| (a) Allowable and unallowable costs. Allowable and
unallowable costs, both direct and indirect, are defined to identify
expenses that are reasonable and necessary to provide contracted client
care and are consistent with federal and state laws and regulations.
When a particular type of expense is classified as unallowable, the
classification means only that the expense will not be included in
the database for reimbursement determination purposes because the
expense is not considered reasonable and/or necessary. The classification
does not mean that individual contracted providers may not make the
expenditure. The description of allowable and unallowable costs is
designed to be a general guide and to clarify certain key expense
areas. This description is not comprehensive, and the failure to identify
a particular cost does not necessarily mean that the cost is an allowable
or unallowable cost.
(b) Cost-reporting process. The primary objective of
the cost-reporting process is to provide a basis for determining appropriate
reimbursement to contracted providers. To achieve this objective,
the reimbursement determination process uses allowable cost information
reported on cost reports or other surveys. The cost report collects
actual allowable costs and other financial and statistical information,
as required. Costs may not be imputed and reported on the cost report
when no costs were actually incurred (except as stated in §355.103(b)(19)(A)(i)
of this title (relating to Specifications for Allowable and Unallowable
Costs) or when documentation does not exist for costs even if they
were actually incurred during the reporting period).
(c) Accurate cost reporting. Accurate cost reporting
is the responsibility of the contracted provider. The contracted provider
is responsible for including in the cost report all costs incurred,
based on an accrual method of accounting, which are reasonable and
necessary, in accordance with allowable and unallowable cost guidelines
in this section and in §355.103 of this title, revenue reporting
guidelines in §355.104 of this title (relating to Revenues),
cost report instructions, and applicable program rules. Reporting
all allowable costs on the cost report is the responsibility of the
contracted provider. The Texas Health and Human Services Commission
(HHSC) is not responsible for the contracted provider's failure to
report allowable costs; however, in an effort to collect reliable,
accurate, and verifiable financial and statistical data, HHSC is responsible
for providing cost report training, general and/or specific cost report
instructions, and technical assistance to providers. Furthermore,
if unreported and/or understated allowable costs are discovered during
the course of an audit desk review or field audit, those allowable
costs will be included on the cost report or brought to the attention
of the provider to correct by submitting an amended cost report.
(d) Cost and accountability report training. It is
the responsibility of the provider to ensure that each cost or accountability
report preparer has completed the required state-sponsored training.
Preparers may be employees of the provider or persons who have been
contracted by the provider for the purpose of cost or accountability
report preparation. Preparers must complete training for each program
for which a cost or accountability report is submitted, as applicable.
Contracted preparer's fees to complete training are considered allowable
expenses for cost reporting purposes. Preparers that participate in
training may be assessed a convenience fee, which will be determined
by HHSC. Convenience fees assessed for training are allowable costs.
Applicable federal and state accessibility standards apply to training.
Beginning with the 2018 cost reports and 2019 accountability reports,
reporting schedules per program are determined by HHSC and are published
on the HHSC website.
(1) Training schedules.
(A) For programs with odd-year and even-year cost reports.
Preparers must complete state-sponsored cost report training every
other year in order to be eligible to complete both that odd-year
cost report and the following even-year cost report. If a new preparer
wishes to complete an even-year cost report and has not completed
the previous odd-year cost report training, the preparer must complete
an even-year cost report training.
(B) For programs with odd-year and even-year accountability
reports. Preparers must complete state-sponsored accountability report
training every other year in order to be eligible to complete both
that odd-year accountability report and the following even-year accountability
report. If a new preparer wishes to complete an even-year accountability
report and has not completed the previous odd-year accountability
report training, the preparer must complete an even-year accountability
report training.
(C) For all other programs. Preparers must complete
the state-sponsored training for each program for which a cost or
accountability report is submitted. Beginning with the 2018 cost reports,
new preparers must complete cost report training every other year
for each program cost or accountability report being prepared in order
to be eligible to complete both that year's cost report and the following
year's accountability report, if applicable. If a new preparer wishes
to complete an accountability report and has not completed the previous
year's cost report training, the preparer must complete an accountability
report training for that program for that year.
(2) Failure to complete the required cost or accountability
report training.
(A) For nursing facilities, failure to file a completed
cost or accountability report signed by preparers who have completed
the required cost report training may result in vendor hold as specified
in §355.403 of this title (relating to Vendor Hold).
(B) For School Health and Related Services (SHARS)
providers, failure to complete the required cost report training may
result in an administrative contract violation as specified in §355.8443
of this title.
(C) For all other programs, failure to file a completed
cost or accountability report signed by preparers who have completed
the required cost report training 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).
(e) Generally accepted accounting principles. 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.
(f) Allowable costs. Allowable costs are expenses,
both direct and indirect, that are reasonable and necessary, as defined
in paragraphs (1) and (2) of this subsection, and which meet the requirements
as specified in subsections (i), (j), and (k) of this section, in
the normal conduct of operations to provide contracted client services
meeting all pertinent state and federal requirements. Only allowable
costs are included in the reimbursement determination process.
(1) "Reasonable" refers to the amount expended. The
test of reasonableness includes the expectation that the provider
seeks to minimize costs and that the amount expended does not exceed
what a prudent and cost-conscious buyer pays for a given item or service.
In determining the reasonableness of a given cost, the following are
considered:
(A) the restraints or requirements imposed by arm's-length
bargaining, i.e., transactions with nonowners or other unrelated parties,
federal and state laws and regulations, and contract terms and specifications;
and
(B) the action that a prudent person would take in
similar circumstances, considering his responsibilities to the public,
the government, his employees, clients, shareholders, and members,
and the fulfillment of the purpose for which the business was organized.
(2) "Necessary" refers to the relationship of the cost,
direct or indirect, incurred by a provider to the provision of contracted
client care. Necessary costs are direct and indirect costs that are
appropriate in developing and maintaining the required standard of
operation for providing client care in accordance with the contract
and state and federal regulations. In addition, to qualify as a necessary
expense, a direct or indirect cost must meet all of the following
requirements:
(A) the expenditure was not for personal or other activities
not directly or indirectly related to the provision of contracted
services;
(B) the cost does not appear as a specific unallowable
cost in §355.103 of this title;
(C) if a direct cost, it bears a significant relationship
to contracted client care. To qualify as significant, the elimination
of the expenditure would have an adverse impact on client health,
safety, or general well-being;
(D) the direct or indirect expense was incurred in
the purchase of materials, supplies, or services provided to clients
or staff in the normal conduct of operations to provide contracted
client care;
(E) the direct or indirect costs are not allocable
to or included as a cost of any other program in either the current,
a prior, or a future cost-reporting period;
(F) the costs are net of all applicable credits;
(G) allocated costs of each program are adequately
substantiated; and
(H) the costs are not prohibited under other pertinent
federal, state, or local laws or regulations.
(3) Direct costs are those costs incurred by a provider
that are definitely attributable to the operation of providing contracted
client services. Direct costs include, but are not limited to, salaries
and nonlabor costs necessary for the provision of contracted client
care. Whether or not a cost is considered a direct cost depends upon
the specific contracted client services covered by the program. In
programs in which client meals are covered program services, the salaries
of cooks and other food service personnel are direct costs, as are
food, nonfood supplies, and other such dietary costs. In programs
in which client transportation is a covered program service, the salaries
of drivers are direct costs, as are vehicle repairs and maintenance,
vehicle insurance and depreciation, and other such client transportation
costs.
(4) Indirect costs are those costs that benefit, or
contribute to, the operation of providing contracted services, other
business components, or the overall contracted entity. These costs
could include, but are not limited to, administration salaries and
nonlabor costs, building costs, insurance expense, and interest expense.
Central office or home office administrative expenses are considered
indirect costs. As specified in §355.8443 of this title, SHARS
providers use an unrestricted indirect cost rate to determine indirect
costs.
(g) Unallowable costs. Unallowable costs are expenses
that are not reasonable or necessary, according to the criteria specified
in subsection (f)(1) - (2) of this section and which do not meet the
requirements as specified in subsections (i), (j), and (k) of this
section or which are specifically enumerated in §355.103 of this
title or program-specific reimbursement methodology. Providers must
not report as an allowable cost on a cost report a cost that has been
determined to be unallowable. Such reporting may constitute fraud.
(Refer to §355.106(a) of this title (relating to Basic Objectives
and Criteria for Audit and Desk Review of Cost Reports)).
(1) For nursing facilities, placement as an allowable
cost on a cost report of a cost which has been determined to be unallowable
may result in vendor hold as specified in §355.403 of this title.
(2) For Intermediate Care Facilities for Individuals
with an Intellectual Disability or Related Conditions (ICF/IID), Home
and Community-based Services (HCS), Service Coordination/Targeted
Case Management, Rehabilitative Services, and Texas Home Living (TxHmL)
programs, placement as an allowable cost on a cost report a cost,
which has been determined to be unallowable, 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.
(3) For SHARS providers, submission of a cost that
has been determined to be unallowable may result in an administrative
contract violation as specified in §355.8443 of this title.
(4) For all other programs, submission of a cost, which
has been determined to be unallowable, 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.
(h) Other financial and statistical data. The primary
purpose of the cost report is to collect allowable costs to be used
as a basis for reimbursement determination. In addition, providers
may be required on cost reports to provide information in addition
to allowable costs to support allowable costs, such as wage surveys,
workers' compensation surveys, or other statistical and financial
information. Additional data requested may include, when specified
and in the appropriate section or line number specified, costs incurred
by Cont'd... |
