37.40.345    ALLOWABLE COSTS

(1) This rule applies for purposes of determining allowable costs for cost reporting periods beginning on or after July 1, 1991. Allowable costs for cost reporting periods beginning prior to July 1, 1991 will be determined in accordance with rules for allowable costs then in effect.

(2) For purposes of reporting and determining allowable costs, the department hereby adopts and incorporates herein by reference the Provider Reimbursement Manual (PRM-15), published by the United States Department of Health and Human Services, Social Security Administration, which provides guidelines and policies to implement Medicare regulations and principles for determining the reasonable cost of provider services furnished under the Health Insurance for Aged Act of 1965, as amended. A copy of the PRM-15 may be obtained through the Department of Public Health and Human Services, Senior and Long Term Care Division, P.O. Box 4210, 111 N. Sanders, Helena, MT 59604-4210. Applicability of the PRM-15 is subject to the exceptions and limitations specified in this rule.

(a) The term "allowable costs" means costs which are allowable under the provisions of this subchapter and which are considered in determining the costs of providing Medicaid nursing facility services. The determination that a cost is an allowable cost does not require the department to reimburse the provider for that cost. Providers will be reimbursed only as specifically provided in these rules.

(3) For purposes of reporting costs as required in ARM 37.40.346, allowable costs will be determined in accordance with the PRM-15, subject to the exceptions and limitations provided in these rules, including but not limited to the following:

(a) Return on net invested equity is an allowable cost only for providers of intermediate care facility services for individuals with intellectual disabilities which provide services on a for-profit basis.

(b) Allowable property costs are limited as follows:

(i) The capitalized costs of movable equipment are not allowable in excess of the fair market value of the asset at the time of acquisition.

(ii) Property-related interest, whether actual interest or imputed interest for capitalized leases, is not allowable in excess of the interest rates available to commercial borrowers from established lending institutions at the date of asset acquisition or at the inception of the lease.

(iii) Leases must be capitalized according to generally accepted accounting principles.

(iv) Depreciation of real property and movable equipment must be in accordance with American hospital association guidelines. Depreciation of real property and movable equipment based upon accelerated cost recovery guidelines is not an allowable cost.

(v) In accordance with sections 1861(v) (1) (O) and 1902(a) (13) of the Social Security Act, allowable property costs shall not be increased on the basis of a change in ownership which takes place on or after July 18, 1984. Section 1861(v) (1) (O) and section 1902(a) (13) of the Social Security Act are hereby adopted and incorporated herein by reference. The cited statutes are federal statutes governing allowability of certain facility property costs for purposes of Medicare and Medicaid program reimbursement. Copies of these sections may be obtained through the Department of Public Health and Human Services, Senior and Long Term Care Division, P.O. Box 4210, 111 N. Sanders, Helena, MT 59604-4210.

(c) Administrator compensation is allowable only as determined according to the PRM-15 provisions relating to owner compensation, and as specifically limited in this rule.

(i) For purposes of reporting and determining allowable administrator compensation, administrator compensation includes:

(A) all salary paid to the administrator for managerial, administrative, professional or other services;

(B) all employee benefits except employer contributions required by state or federal law for FICA, workers' compensation insurance (WCI) , federal unemployment insurance (FUI) , and state unemployment insurance (SUI) ;

(C) all deferred compensation either accrued or paid;

(D) the value of all supplies, services, special merchandise, and other valuable items paid or provided for the personal use or benefit of the administrator;

(E) wages of any provider employee to the extent such employee works in the home of the administrator;

(F) the value of use of an automobile owned by the provider business to the extent used by the administrator for uses not related to patient care;

(G) personal life, health, or disability insurance premiums paid by the provider on the administrator's behalf;

(H) the rental value of any portion of the facility occupied by the administrator as a personal residence;

(i) the value of any other remuneration, compensation, fringe, or other benefits whether paid, accrued, or contingent.

(d) Allowable costs include employee benefits as follows:

(i) Employee benefits are defined as amounts accrued on behalf of an employee, in addition to direct salary or wages, and from which the employee or his beneficiary derives a personal benefit before or after the employee's retirement or death, if uniformly applicable to all employees. An item is an employee benefit only if it directly benefits an individual employee and does not directly benefit the owner, provider, or related parties.

(ii) Employee benefits include all employer contributions which are required by state or federal law, including FICA, WCI, FUI, SUI.

(iii) Costs of recreational activities or facilities available to employees as a group, including but not limited to condominiums, swimming pools, weight rooms and gymnasiums, are not allowable.

(iv) For purposes of this rule, an employee is one from whose salary or wages the employer is required to withhold FICA. Stockholders who are related parties to the corporate providers, officers of a corporate provider, and sole proprietors and partners owning or operating a facility are not employees even if FICA is withheld for them.

(v) Accrued vacation and sick leave are employee benefits if the facility has in effect a written policy uniformly applicable to all employees within a given class of employees, and are allowable to the extent they are reasonable in amount.

(e) Bad debts, charitable contributions and courtesy allowances are deductions from revenue and are not allowable costs.

(f) Revenues received for services or items provided to employees and guests are recoveries of cost and must be deducted from the allowable cost of the related items.

(g) Dues, membership fees, and subscriptions to organizations unrelated to the provider's provision of nursing facility services are not allowable costs.

(h) Charges for services of a chaplain are not an allowable cost.

(i) Subject to (4) , fees for management or professional services (e.g., management, legal, accounting or consulting services) are allowable to the extent they are identified to specific services and the hourly rate charged is reasonable in amount. In lieu of compensation on the basis of an hourly rate, allowable costs may include compensation for professional services on the basis of a reasonable retainer agreement which specifies in detail the services to be performed. Documentation that such services were in fact performed must be maintained by the provider. If the provider elects compensation under a retainer agreement, allowable costs for services specified under the agreement are limited to the agreed retainer fee.

(j) Travel costs and vehicle operating expenses related to resident care are allowable to the extent such costs are reasonable and adequately documented.

(i) Vehicle operating costs will be allocated between business and personal use based on actual mileage logs, a percentage derived from a sample mileage log and pre-approved by the department, or any other method pre-approved by the department.

(ii) For vehicles used primarily by an administrator, any portion of vehicle costs allocated to personal use shall be included as administrator compensation and subject to the limits specified in (3) (c) .

(iii) Allowable costs include automobile depreciation calculated on a straight-line basis, subject to salvage value, with a minimum of a three-year useful life. The total of automobile depreciation and interest, or comparable lease costs will not be allowable in excess of $7,500 per year.

(iv) Public transportation costs will be allowable only at tourist or other available commercial rate (not first class) .

(k) Allowable costs for purchases, leases or other transactions between related parties are subject to the following limitation:

(i) Allowable cost of services, facilities and supplies furnished to a provider by a related party or parties shall not exceed the lower of costs to the related party or the price of comparable services, facilities or supplies obtained from an unrelated party. A provider must identify such related parties and costs in the annual cost report.

(4) Costs, including attorney's fees, in connection with court or administrative proceedings are allowable only to the extent that the provider prevails in the proceeding. Where such proceedings are related to specific reimbursement amounts, the proportion of costs which are allowable shall be the percentage of costs incurred which equals the percentage derived by dividing the total cost or reimbursement on which the provider prevails by the total cost or reimbursement at issue.

History: 53-2-201, 53-6-113, MCA; IMP, 53-6-101, 53-6-113, MCA; NEW, 1991 MAR p. 2050, Eff. 11/1/91; AMD, 1992 MAR p. 1617, Eff. 7/31/92; AMD, 1993 MAR p. 1385, Eff. 7/1/93; AMD, 1998 MAR p. 1749, Eff. 6/26/98; AMD, 1999 MAR p. 1393, Eff. 6/18/99; TRANS, from SRS, 2000 MAR p. 489; AMD, 2000 MAR p. 492, Eff. 2/11/00; AMD, 2003 MAR p. 1294, Eff. 7/1/03; AMD, 2016 MAR p. 1071, Eff. 7/1/16.