Reasonable compensation for services performed by owners (whether sole
proprietors, partners, or stockholders) is an allowable cost, provided the
services are actually performed, documented, and are necessary, and the
provisions of this rule are met.
(2) The allowance of compensation for
services of sole proprietors and partners is the amount determined by the
Department to be the reasonable value of the services rendered as long as
compensation was paid in conformance with this rule.
(3) Compensation for services performed by
owners may be included in allowable provider cost only to the extent that it
represents reasonable remuneration for managerial, administrative,
professional, and other services related to the operation of the facility and
rendered in connection with resident care. Services rendered in connection with
resident care include both direct and indirect activities in the provision and
supervision of resident care, such as administration, management, and overall
supervision of the institution. Services which are not related to either direct
or indirect resident care; e.g., those primarily for the purpose of managing or
improving the owner's financial investment are not recognized as an allowable
cost. Costs related to the owner's management and overall supervision of the
facility will be reported in Account 436.
(4) Payments to an owner that represent a
return on equity capital are not allowable costs for reimbursement purposes.
Such payments are not considered as compensation for purposes of determining
the reasonable level of reimbursement of the owner.
(5) The compensation allowance will be an
amount as would ordinarily be paid for comparable services in other nursing
facilities, as defined by section (6) of this rule. This determination will be
made by the Department depending upon the facts and circumstances of each
(6) For purposes of
determining whether the compensation paid to or claimed by an owner is
reasonable, the total of all benefits and remuneration such as travel allowance
or key-man insurance, regardless of the form, will be considered. The
Department has established the 75th percentile ranking of average compensation
paid, in all facilities by job category, as being reasonable.
(7) Accrued compensation of an owner, if not
paid within 75 days after the end of the Nursing Facility Financial Statement
reporting period, may not be included as an allowable expense.
(8) An owner must not be compensated for
services in excess of 40 hours in one week. This rule applies even if an owner
may provide services in more than one area.
(9) The requirement that the function be
necessary means that had the owner not rendered the services, the institution
would have had to employ another person to perform them. The services must be
pertinent to the operation and sound conduct of the institution.
(10) Compensation paid to an employee who is
an immediate relative of the owner of the facility is also reviewable under the
test of reasonableness. For this purpose, the following persons are considered
"immediate relatives": Husband and wife; natural parent, child and sibling;
adopted child and adoptive parent; stepparent, stepchild, stepbrother and
stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law,
brother-in-law, and sister-in-law; and grandparent and grandchild, uncle, aunt,
nephew, niece, and cousin.
Where an owner provides services for more than one facility or is engaged in
other occupations or business activities, allowable compensation may be
adjusted to reflect an appropriate allocation of time spent in each area based
on the combined total of resident days.
(12) Where an owner functions as an
administrator or assistant administrator, the rules governing compensation of
these positions apply, in addition to the requirements of this rule.
Or. Admin. R.
PWC 866(Temp), f. 12-30-77,
ef. 1-1-78; AFS 19-1978, f. & ef. 5-1-78; Renumbered from 461-017-0330 by
Ch. 784, OL 1981 & AFS 69-1981, f. 9-30-81, ef. 10-1-81; SSD 6-1985, f.
5-31-85, ef. 6-1-85; SSD 10-1986, f. & ef. 7-1-86; SSD 8-1991, f. &
cert. ef. 4-1-91; SSD 6-1993, f. 6-30-93, cert. ef. 7-1-93; SSD 8-1994, f.
& cert. ef. 12-1-94; SPD 9-2006, f. 1-26-06, cert. ef.
Stat. Auth.: ORS
414.065 & 410
Stats. Implemented: ORS