.
The time study can be performed for one continuous week during a quarter,
or it can be performed over five or seven individual days, whichever
is applicable, throughout a quarter. The time study must be a 100%
time study, accounting for 100% of the time paid the employee, including
vacation and sick leave.
(ii) To support the existence of a loan, the provider
must have available a signed copy of the loan contract which contains
the pertinent terms of the loan, such as amount, rate of interest,
method of payment, due date, and collateral. The documentation must
include an explanation for the purpose of the loan and an audit trail
must be provided showing the use of the loan proceeds. Evidence of
systematic interest and principal payments must be available and supported
by the payback schedule in the note or amortization schedule supporting
the note. Documentation must also include substantiation of any costs
associated with the securing of the loan, such as broker's fees, due
diligence fees, lender's fees, attorney's fees, etc. To document allowable
interest costs associated with related party loans, the provider is
required to maintain documentation verifying the prime interest rate
in accordance with §355.103(b)(11)(C) of this title for a similar
type of loan as of the effective date of the related party loan.
(iii) For ground transportation equipment, a mileage
log is not required if the equipment is used solely (100%) for provision
of contracted client services in accordance with program requirements
in delivering one type of contracted care. However, the contracted
provider must have a written policy that states that the ground transportation
equipment is restricted to that use and that policy must be followed.
For ground transportation equipment that is used for several purposes
(including for personal use) or multiple programs or across various
business components, mileage logs must be maintained. Personal use
includes, among other things, driving to and from a personal residence.
At a minimum, mileage logs must include for each individual trip the
date, the time of day (beginning and ending), driver, persons in the
vehicle, trip mileage (beginning, ending, and total), purpose of the
trip, and the allocation centers (the departments, programs, and/or
business entities to which the trip costs should be allocated). Flight
logs must include dates, mileage, passenger lists, and destinations,
along with any other information demonstrating the purpose of the
trips so that a relationship to contracted client care in Texas can
be determined. For the purpose of comparison to the cost of commercial
alternatives, documentation of the cost of operating and maintaining
a private aircraft includes allowable expenses relating to the lease
or depreciation of the aircraft; aircraft fuel and maintenance expenses;
aircraft insurance, taxes, and interest; pilot expenses; hangar and
other related expenses; mileage, vehicle rental or other ground transportation
expense; and airport parking fees. Documentation demonstrating the
allowable cost of commercial alternatives includes commercial airfare
ticket costs at lowest fare offered (including all discounts) and
associated expenses including mileage, vehicle rental or other ground
transportation expense; airport parking fees; and any hotel or per
diem due to necessary layovers (no scheduled flights at time of return
trip).
(iv) To substantiate the allowable cost of leasing
a luxury vehicle as defined in §355.103(b)(10)(C)(i) of this
title, the provider must obtain at the time of the lease a separate
quotation establishing the monthly lease costs for the base amount
allowable for cost-reporting purposes as specified in §355.103(b)(10)(C)(i)
of this title. Without adequate documentation to verify the allowable
lease costs of the luxury vehicle, the reported costs shall be disallowed.
(v) For adequate documentation purposes, a written
description of each cost allocation method must be maintained that
includes, at a minimum, a clear and understandable explanation of
the numerator and denominator of the allocation ratio described in
words and in numbers, as well as a written explanation of how and
to which specific business components the remaining percentage of
costs were allocated.
(vi) To substantiate the allowable cost for staff training
as defined in §355.103(b)(15)(A) of this title, the provider
must maintain a description of the training verifying that the training
pertained to contracted client care-related services or quality assurance.
At a minimum, a program brochure describing the seminar or a conference
program with description of the workshop must be maintained. The documentation
must provide a description clearly demonstrating that the seminar
or workshop provided training pertaining to contracted client care-related
services or quality assurance.
(vii) Documentation regarding the allocation of costs
related to noncontracted services, as specified in §355.102(j)(2)
of this title, must be maintained by the provider. At a minimum, the
provider must maintain written records verifying the number of units
of noncontracted services provided during the provider's fiscal year,
along with adequate documentation supporting the direct and allocated
costs associated with those noncontracted services.
(viii) Adequate documentation to substantiate legal,
accounting, and auditing fees must include, at a minimum, the amount
of time spent on the activity, a written description of the activity
performed which clearly explains to which business component the cost
should be allocated, the person performing the activity, and the hourly
billing amount of the person performing the activity. Other legal,
accounting, and auditing costs, such as photocopy costs, telephone
costs, court costs, mailing costs, expert witness costs, travel costs,
and court reporter costs, must be itemized and clearly denote to which
business component the cost should be allocated.
(ix) Providers who self insure for all or part of their
employee-related insurance costs, such as health insurance and workers'
compensation costs, must use one of the two following methods for
determining and documenting the provider's allowable costs under the
cost ceilings and any carry forward as described in §355.103(b)(13)(E)
of this title.
(I) Providers may obtain and maintain each fiscal year's
documentation to establish what their premium costs would have been
had they purchased commercial insurance for total coverage. The documentation
should include, at a minimum, bids from two commercial carriers. Bids
must be obtained no less frequently than every three years.
(II) If providers choose not to obtain and maintain
commercial bids as described in subclause (I) of this clause, providers
may claim as an allowable cost the health insurance actual paid claims
incurred on behalf of the employees that does not exceed 10% of the
payroll for employees eligible for receipt of this benefit. In addition,
providers may claim as an allowable cost the workers' compensation
actual paid claims incurred on behalf of the employees, an amount
each cost report period not to exceed 10% of the payroll for Cont'd... |
