§ 1187.59. Nonallowable costs.
(a) Nonallowable costs related to expenses and revenues. The Department will not recognize as allowable costs the expenses or revenues of a nursing facility related to:
(1) Nonworking officers’ or owners’ salaries.
(2) Fundraising expenses for capital and replacement items exceeding 5% of the amount raised and, for operating expenses and cash flow, fundraising expenses exceeding 10% of the amount raised.
(3) Free care or discounted services.
(4) Parties and social activities not related to resident care.
(5) Organizational memberships not necessary to resident care.
(6) Personal telephone service.
(7) Personal television service.
(8) The direct and indirect costs related to nonallowable cost centers, including gift, flower and coffee shops, homes for administrators or pastors, convent areas and nurses’ quarters, except as provided in § 1187.55(3) (relating to selected resident care and other resident related cost policies).
(9) Vending machines.
(10) Charitable contributions.
(11) Employee and guest meals.
(12) Pennsylvania Capital Stock and Franchise Tax.
(13) Income tax.
(14) Ambulance costs.
(15) Promotional advertising, including a yellow page listing larger than a minimum insert.
(16) Late payment penalties.
(17) Taxes based upon net income.
(18) Officers’ and directors’ life insurance, including life insurance premiums necessary to obtain mortgages and other loans.
(19) Bad debts or contractual adjustments.
(20) Collection expenses associated with bad debts.
(21) Losses on the sale of fixed and movable assets.
(22) Remuneration of any kind for any purpose, including travel expenses for members of the Board of Directors.
(23) Dry cleaning, mending or other specialty laundry services.
(24) Depreciation on fixed or movable property, capital interest, amortization—capital costs and rental expense for fixed property.
(25) Expenses or revenues not necessary to resident care.
(26) Costs, including legal fees, accounting and administrative costs, travel costs and the costs of feasibility studies, attributable to the negotiation or settlement of the sale or purchase of a capital asset—by acquisition or merger—for which payment has previously been made under Title XVIII of the Social Security Act (42 U.S.C.A. § § 1395—1395yy) if the sale or purchase was made on or after July 18, 1984.
(27) Letter of credit costs.
(28) Legal expenses related to an appeal or action challenging a payment determination under this chapter until a final adjudication is issued sustaining the nursing facility’s appeal. If the nursing facility prevails on some but not all issues raised in the appeal or action, a percentage of the reasonable legal expenses is allowable based upon the proportion of additional reimbursement received to the total additional reimbursement sought on appeal.
(29) Nonstandard or nonuniform fringe benefits.
(30) Return on net equity and net worth.
(b) Nonallowable costs related to revenue producing items. In determining the operating costs of a nursing facility, the Department will not allow costs related to:
(1) The sale of laundry and linen service.
(2) The sale of drugs to nonresidents.
(3) The sale of medical and surgical supplies to nonresidents.
(4) The sale of clinical records and abstracts.
(5) The rental of quarters to employees and others.
(6) The rental of space within the nursing facility.
(7) The payments received from clinical specialists.
(8) Discounts on purchases which include trade, quantity and time.
(9) Rebates and refunds of expenses.
(c) Income that reduces allowable costs.
(1) Except as provided in § 1187.56(3)(i) (relating to selected administrative cost policies), any form of investment income shall be used to reduce the allowable administrative interest expense.
(2) Grants, gifts and income designated by the donor for specific operating expenses are used to reduce the allowable costs relating to the specific operating expense.
(3) Recovery of insured loss shall be used to reduce the allowable costs relating to the insured loss.
(4) Applicable revenue producing items, other than room and board, shall be used to reduce the related allowable costs.
(5) Payments received under an exceptional DME grant reduce the allowable cost of the major movable property and related services and items in the cost centers where the costs were originally reported in the MA-11.
(d) Nonallowable direct nursing facility payments. Costs for prescription drugs, physician services, dental services, dentures, podiatry services, eyeglasses, appliances, X-rays, laboratory services and other materials or services covered by payments, other than MA or Medicare Part A, made directly to nursing facilities, including Medicare Part B, Champus, Blue Cross, Blue Shield or other insurers or third parties, are not allowable in determining net operating costs.
Source The provisions of this § 1187.59 amended February 8, 2002, effective retroactively November 1, 1999, 32 Pa.B. 734. Immediately preceding text appears at serial pages (201547) to (201549).
Cross References This section cited in 55 Pa. Code § 1187.51 (relating to scope).
No part of the information on this site may be reproduced for profit or sold for profit.
This material has been drawn directly from the official Pennsylvania Code full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.
