1. (a) General requirements. For the completion and submittal of cost reports pertaining to providers' fiscal years ending in calendar year 1997 and subsequent years, providers must apply the information in this section. Texas Department of Human Services (DHS) applies the general principles of cost determination as specified in §355.101 of this title (relating to Introduction).

2. (b) Cost reporting. Providers must follow the cost-reporting guidelines as specified in §355.105 of this title (relating to General Reporting and Documentation Requirements, Methods and Procedures).

   1. (1) All contracted providers must submit a cost report unless the number of days between the date the first DHS client received services and the provider's fiscal year end is 30 days or fewer. The provider may be excused from submitting a cost report if circumstances beyond the control of the provider make cost report completion impossible, such as the loss of records due to natural disasters or removal of records from the provider's custody by any governmental entity. Requests to be excused from submitting a cost report must be received by DHS's Rate Analysis Department before the due date of the cost report.

   2. (2) Providers are responsible for reporting only allowable costs on the cost report, except where cost report instructions indicate that other costs are to be reported in specific lines or sections. Only allowable cost information is used to determine recommended reimbursement. DHS excludes from reimbursement determination unallowable expenses included in the cost report and makes the appropriate adjustments to expenses and other information reported by providers. The purpose is to ensure that the database reflects costs and other information which are necessary for the provision of services and are consistent with federal and state regulations.

      1. (A) Individual cost reports may not be included in the database used for reimbursement determination if:

         1. (i) there is reasonable doubt as to the accuracy or allowability of a significant part of the information reported; or
         2. (ii) an auditor determines that reported costs are not verifiable.
      2. (B) When material pertinent to proposed reimbursements is made available to the public, the material will include the number of cost reports eliminated from reimbursement determination for the reason stated in subparagraph (A)(i) of this paragraph.

3. (c) Reimbursement determination. DHS determines reimbursement in the following manner.

   1. (1) Cost determination by cost area. DHS combines reported allowable costs for Primary Home Care and Family Care into five cost areas, after allocating payroll taxes to each salary line item on the cost report on a pro rata basis based on the portion of that salary line item to the amount of total salary expense and after applying employee benefits directly to the corresponding salary line item.

      1. (A) Field supervisors cost area. This includes field supervisors' salaries, wages, training, and travel expenses. These costs are divided by total hours of service, including total nonpriority and Priority 1 service hours, in order to calculate each provider's field supervisor unit cost.
      2. (B) Nonpriority attendants cost area. This includes nonpriority attendants' salaries and wages, and travel expenses. These costs are divided by total nonpriority hours of service in order to calculate each provider's nonpriority attendant unit cost.
      3. (C) Administration cost area. This includes administrative salaries and wages, and other administrative expenses. These costs are allocated between nonpriority and Priority 1 services. Administration expenses equal to $0.18 per Priority 1 hour of service are allocated to Priority 1. To calculate the administration unit cost the remaining non-allocated administration costs are divided by total nonpriority and Priority 1 hours of service. For nonpriority, the calculated administration unit cost is the nonpriority administration unit cost. For Priority 1, the $0.18 is added to the calculated administration unit cost to determine the Priority 1 administration unit cost.
      4. (D) Facility cost area. This includes building and equipment expenses, and operation and maintenance expenses. These costs are divided by total hours of service, including nonpriority services and Priority 1 services in order to calculate each provider's facility unit cost.
      5. (E) Priority 1 attendants cost area. This includes Priority 1 attendants' salaries and wages, and travel expenses. These costs are divided by total Priority 1 hours of service in order to calculate each provider's Priority 1 attendant unit cost.
   2. (2) Projected costs. DHS projects allowable expenses, excluding depreciation and mortgage interest, per hour of service from each provider agency's reporting period to the next ensuing reimbursement period. DHS determines reasonable and appropriate economic adjusters as described in §355.108 of this title (relating to Determination of Inflation Indices) to calculate the projected expenses. For providers reporting traditional workers' compensation insurance (WCI) policy premium costs, their reported workers' compensation costs are inflated by applying the WCI index as calculated in §355.108(c)(2) of this title (relating to Determination of Inflation Indices), plus additional inflation percentages for a risk pool surcharge and for premium differential and modifiers associated with the home health industry. DHS also adjusts reimbursement where new legislation, regulations, or economic factors affect costs as specified in §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs). Depreciation and mortgage interest expenses are not projected.
   3. (3) Projected cost arrays. To calculate the reimbursement per hour of service, DHS rank orders from low to high all provider agencies' projected allowable costs per hour of service in each cost area and all provider agencies' projected total costs.
   4. (4) Recommended reimbursement for each cost area component. The hours of service used to calculate each cost area component for each provider agency are summed until the median hour of service is reached. The corresponding projected expense is the weighted median cost component. The cost component for each cost area is multiplied by 1.044 to calculate the recommended reimbursement for each cost area component.

   5. (5) Total recommended reimbursement.

      1. (A) For nonpriority clients. DHS determines the recommended reimbursement by summing the recommended reimbursement described in paragraph (4) of this subsection for the cost area components described in paragraph (1)(A)-(D) of this subsection.
      2. (B) For Priority 1 clients. DHS determines the recommended reimbursement by summing the recommended reimbursement described in paragraph (4) of this subsection for the cost area component described in paragraph (1)(A) and (C)-(E) of this subsection.
   6. (6) Reimbursement determination authority. The reimbursement determination authority is specified in §355.101 of this title (relating to Introduction).
   7. (7) Desk reviews and field audits of cost reports. DHS performs desk reviews or field audits on all contracted providers. The frequency and nature of the field audits are determined by DHS to ensure the fiscal integrity of the program. Desk reviews and field audits will be conducted in accordance with §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports), and providers will be notified of the results of a desk review or an audit in accordance with §355.107 of this title (relating to Notification of Exclusions and Adjustments). Providers may request an informal review and, if necessary, an administrative hearing to dispute an action taken by DHS under §355.110 of this title (relating to Informal Reviews and Formal Appeals).
4. (d) Factors affecting allowable costs. Providers must follow the guidelines in determining whether a cost is allowable or unallowable as specified in §355.102 this title (relating to General Principles of Allowable and Unallowable Costs) and §355.103 of this title (relating to Specifications for Allowable and Unallowable Costs).
5. (e) Reporting revenues. Revenues must be reported on the cost report in accordance with §355.104 of this title (relating to Revenues).

Source Note:The provisions of this §355.5902 adopted to be effective September 1, 1996, 21 TexReg 7890; amended to be effective September 1, 1997, 22 TexReg 6461; duplicated effective September 1, 1997, as published in the Texas Register October 17, 1997, 22 TexReg 10311.