Code of Massachusetts Regulations
957 CMR - CENTER FOR HEALTH INFORMATION AND ANALYSIS
Title 957 CMR 7.00 - Nursing Facilities Cost Reporting Requirements
Section 7.03 - Reporting Requirements
Universal Citation: 957 MA Code of Regs 957.7
Current through Register 1531, September 27, 2024
(1) Required Cost Reports.
(a)
Nursing Facility Cost
Report. Each Provider must complete and file a Nursing Facility
cost report each calendar year with the Center. The Nursing Facility cost
report must contain the complete financial condition of the Provider, including
all applicable management company, central office, and real estate expenses. If
a Provider has closed on or before November 30th,
the Provider is not required to file an HCF-1 report.
(b)
Realty Company Cost
Report. A Provider that does not own the real property of the
Nursing Facility and pays rent to an affiliated or non-affiliated realty trust
or other business entity must file or cause to be filed a realty company cost
report with the Center.
(c)
Management Company Cost Report. A Provider must file a
separate management company cost report with the Center for each entity for
which it reports management or central office expenses related to the care of
Massachusetts Publicly-aided Residents. If the Provider identifies such costs,
the Provider must certify that costs are reasonable and necessary for the care
of Publicly-aided Residents in Massachusetts.
(d)
Financial
Statements. If a Provider or its parent organization is required
or elects to obtain independent audited financial statements for purposes other
than
957 CMR 7.00, the Provider
must file a complete copy of its audited financial statements with the Center,
that most closely correspond to the Provider's Nursing Facility cost report
fiscal period. If the Provider or its parent organization does not obtain
audited financial statements but is required or elects to obtain reviewed or
compiled financial statements for purposes other than
957 CMR 7.00, the Provider
must file with the Center a complete copy of its financial statements that most
closely correspond to the Nursing Facility cost report fiscal period. Financial
statements must accompany the Provider's Nursing Facility cost report filing.
Nothing in this section shall be construed as an additional requirement that
nursing homes complete audited, reviewed, or compiled financial statements
solely to comply with the Center's reporting requirements.
(e)
CMS-2540
Reports. State operated Nursing Facilities that meet the
definition in
42 CFR
433.50(a)(i) must file a
CMS-2540 report with the Center annually. The State operated Nursing Facility
must report the final disposition made by the Medicare intermediary.
(2) General Cost Reporting Requirements.
(a)
Accrual Method. Providers must complete all required
reports using the accrual method of accounting.
(b)
Documentation of Reported
Costs. Providers must maintain accurate, detailed and original
financial records to substantiate reported costs for a period of at least five
years following the submission of required reports or until the final
resolution of any appeal of a rate for the period covered by the report,
whichever is later. Providers must maintain complete documentation of all of
the financial transactions and census activity of the Provider and affiliated
entities including, but not limited to, the books, invoices, bank statements,
canceled checks, payroll records, governmental filings, and any other records
necessary to document the Provider's reported costs. Providers must be able to
document expenses relating to affiliated entities for which it has identified
costs related to the care of Massachusetts Publicly-aided Residents whether or
not they are Related Parties.
(c)
Fixed Asset Ledger. Providers must maintain a fixed
asset ledger that clearly identifies each asset for which expenses are
reported, including location, date of purchase, cost, salvage value,
accumulated depreciation, and the disposition of sold, lost or fully
depreciated assets.
(d)
Job Descriptions and Time Records. Providers and
management companies must maintain written job descriptions including
qualifications, duties, responsibilities, and time records such as time cards
for all positions that the Provider identifies as related to the care of
Massachusetts Publicly-aided Residents. Facilities organized as sole
proprietors or partnerships in which the sole proprietor or partner functions
as administrator with no reported administrator salary or benefits must
maintain documentation to support the provision of administrator services by
the sole proprietor or partner.
(e)
Indirect Restorative Therapy Services Record.
Providers must maintain a record of Indirect Restorative Therapy services
documented by a written summary available for inspection in the Nursing
Facility as required by the Department in accordance with
105
CMR 150.010(F): Records and
Reports.
(f)
Other Cost
Reporting Requirements.
1.Administrative
Costs. The following expenses must be reported as administrative:
a.All compensation, including payroll taxes
and benefits, for the positions of administrator, assistant administrator,
Administrator-in-training, business manager, secretarial and clerical staff,
bookkeeping staff, and all staff or consultants whose duties are primarily
administrative rather than directly related to the provision of on-site care to
residents or to the on-site physical upkeep of the Nursing Facility;
b.Expenses related to tasks performed by
persons at a management level above that of an on-site Provider department
head, that are associated with monitoring, supervising, and/or directing
services provided to residents in a Nursing Facility as well as legal,
accounting, financial and managerial services or advice including computer
services and payroll processing; and
c.Expenses related to policy making, planning
and decision making activities necessary for the general and long-term
management of the affairs of a Nursing Facility, including but not limited to
the following: the financial management of the Provider, including the cost of
financial accounting and management advisory consultants, the establishment of
personnel policies, the planning of resident admission policies and the
planning of the expansion and financing of the Provider.
d.Providers must report the cost of
administrative personnel to the appropriate account. The cost of administrative
personnel includes all expenses, fees, payroll taxes, fringe benefits, salaries
or other compensation.
e.Providers
may allocate administrative costs among two or more accounts. The Provider must
maintain specific and detailed time records to support the
allocation.
2.Draw Accounts.
Providers may not report or claim proprietorship or partnership drawings as
salary expense.
3.Expenses that Generate
Income. Providers must identify the expense accounts that generate
income.
4.Fixed
Costs.
a.Additions. If the
square footage of the building is enlarged, Providers must report all Additions
and renovations as building Additions.
b.Allocation.
Providers must allocate all fixed costs, except Equipment, on the basis of
square footage. A Provider may elect to specifically identify Equipment related
to the Nursing Facility. The Provider must document each piece of Equipment in
the fixed asset ledger. If a Provider elects not to identify Equipment, it must
allocate Equipment on the basis of square footage.
c.Replacement of
Beds. If a Provider undertakes construction to replace beds, it
must write off the fixed assets that are no longer used to provide care to
Publicly-aided Residents and may not identify associated expenses as related to
the care of Massachusetts Publicly-aided Residents.
d.Fully Depreciated
Assets. Providers must separately identify fully depreciated
assets. Providers must report the costs of fully depreciated assets and related
accumulated depreciation on all Cost Reports unless they have removed such
costs and accumulated depreciation from the Provider's books and records.
Providers must attach a schedule of the cost of the retired Equipment,
accumulated depreciation, and the accounting entries on the books and records
of the Provider to the cost report when Equipment is retired.
e.Major Repair
Projects. Providers must report all expenditures for major repair
projects whose useful life is greater than one year, including, but not limited
to, wallpapering and painting as Improvements. Providers may not report such
expenditures as prepaid expenses.
5.Laundry Expense.
Providers must separately identify the expense associated with laundry services
for which non-Publicly-aided Residents are billed. Providers must identify such
expense as non-related to Medicaid patient care.
6.Mortgage Acquisition
Costs. Providers must classify Mortgage Acquisition Costs as other
assets. Providers may not add Mortgage Acquisition Costs to fixed asset
accounts.
7.Nursing
Costs. The costs must be associated with direct resident care
personnel and be required to meet federal and state laws.
8.Related Parties.
Providers must disclose salary expense paid to a Related Party and must
identify all goods and services purchased from a Related Party. If a Provider
purchases goods and services from a Related Party, it must disclose the Related
Party's cost of the goods and services.
(g)
Special Cost Reporting
Requirements.
1.Facilities in
which other programs are operated. If a Provider operates an adult day health
program, an assisted living program, or provides outpatient services, the
Provider may not identify expenses of such programs as related to the care of
Massachusetts Publicly-aided Residents.
a.If
the Provider converts a portion of the Provider to another program, the
Provider must identify the existing Equipment no longer used in Nursing
Facility operations and remove such Equipment from the Nursing Facility
records.
b.The Provider must
identify the total square footage of the existing Building, the square footage
associated with the program, and the Equipment associated with the
program.
c.The Provider must
allocate all shared costs, including shared capital costs, using a
well-documented and generally accepted allocation method. The Provider must
directly assign to the program any additional capital expenditures associated
with the program.
2.Hospital-based Nursing
Facilities. A Hospital-based Nursing Facility must file cost
reports on a fiscal year basis consistent with the fiscal year used in the
DHCFP-403 Hospital Cost Report and any successor state agency template cost
report. The Provider must:
a.identify the
existing Building Costs and Improvement costs associated with the Nursing
Facility. The Provider must allocate such costs on a square footage
basis.
b.report major moveable
Equipment and fixed Equipment in a manner consistent with the Hospital Cost
Report. In addition, the Provider must classify fixed Equipment as either
Building Improvements or Equipment in accordance with the definitions contained
in
957 CMR 7.02. The
Provider may elect to report major moveable and fixed Equipment by one of two
methods:
i.A Provider may elect to
specifically identify the major moveable and fixed Equipment directly related
to the care of Publicly-aided Residents in the Nursing Facility. The Provider
must maintain complete documentation in a fixed asset ledger that clearly
identifies each piece of Equipment and its cost, date of purchase, and
accumulated depreciation. The Provider must submit this documentation to the
Center with its first notification of change in beds.
ii.If the Provider elects not to identify
specifically each item of major moveable and fixed Equipment, the fixed
Equipment will be allocated to the extent allowable on a square footage
basis.
c.The Provider
must report additional capital expenditures directly related to the
establishment of the Nursing Facility within the hospital as Additions. Capital
expenditures that relate to the total plant will be allocated to the extent
allowable on a square footage basis.
d.The Provider must use direct costing
whenever possible to obtain operating expenses associated with the Nursing
Facility. The Provider must allocate all costs shared by the hospital and the
Nursing Facility using the statistics specified in the Hospital Cost Report
instructions. The Provider must disclose all analysis, allocations and
statistics used in preparing the Nursing Facility cost report.
(3) General Cost Principles. In order to report a cost as related to Medicaid patient care, a cost must satisfy the following criteria:
(a) The cost must be ordinary, necessary and
directly related to the care of Publicly-aided Residents;
(b) The cost must adhere to the Prudent Buyer
Concept;
(c) Payments to related
parties. Expenses otherwise allowable shall not be included for purposes of
determining rates under
101 CMR 206.00: Standard
Payments to Nursing Facilities where such expenses are paid to a Related Party
unless the Provider identifies any such Related party and expenses attributable
to it in the reports submitted under
957 CMR 7.00 and demonstrates
that such expenses do not exceed the lower of the cost to the Related Party or
the price of comparable services, facilities or supplies that could be
purchased elsewhere. The Center may request either the Provider or the Related
Party, or both, to submit information, books and records relating to such
expenses for the purpose of determining whether the expenses are
allowable;
(d)
Employee
Benefits. Only the Provider's contribution of Generally Available
Employee Benefits shall be deemed an allowable cost. Providers may vary
Generally Available Employee Benefits by groups of employees at the option of
the employer. To qualify as a Generally Available Employee Benefit, the
Provider must establish and maintain evidence of its nondiscriminatory nature.
Generally Available Employee Benefits shall include but are not limited to
group health and life insurance, pension plans, seasonal bonuses, child care,
and job related education and staff training. Bonuses related to profit,
private occupancy, or directly or indirectly to rates of reimbursement shall
not be included for calculation of prospective rates. Benefits which are
related to salaries shall be limited to allowable salaries. Benefits, including
pensions, related to non-administrative and non-nursing personnel will be part
of the other operating cost center. Benefits that are related to the Director
of Nurses, including pensions and education, shall be part of the Nursing Cost
Center. Providers may accrue expenses for employee benefits such as vacation,
sick time, and holidays that employees have earned but have not yet taken,
provided that these benefits are both stated in the written policy and are the
actual practice of the Provider and that such benefits are guaranteed to the
employee even upon death or termination of employment. Such expenses may be
recorded and claimed for reimbursement purposes only as of the date that a
legal liability has been established;
(e) The cost must be for goods or services
actually provided in the Nursing Facility;
(f) The cost must be reasonable;
and
(g) The cost must actually be
paid by the Provider. Costs not considered related to the care of Massachusetts
Publicly-aided Residents include, but are not limited to: costs discharged in
bankruptcy; costs forgiven; costs converted to a promissory note; and accruals
of self-insured costs based on actuarial estimates.
(h) A Provider must report the following
costs as non-allowable costs:
1.Bad debts,
refunds, charity and courtesy allowances and contractual adjustments to the
Commonwealth and other third parties;
2.Federal and state income taxes, except the
non income related portion of the Massachusetts Corporate Excise Tax;
3.Expenses not directly related to the
provision of resident care including, but not limited to, expenses related to
other business activities and fund raising, gift shop expenses, research
expenses, rental expense for space not required by the Department and
expenditure of funds received under federal grants for compensation paid for
training personnel and expenses related to grants of contracts for special
projects;
4.Compensation and fringe
benefits of residents on a Provider's payroll;
5.Penalties and interest, incurred because of
late payment of loans or other indebtedness, late filing of federal and state
tax returns, or from late payment of municipal taxes;
6.Any increase in compensation or fringe
benefits granted as an unfair labor practice after a final adjudication by the
court of last resort;
7.Expenses
for Purchased Service Nursing services purchased from temporary nursing
agencies not registered with the Department under regulation 105 CMR 157.00:
The Registration and Operation of Temporary Nursing Service Agencies or paid
for at rates greater than the rates established by EOHHS pursuant to
101
CMR 345.00: Temporary Nursing Services;
8.Any expense or amortization of a
capitalized cost that relates to costs or expenses incurred prior to the
opening of the Nursing Facility;
9.All legal expenses, including those
accounting expenses and filing fees associated with any appeal
process;
10.Prescribed legend drugs
for individual patients;
11.Recovery of expense items, that is,
expenses that are reduced or eliminated by applicable income including but not
limited to, rental of quarters to employees and others, income from meals sold
to persons other than residents, telephone income, vending machine income and
medical records income. Vending machine income shall be recovered against Other
Operating Costs. Other recoverable income shall be recovered against an account
in the appropriate cost group category, such as Administrative and General
Costs, Other Operating Costs, nursing costs, and capital costs. The cost
associated with laundry income which is generated from special services
rendered to private patients shall be identified and eliminated from claims for
reimbursement. Special services are those services not rendered to all patients
(e.g., dry cleaning, etc.). In the event that the cost of special services
cannot be determined, laundry income shall be recovered against laundry
expense;
12.Costs of ancillary
services required by a purchasing agency to be billed on a direct basis, such
as prescribed drugs and direct therapy costs; and
13.Accrued expenses which remain unpaid more
than 120 days after the close of the reporting year, excluding vacation and
sick time accruals, shall not be included in the prospective rates. Upon
receipt of satisfactory evidence of payment, the adjustment will be reversed
and include that cost, if otherwise allowable, in the applicable prospective
rates.
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