PURPOSE: This rule establishes a payment plan for nonstate-operated intermediate care facility for individuals with intellectual disabilities services. The plan describes principles to be followed by Title XIX intermediate care facility for individuals with intellectual disabilities providers in making financial reports and presents the necessary procedures for setting rates, making adjustments, and auditing the cost reports.

1. (1) Objectives. This rule establishes a payment plan for nonstate-operated intermediate care facility for individuals with intellectual disabilities (ICF/IID) services.

2. (2) General Principles.

   1. (A) The MO HealthNet program shall reimburse qualified providers of ICF/IID services based solely on the individual MO HealthNet participant’s days of care (within benefit limitations) multiplied by the facility’s Title XIX per diem rate less any payments made by participants.

   2. (B) Effective November 1, 1986, the Title XIX per diem rate for all ICF/IID facilities participating on or after October 31, 1986, shall be the lower of—

      1. 1. The average private pay charge;
      2. 2. The Medicare per diem rate, if appli-

cable;

1. 3. The rate paid to a facility on October

31, 1986, as adjusted by updating its base year to its 1985 fiscal year. Facilities which do not have a full twelve- (12-) month 1985 fiscal year shall not have their base years updated to their 1985 fiscal years. Changes in ownership, management, control, operation, leasehold interests by whatever form for any facility previously certified for participation in the MO HealthNet program at any time that results in increased capital costs for the successor owner, management, or leaseholder shall not be recognized for purposes of reimbursement; and

1. 4. However, any provider who does not

have a rate on October 31, 1986, and whose facility meets the definition in subsection (3)(J) of this rule, will be exempt from paragraph (2)(B)3., and the rate shall be determined in accordance with applicable provisions of this rule.

1. (C) This plan has an effective date of November 1, 1986, at which time prospective per diem rates shall be calculated for the remainder of the state’s FY-87 and future fiscal years. Per diem rates established by updating facilities’ base years to FY-85 may be subject to retroactive and prospective adjustment based on audit of the facilities’ new base year period.
2. (D) The Title XIX per diem rates as determined by this plan shall apply only to services furnished on or after November 1, 1986.

1. (3) Definitions.

   1. (A) Allowable cost areas. Those cost areas which are allowable for allocation to the MO HealthNet program based upon the principles established in this rule. The allowability of cost areas, not specifically addressed in this rule, will be based upon criteria of the Medicare Provider Reimbursement Manual (HIM- 15) and section (7) of this rule.
   2. (B) Average private pay charge. The average private pay charge is the usual and customary charge for non-MO HealthNet patients determined by dividing total non-MO HealthNet days of care into total revenue collected for the same service that is included in the MO HealthNet per diem rate, excluding negotiated payment methodologies with the Veterans Administration and the Missouri Department of Mental Health.
   3. (C) Committee. The advisory committee defined in subsection (6)(A) of this rule.
   4. (D) Cost report. The cost report shall detail the cost of rendering covered services for the fiscal reporting period. Providers must file the cost report on forms provided by and in accordance with the procedures of the department.
   5. (E) Department. The department, unless otherwise specified, refers to the Missouri Department of Social Services.
   6. (F) Director. The director, unless otherwise specified, refers to the director, Missouri Department of Social Services. 13 CSR 70-10

   7. (G) Effective date.

      1. 1. The plan effective date shall be

November 1, 1986.

1. 2. The effective date for rate adjust-

ments granted in accordance with section (6) of this rule shall be for dates of service beginning the first day of the month following the director’s, or his/her designee’s, final determination on the rate.

1. (H) ICF/IID. Nonstate-operated facilities certified to provide intermediate care for individuals with intellectual disabilities under the Title XIX program.
2. (I) Medicare rate. This is the allowable cost of care permitted by Medicare standards and principles of reimbursement.
3. (J) New construction. Newly built facilities or parts, for which an approved Certificate of Need (CON) or applicable waivers were obtained and which were newly completed and operational on or after November 1, 1986.
4. (K) New owners. Original owners of new construction.
5. (L) Providers. A provider under the Prospective Reimbursement Plan is a nonstate-operated ICF/IID facility with a valid participation agreement, in effect on or after October 31, 1986, with the Missouri Department of Social Services for the purpose of providing long-term care (LTC) services to Title XIX-eligible participants. Facilities certified to provide intermediate care services to individuals with intellectual disabilities under the Title XIX program may be offered a MO HealthNet participation agreement on or after January 1, 1990, only if 1) the facility has no more than fifteen (15) beds for individuals with intellectual disabilities, and 2) there is no other licensed residential living facility for individuals with intellectual disabilities within a radius of one-half (1/2) mile of the facility seeking participation in the MO Health- Net program.
6. (M) Reasonable and adequate reimbursement. Reimbursement levels which meet the needs of an efficiently and economically operated facility and which in no case exceed normal market costs.

7. (N) Related parties. Parties are related when—

   1. 1. An individual or group, regardless of

the business structure of either, where, through their activities, one (1) individual’s or group’s transactions are for the benefit of the other and the benefits exceed those which are usual and customary in the dealings;

1. 2. One (1) or more persons has an own-

ership or controlling interest in a party, and the person(s) or one (1) or more relatives of the person(s) has an ownership or controlling interest in the other party. For the purposes of this paragraph, ownership or controlling interest does not include a bank, savings bank, trust company, building and loan association, savings and loan association, credit union, industrial loan and thrift company, investment banking firm, or insurance company unless the entity, directly or through a subsidiary, operates a facility; or

1. 3. As used in section (3), the following

terms mean:

1. A. Indirect ownership/interest means

an ownership interest in an entity that has an ownership interest in another entity. This term includes an ownership interest in any entity that has an indirect ownership interest in an entity;

1. B. Ownership interest means the pos-

session of equity in the capital, in the stock, or in the profits of an entity;

1. C. Ownership or controlling interest

is when a person or corporation(s)—

1. (I) Has an ownership interest

totalling five percent (5%) or more in an entity;

1. (II) Has an indirect ownership

interest equal to five percent (5%) or more in an entity. The amount of indirect ownership interest is determined by multiplying the percentages of ownership in each entity;

1. (III) Has a combination of direct

and indirect ownership interest equal to five percent (5%) or more in an entity;

1. (IV) Owns an interest of five percent

(5%) or more in any mortgage, deed of trust, note, or other obligation secured by an entity, if that interest equals at least five percent (5%) of the value of the property or assets of the entity. The percentage of ownership resulting from the obligations is determined by multiplying the percentage of interest owned in the obligation by the percentage of the entity’s assets used to secure the obligation;

1. (V) Is an officer or director of an

entity; or

1. (VI) Is a partner in an entity that is

organized as a partnership;

1. D. Relative means persons related by

blood or marriage to the fourth degree of consanguinity; and

1. E. Entity means any person, corpora-

tion, partnership, or association.

1. (O) Rural. Those counties which are not defined as urban.
2. (P) Urban. The urban counties are standard metropolitan statistical areas including Andrew, Boone, Buchanan, Cass, Christian, Clay, Franklin, Greene, Jackson, Jasper, Jefferson, Newton, Platte, Ray, St. Charles, St. Louis, and St. Louis City.

1. (4) Prospective Reimbursement Rate Computation.

   1. (A) Except in accordance with other provisions of this rule, the provisions of this section shall apply to all providers of ICF/IID services certified to participate in Missouri’s MO HealthNet program.

      1. 1. ICF/IID facilities.

         1. A. Except in accordance with other

provisions of this rule, the MO HealthNet program shall reimburse providers of these LTC services based on the individual MO HealthNet-participant days of care multiplied by the Title XIX prospective per diem rate less any payments collected from participants. The Title XIX prospective per diem reimbursement rate for the remainder of state Fiscal Year 1987 shall be the facility’s per diem reimbursement payment rate in effect on October 31, 1986, as adjusted by updating the facility’s allowable base year to its 1985 fiscal year. Each facility’s per diem costs as reported on its Fiscal Year 1985 Title XIX cost report will be determined in accordance with the principles set forth in this rule. If a facility has not filed a 1985 fiscal year cost report, the most current cost report on file with the department will be used to set its per diem rate. Facilities with less than a full twelve- (12-) month 1985 fiscal year will not have their base year rates updated.

1. B. For state FY-88 and dates of ser-

vice beginning July 1, 1987, the negotiated trend factor shall be equal to two percent (2%) to be applied in the following manner: Two percent (2%) of the average per diem rate paid to both stateand nonstate-operated ICF/IID facilities on June 1, 1987, shall be added to each facility’s rate.

1. C. For state FY-89 and dates of ser-

vice beginning January 1, 1989, the negotiated trend factor shall be equal to one percent (1%) to be applied in the following manner: One percent (1%) of the average per diem rate paid to both stateand nonstate-operated ICF/IID facilities on June 1, 1988, shall be added to each facility’s rate.

1. D. For state FY-91 and dates of ser-

vice beginning July 1, 1990, the negotiated trend factor shall be equal to one percent (1%) to be applied in the following manner: One percent (1%) of the average per diem rate paid to both stateand nonstate-operated ICF/IID facilities on June 1, 1990, shall be added to each facility’s rate.

1. E. FY-96 negotiated trend factor. All

nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates effective for dates of service beginning January 1, 1996, of six dollars and seven cents ($6.07) per patient day for the negotiated trend factor. This adjustment is equal to four and six-tenths percent (4.6%) of the weighted average per diem rates paid to nonstate-operated ICF/IID facilities on June 1, 1995, of one hundred and thirty-one dollars and ninety-three cents ($131.93).

1. F. State FY-99 trend factor. All non-

state-operated ICF/IID facilities shall be granted an increase to their per diem rates effective for dates of service beginning July 1, 1998, of four dollars and forty-seven cents ($4.47) per patient day for the trend factor. This adjustment is equal to three percent (3%) of the weighted average per diem rate paid to nonstate-operated ICF/IID facilities on June 30, 1998, of one hundred forty-eight dollars and ninety-nine cents ($148.99).

1. G. State FY-2000 trend factor. All

nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates effective for dates of service beginning July 1, 1999, of four dollars and sixty-three cents ($4.63) per patient day for the trend factor. This adjustment is equal to three percent (3%) of the weighted average per diem rate paid to nonstate-operated ICF/IID facilities on April 30, 1999, of one hundred fifty-four dollars and forty-three cents ($154.43). This increase shall only be used for increases for the salaries and fringe benefits for direct care staff and their immediate supervisors.

1. H. State FY-2001 trend factor. All

nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates effective for dates of service beginning July 1, 2000, of four dollars and eighty-one cents ($4.81) per patient day for the trend factor. This adjustment is equal to three percent (3%) of the weighted average per diem rate paid to nonstate-operated ICF/IID facilities on April 30, 2000, of one hundred sixty dollars and twenty-three cents ($160.23). This increase shall only be used for increases for salaries and fringe benefits for direct care staff and their immediate supervisors.

1. I. State FY-2007 trend factor. All

nonstate-operated ICF/IID facilities shall be granted an increase of seven percent (7%) to their per diem rates effective for dates of service billed for state fiscal year 2007 and thereafter. This adjustment is equal to seven percent (7%) of the per diem rate paid to nonstate-operated ICF/IID facilities on June 30, 2006.

1. J. State FY-2008 trend factor. Effec-

tive for dates of service beginning July 1, 2007, all nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates of two percent (2%) for the trend factor. This adjustment is equal to two percent (2%) of the per diem rate paid to nonstate-operated ICF/IID facilities on June 30, 2007.

1. K. State FY-2009 trend factor. Effec-

tive for dates of service beginning July 1, 2008, all nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates of three percent (3%) for the trend factor. This adjustment is equal to three percent (3%) of the per diem rate paid to nonstateoperated ICF/IID facilities on June 30, 2008.

1. L. State FY-2009 catch up increase.

Effective for dates of service beginning July 1, 2008, all nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates of thirteen and ninety-five hundredths percent (13.95%). This adjustment is equal to thirteen and ninety-five hundredths percent (13.95%) of the per diem rate paid to nonstate-operated ICF/IID facilities on June 30, 2008. This increase is intended to provide compensation to providers for the years (2003, 2004, 2005, and 2006) where no trend factor was given. The catch up increase was based on the CMS PPS Skilled Nursing Facility Input Price Index (4 quarter moving average).

1. M. State FY-2012 trend factor. Effec-

tive for dates of service beginning October 1, 2011, all nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates of one and four tenths percent (1.4%) for the trend factor. This adjustment is equal to one and four tenths percent (1.4%) of the per diem rate paid to nonstate-operated ICF/IID facilities on September 30, 2011.

1. N. State FY-2014 trend factor. Effec-

tive for dates of service beginning January 1, 2014, all nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates of three percent (3%) for the trend factor. This adjustment is equal to three percent (3%) of the per diem rate paid to nonstateoperated ICF/IID facilities on December 31, 2013.

1. O. State FY-2016 trend factor. Effec-

tive for dates of service beginning February 1, 2016, all nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates of one percent (1%) for the trend factor. This adjustment is equal to one percent (1%) of the per diem rate paid to nonstate-operated ICF/IID facilities on January 31, 2016.

1. P. State FY-2017 trend factor. Effec-

tive for dates of service beginning September 1, 2016, all nonstate-operated ICF/IID facilities shall be granted an increase to their per diem rates of two percent (2%) for the trend factor. This adjustment is equal to two percent (2%) of the per diem rate paid to nonstate-operated ICF/IID facilities on August 31, 2016.

1. 2. Adjustments to rates. The prospec-

tively determined reimbursement rate may be adjusted only under the following conditions:

1. A. When information contained in a

facility’s cost report is found to be fraudulent, misrepresented, or inaccurate, the facility’s reimbursement rate may be reduced, both retroactively and prospectively, if the fraudulent, misrepresented, or inaccurate information as originally reported resulted in establishment of a higher reimbursement rate than the facility would have received in the absence of this information. No decision by the MO HealthNet agency to impose a rate adjustment in the case of fraudulent, misrepresented, or inaccurate information in any way shall affect the MO HealthNet agency’s ability to impose any sanctions authorized by statute or rule. The fact that fraudulent, misrepresented, or inaccurate information reported did not result in establishment of a higher reimbursement rate than the facility would have received in the absence of the information also does not affect the MO HealthNet agency’s ability to impose any sanctions authorized by statute or rules;

1. B. In accordance with subsection

(6)(B) of this rule, a newly constructed facility’s initial reimbursement rate may be reduced if the facility’s actual allowable per diem cost for its first twelve (12) months of operation is less than its initial rate;

1. C. When a facility’s MO HealthNet

reimbursement rate is higher than either its private pay rate or its Medicare rate, the MO HealthNet rate will be reduced in accordance with subsection (2)(B) of this rule;

1. D. When the provider can show that it

incurred higher cost due to circumstances beyond its control, and the circumstances are not experienced by the nursing home or ICF/IID industry in general, the request must have a substantial cost effect. These circumstances include, but are not limited to:

1. (I) Acts of nature, such as fire,

earthquakes, and flood, that are not covered by insurance;

1. (II) Vandalism, civil disorder, or

both; or

1. (III) Replacement of capital depre-

ciable items not built into existing rates that are the result of circumstances not related to normal wear and tear or upgrading of existing system;

1. E. When an adjustment to a facility’s

rate is made in accordance with the provisions of section (6) of this rule; or

1. F. When an adjustment is based on an

Administrative Hearing Commission or court decision.

1. (B) In the case of newly constructed nonstate-operated ICF/IID facilities entering the MO HealthNet program after October 31, 1986, and for which no rate has previously been set, the director or his/her designee may set an initial rate for the facility as in his/her discretion s/he deems appropriate. The initial rate shall be subject to review by the advisory committee under the provisions of section (6) of this rule.

1. (5) Covered Services and Supplies.

   1. (A) ICF/IID services and supplies covered by the per diem reimbursement rate under this plan, and which must be provided, as required by federal or state law or rule and include, among other services, the regular room, dietary and nursing services, or any other services that are required for standards of participation or certification. Also included are minor medical and surgical supplies and the use of equipment and facilities. These items include, but are not limited to, the following:

      1. 1. All general nursing services includ-

ing, but not limited to, administration of oxygen and related medications, hand-feeding, incontinency care, tray service, and enemas;

1. 2. Items which are furnished routinely

and relatively uniformly to all participants, 13 CSR 70-10

for example, gowns, water pitchers, soap, basins, and bed pans;

1. 3. Items such as alcohol, applicators,

cotton balls, bandaids, and tongue depressors;

1. 4. All nonlegend antacids, nonlegend

laxatives, nonlegend stool softeners, and nonlegend vitamins. Any nonlegend drug in one (1) of these four (4) categories must be provided to residents as needed and no additional charge may be made to any party for any of these drugs. Facilities may not elect which nonlegend drugs in any of the four (4) categories to supply; all must be provided as needed within the existing per diem rate;

1. 5. Items which are utilized by individual

participants but which are reusable and expected to be available, such as ice bags, bed rails, canes, crutches, walkers, wheelchairs, traction equipment, and other durable, nondepreciable medical equipment;

1. 6. Additional items as specified in the

appendix to this plan when required by the patient;

1. 7. Special dietary supplements used for

tube feeding or oral feeding, such as elemental high nitrogen diet, including dietary supplements written as a prescription item by a physician;

1. 8. All laundry services except personal

laundry which is a noncovered service;

1. 9. All general personal care services

which are furnished routinely and relatively uniformly to all participants for their personal cleanliness and appearance shall be covered services, for example, necessary clipping and cleaning of fingernails and toenails, basic hair care, shampoos, and shaves to the extent necessary for reasonable personal hygiene. The provider shall not bill the patient or his/her responsible party for this type of personal service;

1. 10. All consultative services as required

by state or federal law or regulation or for proper operation by the provider. Contracts for the purchase of these services must accompany the provider cost report. Failure to do so will result in the penalties specified in section (9) of this rule;

1. 11. Semiprivate room and board and pri-

vate room and board when necessary to isolate a participant due to a medical or social condition, such as contagious infection, irrational loud speech, and the like. Unless a private room is necessary due to a medical or social condition, a private room is a noncovered service, and a MO HealthNet participant or responsible party may therefore pay the difference between a facility’s semiprivate charge and its charge for a private room. MO HealthNet participants may not be placed in private rooms and charged any additional amount above the facility’s MO HealthNet per diem unless the participant or responsible party in writing specifically requests a private room prior to placement in a private room and acknowledges that an additional amount not payable by MO HealthNet will be charged for a private room;

1. 12. Twelve (12) days per any period of

six (6) consecutive months during which a participant is on a temporary leave of absence from the facility. Temporary leave of absence days must be specifically provided for in the participant’s plan of care. Periods of time during which a participant is away from the facility because s/he is visiting a friend or relative are considered temporary leaves of absence; and

1. 13. Days when participants are away

from the facility overnight on facility-sponsored group trips under the continuing supervision and care of facility personnel.

1. (6) Rate Determination. All nonstate-operated ICF/IID providers of LTC services under the MO HealthNet program who desire to have their rates changed or established must apply to the MO HealthNet Division. The department may request the participation of the Department of Mental Health in the analysis for rate determination. The procedure and conditions for rate reconsideration are as follows:

   1. (A) Advisory Committee. The director, Department of Social Services, shall appoint an advisory committee to review and make recommendations pursuant to provider requests for rate determination. The director may accept, reject, or modify the advisory committee’s recommendations.

      1. 1. Membership. The advisory committee

shall be composed of four (4) members representative of the nursing home industry in Missouri, three (3) members from the Department of Social Services, and two (2) members which may include, but are not limited to, a consumer representative, an accountant or economist, or a representative of the legal profession. Members shall be appointed for terms of twelve (12) months. The director shall select a chairman from the membership who shall serve at the director’s discretion.

1. 2. Procedures.

   1. A. The committee may hold meetings

when five (5) or more members are present and may make recommendations to the department in instances where a simple majority of those present and voting concur.

1. B. The committee shall meet no less

than one (1) time each quarter, and members shall be reimbursed for expenses.

1. C. The MO HealthNet Division will

summarize each case and, if requested by the advisory committee, make recommendations. The advisory committee may request additional documentation as well as require the facility to submit to a comprehensive operational review to determine if there exists an efficient and economical delivery of patient services. The review will be made at the discretion of the committee and may be performed by it or its designee. The findings from a review may be used to determine the per diem rate for the facility. Failure to submit requested documentation shall be grounds for denial of the request.

1. D. The committee, at its discretion,

may issue its recommendation based on written documentation or may request further justification from the provider sending the request.

1. E. The advisory committee shall have

ninety (90) days from the receipt of each complete request, provided the request is on behalf of a facility which has executed a valid Title XIX participation agreement, or the receipt of any additional documentation to submit its recommendations in writing to the director. If the committee is unable to make a recommendation within the specified time limit, the director or his/her designee, if the committee establishes good cause, may grant a reasonable extension.

1. F. Final determination on rate adjust-

ment. The director’s, or his/her designee’s, final decision on each request shall be issued in writing to the provider within fifteen (15) working days from receipt of the committee’s recommendation.

1. G. The director’s, or his/her

designee’s, final determination on the advisory committee’s recommendation shall become effective on the first day of the month in which the request was made, providing that it was made prior to the tenth of the month. If the request is not filed by the tenth of the month, adjustments shall be effective the first day of the following month;

1. (B) In the case of new construction where a valid Title XIX participation agreement has been executed, a request for a rate must be submitted in writing to the MO HealthNet Division and must specifically and clearly identify the issue and the total amount involved. The total dollar amount must be supported by complete, accurate, and documented records satisfactory to the single state agency. Until an initial per diem rate is established, the MO HealthNet Division shall grant a tentative per diem rate for that period. In no case may a facility receive a per diem reimbursement rate greater than the class ceiling in effect on March 1, 1990, adjusted by the negotiated trend factor.

   1. 1. In the case of newly built facility or

part of the facility which is less than two (2) years of age and enters the Title XIX Program on or after November 1, 1986, a reimbursement rate shall be assigned based on the projected estimated operating costs. Advice of the advisory committee will be obtained for all initial rate determination requests for new construction. Owners of new construction which have an approved CON are certified for participation and which have a valid Title XIX participation agreement shall submit a budget in accordance with the principles of section (7) of this rule and other documentation as the committee may request.

1. 2. The establishment of the permanent

rate for all new construction facility providers shall be based on the second full facility fiscal year cost report prepared in accordance with the principles of section (7) of this rule. This cost report shall be submitted within ninety (90) days of the close of their second full facility fiscal year. This cost report shall be based on actual operating costs. No request for an extension of this ninety- (90-) day filing requirement will be considered. Any new construction facility provider which fails to timely submit the cost report may be subject to sanction under this rule and 13 CSR 70-3.030.

1. 3. Prior to establishment of a permanent

rate for new construction facility providers, the cost reports may be subject to an on-site audit by the Department of Social Services to determine the facility’s actual allowable costs. Allowability of costs will be determined as described in subsection (3)(A) of this rule.

1. 4. The cost report, audited or unaudited,

will be reviewed by the MO HealthNet Division, and each facility’s actual allowable per diem cost will be determined. The cost report shall not be submitted to the advisory committee for review. If a facility’s actual allowable per diem cost is less than its initial per diem reimbursement rate, the facility’s rate will be reduced to its actual allowable per diem cost. This reduction will be effective on the first day of the second full facility fiscal year.

1. 5. If a facility’s actual allowable per

diem cost is higher than its initial per diem reimbursement rate, the facility’s rate will not be adjusted; a facility shall not receive a rate increase based on review or audit of the cost report and actual operating costs;

1. (C) In the case of existing facilities not previously certified to participate in the Title XIX program, a request for a per diem reimbursement rate must be submitted in writing to the MO HealthNet Division and must specifically and clearly identify the issue and the total amount involved. The total dollar amount must be supported by complete, accurate, and documented records satisfactory to the single state agency. Until the time as a per diem rate is established, the MO HealthNet Division shall grant a tentative per diem rate for that period. In no case may a facility receive a per diem reimbursement rate greater than the class ceiling in effect on March 1, 1990, adjusted by the negotiated trend factor.

   1. 1. In the case of a facility described in

subsection (6)(C) of this rule and entering the Title XIX program on or after March 1, 1990, a reimbursement rate shall be assigned based on the projected estimated operating costs. Advice of the advisory committee will be obtained for all initial rate determination requests for first full facility’s fiscal year.

1. 2. The establishment of the permanent

rate for all existing facility providers shall be based on the second full facility fiscal year cost report prepared in accordance with the principles of section (7) of this rule. This cost report shall be submitted within ninety (90) days of the close of their second full facility fiscal year. This cost report shall be based on actual operating costs. No request for an extension of this ninety- (90-) day filing requirement will be considered. Any new construction facility provider which fails to timely submit the cost report may be subject to sanction under this rule and 13 CSR 70- 3.030.

1. 3. Prior to establishment of a permanent

rate for existing facility providers, the cost reports may be subject to an on-site audit by the Department of Social Services to determine the facility’s actual allowable costs. Allowability of costs will be determined as described in subsection (3)(A) of this rule.

1. 4. The cost report, audited or unaudited,

will be reviewed by the MO HealthNet Division, and each facility’s actual allowable per diem cost will be determined. The cost report shall not be submitted to the advisory committee for review. If a facility’s actual allowable per diem cost is less than its initial per diem reimbursement rate, the facility’s rate will be reduced to its actual allowable per diem cost. This reduction will be effective on the second day of the first full facility fiscal year.

1. 5. If a facility’s actual allowable per

diem cost is higher than its initial per diem reimbursement rate, the facility’s rate will not be adjusted; a facility shall not receive a rate increase based on review or audit of the cost report and actual operating costs;

1. (D) Rate Reconsideration.

   1. 1. The committee may review the fol-

lowing conditions for rate reconsideration:

1. A. Those costs directly related to a

change in a facility’s case mix; and

1. B. Requests for rate reconsideration

which the director, in his/her discretion, may refer to the committee due to extraordinary circumstances contained in the request and as defined in subparagraph (4)(A)2.D. of this rule.

1. 2. The request for an adjustment must

be submitted in writing to the MO HealthNet Division and must specifically and clearly identify the issue and the total dollar amount involved. The total dollar amount must be supported by complete, accurate, and documented records satisfactory to the single state agency. The facility must demonstrate that the adjustment is necessary, proper, and consistent with efficient and economical delivery of covered patient care services.

1. 3. However, for state fiscal years after

Fiscal Year 1987, in no case may a facility receive a per diem reimbursement rate higher than the class ceiling for that facility in effect on June 30 of the preceding fiscal year adjusted by the negotiated trend factor.

1. 4. The following will not be subject to

review:

1. A. The negotiated trend factor;
2. B. The use of prospective reimburse-

ment rate; and

1. C. The cost base for the June 30 per

diem rate except as specified in this rule;

1. (E) Rate Adjustments. The department may alter a facility’s per diem rate based on—

   1. 1. Court decisions;
   2. 2. Administrative Hearing Commission

decisions;

1. 3. Determination through desk audits,

field audits, and other means, which establishes misrepresentations in or the inclusion of unallowable costs in the cost report used to establish the per diem rate. In these cases, the adjustment shall be applied retroactively; or

1. 4. Adjustments determined by the

department without the advice of the rate advisory committee.

1. A. Prospective payment adjustment

(PPA). A FY-92 PPA will be provided prior to the end of the state fiscal year for nonstateoperated ICF/IID facilities with a current provider agreement on file with the MO HealthNet Division as of October 1, 1991.

1. (I) For providers which qualify, the

PPA shall be the lesser of—

1. (a) The provider’s facility peer

group factor (FPGF) times the projected patient days (PPD) covered by the adjustment year times the prospective payment adjustment factor (PPAF) times the nonstate-operated intermediate care facility for individuals with intellectual disabilities ceiling (ICFI- IDC) on October 1, 1991 (FPGF × PPD × PPAF × ICFIIDC). For example: A provider having nine hundred twenty (920) paid days for the period May 1991 to July 1991 out of a total paid days for this same period of twenty-eight thousand five hundred sixty-one (28,561) represents an FPGF of three and twenty-two hundredths percent (3.22%). So using the FPGF of 3.22% × 114,244 × 24.5% × $156.01 = $140,659; or

1. (b) The provider FPGF times

one hundred forty-five percent (145%) of the amount credited to the intermediate care revenue collection center (ICRCC) of the State Title XIX Fund (STF) for the period October 1, 1991 through December 31, 1991.

1. (II) FPGF—is determined by using

each ICF/IID facility’s paid days for the service dates in May 1991 through July 1991 as of September 20, 1991, divided by the sum of the paid days for the same service dates for all provider’s qualifying as of the determination date of October 16, 1991.

1. (III) ICFIIDC—is one hundred

fifty-six dollars and one cent ($156.01) on October 1, 1991. 13 CSR 70-10

1. (IV) PPAF—is equal to twenty-four

and five-tenths percent (24.5%) for fiscal year 1992 which includes an adjustment for economic trends.

1. (V) PPD—is the projection of one

hundred fourteen thousand two hundred forty-four (114,244) patient days made on October 1, 1991, for the adjustment year;

1. 5. FY-92 trend factor and Workers’

Compensation. All facilities with either an interim rate or a prospective per diem rate in effect on September 1, 1992, shall be granted an increase to their per diem rate effective September 1, 1992, of eight dollars and eighty-six cents ($8.86) per patient day related to the continuation of the FY-92 trend factor and the Workers’ Compensation adjustment. This adjustment is equal to seven and one-half percent (7.5%) of the March 1992 weighted average per diem rate of one hundred eighteen dollars and fourteen cents ($118.14) for all nonstate-operated ICF/IID facilities; or

1. 6. FY-93 negotiated trend factor. All

facilities with either an interim rate or prospective per diem rate in effect on September 1, 1992, shall be granted an increase to their per diem rate effective September 1, 1992, of one dollar and sixtysix cents ($1.66) per patient day for the negotiated trend factor. This adjustment is equal to one and four-tenths percent (1.4%) of the March 1992 weighted average per diem rate of one hundred eighteen dollars and fourteen cents ($118.14) for all nonstate-operated ICF/IID facilities; and

1. (F) Rate determination shall be based on a determination of reasonable and adequate reimbursement levels for allowable cost items described in this rule which are related to ordinary and necessary care for the level-ofcare provided for an efficiently and economically operated facility. All providers shall submit documentation of expenses for allowable cost areas. The department shall have authority to require those uniform accounting and reporting procedures and forms as it deems necessary. A reasonable and adequate reimbursement in each allowable cost area will be determined by the advisory committee with the consent of the director.

1. (7) Allowable Cost Areas.

   1. (A) Compensation of Owners.

      1. 1. Allowance of compensation of ser-

vices of owners shall be an allowable cost area, provided the services are actually performed and are necessary services.

1. 2. Compensation shall mean the total

benefit, within the limitations set forth in this rule, by the owner of the services s/he renders to the facility including direct payments for managerial, administrative, professional and other services, amounts paid by the provider for the personal benefit of the owner, the cost of assets and services which the owner receives from the provider, and additional amounts determined to be the reasonable value of the services rendered by sole proprietors or partners and not paid by any method previously described.

1. 3. Reasonableness of compensation may

be determined by reference to or in comparison with compensation paid for comparable institutions or it may be determined by other appropriate means such as the Medicare and Medicaid Provider Reimbursement Manual (HIM-15) or by other means.

1. 4. Necessary services refers to those

services that are pertinent to the operation and sound conduct of the facility, had the provider not rendered these services, then employment of another person(s) to perform the service would be necessary.

1. (B) Covered services and supplies as defined in section (5) of this rule.

2. (C) Depreciation.

   1. 1. An appropriate allowance for depreci-

ation on buildings, furnishings, and equipment which are part of the operation and sound conduct of the provider’s business is an allowable cost item. Finder’s fees are not an allowable cost item.

1. 2. The depreciation must be identifiable

and recorded in the provider’s accounting records, based on the basis of the asset and prorated over the estimated useful life of the asset using the straight-line method of depreciation from the date initially put into service.

1. 3. The basis of assets at the time placed

in service shall be the lower of—

1. A. The book value of the provider;
2. B. Fair market value at the time of

acquisition;

1. C. The recognized Internal Revenue

Service (IRS) tax basis; and

1. D. In the case of the change in own-

ership, the cost basis of acquired assets of the owner of record on or after July 18, 1984, as of the effective date of the change of ownership; or in the case of a facility which entered the program after July 18, 1984, the owner at the time of the initial entry into the MO HealthNet program.

1. 4. The basis of donated assets will be

allowed to the extent of recognition of income resulting from the donation of the asset. Should a dispute arise between a provider and the Department of Social Services as to the fair market value at the time of acquisition of a depreciable asset and an appraisal by a third party is required, the appraisal cost will be shared proportionately by the MO HealthNet program and the facility in ratio to MO HealthNet participant reimbursable patient days to total patient days.

1. 5. Allowable methods of depreciation

shall be limited to the straight-line method. The depreciation method used for an asset under the MO HealthNet program need not correspond to the method used by a provider for non-MO HealthNet purposes; however, useful life shall be in accordance with the American Hospital Association’s Guidelines. Component part depreciation is optional and allowable under this plan.

1. 6. Historical cost is the cost incurred by

the provider in acquiring the asset and preparing it for use except as provided in this rule. Usually, historical cost includes costs that would be capitalized under generally accepted accounting principles. For example, in addition to the purchase price, historical cost would include architectural fees and related legal fees. Where a provider has elected, for federal income tax purposes, to expense certain items such as interest and taxes during construction, the historical cost basis for MO HealthNet depreciation purposes may include the amount of these expensed items. However, where a provider did not capitalize these costs and has written off the costs in the year they were incurred, the provider cannot retroactively capitalize any part of these costs under the program. For Title XIX purposes and this rule, any asset costing less than five hundred dollars ($500) or having a useful life of one (1) year or less, may be expensed and not capitalized at the option of the provider, or in the case of a facility which entered the program after July 18, 1984, the owner at the time of the initial entry into the MO HealthNet program.

1. 7. When an asset is acquired by trading

in an existing asset, the cost basis of the new asset shall be the sum of undepreciated cost basis of the traded asset plus the cash paid.

1. 8. For the purpose of determining

allowance for depreciation, the cost basis of the asset shall be as prescribed in paragraph (7)(C)3.

1. 9. Capital expenditures for building con-

struction or for renovation costs which are in excess of one hundred fifty thousand dollars ($150,000) and which cause an increase in a provider’s bed capacity shall not be allowed in the program or depreciation base if these capital expenditures fail to comply with any other federal or state law or regulation, such as Certificate of Need (CON).

1. 10. Amortization of leasehold rights and

related interest and finance costs shall not be allowable costs under this plan.

1. (D) Interest and Finance Costs.

   1. 1. Necessary and proper interest on both

current and capital indebtedness shall be an allowable cost item excluding finder’s fees.

1. 2. Interest is the cost incurred for the

use of borrowed funds. Interest on current indebtedness is the cost incurred for funds borrowed for a relatively short term. This is usually for those purposes as working capital for normal operating expenses. Interest on capital indebtedness is the cost incurred for funds borrowed for capital purposes, such as acquisition of facilities and capital improvements, and this indebtedness must be amortized over the life of the loan.

1. 3. Interest may be included in finance

charges imposed by some lending institutions or it may be a prepaid cost or discount in transactions with those lenders who collect the full interest charges when funds are borrowed.

1. 4. To be an allowable cost item, interest

(including finance charges, prepaid costs, and discounts) must be supported by evidence of an agreement that funds were borrowed and that payment of interest and repayment of the funds are required, identifiable in the provider’s accounting records, relating to the reporting period in which the costs are claims, and necessary and proper for the operation, maintenance, or acquisition of the provider’s facilities.

1. 5. Necessary means that the interest be

incurred for a loan made to satisfy a financial need of the provider and for a purpose related to participant care. Loans which result in excess funds or investments are not considered necessary.

1. 6. Proper means that the interest be

incurred at a rate not in excess of what a prudent borrower would have had to pay in the money market existing at the time the loan was made, and provided further the department shall not reimburse for interest and finance charges any amount in excess of the prime rate current at the time the loan was obtained.

1. 7. Interest on loans to providers by pro-

prietors, partners, and any stockholders shall not be an allowable cost item because the loans shall be treated as invested capital and included in the computation of an allowable return on owner’s net equity. If a facility operated by a religious order borrows from the order, interest paid to the order shall be an allowable cost.

1. 8. If loans for capital indebtedness

exceed the asset cost basis as defined in subsection (7)(C) of this rule, the interest associated with the portion of the loan(s) which exceed the asset cost basis as defined in subsection (7)(C) of this rule shall not be allowable.

1. 9. Income from a provider’s qualified

retirement fund shall be excluded in consideration of the per diem rate.

1. 10. A provider shall amortize finance

charges, prepaid interest, and discount over the period of the loan ratably or by means of the constant rate of interest method on the unpaid balance.

1. 11. Usual and customary costs, exclud-

ing finder’s fees, incurred to obtain loans shall be treated as interest expense and shall be allowable costs over the loan period ratably or by means of the constant interest applied method.

1. 12. Usual and customary costs shall be

limited to the lender’s title and recording fees, appraisal fees, legal fees, escrow fees, and closing costs.

1. 13. Interest expense resultant from cap-

ital expenditures for building construction or for renovation costs which are in excess of one hundred fifty thousand dollars ($150,000) and which cause an increase in a bed capacity by the provider shall not be an allowable cost item if the capital expenditure fails to comply with other federal or state law or rules such as CON.

1. (E) Rental and Leases.

   1. 1. Rental and leases of land, buildings,

furnishings, and equipment are allowable cost areas provided that the rented items are necessary and not in essence a purchase of those assets. Finder’s fees are not an allowable cost item.

1. 2. Necessary rental and lease items are

those which are pertinent to the economical operation of the provider.

1. 3. In the case of related parties, rental

and lease amounts cannot exceed the lesser of those which are actually paid or the costs to the related party.

1. 4. Determination of reasonable and ade-

quate reimbursement for rental and amounts, except in the case of related parties which is subject to other provisions of this rule, may require affidavits of competent, impartial experts who are familiar with the current rentals and leases.

1. 5. The test of necessary costs shall take

into account the agreement between the owner and the tenant regarding the payment of related property costs.

1. 6. Leases subject to CON approval must

have that approval before a rate is determined.

1. 7. If rent or lease costs increase solely

as a result of change in ownership, the resulting increase which exceeds the allowable capital cost of the owner of record as of July 18, 1984, or in the case of a facility which entered the program after July 18, 1984, the owner at the time of the initial entry into the MO HealthNet program, shall be a nonallowable cost.

1. (F) Taxes. Taxes levied on or incurred by providers shall be allowable cost areas with the exceptions of the following items:

   1. 1. Federal, state, or local income and

excess profit taxes including any interest and penalties paid;

1. 2. Taxes in connection with financing,

refinancing, or refunding operations, such as taxes on the issuance of bond, property transfer, issuance of transfer of stocks;

1. 3. Taxes for which exemptions are avail-

able to the provider;

1. 4. Special assessments on land which

represent capital improvements. These costs shall be capitalized and depreciated over the period during which the assessment is scheduled to be paid;

1. 5. Taxes on property which are not a

part of the operation of the provider;

1. 6. Taxes which are levied against a resi-

dent and collected and remitted by the provider; and

1. 7. Self-employment Federal Insurance

Contributions Act (FICA) taxes applicable to individual proprietors, partners, or members of a joint venture to the extent the taxes exceed the amount which would have been paid by the provider on the allowable compensation of the persons had the provider organization been an incorporated rather than unincorporated entity.

1. (G) Issuance of Revenue Bond and Tax Levies by District and County Facilities. Those nursing home districts and county facilities whose funding is through the issuance of revenue bonds, that interest which is paid per the revenue bond will be an allowable cost item. Depreciation on the plant and equipment of these facilities also shall be an allowable cost item. Any tax levies which are collected by nursing home districts or county homes that are supported in whole or in part by these levies will not be recognized as a revenue offset except to the extent that the funds are used for the actual operation of the facility.

2. (H) Value of Services of Employees.

   1. 1. Except as provided for in this rule,

the value of services performed by employees in the facility shall be included as an allowable cost area to the extent actually compensated, either to the employee or to the supplying organization.

1. 2. Services rendered by volunteers, such

as those affiliated with the American Red Cross, hospital guilds, auxiliaries, private individuals, and similar organizations, shall not be included as an allowable cost area, as the services have traditionally been rendered on a purely volunteer basis without expectation of any form of reimbursement by the organization through which the service is rendered or by the person rendering the service.

1. 3. Services by priests, ministers, rabbis

and similar type professionals shall be an allowable cost area; provided, that the services are not of a religious nature. An example of an allowable cost area under this section would be a necessary administrative function performed by a clergyman. The state will not recognize building costs on space set aside primarily for professionals providing any religious function. Costs for wardrobe and similar items likewise are considered nonallowable.

1. (I) Fringe Benefits.

   1. 1. Life insurance.

      1. A. Types of insurance which are not

considered an allowable cost area; premiums related to insurance on the lives of officers and key employees are not allowable cost areas under the following circumstances:

1. (I) Where, upon the death of an

insured officer or key employee, the insurance proceeds are payable directly to the 13 CSR 70-10

provider. In this case, the provider is a direct beneficiary. Insurance of this type is referred to as key-man insurance; and

1. (II) Where insurance on the lives of

officers is voluntarily taken out as part of a mortgage loan agreement entered into for building construction and, upon the death of an insured officer, the proceeds are payable directly to the lending institution as a credit against the loan balance. In this case, the provider is an indirect beneficiary.

1. B. Types of insurance which are con-

sidered an allowable cost area—

1. (I) Where credit life insurance is

required as part of a mortgage loan agreement. An example would be insurance on loans granted under certain federal programs; and

1. (II) Where the relative(s) or estate

of the employee, excluding stockholders, partners and proprietors, is the beneficiary. This type of insurance is considered to be a fringe benefit and is an allowable cost area to the extent that the amount of coverage is reasonable.

1. 2. Retirement plans.

   1. A. Contributions to qualified retire-

ment plans for the benefit of employees excluding stockholders, partners, and proprietors of the provider shall be allowable cost areas. Interest income from funded pensions or retirement plans shall be excluded from consideration in determining the allowable cost area.

1. B. Amounts funded to pension and

retirement plans, together with associated income, shall be recaptured if not actually paid when due, as an offset to expenses on the cost report form.

1. 3. Deferred compensation plans.

   1. A. Contributions for the benefit of

employees, excluding stockholders, partners, and proprietors, under deferred compensation plans shall be all allowable cost areas when, and to the extent that, the costs are actually paid by the provider. Deferred compensation plans must be funded. Provider payments under unfunded deferred compensation plans will be considered as an allowable cost area only when paid to the participating employee and only to the extent considered reasonable.

1. B. Amount paid by tax-exempt orga-

nizations to purchase tax-sheltered annuities for employees shall be treated as deferred compensation actually paid by the provider.

1. C. Amounts funded to deferred com-

pensation plans together with associated income shall be recaptured if not actually paid when due, as an offset to expenses on the cost report form.

1. (J) Education and Training Expenses.

   1. 1. The cost of on-the-job training which

directly benefits the quality of health care or administration at the facility shall be allowable. Off-the-job training involving extended periods exceeding five (5) continuous days is an allowable cost item only when specifically authorized in advance by the department.

1. 2. Cost of education and training shall

include incidental travel costs but will not include leaves of absence or sabbaticals.

1. (K) Organizational Cost Items.

   1. 1. Organizational cost items may be

included as an allowable cost area on an amortized basis.

1. 2. Organizational cost items include the

following: legal fees incurred in establishing the corporation or other organizations, necessary accounting fees, expenses of temporary directors, and organizational meetings of directors and stockholders, and fees paid to states of incorporation.

1. 3. Organizational costs shall be amor-

tized ratably over a period of sixty (60) months beginning with the date of organization. When the provider enters the program more than sixty (60) months after the date of organization, no organizational costs shall be recognized.

1. 4. Where a provider did not capitalize

organizational costs and has written off those costs in the year they were incurred, the provider cannot retroactively capitalize any part of these costs under the program.

1. 5. Where a provider is organized within

a five- (5-) year period prior to entering the program and has properly capitalized organizational costs using a sixty- (60-) month amortization period, no change in the rate of amortization is required. In this instance the unamortized portion of organizational costs is an allowable cost area under the program and shall be amortized over the remaining part of the sixty- (60-) month period.

1. 6. For change in ownership after July

18, 1984, allowable amortization will be limited to the prior owner’s allowable unamortized portion of organizational cost.

1. (L) Advertising Costs. Advertising costs which are reasonable, appropriate, and helpful in developing, maintaining, and furnishing services shall be an allowable cost area. The costs must be common and accepted occurrence in the field of the activity of the provider.
2. (M) Cost of Suppliers Involving Related Parties. Costs applicable to facilities, goods, and services furnished to a provider by a supplier related to the provider shall not exceed the lower of the cost to the supplier or the prices of comparable facilities, goods, or services obtained elsewhere. A provider shall identify suppliers related to it in the uniform cost report and the type-quantity and costs of facilities, goods, and services obtained from each supplier.
3. (N) Utilization Review. Incurred cost for the performance of required utilization review for ICF/IID is an allowable cost area. The expenditures must be for the purpose of providing utilization review on behalf of a Title XIX participant. Utilization review costs incurred for Title XVIII and Title XIX must be apportioned on the basis of reimbursable participant days recorded for each program during the reporting period.
4. (O) Minimum Utilization. In the event the occupancy of a provider is below ninety percent (90%), the following cost centers will be calculated as if the provider experienced ninety percent (90%) occupancy: laundry, housekeeping, general, administrative, and plant operation costs. In no case may costs disallowed under this provision be carried forward to succeeding periods.

5. (P) Nonreimbursable Costs.

   1. 1. Bad debts, charity, and courtesy

allowances are deductions from revenue and are not to be included as allowable costs.

1. 2. Those services that are specifically

provided by Medicare and MO HealthNet must be billed to those agencies.

1. 3. Any costs incurred that are related to

fund drives are not reimbursable.

1. 4. Costs incurred for research purposes

shall not be included as allowable costs.

1. 5. The cost of services provided under

the Title XX program, by contract or subcontract, is specifically excluded as an allowable item.

1. 6. Attorney fees related to litigation

involving state, local, or federal governmental entities and attorneys’ fees which are not related to the provision of LTC services, such as litigation related to disputes between or among owners, operators, or administrators.

1. 7. Costs, such as legal fees, accounting

and administration costs, travel costs, and the costs of feasibility studies, which are attributable to the negotiation or settlement of the sale or purchase of any capital asset by acquisition of merger for which any payment has been previously made under the program.

1. (Q) Other Revenues. Other revenues, including those listed that follow and excluding amounts collected under paragraph (5)(A)8. will be deducted from the total allowable cost and must be shown separately in the cost report by use of a separate schedule if included in the gross revenue: income from telephone services; sale of employee and guest meals; sale of medical abstracts; sale of scrap and waste food or materials; rental income; cash, trade, quantity time, and other discounts; purchase rebates and refunds; recovery on insured loss; parking lot revenues; vending machine commissions or profit; sales from drugs to other than participants; income from investments of whatever type; and room reservation charges for temporary leave of absence days which are not covered services under section (5) of this rule. Failure to separately account for any of the revenues specifically set out previously in this rule in a readily ascertainable manner shall result in termination from the program.

   1. 1. Interest income received from a fund-

ed depreciation account will not be deducted from allowable operating costs provided that interest is applied to the replacement of the asset being depreciated.

1. 2. Cost centers or operations specified

by the provider in paragraph (7)(R)3. of this rule shall not have their associated cost or revenues included in the covered costs or revenues of the facility.

1. 3. Restricted and unrestricted funds.

   1. A. Restricted funds as used in this

rule mean those funds, cash or otherwise, including grants, gifts, taxes, and income from endowments, which must be used only for a specific purpose designated by the donor. Those restricted funds which are not transferred funds and are designated by the donor for paying operating costs will be offset from the total allowable expenses. If an administrative body has the authority to rerestrict restricted funds designated by the donor for paying operating costs, the funds will not be offset from total allowable expenses.

1. B. Unrestricted funds as used in this

rule mean those funds, cash or otherwise, including grants, gifts, taxes, and income from endowments, that are given to a provider without restriction by the donor as to their use. These funds can be used in any manner desired by the provider. However, those unrestricted funds which are not transferred funds and are used for paying operating costs will be offset from total allowable expenses.

1. C. Transferred funds as used in this

rule are those funds appropriated through a legislative or governmental administrative body’s action, state or local, to a state or local government provider. The transfer can be state-to-state, state-to-local, or local-tolocal provider. These funds are not considered a grant or gift for reimbursement purposes, so having no effect on the provider’s allowable cost under this plan.

1. (R) Apportionment of Costs to MO HealthNet Participant Residents.

   1. 1. Provider’s allowable cost areas shall

be apportioned between MO HealthNet program participant residents and other patients so that the share borne by the MO HealthNet program is based upon actual services received by program participants.

1. 2. To accomplish this apportionment,

the ratio of participant residents’ charges to total patient charges for the service of each ancillary department may be applied to the cost of this department. To this shall be added the cost of routine services for MO Health- Net program participant residents determined on the basis of a separate average cost per diem for general routine care areas or at the option of the provider on the basis of overall routine care area.

1. 3. So that its charges may be allowable

for use in apportioning costs under the program, each provider shall have an established charge structure which is applied uniformly to each patient as services are furnished to the patient and which is reasonable and consistently related to the cost of providing these services.

1. 4. Average cost per diem for general

routine services means the amount computed by dividing the total allowable patient costs for routine services by the total number of patient days of care rendered by the provider in the cost-reporting period.

1. 5. A patient day of care is that period of

service rendered a patient between the census-taking hours on two (2) consecutive days, including the twelve (12) temporary leave of absence days per any period of six (6) consecutive months as specifically covered under section (5) of this rule, the day of discharge being counted only when the patient was admitted the same day. A census log shall be maintained in the facility for documentation purposes. Census shall be taken daily at midnight. A day of care includes those overnight periods when a participant is away from the facility on a facility-sponsored group trip and remains under the supervision and care of facility personnel.

1. 6. ICF/IID facilities that provide inter-

mediate care services to MO HealthNet participants may establish distinct part cost centers in their facility provided that adequate accounting and statistical data required to separately determine the nursing care cost of each distinct part is maintained. Each distinct part may share the common services and facilities, such as management services, dietary, housekeeping, building maintenance, and laundry.

1. 7. In no case may a provider’s allowable

costs allocated to the MO HealthNet program include the cost of furnishing services to persons not covered under the MO HealthNet program.

1. (S) Return on Equity.

   1. 1. A return on a provider’s net equity

shall be an allowable cost area.

1. 2. The amount of return on a provider’s

net equity shall not exceed twelve percent (12%).

1. 3. An owner’s net equity is comprised of

investment capital and working capital. Investment capital includes the investment in building, property, and equipment (cost of land, mortgage payments toward principle, and equipment purchase less the accumulative depreciation). Working capital represents the amount of capital which is required to insure proper operation of the facility.

1. 4. The return on owner’s net equity shall

be payable only to proprietary providers.

1. 5. A provider’s return on owner’s net

equity shall be apportioned to the MO HealthNet program on the basis of the provider’s MO HealthNet program reimbursable participant resident days of care to total resident days of care during the costreporting period. For the purpose of this calculation, total resident days of care shall be the greater of ninety percent (90%) of the provider’s certified bed capacity or actual occupancy during the cost year.

1. (8) Reporting Requirements.

   1. (A) Annual Cost Report.

      1. 1. Each provider shall establish a twelve-

(12-) month fiscal period which is to be designated as the provider’s fiscal year. An annual cost report for the fiscal year shall be submitted by the provider to the department on forms to be furnished for that purpose. The completed cost report shall be submitted by each provider the first day of the sixth month following the close of the fiscal period.

1. 2. Unless adequate and current docu-

mentation in the following areas has been filed previously with the department, authenticated copies of the following documents must be submitted with the cost reports: authenticated copies of all leases related to the activities of the facility; all management contracts, all contracts with consultants; federal and state income tax returns for the fiscal year; and documentation of expenditures, by line item, made under all restricted and unrestricted grants. For restricted grants, a statement verifying the restriction as specified by the donor.

1. 3. Adequate documentation for all line

items on the uniform cost reports must be maintained by the facility and must be submitted to the department upon request.

1. 4. If a cost report is more than ten (10)

days past due, payment shall be withheld from the facility until the cost report is submitted. Upon receipt of a cost report prepared in accordance with this regulation, the payments that were withheld will be released to the provider. For cost reports which are more than ninety (90) days past due, the department may terminate the provider’s MO HealthNet participation agreement and if terminated, retain all payments which have been withheld pursuant to this provision.

1. 5. If a provider notifies, in writing, the

director of the Institutional Reimbursement Unit of the division prior to the change of control, ownership, or termination of participation in the MO HealthNet program, the division will withhold all remaining payments from the selling provider until the cost report is filed. The fully completed cost report with all required attachments and documentation is due the first day of the sixth month after the date of change of control, ownership, or termination. Upon receipt of a cost report prepared in accordance with this regulation, any payment that was withheld will be released to the selling provider.

1. (B) Certification of Cost Reports.

   1. 1. The accuracy and validity of any cost

report must be certified. Certification must be made by one (1) of the following persons 13 CSR 70-10

(who must be authorized by the governing body of the facility to make the certification and will furnish proof of the authorization): an incorporated entity, an officer of the corporation; for a partnership, a partner; for a sole proprietorship or sole owner, the owner; or for a public facility, the chief administrative officer of the facility. The cost report must also be notarized by a licensed notary public.

1. 2. Certification statement. Form of Certification Misrepresentation or falsifications of any

information contained in this report may be punishable by fine, imprisonment, or both, under state or federal law. Certification by officer or administrator of provider: I hereby certify that I have read the above statement and that I have examined the accompanying cost report and supporting schedules prepared by __________________ ____________________________________ (Provider’s name(s) and number(s)) for the cost report period beginning, _________________, 20 ______ and ending _________________, 20_____, and that to the best of my knowledge and belief, it is a true, correct, and complete statement prepared from the books and records of the provider in accordance with applicable instructions, except as noted. ______________ __________ __________ (Signature) (Title) (Date)

1. (C) Adequacy of Records.

   1. 1. The provider must make available to

the department or its duly authorized agent, including federal agents from Health and Human Services (HHS), at all reasonable times, the records as are necessary to permit review and audit of provider’s cost reports. Failure to do so may lead to sanctions stated in section (8) of this rule or other sanctions available in section (9) of this rule.

1. 2. All records associated with the prepa-

ration and documentation of the data associated with the cost report must be retained for seven (7) years from the cost report filing date.

1. (D) Accounting Basis.

   1. 1. The cost report submitted must be

based on the accrual basis of accounting.

1. 2. Governmental institutions that operate

on a cash or modified cash basis of accounting may continue to use those methods, provided appropriate treatment of capital expenditures is made.

1. (E) Audits.

   1. 1. Cost reports shall be based upon the

provider’s financial and statistical records which must be capable of verification by audit.

1. 2. If the provider has included the cost

of a certified audit of the facility as an allowable cost item to the plan, a copy of that audit report and accompanying letter shall be submitted without deletions.

1. 3. The annual cost report for the fiscal

year of the provider may be subject to audit by the Department of Social Services or its contracted agents. Twelve- (12-) month cost reports for new construction facilities required to be submitted under section (4) of this rule may be audited by the department or its contracted agents prior to establishment of a permanent rate.

1. 4. The department will conduct a desk

review of all cost reports after submission by the provider and shall provide for on-site audits of facilities wherever cost variances or exceptions are noted by their personnel.

1. 5. The department shall retain the annu-

al cost report and any working papers relating to the audits of those cost reports for a period of not less than seven (7) full years from the date of submission of the report or completion of the audit.

1. 6. Those providers having an annual Title

XIX bed-day ratio on total bed days or certified beds of greater than sixty percent (60%) or an annual Title XIX payment of two hundred thousand dollars ($200,000) or more, or both, shall be required, for at least the first two (2) fiscal years of participation in the plan, to have an annual audit of their financial records by an independent certified public accountant. The auditor may issue a qualified audit report stating that confirmations of accounts receivable and accounts payable are not required by the plan. For the purposes of the paragraph, the Department of Social Services will only accept an unqualified opinion from a certified public accounting firm. A copy of the audit report must be submitted to the department to support the annual cost report of the facility.

1. (9) Sanctions and Overpayments.

   1. (A) Sanctions may be imposed against a provider in accordance with 13 CSR 70- 3.030 and other federal or state statutes and regulations.
   2. (B) In the case of overpayments to providers based on, but not limited to, field or audit findings or determinations based on a comprehensive operational review of the facility, the provider shall repay the overpayment in accordance with the provisions as set forth in 13 CSR 70-3.030.

2. (10) Exceptions.

   1. (A) For those MO HealthNet-eligible participant-patients who have concurrent Medicare Part A skilled nursing facilities benefits available, MO HealthNet reimbursement for covered days of stay in a qualified facility will be based on the coinsurance as may be imposed under the Medicare Program.

   2. (B) The Title XIX reimbursement rate for out-of-state providers shall be set by one (1) of the following methods:

      1. 1. For providers which provided ser-

vices of fewer than one thousand (1,000) patient days for Missouri Title XIX participants, the reimbursement rate shall be the rate paid for comparable services and levelof-care by the state in which the provider is located; and

1. 2. For providers which provide services

of one thousand (1,000) or more patient days for Missouri Title XIX participants, the reimbursement rate shall be the lower of—

1. A. The rate paid for comparable ser-

vices and level-of-care by the state in which the provider is located; or

1. B. The rate calculated in sections (4)

and (6) of this rule.

1. (11) Payment Assurance.

   1. (A) The state will pay each provider, which furnished the services in accordance with the requirements of the state plan, the amount determined for services furnished by the provider according to the standards and methods set forth in these rules.
   2. (B) Where third-party payment is involved, MO HealthNet will be the payor of last resort with the exception of state programs such as Vocational Rehabilitation and the Missouri Crippled Children’s Service. Procedures for remitting third-party payments are provided in the MO HealthNet program provider manuals.
2. (12) Provider Participation. Payments made in accordance with the standards and methods described in this rule are designed to enlist participation of a sufficient number of providers in the program so that eligible persons can receive medical care and services included in the state plan at least to the extent these services are available to the general public.
3. (13) Payment in Full. Participation in the program shall be limited to providers who accept as payment in full for covered services rendered to MO HealthNet participants, the amount paid in accordance with these rules and applicable copayments.

4. (14) Plan Evaluation. Documentation will be maintained to effectively monitor and evaluate experience during administration of this rule.

   APPENDIX A Routine Covered

   Medical Supplies and Services

ABD Pads A & D Ointment Adhesive Tape Aerosol Inhalators, Self-Contained Aerosol, Other Types Air Mattresses Air P.R. Mattresses Airway Oral Alcohol Alcohol Plasters Alcohol Sponges Antacids, Nonlegend Applicators, Cotton-Tipped Applicators, Swab-Eez Aquamatic K Pads (water-heated pad) Arm Slings Asepto Syringes Baby Powder Bandages Bandages (elastic or cohesive) Bandaids Basins Bed Frame Equipment (for certain immobilized bed patients) Bed Rails Bedpan, Fracture Bedpan, Regular Bedside Tissues Benzoin Bibs Bottle, Specimen Canes Cannula Nasal Catheter Indwelling Catheter Plugs Catheter Trays Catheter (any size) Colostomy Bags Composite Pads Cotton Balls Crutches Customized Crutches, Canes, and Wheelchairs Decubitus Ulcer Pads Deodorants Disposable Underpads Donuts Douche Bags Drain Tubing Drainage Bags Drainage Sets Drainage Tubes Dressing Tray Dressings (all) Drugs, Stock (excluding Insulin) Enema Can Enema Soap Enema Supplies Enema Unit Enemas Equipment and Supplies for Diabetic Urine Testing Eye Pads Feeding Tubes Female Urinal Flotation Mattress or Biowave Mattress Flotation Pads, Turning Frames, or both Folding Foot Cradle Gastric Feeding Unit Gauze Sponges Gloves, Unsterile and Sterile Gowns, Hospital Green Soap Hand-Feeding Heat Cradle Heating Pads Heel Protector Hot Pack Machine Ice Bags Incontinency Care Incontinency Pads and Pants Infusion Arm Boards Inhalation Therapy Supplies Intermittent Positive Pressure Breathing Machine (IPPB) Invalid Ring Irrigation Bulbs Irrigation Trays I.V. Trays Jelly, Lubricating Laxatives, Nonlegend Lines, Extra Lotion, Soap, and Oil Male Urinal Massages (by nurses) Medical Social Services Medicine Cups Medicine Dropper Merthiolate Aerosol Mouthwashes Nasal Cannula Nasal Catheter Nasal Catheter, Insertion and Tube Nasal Gastric Tubes Nasal Tube Feeding Nebulizer and Replacement Kit Needles (hypodermic, scalp, vein) Needles (various sizes) Nonallergic Tape Nursing Services (all) regardless of level including the administration of oxygen and restorative nursing care Nursing Supplies and Dressing (other than items of personal comfort or cosmetic) Overhead Trapeze Equipment Oxygen Equipment (such as IPPB machines and oxygen tents) Oxygen Mask Pads Peroxide Pitcher Plastic Bib Pump (aspiration and suction) Restraints Room and Board (semiprivate or private if necessitated by a medical or social condition) Sand Bags Scalpel Sheepskin Special Diets Specimen Cups Sponges Steam Vaporizer Sterile Pads Stomach Tubes Stool Softeners, Nonlegend Suction Catheter Suction Machines Suction Tube Surgical Dressings (including sterile sponges) Surgical Pads Surgical Tape Suture Removal Kit Suture Trays Syringes (all sizes) Syringes, Disposable Tape (for laboratory test) Tape (nonallergic or butterfly) Testing Sets and Refills (S & A) Tongue Depressors Tracheostomy Sponges Tray Service Tubing I.V. Trays, Blood Infusion Set, I.V. Tubing Underpads Urinary Drainage Tube Urinary Tube and Bottle Urological Solutions Vitamins, Nonlegend Walkers Water Pitchers Wheelchairs AUTHORITY: sections 208.153, 208.159, and 208.201, RSMo 2016.* This rule was previously filed as 13 CSR 40-81.083. Original rule filed Aug. 13, 1982, effective Nov. 11, 1982. Rescinded: Filed July 12, 1984, effective Oct. 11, 1984. Readopted: Filed July 3, 1986, effective Nov. 1, 1986. Amended: Filed Dec. 16, 1986, effective April 26, 1987. Emergency amendment filed June 19, 1987, effective July 1, 1987, expired Oct. 29, 1987. Amended: Filed Aug. 18, 1987, effective Oct. 25, 1987. Emergency amendment filed Feb. 5, 1988, effective Feb. 15, 1988, expired June 13, 1988. Amended: Filed Feb. 5, 1988, effective June 11, 1988. Emergency amendment filed Dec. 16, 1988, effective Jan. 1, 1989, expired May 1, 1989. Amended: Filed Dec. 5, 1988, effective Feb. 24, 1989. Amended: Filed Dec. 16, 1988, effective March 11, 1989. Amended: Filed Aug. 16, 1989, effective Nov. 11, 1989. Amended: Filed Dec. 1, 1989, effective Feb. 25, 1990. Rescinded and readopted: Filed March 5, 1990, effective June 11, 1990. Amended: Filed May 30, 1990, effective Sept. 28, 1990. Emergency amendment filed Nov. 15, 1991, effective Dec. 3, 1991, expired April 1, 1992. Emergency amendment filed March 13, 1992, effective April 2, 1992, expired July 30, 1992. Amended: Filed Nov. 15, 1991, effective April 9, 1992. Emergency amendment filed July 17, 1992, effective Sept. 1, 1992, expired Dec. 29, 1992. Emergency amendment filed Dec. 8, 1992, effective Dec. 31, 1992, expired April 28, 1993. Amended: Filed July 17, 1992, effective April 8, 1993. Amended: Filed Dec. 14, 1992, effective June 7, 1993. Amended: Filed Nov. 21, 1994, effective June 30, 1995. Emergency amend- 13 CSR 70-10

ment filed Dec. 15, 1995, effective Jan. 1, 1996, expired June 28, 1996. Amended: Filed Oct. 10, 1995, effective May 30, 1996. Amended: Filed Oct. 16, 1995, effective May 30, 1996. Emergency amendment filed Feb. 23, 1999, effective March 5, 1999, expired Aug. 31, 1999. Amended: Filed May 27, 1999, effective Nov. 30, 1999. Emergency amendment filed Sept. 20, 1999, effective Oct. 1, 1999, expired March 29, 2000. Amended: Filed Feb. 14, 2001, effective Aug. 30, 2001. Emergency amendment filed Jan. 24, 2007, effective Feb. 3, 2007, expired Aug. 1, 2007. Amended: Filed Jan. 16, 2007, effective July 30, 2007. Emergency amendment filed June 20, 2007, effective July 1, 2007, expired Dec. 27, 2007. Amended: Filed June 20, 2007, effective Jan. 30, 2008. Emergency amendment filed June 18, 2008, effective July 1, 2008, expired Dec. 28, 2008. Amended: Filed July 1, 2008, effective Jan. 30, 2009. Emergency amendment filed Sept. 20, 2011, effective Oct. 1, 2011, expired March 29, 2012. Amended: Filed Sept. 20, 2011, effective March 30, 2012. Amended: Filed Dec. 13, 2013, effective June 30, 2014. Emergency amendment filed Aug. 15, 2016, effective Sept. 1, 2016, expired Feb. 27, 2017. Amended: Filed Aug. 15, 2016, effective March 30, 2017.

*Original authority: 208.153, RSMo 1967, amended 1967, 1973, 1989, 1990, 1991, 2007, 2012; 208.159, RSMo 1979; and 208.201, RSMo 1987, amended 2007.