Tenn. Comp. R. & Regs. 1200-13-06-.09

Current through December 10, 2024

Section 1200-13-06-.09 - FOOTNOTES AND INSTRUCTIONS FOR THE NURSING FACILITY LEVEL I COST REPORT

(1)General

1. Enter the NF-1 Provider number as issued by the Tennessee Department of Health and the NF-2 Provider number as issued by Medicare. Providers with numbers other than NF-1 and NF-2 may include them on the Level II line.

2. Enter name of facility exactly as shown on the license (permit) to operate issued by the Tennessee Department of Health.

3. Cash basis accounting is not acceptable for purposes of this report. All amounts must be reported in whole dollars.

4. Adequate financial records, statistical data, and source documents must be maintained for proper determination of costs under the program.

B.Statistical Data

5. All statistics to be reported in this section will be for the same period as the accounting period covered by this report.

6. Possible bed days should be the sum of the count of the number of licensed beds for each day of the accounting period.

7. An inpatient day is that period of service rendered a patient between the census taking hours on two successive days, the day of discharge being counted only when the patient was admitted that same day. All days charged for must be included in the patient day statistics including leave days, reserved bed days, etc. A census will be recorded each day during the accounting period. All such records must be available for verification by the Comptroller's Office. All inpatient days must be identified by the categories indicated.

8. Report all meals provided to patients, employees, guests, and owners. The cost of meals provided to owners must be included in compensation stated in Section E. Adequate meal records must be maintained.

E.Ownership of Facility; Compensation of Owners, Administrators, and Relatives of Owners and Administrators; Related Party Transactions, Including Home Office Costs; Charge Rates; and Patient Transportation

9. Controlling interest is defined as a person or entity that:

(a) has an ownership interest totaling five percent (5%) or more in a disclosing entity,

(b) has an indirect ownership interest equal to five percent (5%) or more in a disclosing entity,

(c) has a combination of direct and indirect ownership interest obligation secured by the disclosing entity if that interest equals at least five percent (5%) of the value of the property or assets of the disclosing entity,

(d) is an officer or director of a disclosing entity that is organized as a corporation, or

(e) is a partner in a disclosing entity that is organized as a partnership.

Indirect ownership interest is defined as any ownership interest in an entity that has an ownership interest in the disclosing entity. This includes an ownership interest in any entity that has an indirect ownership interest in the disclosing entity.

The amount of indirect ownership interest is determined by multiplying the percentages of ownership in each entity. EXAMPLE: A owns ten percent (10%) of the stock of Corporation B which owns eighty percent (80%) of the stock of the disclosing entity. A's interest is an eight percent (8%) indirect ownership interest in the disclosing entity and must be disclosed.

The amount of ownership, mortgage, deed of trust, note, or other obligation is determined by multiplying the percentage owned in the obligation by the percentage of the disclosing entity's assets used to secure the obligation. EXAMPLE: A owns ten percent (10%) of a note secured by sixty percent (60%) of the provider's assets. A's interest in the provider's assets is six percent (6%) and must be disclosed.

10. Disclosing entities are defined as hospitals, skilled nursing facilities, clinical laboratories, renal disease facilities, health maintenance organizations, and rural health clinics (as established by P. L. 95210) under Title XVIII (Medicare), entities (other than practitioners or groups of practitioners) that furnish or arrange for the furnishing of services under the Title XIX or Title V (Children's Special Service) programs; fiscal intermediaries, fiscal agents, and carriers participating in Medicare or Medicaid; and providers of health related services under the Title XX program.

11. Information relating to ownership shall be maintained at the facility and available for audit and upon request at any time.

12. The amounts of business transacted with entities that are not related entities need not be disclosed in the cost report. However, in the event of a request, the disclosure of the amounts and the ownership of the business entity with whom the provider transacted business of more than $25,000 or five percent or more of the total operating expenses of the provider, whichever is less, may be required within 30 days of the request.

13. For reimbursement purposes, a reasonable allowance or compensation for services of an owner or persons related to an owner is an allowable cost, provided the services are performed in a necessary function. The requirement that the function be necessary means that had the owner not rendered the services, the institution would have had to employ another person to perform them. The services must be related to patient care and pertinent to the operation and sound management of the institution.

Total compensation to such persons must be listed in Section E, Items 1 and 2. Where such amounts include items other than salaries, a schedule must be attached that identifies the amounts and the method of assigning values to these benefits. All such costs included in Section F must be reported in Section E.

The Comptroller's Office will review these amounts and compare them with allowable compensation ranges and make necessary adjustments. The Comptroller will consider the duties, responsibilities, and managerial authority of the person as well as the services performed for other institutions and his engagements in other occupations. Only one fulltime position, or its equivalent will be allowed for each person. The duties performed, time spent, and compensation received by such a person must be substantiated by appropriate records. Allowable ranges can be found in Chapter 1200-13-6-.11.

14. Complete Section E, Item 2 only for individuals who are not owners of the facility. If the individual is related to any owner by blood or marriage, this relationship must be indicated in Column 3. See PRM, Part 1, Section 902.5.

15. All loan transactions with related parties as defined in footnotes 9 and 10 shall be fully disclosed in Section E and the corresponding interest expense shall be disallowed in Section G.

16. The hospital parent or a hospital-based nursing home shall not be considered as a home office if the hospital is a regular provider in the Medicaid hospital program and files the appropriate Medicare-Medicaid hospital cost report in a timely manner. Costs allocated to the nursing home on the hospital's Medicare-Medicaid cost report are includable in Section F of this cost report. These amounts do not have to be audited by the Certified Public Accountant or licensed Public Accountant if significant portions of the corresponding expenses before allocation are apportioned to the hospital and prior approval is received from the Comptroller's Office. The report by the Certified Public Accountant must disclose the amounts allocated to the hospital and nursing facility, the bases used, and the corresponding figures which were not included in the audit.

17. Home Office costs directly related to those services performed for individual providers which relate to patient care, plus an appropriate share of indirect costs (overhead, rent, administrative salaries, etc.) may be allowable to the extent they are reasonable. Home Office costs or related organization costs that are not otherwise allowable costs when incurred directly by the provider cannot be allowable costs when allocated to providers. Nursing facility cost reports will not be processed until the home office costs are submitted.

F.Operating Expenses

18. Itemized schedules must be attached to support advertising, public relations, "other," and "purchased services" accounts. Amounts not supported will be disallowed.

Enter in the appropriate classification the number of personnel employed full-time as of the end of the fiscal period covered by this statement. Report the fulltime equivalent (FTE) of all personnel working in the particular classification. For example, if five people are employed full-time as LPNs, one person is employed as an LPN one day per week (eight hours per day), and another person works as an LPN two days per week (eight hours per day), the total LPNs to be reported should be 5.6 full-time equivalent employees. The number of personnel in each particular classification under Section F, Column (4), "FTEs", must coincide with the salaries reported in each particular classification of Section F, Column (2), "Amount of Expense". Payroll records are to be available for verification by the Comptroller's Office.

19. All facilities should properly identify and include in Section F. "Operating Expense," the cost of providing to all patients the medical supplies, equipment, and services specified by the Department of Health as covered services. These are items and services (per the Department of Health contract with all facilities) for which the facility may not receive extra payments from Medicaid patients, their relatives or others.

20. Include the cost of covered supplies only. Do not include drugs or pharmacy items that are not covered by the NF-1 program. Drugs and pharmacy should be included in item F.9.

21. Psychiatric and Psychological Services can be provided only to ICF/MR patients in an ICF/MR licensed facility.

22. The purpose of Section G, "Adjustments for Calculating Allowable Routine Operating Expense" is to determine the cost of room and board, nursing care, medical and nursing supplies, and other services as specified and defined by the Department of Health as NF-1 covered services. Consequently, the cost of any items or services not a part of the cost of providing NF-1 covered services included in Section F, "Operating Expense" are to be deducted from operating expenses in Section G. Accounting and other records of participating facilities are subject to audit and verification by the Comptroller's Office for proper determination of cost of covered services. In addition to the items specifically identified in Section G, the following are also expenses not considered a part of the cost of providing routine service, and should be deducted. This list is not to be considered all inclusive. Generally, where an item is not specifically addressed, Medicare reimbursement principles apply.

a. Interest paid:

(1) On borrowed funds used for a non-allowable expenditure.

(2) On borrowed funds which create excess working capital.

(3) On borrowed funds used for investing in other than provider's health care operations.

(4) To partners (owners), stockholders, or related organizations or relatives.

(5) On borrowed funds used to fund depreciation.

b. Any imputed value of produce, supplies or space donated to the provider.

c. Purchase discounts, cash discounts, trade discounts, quantity discounts or allowances.

d. Purchase refunds or rebates.

e. Costs which are not necessary or related to patient care.

f. Costs of non-competing covenant agreements.

g. Insurance premiums paid on the lives of owners, officers, and key personnel, if the provider is the direct or indirect beneficiary. If another party is beneficiary, the premiums are to be considered as compensation to the respective owner, officer, or key employee and should be disclosed separately.

h. Cost of personal comfort items and other non-covered items, as may be specified and defined by the Department of Health.

i. Cost of luxury items such as TV, telephone, and radio in patient rooms. (This does not include those items placed in lounges or recreation rooms to be used by all patients).

j. Any fines, penalties, or interest paid on any tax payments or interest charges on overdue payables.

k. Federal, State, or local income taxes, or excess profit taxes.

l. Any taxes for which exemptions are available but not taken.

m. Sales taxes collected by the provider and remitted to the state.

n. Real estate taxes and other expenses on property purchased and held for investment or expansion, and not used in rendering patient service.

o. Self employment taxes applicable to owners, partners, members of joint ventures, etc.

p. Casualty and other losses such as liability, theft, larceny, embezzlement, that are insurable but uninsured. (When insured, the insurance premiums and cost of deductibles for these losses are allowable). Medicare principles must apply.

q. Advertising costs incurred:

(1) To raise funds for the provider.

(2) Which are designed to encourage physicians to utilize the provider's facilities in their capacity as an independent practitioner.

(3) In connection with the issuance of the provider's own stock or sale of stock held by the provider in another corporation.

(4) Which seek to increase patient population or utilization of the provider's facilities by the general public.

r. Membership dues, initiation fees, subscription costs or special assessments paid to Social, Fraternal, or other organizations whose activities are unrelated to the profession or business of their members.

s. Cost of private duty nurses and attendants.

t. Travel expenses which are personal in nature, not proper or related to patient care, and auto expenses applicable to non-business uses of the vehicles. Detailed justification for out of state travel must be retained for audit verification.

u. Any other costs which are identified and specified as non-allowable by the Medicaid Program manuals, or federal or state rules or regulations.

23. The cost of excludable expenses should be deducted. In the relatively few instances where such costs cannot be adequately determined, deduct the revenue received therefrom. If the amount shown is revenue enter "R" as the base.

24. Cost of facilities furnished to owners, administrators, and other non-patients must be determined on a reasonable basis. Where the nursing home has no plan for determining reasonable charges for these facilities, the patient charge schedule may be used by the Comptroller of the Treasury in arriving at the amount of exclusion.

25. In Section G. Item 2bb any costs or expenses included in Section F, "Operating Expense," for the items or services for which Medicaid NF-1 patients may be charged extra by the facility in addition to the established reimbursable cost rate of the facility are to be deducted from operating expense.

26. Facilities with no ancillary or extra charge areas should omit Sections H and I.

H.Allocation of Cost to Routine, Ancillary and Extra Charge Areas

(Facilities with no ancillary or extra charge areas can omit this section).

27. The statistical bases below shall be used to apportion indirect costs to ancillary and extra charge areas unless prior approval is obtained in writing from the Comptroller of the Treasury.

Cost Item	Basis
1. Administration and General	Direct Costs (Section F)
2. Employee Benefits	Salaries
3. Dietary	Meals Served
4. Housekeeping	Square Feet or Actual Time Spent
5. Laundry	Pounds
6. Plant Operation and Maintenance	Square Feet
7. Medical and Nursing	Actual Cost
8. Recreational Activities	Time Spent
9. Social Services	Time Spent
10. Property Expenses	Square Feet
11. Building Depreciation	Square Feet
12. Equipment and Other Depreciation	Dollar Value
13. Any other cost which should be	Any reasonable basis
allocated to Ancillary or	approved by the State
Extra-Charge areas	Comptroller's Office

The first line under each cost item to be allocated should show the allocation statistics used to apportion the total cost. The second line should show the costs after allocation. The allocation formula is:

Area Statistic X Total Cost = Area Cost Total Statistic

J.Patient Log Summary of Charges

28. Routine charges must be based on the facility's established daily charge rate before contractual allowances. Ancillary charges (Section J) do not apply to Medicaid NF1 recipients.

29. If a facility is rendering only one level of care, the percentages of costs of the NF-1 program will be determined as a percentage of Medicaid NF-1 patient days to total patient days (Section K, Item a). If a facility is rendering more than one level of care, the percentage of costs to the NF-1 program will be determined as a percentage of Medicaid NF-1 covered charges to total covered charges (Section K, Item b).

L.Depreciation and Amortization Schedule

30. The Depreciation and Amortization Schedule (Section L) must be completed. Fixed Asset cost must agree with the Fixed Asset cost by classification shown in Section C. Do not include land, as land is not considered a depreciable asset. The sum of the current period total amortization expense reported in Section L and the current year unamortized expense reported in Section C.1.c. (Items (5) and (6)) should equal the unamortized expense reported in Section C.1.c. (Items (5) and (6)) of the prior period cost report.

N. Statement of Equity Capital

31. Equity Capital means the net worth of a provider, excluding those assets not related to patient care. Specifically, Equity Capital, includes:

(a) a provider's investment in plant, property, and equipment (net of depreciation and associated long-term debt) related to patient care plus funds deposited by a provider who leases plant, property, and equipment related to patient care and is required by terms of the lease to deposit such funds (net of noncurrent debt related to such investment or deposited funds) and

(b) net working capital maintained for necessary and proper operation of patient care activities.

Providers of chain organizations may assign an appropriate share of the equity capital of the home office to each facility. This assignment must be shown in the home office cost report. Debt representing loans from partners, stockholders, or related organizations and for which the interest is not an allowable cost shall be considered as equity capital and shall not be subtracted in the determination of (a) or (b) above.

Investments, excess fixed assets, excess inventory, goodwill, loans to officers, owners, related organizations, or employees, uncollectible accounts and notes receivable, cash in excess of reasonable needs, and other assets, current or noncurrent, that are not reasonably related to patient care must be excluded from equity capital. Further, any capital expenditure that has not been approved by the Tennessee Health Facilities Commission or its successor agency in accordance with state law must be excluded from equity capital.

If the current year's beginning equity capital does not agree with the prior year's ending equity capital shown on the prior year's cost report, Section N, Statement of Equity Capital, a reconciliation must be attached.

All entries on line 1c, 1d, or 1e must be dated. Any changes in equity capital reported on lines 1c, 1d, and 1e must be supported by a schedule showing the date and amount of each change that has occurred during the period. EXAMPLE - If the beginning balance of a loan to an owner is $10,000 and the ending balance is $12,000 and the net change of $2,000 occurred at different dates in different amounts (e.g., on February 15, the owner repaid $1,000; on April 20, the owner repaid $1,000; on June 10, the owner borrowed $3,000; on September 5, the owner repaid $2,000; and on October 20, the owner borrowed $3,000) each increase and/or decrease during the period must be dated with the appropriate amounts reported separately. A return on equity amount cannot be calculated unless the changes are dated and the amounts are reported accurately.

32. Reserved

Tenn. Comp. R. & Regs. 1200-13-06-.09

Original rule filed January 12, 1987; effective February 26, 1988. Amendment filed December 1, 1988; effective January 15, 1989. Amendment filed September 14, 1992; effective October 29, 1992. Amendment filed August 17, 1995; effective October 31, 1995. Amendment filed January 21, 2000; effective April 5, 2000.

Authority: T.C.A. §§ 4-5-202, 12-4-301, 71-5-105, and 71-5-109.