Costs applicable to services and supplies furnished to a provider by
organizations related to the provider by common ownership or control are
allowable at the lower of cost excluding profits and markups to the related
party or charge to the facility. Such costs are allowable to the extent that
they relate to resident care, are reasonable, ordinary, and necessary, and are
not in excess of those costs incurred by a prudent cost-conscious buyer.
Documentation of costs to related parties (including those identified in OAR
(10) must be made available at time of audit. If documentation is
not available, such payments to or for the benefit of the related organization
will be non-allowable costs.
exception is provided to the general rule in section (1) of this rule
applicable to related organizations. The exception applies if the provider
demonstrates by convincing evidence to the satisfaction of the Department:
(a) That the supplying organization is a
separate legal entity; and
a substantial part of the supplying organization's business activity, of the
type carried on with the provider, is transacted with other organizations not
related to the provider and the supplier by common ownership or control and
there is an open, competitive market. Prices paid by the provider may not be in
excess of what would be paid by a prudent cost conscious buyer.
If the provider takes the
position that an exception as stated in section (2) of this rule applies, then
the provider must:
(a) Make available the
books and records of the related organization to SPD auditors; and
(b) Maintain a receiving report signed by
personnel of the nursing facility for services or supplies furnished by the
(4) Rental expense paid to related
organizations for facilities may be allowable to the extent the rental does not
exceed the related organization's costs of owning (e.g., depreciation, interest
on a mortgage) or leasing the assets, computed in accordance with the
provisions of these rules. The exception listed in section (2) of this rule
does not apply to rental expense paid for facilities.
Or. Admin. R.
PWC 866(Temp), f. 12-30-77,
ef. 1-1-78; AFS 19-1978, f. & ef. 5-1-78; Renumbered from 461-017-0335 by
Ch. 784, OL 1981 & AFS 69-1981, f. 9-30-81, ef. 10-1-81; 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; SSD 6-1995, f. 6-30-95, cert.ef. 7-1-95; SPD
9-2006, f. 1-26-06, cert. ef. 2-1-06
Stat. Auth.: ORS
Stats. Implemented: ORS