Current through Register Vol. 43, No. 39, September 26, 2024
(a) Non-working
owners and related parties. Remunerations paid to non-working owners or other
related parties, as defined in K.A.R. 30-10-200, shall not be considered an
allowable cost regardless of the name assigned to the transfer or accrual or
the type of provider entity making the payment. Each payment shall be
separately identified and reported as owner compensation in the
non-reimbursable and non-client related expense section of the cost report.
(b) Services related to client
care.
(1) If owners with 5% or more ownership
interest, spouses, or related parties actually perform a necessary function
directly contributing to client care, a reasonable amount shall be allowed for
such client care activity. The reasonable amount allowed shall be the lesser
of:
(A) The reasonable cost that would have
been incurred to pay a non-owner employee to perform the client-related
services actually performed by owners or other related parties, limited by a
schedule of salaries and wages based on the state civil service salary schedule
in effect when the cost report is processed until the subsequent cost report is
filed; or
(B) the amount of cash
and other assets actually withdrawn by the owner, spouse, or related parties.
(2) The client-related
functions shall be limited to those functions common to the industry and for
which cost data is available which are normally performed by non-owner
employees. The job titles for administrative and supervisory duties performed
by an owner, spouse, or related party shall be limited to the work activities
included in the schedule of the owner, spouse, or related party salary
limitations.
(3) The salary limit
shall also be pro-rated in accordance with subsection (c) of this regulation.
In no case shall the limitation exceed the highest salary limit on the
civil-service-based chart.
(4) The
owner, spouse, or related party shall be professionally qualified for those
functions performed which require licensure or certification.
(5) Cash and other assets actually withdrawn
shall include only those amounts or items actually paid or transferred during
the cost reporting period in which the services were rendered and reported to
the internal revenue service.
(6)
Any liabilities of the provider shall be paid in cash within 75 days after the
end of the accounting period.
(c) Allocation of owner, spouse, or related
party total work time for client-related functions. When any owner, spouse, or
related party performs a client-related function for less than a
full-time-equivalent work week, the compensation limit shall be pro-rated. The
time spent on each function within a facility or within all facilities in which
they have an ownership or management interest, shall be pro-rated separately by
function, but shall not exceed 100% of that person's total work time. Time
spent on other non-related business interests or work activities shall not be
included in calculations of total work time.
(d) Reporting owner, spouse, or related party
compensation on cost report. Owner, spouse, or related party compensation shall
be reported on the owner compensation line in the appropriate cost center for
the work activity involved. Any compensation paid to employees who have an
ownership interest of 5% or more, including employees at the central office of
a chain organization, shall be considered to be owner compensation. Providers
with professionally qualified owner, spouse, or related party employees
performing duties other than those for which they are professionally qualified
shall report the cost for such duties in the administrative cost center.
(e) Owner-administrator
compensation limitation.
(1) Reasonable
limits shall be determined by the agency for owner-administrator compensation
based upon the current civil service salary schedule.
(2) This limitation shall apply to the
salaries of each administrator and co-administrator of that facility and to
owner compensation reported in the administrative cost center of the cost
report. This limitation shall apply to the salary of the administrator and
co-administrator, regardless of whether they have any ownership interest in the
business entity.
(3) Each salary
in excess of the owner, spouse, or related party limitations determined in
accordance with subsections (b) and (c) of this regulation shall be transferred
to the owner compensation line in the administrative cost center and shall be
subject to the owner-administrator compensation limitation.
(f) Management consultant fees.
Fees for consulting services provided by the following professionally qualified
people shall be considered owner's compensation subject to the
owner-administrator compensation limit and shall be reported on the owner
compensation line in the administrative cost center if the actual cost of the
service is not submitted with the ICF-MR financial and statistical report:
(1) Related parties as defined in K.A.R.
30-10-200;
(2) current owners of
the provider agreement and operators of the facility;
(3) current owners of the facility in a
lessee-lessor relationship;
(4)
management consulting firms owned and operated by former business associates of
the current owners in this and other states;
(5) owners who sell and enter into management
contracts with the new owner to operate the facility; and
(6) accountants, lawyers and other
professional people who have common ownership interests in other facilities, in
this or other states, with the owners of the facility from which the consulting
fee is received.
(g)
Costs not related to client care. An allowance shall not be made for costs
related to investigation of investment opportunities, travel, entertainment,
goodwill, administrative or managerial activities performed by owners or other
related parties that are not directly related to client care. The effective
date of this regulation shall be October 1, 1991.
