N.D. Admin. Code 75-02-07.1-10

Current through Supplement No. 395, January, 2025

Section 75-02-07.1-10 - Nonallowable costs

Costs not related to resident care are costs not appropriate or necessary and proper in developing and maintaining the operation of the facility and its activities. These costs are not allowed in computing the rates. Nonallowable costs include:

1. Political contributions;

2. Salaries or expenses of a lobbyist;

3. Advertising designed to encourage potential residents to select a particular facility;

4. Fines or penalties, including interest charges on the penalty, bank overdraft charges, and late payment charges;

5. Legal and related expenses for challenges to decisions made by governmental agencies except for successful challenges as provided for in section 75-02-07.1-08;

6. Costs incurred for activities directly related to influencing employees with respect to unionization;

7. Cost of memberships in sports, health, fraternal, or social clubs or organizations such as elks, YMCA, country clubs, or knights of columbus;

8. Assessments made by or the portion of dues charged by associations or professional organizations for lobbying costs, contributions to political action committees or campaigns, or litigation, except for successful challenges to decisions made by governmental agencies, including all dues unless an allocation of dues to such costs is provided;

9. Community contributions, employer sponsorship of sports teams, and dues to civic and business organizations, i.e., lions, chamber of commerce, kiwanis, in excess of one thousand five hundred dollars per cost reporting period;

10. Home office costs not otherwise allowable if incurred directly by the facility;

11. Stockholder servicing costs incurred primarily for the benefit of stockholders or other investors that include annual meetings, annual reports and newsletters, accounting and legal fees for consolidating statements for security exchange commission purposes, stock transfer agent fees, and stockbroker and investment analysis;

12. Corporate costs not related to resident care, including reorganization costs; costs associated with the acquisition of capital stock, except otherwise allowable interest and depreciation expenses associated with the transaction described in subsection 4 of section 75-02-07.1-13; and costs relating to the issuance and sale of capital stock or other securities;

13. The full cost of items or services such as telephone, radio, and television, including cable hookups or satellite dishes, located in resident accommodations, excluding common areas, furnished solely for the personal comfort of the residents;

14. Fundraising costs, including salaries, advertising, promotional, or publicity costs incurred for such a purpose;

15. The cost of any equipment, whether owned or leased, not exclusively used by the facility except to the extent that the facility demonstrates, to the satisfaction of the department, that any portion of the use of equipment was related to resident care;

16. Costs, including, by way of illustration and not by way of limitation, legal fees, accounting and administration costs, travel costs, and the costs of feasibility studies, attributed to the negotiation or settlement of the sale or purchase of any capital assets, whether by sale or merger, when the cost of the asset has been previously reported and included in the rate paid to any health care facility or basic care facility;

17. Costs incurred by the provider's subcontractors or by the lessor of property that the provider leases, that are an element in the subcontractor's or lessor's charge to the provider, if the costs would not have been allowable had the costs been incurred by a provider directly furnishing the subcontracted services, or owning the leased property, except no facility shall have a particular item of cost disallowed under this subsection if that cost arises out of a transaction completed before July 1, 1995;

18. The cost, in excess of charges, of providing meals and lodging to facility personnel living on premises;

19. Depreciation expense for facility assets not related to resident care;

20. Nonbasic care facility operations and associated administration costs;

21. All costs for services paid directly by a government entity to an outside provider, such as prescription drugs;

22. Travel costs involving the use of vehicles not exclusively used by the facility except to the extent:

a. The facility supports vehicle travel costs with sufficient documentation to establish that the purpose of the travel is related to resident care;

b. Resident-care related vehicle travel costs do not exceed a standard mileage rate established by the internal revenue service; and

c. The facility documents all costs associated with a vehicle not exclusively used by the facility;

23. Travel costs other than vehicle-related costs unless supported, reasonable, and related to resident care;

24. Additional compensation paid to an employee, who is a member of the board of directors, for service on the board;

25. Fees paid to a member of a board of directors for meetings attended to the extent that the fees exceed the compensation paid, per day, to a member of the legislative council, pursuant to North Dakota Century Code section 54-35-10;

26. Travel costs associated with a board of directors meeting to the extent the meeting is held in a location where the organization has no facility;

27. The costs of deferred compensation and pension plans that discriminate in favor of certain employees, excluding the portion which relates to costs that benefit all eligible employees;

28. Premiums for top management personnel life insurance policies, except that the premiums must be allowed if the policy is included within a group policy provided for all employees, or if the policy is required as a condition of mortgage or loan and the mortgagee or lending institution is listed as the sole beneficiary;

29. Personal expenses of owners and employees, including vacations, personal travel, and entertainment;

30. Costs not adequately documented through written documentation, date of purchase, vendor name, listing of items or services purchased, cost of items purchased, account number to which the cost is posted, and a breakdown of any allocation of costs between accounts or facilities;

31. The following taxes:

a. Federal income and excess profit taxes, including any interest or penalties paid thereon;

b. State or local income and excess profit taxes;

c. Taxes in connection with financing, refinancing, or refunding operation, such as taxes on the issuance of bonds, property transfers, or issuance or transfer of stocks, which are generally either amortized over the life of the securities or depreciated over the life of the asset, but not recognized as tax expense;

d. Taxes, including real estate and sales tax, for which exemptions are available to the provider;

e. Taxes on property not used in the provision of covered services;

f. Taxes, including sales taxes, levied against the residents and collected and remitted by the provider; and

g. Self-employment (FICA) taxes, applicable to persons such as individual proprietors, partners, or members of a joint venture;

32. The unvested portion of a facility's accrual for sick or annual leave;

33. Salaries accrued at a facility's fiscal yearend but not paid within seventy-five days of the facility's fiscal yearend;

34. Employment benefits associated with salary costs not includable in a rate set under this chapter;

35. The cost, including depreciation, of equipment or items purchased with funds received from a government agency;

36. Hair care, other than routine hair care, furnished by the facility;

37. The cost of education unless:

a. The education was provided by an accredited academic or technical educational facility;

b. The expenses were for materials, books, or tuition;

c. The employee was enrolled in a course of study intended to prepare the employee for a position at the facility and is in that position; and

d. The facility claims the cost of the education at a rate that does not exceed one dollar per hour of work performed by the employee in the position for which the employee received education at the facility's expense, provided the amount claimed per employee may not exceed two thousand dollars per year, or an aggregate of eight thousand dollars, and in any event may not exceed the cost to the facility of the employee's education;

38. Repealed effective July 1, 1999.

39. Increased lease costs of a provider except to the extent:

a. The lessor incurs increased costs related to the ownership of the facility or a resident-related asset;

b. The increased costs related to the ownership are charged to the lessee; and

c. The increased costs related to the ownership would be allowable had the costs been incurred directly by the lessee;

40. Bad debts expense in excess of subsection 5 of section 75-02-07.1-08.1;

41. Costs associated with or paid for the acquisition of licensed basic care capacity; and

42. Goodwill.

N.D. Admin Code 75-02-07.1-10

Effective July 1, 1996; amended effective July 1, 1998; January 1, 2000.

Amended by Administrative Rules Supplement 2023-391, January 2024, effective 1/1/2024.

General Authority: NDCC 50-06-16, 50-24.5-02(3)

Law Implemented: NDCC 50-24.5-02(3)