(a) Day Activity and Health Care Services. Day activity and health care facilities provide noninstitutional care to clients residing in the community through rehabilitative nursing and social services. The Texas Department of Aging and Disability Services (DADS) reimburses Day Activity and Health Services (DAHS) provider agencies for the services they provide to clients.
(b) 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. 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).
(c) Cost-reporting guidelines. 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).
(d) Exclusion of cost reports.
  (1) 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. HHSC excludes from reimbursement determination any 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.
  (2) 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.
(e) Review of cost reports. HHSC may perform desk reviews or field audits on cost reports for all contracted providers. HHSC determines the frequency and nature of the desk reviews and field audits 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 a field audit in accordance with §355.107 of this title (relating to Notification of Exclusions and Adjustments). Providers may request an informal and, if necessary, an administrative hearing to dispute an action taken by HHSC under §355.110 of this title (relating to Informal Reviews and Formal Appeals).
(f) Reimbursement determination. HHSC determines reimbursement in the following manner.
  (1) A contracted provider must submit a cost report unless the provider meets one or more of the conditions in §355.105(b)(4)(D) of this title.
  (2) HHSC staff allocate payroll taxes and employee benefits 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. The employee benefits for administrative staff are allocated directly to the corresponding salaries for those positions. The allocated payroll taxes are Federal Insurance Contributions Act (FICA) or Social Security, Workers' Compensation Insurance (WCI), Federal Unemployment Tax Act (FUTA), and the Texas Unemployment Compensation Act (TUCA).
  (3) HHSC staff project all allowable expenses, excluding depreciation and mortgage interest, for the period from each provider's reporting period to the next ensuing reimbursement period. HHSC staff determine reasonable and appropriate economic adjusters as described in §355.108 of this title (relating to Determination of Inflation Indices) to calculate the projected expenses. HHSC staff also adjust reimbursement if 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).
  (4) HHSC staff combine allowable reported costs into the following four cost areas:
    (A) Attendant cost area. This cost area is calculated as specified in §355.112 of this title (relating to Attendant Compensation Rate Enhancement).
    (B) Other direct care costs. This cost area includes other direct care staff; food and food service costs; activity costs; and other direct service costs.
    (C) Facility cost area. This cost area includes building, maintenance staff, and utility costs.
    (D) Administration and transportation cost area. This cost area includes transportation, administrative staff, and other administrative costs.
  (5) For the cost areas described in paragraph (4)(B) - (D) of this subsection, allowable costs are totaled by cost area and then divided by the total units of service for the reporting period to determine the cost per unit of service. HHSC staff rank from low to high all provider agencies' projected costs per unit of service in each cost area. The median projected unit of service cost from each cost area is then determined. Those median projected unit of service costs from each cost area are totaled. That resulting total is multiplied by 1.07 and becomes the recommended reimbursement.
  (6) The reimbursement determination authority is specified in §355.101 of this title (relating to Introduction).
(g) Allowable and unallowable costs. Providers must follow the guidelines specified in §355.102 of this title (relating to General Principles of Allowable and Unallowable Costs) in determining whether a cost is allowable or unallowable. Providers must follow the guidelines for allowable and unallowable costs specified in §355.103 of this title (relating to Specifications for Allowable and Unallowable Costs).
(h) DAHS-specific allowable costs. Allowable costs specific to the DAHS program are:
  (1) certain medical equipment and supplies, if they are related to the services for which DADS has contracted. This may include, but is not limited to, supplies and equipment considered necessary to perform client assessments, medication administration, and nursing treatment.
  (2) transportation costs if they are related to the services for which DADS has contracted. This includes the costs of garaging a vehicle that is primarily used to transport clients to and from the DAHS center. The vehicle may be garaged off-site of the center for security reasons or for route efficiency management. In these cases of off-site vehicle garaging, a mileage log is not required if the vehicle is not used for personal use and is used solely (100%) for the delivery of DAHS services.
(i) DAHS-specific unallowable costs. Unallowable costs specific to the DAHS program are:
  (1) physician's fees for completion of physician orders; and
  (2) costs for which the provider received federal funds which should have been offset as specified in §355.103(b)(18)(B) of this title (relating to Specification for Allowable and Unallowable Costs).
(j) Reporting revenue. Revenue must be reported on the cost report according to §355.104 of this title (relating to Revenue).

Source Note: The provisions of this §355.6907 adopted to be effective September 1, 1996, 21 TexReg 7892; duplicated effective September 1, 1997, as published in the Texas Register October 17, 1997, 22 TexReg 10311; amended to be effective November 22, 1998, 23 TexReg 11631; amended to be effective June 25, 2000, 25 TexReg 5867; amended to be effective November 25, 2012, 37 TexReg 9086; amended to be effective January 1, 2015, 39 TexReg 9193; amended to be effective September 2, 2019, 44 TexReg 4691