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Title: Section 86-2.17 - Allowable costs

Effective Date


86-2.17 Allowable costs.

(a) To be considered as allowable in determining reimbursement rates, costs shall be properly chargeable to necessary patient care. Except as otherwise provided in this Subpart, or in accordance with specific determination by the commissioner, allowable costs shall be determined by the application of the principles of reimbursement developed for determining payments under title XVIII of the Federal Social Security Act (Medicare) program.

(b) Allowable cost shall include a monetary value assigned to services provided by religious orders and for services rendered by an owner and operator of a residential health care facility.

(c) Allowable costs may not include amounts in excess of reasonable or maximum Title XVIII of the Federal Social Security Act (Medicare) or in excess of customary charges to the general public. For purposes of this determination, customary charges to the general public shall equal an average of the applicable charges weighted by patient days. This provision shall not apply to services furnished by public providers free of charge or at a nominal fee.

(d) Allowable costs shall not include expenses or portions of expenses reported by individual residential health care facilities which are determined by the commissioner not to be reasonably related to the efficient production of service because of either the nature or amount of the particular item.

(e) Any general ceilings applied by the commissioner, as to allowable costs in the computation of reimbursement rates, shall be published in a hospital memorandum or other appropriate manner.

(f) Allowable costs shall not include costs not properly related to patient care or treatment which principally afford diversion, entertainment or amusement to owners, operators or employees of residential health care facilities.

(g) Allowable costs shall not include any interest charged related to rate determination or penalty imposed by governmental agencies or courts, and the costs of policies obtained solely to insure against the imposition of such a penalty.

(h) Allowable costs shall not include the direct or indirect costs of advertising, public relations or promotion except in those instances where the advertising is specifically related to the operation of the residential health care facility and not for the purpose of attracting patients.

(i) Allowable costs shall not include costs of contributions or other payments to political parties, candidates or organizations.

(j) Allowable costs shall include only that portion of the dues paid to any professional association which has been demonstrated, to the satisfaction of the commissioner, to be allocable to expenditures other than for public relations, advertising or political contributions. Any such costs shall also be subject to any cost ceilings that may be promulgated by the commissioner.

(k) Allowable costs shall not include any element of cost as determined by the commissioner to have been created by the sale of a residential health care facility.

(l) Allowable costs shall not include the interest paid to a lender related through control, ownership, affiliation or personal relationship to the borrower, except in instances where the prior approval of the Commissioner of Health has been obtained.

(m) Allowable costs shall be reduced by income earned for Medicare part B eligible services to the extent that Medicaid has paid for these services.

(n) Allowable costs shall include any fee assessed by the commissioner on a residential health care facility, for the purpose of providing revenue for the account established pursuant to chapter 1021 of the Laws of 1981. The reimbursement rate for a facility shall reflect the cost of the annual fee prior to collection of the fee through the rate of reimbursement.


VOLUME A-2 (Title 10)