Current through Register Vol. 53, No. 52, December 30, 2023
(a)
Nonallowable costs related to expenses and revenues. The
Department will not recognize as allowable costs the expenses or revenues of a
nursing facility related to:
(1) Nonworking
officers' or owners' salaries.
(2)
Fundraising expenses for capital and replacement items exceeding 5% of the
amount raised and, for operating expenses and cash flow, fundraising expenses
exceeding 10% of the amount raised.
(3) Free care or discounted
services.
(4) Parties and social
activities not related to resident care.
(5) Organizational memberships not necessary
to resident care.
(6) Personal
telephone service.
(7) Personal
television service.
(8) The direct
and indirect costs related to nonallowable cost centers, including gift, flower
and coffee shops, homes for administrators or pastors, convent areas and
nurses' quarters, except as provided in §
1187.55(3)
(relating to selected resident care and other resident related cost
policies).
(9) Vending
machines.
(10) Charitable
contributions.
(11) Employee and
guest meals.
(12) Pennsylvania
Capital Stock and Franchise Tax.
(13) Income tax.
(14) Ambulance costs.
(15) Promotional advertising, including a
yellow page listing larger than a minimum insert.
(16) Late payment penalties.
(17) Taxes based upon net income.
(18) Officers' and directors' life insurance,
including life insurance premiums necessary to obtain mortgages and other
loans.
(19) Bad debts or
contractual adjustments.
(20)
Collection expenses associated with bad debts.
(21) Losses on the sale of fixed and movable
assets.
(22) Remuneration of any
kind for any purpose, including travel expenses for members of the Board of
Directors.
(23) Dry cleaning,
mending or other specialty laundry services.
(24) Depreciation on fixed or movable
property, capital interest, amortization-capital costs and rental expense for
fixed property.
(25) Expenses or
revenues not necessary to resident care.
(26) Costs, including legal fees, accounting
and administrative costs, travel costs and the costs of feasibility studies,
attributable to the negotiation or settlement of the sale or purchase of a
capital asset-by acquisition or merger-for which payment has previously been
made under Title XVIII of the Social Security Act (42 U.S.C.A. §§
1395-1395yy) if the sale or purchase
was made on or after July 18, 1984.
(27) Letter of credit costs.
(28) Legal expenses related to an appeal or
action challenging a payment determination under this chapter until a final
adjudication is issued sustaining the nursing facility's appeal. If the nursing
facility prevails on some but not all issues raised in the appeal or action, a
percentage of the reasonable legal expenses is allowable based upon the
proportion of additional reimbursement received to the total additional
reimbursement sought on appeal.
(29) Nonstandard or nonuniform fringe
benefits.
(30) Return on net equity
and net worth.
(b)
Nonallowable costs related to revenue producing items. In
determining the operating costs of a nursing facility, the Department will not
allow costs related to:
(1) The sale of
laundry and linen service.
(2) The
sale of drugs to nonresidents.
(3)
The sale of medical and surgical supplies to nonresidents.
(4) The sale of clinical records and
abstracts.
(5) The rental of
quarters to employees and others.
(6) The rental of space within the nursing
facility.
(7) The payments received
from clinical specialists.
(8)
Discounts on purchases which include trade, quantity and time.
(9) Rebates and refunds of
expenses.
(c)
Income that reduces allowable costs.
(1) Except as provided in §
1187.56(3)(i)
(relating to selected administrative cost policies), any form of investment
income shall be used to reduce the allowable administrative interest
expense.
(2) Grants, gifts and
income designated by the donor for specific operating expenses are used to
reduce the allowable costs relating to the specific operating
expense.
(3) Recovery of insured
loss shall be used to reduce the allowable costs relating to the insured
loss.
(4) Applicable revenue
producing items, other than room and board, shall be used to reduce the related
allowable costs.
(5) Payments
received under an exceptional DME grant reduce the allowable cost of the major
movable property and related services and items in the cost centers where the
costs were originally reported in the MA-11.
(d)
Nonallowable direct nursing
facility payments. Costs for prescription drugs, physician services,
dental services, dentures, podiatry services, eyeglasses, appliances, X-rays,
laboratory services and other materials or services covered by payments, other
than MA or Medicare Part A, made directly to nursing facilities, including
Medicare Part B, Champus, Blue Cross, Blue Shield or other insurers or third
parties, are not allowable in determining net operating costs.
The
provisions of this §
1187.59 amended February 8, 2002,
effective retroactively November 1, 1999, 32 Pa.B.
734.
This section cited in 55 Pa. Code § 1187.51
(relating to scope).
