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Title: Section 86-5.28 - Related organizations.

Effective Date


86-5.28 Related organizations.

(a) A related organization shall be defined as any entity which the LTHHCP is in control of or is controlled by, either directly or indirectly, or an organization, or institution whose actions or policies the LTHHCP has the power, directly or indirectly, to significantly influence or direct the actions or policies of an organization or institution or a special purpose organization or where an association of material interest exists in an entity which supplies goods and/or services to the LTHHCP, or an entity which is controlled directly or indirectly by the immediate family of the operator. Immediate family shall include each parent, child, spouse, brother, sister, first cousin, aunt and uncle, whether such relationship arises by reason of birth, marriage or adoption. A special purpose organization shall be defined as an organization which is established to conduct certain of the provider's patient-care-related or non-patient-care-related activities. The special purpose organization is considered to be related if:

(1) The LTHHCP controls the special purpose organization through contracts or other legal documents that allow direct authority over the organization's activities, management and policies; or

(2) The LTHHCP is, for all practical purposes, the sole beneficiary of the special organization's activities. The LTHHCP shall be considered the special purpose organization's sole beneficiary if one or more of the three following circumstances exist:

(i) a special purpose organization has solicited funds in the name of and with the expressed or implied approval of the LTHHCP, and substantially all the funds solicited by the organization were intended by the contributor or were otherwise required to be transferred to the provider or used at its discretion or direction;

(ii) the LTHHCP has transferred some of its resources to a special purpose organization, substantially all of whose resources are held for the benefit of the provider; or

(iii) the LTHHCP has assigned certain of its functions (such as the operation of a dormitory) to a special purpose organization that is operating primarily for the benefit of the LTHHCP.

(b) The costs of goods and/or services furnished to a LTHHCP by a related organization are includable in the computation of the basic rate at the lower of the cost to the related organization or the market price of comparable goods and/or services available in the LTHHCP's region within the course of normal business operations.

(c) If the LTHHCP has incurred any costs in connection with a related organizaton, the final payment rate shall include the costs of such goods and/or services.


VOLUME A-2 (Title 10)