Exception To The Related Organization Principle

An exception is provided to the general rule applicable to related organizations if a provider demonstrates by convincing evidence to the satisfaction of an intermediary: (7-1-26) 01. Supplying Organization. Is a bona fide separate organization; (7-1-26) 02. Non-Exclusive Relationship. A substantial part of the supplying organization’s business activity type carried on with the provider is transacted with other organizations not related to the provider and the supplier by common ownership or control in an open, competitive market. (7-1-26) 03. Sales and Rental of Extended Care Facilities. The exception is not applicable to sales, leases, or rentals of NFs or extended care facilities and do not meet the requirement that there be an open, competitive market for the facilities furnished. (7-1-26) a. Rental expense for transactions between related entities is not recognized. Costs of ownership are allowed. (7-1-26) b. When a facility is purchased from a related entity, the purchaser's depreciable basis will not exceed the seller's net book value. (7-1-26) 056. – 059. (RESERVED) EXCLUDED SERVICES (Sections 060-069)