(a) General requirements. The Texas Health and Human Services Commission (HHSC) applies the general principles of cost determination as specified in §355.101 of this title (relating to Introduction).
(b) Cost reporting. Provider agencies 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) Number of cost reports to be submitted. Every legal entity must submit a cost report unless the entity meets one or more of the conditions in §355.105(b)(4)(D) of this title.
    (A) Contracted providers participating in the attendant compensation rate enhancement.
      (i) At the same level of enhancement. If all the contracts under the legal entity participate in the enhancement at the same level of enhancement, the contracted provider must submit one cost report for the legal entity.
      (ii) At different levels of enhancement. If all the contracts under the legal entity participate in the enhancement but they participate at more than one enhancement level, the contracted provider must submit one cost report for each level of enhancement.
    (B) Contracted providers not participating in the attendant compensation rate enhancement. If all the contracts under the legal entity do not participate in the enhancement, the contracted provider must submit one cost report for the legal entity.
    (C) Contractors participating and not participating in attendant compensation rate enhancement.
      (i) At the same level of enhancement. If some of the contracts under the legal entity do not participate in the enhancement and the rest of the contracts under the legal entity participate at the same level of enhancement, the contracted provider must submit:
        (I) one cost report for the contracts that do not participate; and
        (II) one cost report for the contracts that do participate.
      (ii) At different levels of enhancement. If some of the contracts under the legal entity do not participate in the enhancement and the rest of the contracts under the legal entity participate in the enhancement but they participate at more than one enhancement level, the contracted provider must submit:
        (I) one cost report for the contracts that do not participate; and
        (II) one cost report for each level of enhancement.
  (2) Provider agencies 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. HHSC excludes from reimbursement determination unallowable expenses included in the cost report and makes the appropriate adjustments to expenses and other information reported by provider agencies. 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. Individual cost reports may not be included in the database used for reimbursement determination if:
    (A) there is reasonable doubt as to the accuracy or allowability of a significant part of the information reported; or
    (B) an auditor determines that reported costs are not verifiable.
(c) Reimbursement determination. Reimbursement is determined in the following manner.
  (1) Cost determination by cost area. Allowable costs are combined into three 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.
    (A) Service support cost area. This includes field supervisors' salaries and wages, benefits, and mileage reimbursement expenses. This also includes building, building equipment, and operation and maintenance costs; administration costs; and other service costs. Administration expenses equal to $0.18 per priority unit of service are allocated to priority. The administration costs remaining after this allocation are summed with the other service support costs.
    (B) Non-priority attendants cost area. This includes non-priority 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).
    (C) Priority attendants cost area. This includes priority attendants' salaries and wages, benefits, and mileage reimbursement expenses. This cost area is calculated as specified in §355.112 of this title.
  (2) Recommended reimbursement by cost area. For the service support cost area described in paragraph (1)(A) of this subsection the following is calculated:
    (A) Projected costs. Each contract's total allowable costs, excluding depreciation and mortgage interest, per unit of service are projected from each contract's reporting period to the next ensuing reimbursement period, as described in §355.108 of this title (relating to Determination of Inflation Indices) to calculate the projected expenses. Reimbursement may be adjusted 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).
    (B) Projected cost per unit of service. To determine the projected cost per unit of service for each contract, the total projected allowable costs for the service support cost area are divided by total units of service, including non-priority services, priority services, and STAR+PLUS services, in order to calculate the projected cost per unit of service.
    (C) Projected cost arrays. Each contract's projected allowable costs per unit of service are rank ordered from low to high, along with each contract's corresponding units of service for each cost area.
    (D) Recommended reimbursement for the service support cost area. The total units of service for each contract are summed until the median hour of service is reached. The corresponding projected expense is the weighted median cost component. The weighted median cost component is multiplied by 1.044 to calculate the recommended reimbursement for the service support cost area. The service support cost area recommended reimbursement is limited, if necessary, to available appropriations.
  (3) Total recommended reimbursement.
    (A) For non-priority clients. The recommended reimbursement is determined by summing the recommended reimbursement described in paragraph (2) of this subsection and the cost area component from paragraph (1)(B) of this subsection.
    (B) For priority clients. The recommended reimbursement is determined by summing the recommended reimbursement described in paragraph (2) of this subsection and the cost area component from paragraph (1)(C) of this subsection.
(d) Reimbursement determination authority. The reimbursement determination authority is specified in §355.101 of this title.
(e) Desk reviews and field audits of cost reports. Desk reviews or field audits are performed on cost reports for all provider agencies. The frequency and nature of the field audits are determined by HHSC 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 provider agencies 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). Provider agencies may request an informal review and, if necessary, an administrative hearing to dispute an action taken under §355.110 of this title (relating to Informal Reviews and Formal Appeals).
(f) Factors affecting allowable costs. Provider agencies must follow the guidelines in determining whether a cost is allowable or unallowable as specified in §355.102 of 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).
(g) 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; amended to be effective July 1, 2002, 27 TexReg 5164; amended to be effective May 7, 2003, 28 TexReg 3711; amended to be effective December 25, 2003, 28 TexReg 11253; amended to be effective June 1, 2004, 29 TexReg 5055; amended to be effective February 3, 2008, 33 TexReg667;amended to be effective April 1, 2012, 37 TexReg 2068; amended to be effective November 25, 2012, 37 TexReg 9086