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 four 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, benefits, and mileage reimbursement expenses.
      2. (B) Nonpriority attendants cost area. This includes nonpriority attendants' salaries and wages, benefits, and mileage reimbursement expenses. This cost area is calculated as specified in §355.112 of this title (relating to Attendant Compensation Rate Enhancement).
      3. (C) Priority 1 attendants cost area. This includes Priority 1 attendants' salaries and wages, benefits, and mileage reimbursement expenses. This cost area is calculated as specified in §355.112 of this title (relating to Attendant Compensation Rate Enhancement).
      4. (D) Building, administration, and other service cost areas. This includes building, building equipment, and operation and maintenance costs; administration costs; and other direct service costs. Administration expenses equal to $0.18 per Priority 1 unit of service are allocated to Priority 1. The administration costs remaining after this allocation are summed with the facility and the other service costs.

   2. (2) For the cost areas described in paragraph (1)(A) and (D) of this subsection the following is calculated:

      1. (A) Projected costs. DHS projects allowable expenses, excluding depreciation and mortgage interest, per unit 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. 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).
      2. (B) Projected cost per unit of service. To determine the projected cost per unit of service for each provider agency, the total projected allowable costs for each cost area are divided by total units of service, including nonpriority services and Priority 1 services, in order to calculate the projected cost per unit of service for each cost area.
      3. (C) Projected cost arrays. DHS rank orders from low to high all provider agencies' projected allowable costs per unit of service and each provider agencies' corresponding units of service for each cost area.
      4. (D) 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.

   3. (3) Total recommended reimbursement.

      1. (A) For nonpriority clients. DHS determines the recommended reimbursement by summing the recommended reimbursement described in paragraph (2) of this subsection and the cost area component from paragraph (1)(B) of this subsection.
      2. (B) For Priority 1 clients. DHS determines the recommended reimbursement by summing the recommended reimbursement described in paragraph (2) of this subsection and the cost area component from paragraph (1)(C) of this subsection.
   4. (4) Reimbursement determination authority. The reimbursement determination authority is specified in §355.101 of this title (relating to Introduction).
   5. (5) 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; amended to be effective June 25, 2000, 25 TexReg 5867.