40 TAC §§20.102, 20.103, 20.105, 20.106, 20.110, 20.111
The Texas Department of Human Services (DHS) proposes amendments
to §§20.102, 20.103, 20.105, 20.106, 20.110, and 20.111, concerning
general principles of allowable and unallowable costs, specifications for
allowable and unallowable costs, general reporting and documentation requirements,
methods, and procedures, basic objectives and criteria for audit and desk
review of cost reports, informal reviews and formal appeals, and administrative
contract violations, in its Cost Determination Process chapter.
The purpose of the amendments is to define approval processes and cost
reporting procedures, clarify allowable and unallowable costs, remove obsolete
references, replace an obsolete reference with a new reference, and correct
a typographical error. The amendments clarify current allowable and unallowable
costs rules regarding where to report different types of benefits on the cost
report and the definition of a passenger van. Clarifications are also being
made to the process for requesting a waiver of the related party requirements
for reporting costs on the cost report, the disclosure and process for requesting
approval of an acceptable allocation method, and the contact for sending a
request for an informal review of cost report adjustments. The proposal also
specifies that the request of a waiver of the related party requirement for
reporting costs on the cost report must be submitted within 45 days of the
due date of the cost report. Clarifications are also being made to the definition
of direct costing of certain costs on the cost report. The proposal clarifies
that prior approval must be obtained to use an allocation method that is not
in compliance with DHS rules. The proposal explains what is a functional allocation
method. The proposal also grants a compliance period of 15 calendar days before
a vendor hold can be placed for failure to submit a required cost report,
correct a typographical error regarding how often mandatory cost report training
must be attended. The rules requiring completion of cost reports according
to instructions and rules that differentiate between 1994, 1995, and 1996
cost reports and cost reports for 1997 and subsequent years have been deleted.
The requirement that cost reports must be completed according to instructions
and rules has been moved and restated without a differentiation between cost
report years. The rule reference to vendor hold for the nursing facility program
has been revised to a new rule reference.
Eric M. Bost, commissioner, has determined that for the first five-year
period the sections are in effect there will be no fiscal implications for
state or local government as a result of enforcing or administering the sections.
Mr. Bost also has determined that for each year of the first five years
the sections are in effect the public benefit anticipated as a result of enforcing
the sections will be that the rules will provide guidance to contracted providers
regarding the completion of required costs reports. There will be no effect
on large, small, or micro businesses, because the amendments define approval
processes and cost reporting procedures, clarify allowable and unallowable
costs, remove obsolete references, replace an obsolete reference, and correct
a typographical error. No changes in practice are required of any business.
There is no anticipated economic cost to persons who are required to comply
with the proposed sections.
Under §2007.003(b) of the Texas Government Code, the department has
determined that Chapter 2007 of the Government Code does not apply to these
rules. Accordingly, the department is not required to complete a takings impact
assessment regarding these rules.
Questions about the content of this proposal may be directed to Carolyn
Pratt at (512) 438-4057 in DHS's Rate Analysis Division. Written comments
on the proposal may be submitted to Supervisor, Rules and Handbooks Unit-148,
Texas Department of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030,
within 30 days of publication in the
Texas Register
.
The amendments are proposed under the Human Resources Code, Title
2, Chapters 22 and 32, which authorizes the department to administer public
and medical assistance programs; and under Texas Government Code §531.021,
which provides the Health and Human Services Commission with the authority
to administer federal medical assistance funds.
The amendments implement the Human Resources Code, §§22.001 -
22.030 and §§32.001 - 32.042.
§20.102. General Principles of Allowable and Unallowable Costs.
(a)-(c)
(No change.)
(d)
Cost report training. DHS is responsible for conducting,
at no charge to the provider, comprehensive cost report training for each
contracted program. Beginning with the 1997 cost reports, it is the responsibility
of the provider to ensure that each preparer signing the Cost Report Methodology
Certification has attended cost report training conducted by DHS. Preparers
may be employees of the provider or persons who have been contracted by the
provider for the purpose of cost report preparation. Preparers must attend
cost report training for each program for which a cost report is submitted.
Preparers must attend cost report training for two consecutive years, after
which they are required to attend training on at least a
biennial
[
biannual
] basis. A copy of the most recent cost report training
certificate for each preparer of the cost report must be submitted with each
cost report. Travel costs to attend the state-sponsored cost report training
are allowable within the travel limits specified in §20.103(b)(12) of
this title (relating to Specifications for Allowable and Unallowable Costs).
Contracted preparer's fees to attend state- sponsored cost report training
are allowable.
(1)-(2)
(No change.)
(e)
(No change.)
(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)-(3)
(No change.)
(4)
Indirect costs are those [
shared
] costs
which benefit, or contribute to, the operation of providing contracted services,
other business components, or the overall entity with which DHS has contracted.
These costs could include, but are not limited to, administration salaries
and nonlabor costs, building costs, insurance expense, and interest expense.
Central office and/or home office administrative expenses are considered indirect
costs. [
Indirect costs must be allocated, directly or as a pool of costs,
across those business components sharing in the benefits of those costs.
]
(g)-(h)
(No change.)
(i)
Related party transactions.
(1)-(4)
(No change.)
(5)
An exception is provided to the general rule applicable
to related organizations. The exception applies if the contracted provider
demonstrates [
on each cost report
] by convincing evidence to the
satisfaction of DHS that certain criteria have been met. If all of the conditions
of this exception are met, then the charges by the supplier to the contracted
provider for such services, equipment, facilities, leases, or supplies are
allowable costs. If Medicare has made a determination that a related party
situation does not exist or that an exception to the related party definition
was granted, DHS will review the determination made by Medicare to determine
if it is applicable to the current situation of the contracted provider and
in compliance with this subsection (relating to related party transactions).
In order to have the Medicare determination considered for approval by the
department, a copy of the applicable Medicare determination must accompany
each
written exception request
[
affected cost report
]
submitted to the department, along with evidence supporting the Medicare determination
for the current
cost-reporting
[
cost report
] period.
If the exception granted by Medicare no longer is applicable due to changes
in circumstances of the contracted provider or because the circumstances do
not apply to the contracted provider, DHS may choose not to
consider
[
accept
] the Medicare determination.
Written requests
for an exception to the general rule applicable to related organizations must
be submitted for approval to the Rate Analysis Department within 45 days of
the due date of the cost report in order to be considered for that year's
cost report. Each request must include documentation supporting that the contracted
provider meets each of the four criteria listed in subparagraphs (A)-(D) of
this paragraph. Requests that do not include the required documentation for
each criteria will not be considered for that year's cost report.
[
The contracted provider must demonstrate that the following criteria have
been met.
]
(A)-(D)
(No change.)
(6)-(7)
(No change.)
(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.
[
In the case of direct costs as defined in subsection (f)(3) of this
section, direct costing is required. In the case of indirect costs as defined
in subsection (f)(4) of this section, it is necessary to allocate these costs
either directly or as a pool of costs across those business components sharing
in the benefits.
]
For example, the payroll costs of a direct care
employee who works across cost areas within one DHS-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.
(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)-(C)
(No change.)
(D)
Providers must use an allocation method approved
or required by DHS.
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
.
[
, and must be accompanied by written prior approval from DHS's
Rate Analysis Department.
]
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 DHS'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 DHS'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)
(No change.)
(iii)
Failure to
[
Providers must
] use
an allocation method approved or required by DHS
or to disclose a
[
. A
] change in an allocation [
must be disclosed
] to
DHS
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 DHS may result in vendor hold as specified in
1 TAC §355.403
[
§19.2703 of this title
] (relating to Vendor Hold).
(II)
(No change.)
[
(E)
]
[
Any new contracted provider submitting
its first cost report must have its cost-reporting allocation methods approved
by the DHS's Rate Analysis Department prior to submitting its first cost report.
Submittal of a cost report for a new contracted provider without an approved
allocation method is considered a failure to file a completed cost report
in accordance with §20.105(b)(4)(C) of this title (General Reporting
and Documentation Requirements, Methods, and Procedures).
]
[
(i)
]
[
Requests for approval of a new provider's
cost report allocation methods must be received by the Rate Analysis Department
60 days prior to the due date of the cost report. Requests for approval of
allocation methods will not be acceptable as a basis for the extension of
the cost report due date.
]
[
(ii)
]
[
The 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 DHS 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 §20.110
of this title (relating to Informal Reviews and Formal Appeals).
]
(2)
(No change.)
(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
[
such as rent, depreciation, utilities, maintenance, and
insurance
], 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
[
such
as rent, depreciation, utilities, maintenance, and insurance
], 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
[
meals served in
]
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)-(B)
(No change.)
(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)
(No change.)
(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
[
a
] 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
[
dollar amount
]
of purchases made or requisitions handled; payroll costs for an
administrative
employee working across business components could be
directly
charged
[
allocated
] 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
[
the number of meals served
]; 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 §20.103(b)(10)(B)(ii) of
this title relating to General Principles of Allowable and Unallowable Costs)
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)
(No change.)
(k)
(No change.)
§20.103. Specifications for Allowable and Unallowable Costs.
(a)
(No change.)
(b)
Allowable and unallowable costs.
(1)
Compensation of employees. Compensation includes both
cash and non-cash forms of compensation subject to federal payroll tax regulations.
Compensation includes wages and salaries (including bonuses); payroll taxes
and insurance; and [
fringe
] benefits. Payroll taxes and insurance
include Federal Insurance Contributions Act (old age, survivors, and disability
insurance (OASDI) and Medicare hospital insurance); Unemployment Compensation
Insurance; and Workers' Compensation Insurance.
(A)
Allowable compensation of employees is compensation paid
to employees in arm's-length transactions as nonowners and non-related parties
and is subject to the reasonable and necessary costs which must be incurred
by providers in the provision of contracted client services. Guidelines for
compensation of owners and related parties are specified in paragraph (2)
of this subsection.
(i)-(ii)
(No change.)
(iii)
Benefits
[
Fringe benefits
] are
amounts paid to or on behalf of an employee, in addition to direct salary
or wages, and from which the employee, his dependent, or his beneficiary derives
a personal benefit before or after the employee's retirement or death.
(I)
Benefits
[
Fringe benefits
] paid
to employees in arm's length transactions as nonowners and non-related parties
are allowable costs, subject to the reasonable and necessary costs which must
be incurred by providers in the provision of contracted client care. To be
allowable, [
fringe
] benefits paid to owners and/or related parties
must not discriminate in favor of certain employees, such as employees who
are officers, stockholders, or the highest paid individual(s) of the organization.
(II)
Allowable [
fringe
] benefits are reported on
cost reports either as salaries and/or wages, as employee benefits, or as
costs applicable to specific cost [
areas
]
report line items,
as specified in this subclause and in subclause (iii) of this clause
.
Any [
fringe
] benefit subject to payroll taxes is reported as
salaries
[
salary
] and wages. Allowable [
fringe
]
benefits which are routinely reported as salaries and wages include paid vacations,
paid holidays, sick leave, voting leave, court or jury duty leave, and/or
all-inclusive paid days, as specified in subclause (III)(-c-) of this clause.
Allowable [
fringe
] benefits which are routinely reported as employee
benefits include employer contributions to certain deferred compensation plans,
as specified in subclause (III)(-a-) of this clause, employer contributions
to an employee retirement fund or certain pension plans, as specified in subclause
(III)(-b-) of this clause, and costs of certain employer-paid health, life,
and disability insurance premiums, as specified in subclause (III)(-f-) of
this clause. The contracted provider's unrecovered cost of meals and room
and board furnished to direct care employees
, uniforms, employee personal
vehicle mileage reimbursement in accordance with paragraph (12) of this subsection,
job-related training reimbursements in accordance with paragraph (12) of this
subsection, and job certification renewal fees in accordance with paragraph
(12) of this subsection are not to be reported as
[
are fringe
]
benefits
but
[
which
] are
to be
reported as
costs applicable to specific cost
report line items,
[
areas,
as specified in subclause (III)(-e-) of this clause
], unless they are
subject to payroll taxes, whereas they are reported as salaries and wages.
(III)
Benefits
[
Fringe benefits
] include
the following:
(-a-)
Employer contributions to certain deferred compensation
plans
are reported as employee benefits
. Deferred compensation
is remuneration currently earned by an employee but which is not received
until a subsequent period, usually after retirement. For the cost to be allowable,
the deferred compensation plan must be formal, established, and maintained
by the contracted provider and communicated to all eligible employees. A formal
plan is one that is provided for in a written agreement executed between the
contracted provider and the participating employees. The plan must:
(-1-)-(-7-)
(No change.)
(-b-)
Employer contributions to an employee retirement
fund or certain pension plans
are reported as employee benefits
.
A pension plan is a type of deferred compensation plan which is established
and maintained by the employer to provide systematic payment of definitely
determinable benefits to its employees over a period of years, or for life,
after retirement. Such a plan may include disability, withdrawal, option for
lump-sum payment, or insurance or survivorship benefits incidental and directly
related to the pension benefits. A pension plan must meet all the requirements
of a deferred compensation plan. All employees' pension fund rights must be
nonforfeitable after such time as they vest under the plan. Pension fund rights
cannot be contingent on continuance of employment or other factors. Only the
amount the contracted provider or employer contributed to the pension fund
during the reporting period is allowable and should be reported as an employee
benefit. To be allowable, contributions representing the employee's share
cannot revert to the contracted provider. However employer-paid contributions
can revert to the contracted provider in the event an employee does not vest.
(-c-)
Paid leave
is reported as salaries or wages
. Paid vacations, paid holidays, sick leave, voting leave, court or
jury duty leave, and/or all-inclusive paid days, all are reported as employee
salaries and/or wages rather than as employee benefits, as follows:
(-1-)-(-3-)
(No change.)
(-d-)
Provider-paid instructional courses benefiting
the
employer's
[
employee's
] interest
are not to
be reported as employee benefits, but are to be reported as costs related
to specific cost report line items
. Costs related to provider-paid instructional
courses for the benefit of the employee only are unallowable costs. Refer
to paragraph (12)(A) of this subsection, concerning staff training costs.
(-e-)
Contracted provider's unrecovered cost of meals
and room and board furnished on-site to direct care employees
are not
to be reported as employee benefits, but are to be reported as costs related
to specific cost report line items
. Any reasonable unrecovered cost
of meals and/or room and board furnished on-site by a contracted provider
to its direct care employees, which are equivalent to the meals and/or room
and board provided to clients, are allowable costs since they are related
to client care in that such reasonable costs are appropriate and helpful in
developing and maintaining the contracted provider's operations to deliver
contracted services. Such allowable costs should be reported in the cost area
where the costs were incurred, such as meal costs being reported in the cost
area associated with food and meal preparation and room and/or board costs
being reported in the cost area associated with building costs.
(-f-)
Costs of health, disability and life insurance
premiums paid or incurred by the contracted provider if the benefits of the
policy are payable to the employee or his beneficiary
are reported as
employee benefits
. Report allowable health, disability, and life insurance
premium costs as employee benefits. Refer to paragraph (10) of this subsection,
concerning insurance expense.
(B)
(No change.)
(2)
Compensation of owners and related parties.
Compensation includes both cash and non-cash forms of compensation subject
to federal payroll tax regulations. Compensation includes withdrawals from
an owner's capital account; wages and salaries (including bonuses); payroll
taxes and insurance; and [
fringe
] benefits. Payroll taxes and insurance
include Federal Insurance Contributions Act (old age, survivors, and disability
insurance (OASDI) and Medicare hospital insurance); Unemployment Compensation
Insurance; and Workers' Compensation Insurance. Allowable compensation must
be reported as salaries and not as management fees.
(A)-(E)
(No change.)
(3)-(6)
(No change.)
(7)
Depreciation and amortization expense. For purchases
made after the beginning of the contracted provider's fiscal year 1997, an
asset valued at $1,000 or more and with an estimated useful life of more than
one year at the time of purchase must be depreciated or amortized, using the
straight line method. In determining whether to expense or depreciate a purchased
item, a contracted provider may expense any single item costing less than
$1,000 or having a useful life of one year or less. Depreciation and amortization
expenses for unallowable assets and costs are also unallowable, including
amounts in excess of those resulting from the straight line method, capitalized
lease expenses in excess of actual lease payments, and goodwill or any excess
above the actual value of physical assets at the time of purchase. The minimum
useful lives to be assigned to common classes of depreciable property are
as follows:
(A)-(B)
(No change.)
(C)
Transportation equipment used for the transport of clients,
staff, or materials and supplies utilized by the contracted provider. Cost
reporting must reflect a minimum of three years for automobiles (including
minivans); five years for light trucks and vans
(up to and including
15-passenger vans)
; and seven years for buses and airplanes. Depreciation
expenses for transportation equipment not generally suited or not commonly
used to transport clients, staff, or provider supplies are unallowable costs.
This includes motor homes and recreational vehicles; sports automobiles; motorcycles;
heavy trucks, tractors and equipment used in farming, ranching, and construction;
and transportation equipment used for other activities unrelated to the provision
of contracted client care, unless program-specific reimbursement methodology
rules provide otherwise. Refer to §20.105(b)(2)(B)(iii) of this title
(relating to General Reporting and Documentation Requirements, Methods, and
Procedures) for requirements for the maintenance of mileage logs and other
documentation required to substantiate transportation equipment costs.
(i)
Luxury automobiles are defined for cost-reporting purposes
as passenger vehicles,
including automobiles, light trucks, and vans
(up to and including 15-passenger vans) and
excluding buses, with an
historical cost at time of purchase or a market value at execution of the
lease exceeding $30,000 when purchased or leased before January 1, 1997. For
vehicles leased or purchased on or after January 1, 1997, luxury vehicles
are defined as a base value of $30,000 with 2.0% being added (using the compound
method) to the base value each January 1 beginning on January 1, 1998. Any
amount above the definition of a luxury vehicle stated above is an unallowable
cost. When a passenger vehicle's cost exceeds the amount determined by the
definition of a luxury vehicle stated above, the historical cost is reduced
to the amount determined by the definition of a luxury vehicle. When a passenger
vehicle's market value at the execution of the lease exceeds the amount determined
by the definition of a luxury vehicle stated above, the allowable lease payment
is limited to the lease amount for a vehicle with the base value as determined
above, with substantiating documentation as specified in §20.105(b)(2)(B)(iv)
of this title (relating to General Reporting and Documentation Requirements,
Methods, and Procedures). Luxury vehicles must be depreciated according to
depreciation guidelines in this paragraph. Expenses for passenger luxury vehicles
will be allowable if the contracted provider maintains adequate mileage logs
substantiating the use of the luxury vehicles to transport clients, contracted
provider staff or provider supplies. Refer to §20.105(b)(2)(B)(iii) of
this title (relating to General Reporting and Documentation Requirements,
Methods, and Procedures) for requirements for the maintenance of mileage logs.
The base value does not include specialized equipment, such as wheelchair
lifts, added to assist clients.
(ii)-(iii)
(No change.)
(D)-(F)
(No change.)
(8)-(18)
(No change.)
§20.105. General Reporting and Documentation Requirements, Methods, and Procedures.
(a)
(No change.)
(b)
Cost report requirements. Unless specifically stated in
program rules, each provider must submit financial and statistical information
on cost report forms provided by DHS, or on facsimiles which are formatted
according to DHS specifications and are pre-approved by DHS staff, or electronically
in DHS-prescribed format in programs where these systems are operational.
The cost reports must be submitted to DHS in a manner prescribed by DHS. 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 DHS. Each provider is responsible for accurately
completing any cost report or other special survey or report submitted to
DHS.
(1)
(No change.)
(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 nursing facilities, 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)
(No change.)
(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 DHS auditors to perform required tests of reasonableness,
necessity, and allowability. For the 1997 cost report only, DHS will accept
documentation to retrospectively support expenses which were incurred in the
provider's 1997 fiscal year prior to the adoption of these rules and reported
on the provider's 1997 cost report.
(i)-(x)
(No change.)
(xi)
Regarding compensation of owners and related parties,
providers must maintain the following documentation, at a minimum, for each
owner or related party: a detailed written description of actual duties, functions,
and responsibilities; documentation substantiating that the services performed
are not duplicative of services performed by other employees; time sheets
or other documentation verifying the hours and days worked; the amount of
total compensation paid for these duties, with a breakdown detailing regular
salary, overtime, bonuses, [
fringe
] benefits, and other payments;
documentation of regular, periodic payments and/or accruals of the compensation,
documentation that the compensation is subject to payroll or self-employment
taxes; and a detailed allocation worksheet indicating how the total compensation
was allocated across business components receiving the benefit of these duties.
(I)
(No change.)
(II)
Regarding [
fringe
] benefits provided to owners
and related parties, the provider must maintain clearly defined benefit policies
in its written agreements with employees or in its overall employment policy.
At a minimum, the documentation must include the basis for eligibility for
each type of [
fringe
] benefit available, who is eligible to receive
each type of [
fringe
] benefit, who actually receives each type
of [
fringe
] benefit, whether the persons receiving each type of
benefit are owners, related parties, or arm's-length employees, and the amount
of each [
fringe
] benefit received by each individual.
(xii)
Regarding all forms of compensation, providers must
maintain documentation for each employee which clearly identifies each compensation
component, including regular pay, overtime pay, incentive pay, mileage reimbursements,
bonuses, sick leave, vacation, other paid leave, deferred compensation, retirement
contributions, provider-paid instructional courses, health insurance, disability
insurance, life insurance, and any other form of compensation. Types of documentation
would include insurance policies; provider benefit policies; records showing
paid leave accrued and taken; documentation to support hours (regular and
overtime) worked and wages paid; and mileage logs or other documentation to
support mileage reimbursements and travel allowances. For accrued [
fringe
] benefits, the documentation must clearly identify the period of the
accrual. For example, if an employee accrues two weeks of vacation during
19x1 and receives the corresponding vacation pay during 19x3, that employee's
compensation documentation for 19x3 should clearly indicate that the vacation
pay received had been accrued during 19x1.
(xiii)-(xx)
(No change.)
(3)-(6)
(No change.)
(c)-(h)
(No change.)
§20.106. Basic Objectives and Criteria for Audit and Desk Review of Cost Reports.
(a)
The Texas Department of Human Services (DHS) conducts
desk reviews and field audits of provider cost reports in order to ensure
that all financial and statistical information reported in the cost reports
conforms to all applicable rules and instructions.
Cost reports must
be completed according to instructions and rules in accordance with §20.105(b)(4)
of this title (relating to General Reporting and Documentation Requirements,
Methods, and Procedures). DHS may require supporting documentation other than
that contained in the cost report to substantiate reported information.
[
(1)
For cost reports pertaining
to providers' fiscal years ending in calendar year 1994, 1995 or 1996, completion
must be according to instructions and rules. DHS may require supporting documentation
other than that contained in the cost report to substantiate reported information.]
[
(A)
For nursing facilities, failure to complete
cost reports according to instructions and rules may result in vendor hod
as specified in §19.1810 of this title (relating to Vendor Hold).]
[
(B)
For all other programs, failure to complete
cost reports according to instructions and rules 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 §20.111 of this title relating to Administrative Contract Violations).]
[
(2)
]
[
For cost reports pertaining
to providers' fiscal years ending in calendar year 1997 and subsequent years,
completion must be according to instructions and rules in accordance with §20.105(b)(4)
of this title (relating to General Reporting and Documentation Requirements,
Methods, and Procedures). DHS may require supporting documentation other than
that contained in the cost report to substantiate reported information.
]
(1)
[
(A)
] For nursing facilities,
failure to complete cost reports according to instructions and rules in accordance
with §20.105(b)(4) of this title (relating to General Reporting and Documentation
Requirements, Methods, and Procedures) may result in vendor hold as specified
in §19.2703 of this title (relating to Vendor Hold).
(2)
[
(B)
] For all other programs,
failure to complete cost reports according to instructions and rules in accordance
with §20.105(b)(4) of this title (relating to General Reporting and Documentation
Requirements, Methods, and Procedures) 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 §20.111 of this title (relating to Administrative Contract Violations).
(b)-(e)
(No change.)
[
(f)
For cost reports pertaining
to providers' fiscal years ending in calendar year 1994, 1995 or 1996, each
provider entity or its designated agent(s) must allow access to any and all
records necessary to verify information submitted to DHS on cost reports.
This requirement includes records pertaining to related party transactions
or other business activities engaged in by the provider.]
[
(1)
For nursing facilities, failure to allow access
to any and all records necessary to verify information submitted to DHS on
cost reports may result in vendor hold as specified in §19.1810 of this
title (relating to Vendor Hold).]
[
(2)
For all other programs, failure to allow
access to any and all records necessary to verify information submitted to
DHS on cost reports 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 §20.111 of this
title (relating to Administrative Contract Violations).]
(f)
[
(g)
] For cost reports pertaining
to providers' fiscal years ending in calendar year 1997 and subsequent years,
each provider entity or its designated agent(s) must allow access to any and
all records necessary to verify information submitted to DHS on cost reports.
This requirement includes records pertaining to related party transactions
or other business activities engaged in by the provider.
(1)
For nursing facilities, failure to allow access to any
and all records necessary to verify information submitted to DHS on cost reports
may result in vendor hold as specified in §19.2703 of this title (relating
to Vendor Hold).
(2)
For all other programs, failure to allow access to
any and all records necessary to verify information submitted to DHS on cost
reports 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 §20.111 of this title (relating
to Administrative Contract Violations).
(g)
[
(h)
] A contracted provider may
request an informal review, and subsequently an appeal, of a desk review or
field audit disallowance in accordance with §20.110 of this title (relating
to Informal Reviews and Formal Appeals).
§20.110. Informal Reviews and Formal Appeals.
(a)
General provisions.
(1)-(2)
(No change.)
(3)
Subject matter of informal reviews and formal appeals.
An interested party may request an informal review or formal appeal [
as follows:
]
[
(A)
For cost reports pertaining
to providers' fiscal years 1994, 1995 and 1996, related to a DHS action or
determination regarding desk review or field audit exclusions or adjustments,
taken specifically in regard to the interested party.]
[
(B)
]
[
For cost reports pertaining to providers'
fiscal years ending in calendar year 1997 and subsequent years,
] regarding
a DHS action or determination under §20.102 of this title (relating to
General Principles of Allowable and Unallowable Costs), §20.103 of this
title (relating to Specifications for Allowable and Unallowable Costs), §20.104
of this title (relating to Revenues), and §20.105 (relating to General
Reporting and Documentation Requirements, Methods and Procedures), or program-specific
allowable or unallowable costs, taken specifically in regard to the interested
party.
(b)
(No change.)
(c)
Informal review.
(1)
An interested party who disputes a DHS action or determination
under this chapter may request an informal review under this section. The
purpose of an informal review is to provide for the informal and efficient
resolution of the matters in dispute. An informal review is not a formal administrative
hearing, but is a prerequisite to obtaining a formal administrative hearing
and is conducted according to the following procedures:
(A)
The interested party must contact the
Rate Analysis
Department
[
commissioner of DHS
] in writing
by U.S.
mail or special mail delivery
within 20 calendar days of the date on
DHS's written notification of the exclusions or adjustments to request an
informal review.
(B)
(No change.)
(2)
(No change.)
(d)
(No change.)
§20.111. Administrative Contract Violations.
The Texas Department of Human Services (DHS) may take the following
actions for administrative contract violations.
(1)
DHS grants the following compliance
periods for administrative contract violations:
(A)
For failure to submit a cost report by the
due date, DHS grants the provider a compliance period of no more than 15 calendar
days.
(B)
For all other administrative contract violations,
[
(1)
]
DHS grants the provider a compliance
period of no more than 30 calendar days to correct a contract violation. At
the end of the compliance period, if DHS determines that a contract violation
is not corrected, but determines that the provider has made substantial progress
toward correcting the contract violation, DHS may grant an additional one-time
extension period of up to 15 calendar days.
(2)-(3)
(No change.)
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State, on March 28, 2000.
TRD-200002222
Paul Leche
General Counsel
Texas Department of Human Services
Earliest possible date of adoption: May 14, 2000
For further information, please call: (512) 438-3108