Offsets to cost. 1

Several items of income must be considered as offsets against various costs as recorded in the books of the facility. Income in any form received by the facility must be offset up to the total of the appropriate actual allowable costs, with the following exceptions: a. An established rate; b. Income from payments made under the Workforce Investment Act; c. Bed reduction incentive payments; d. Donations; e. The deferred portion of patronage dividends credited to the facility and not previously offset; f. Charges for private rooms or special services; g. Noncovered bed hold days; or h. Sales tax revenue received from a political subdivision or local taxing authority for a facility located in a community with a population of less than twelve thousand five hundred people. 2. If actual costs are not identifiable, income must be offset up to the total of costs described in this section. If costs relating to income are reported in more than one cost category, the income must be offset in the ratio of the costs in each cost category. Sources of income include: a. "Activities income". Income from the activities department and the gift shop must be offset to activity costs. b. "Dietary income". Amounts received from or on behalf of employees, guests, or other nonresidents for lunches, meals, or snacks must be offset to dietary and food costs. c. "Drugs or supplies income". Amounts received from employees, doctors, or others not admitted as residents must be offset to nursing supplies. Medicare part B income for drugs and supplies must be offset to nursing supplies. d. "Insurance recoveries income". Any amount received from insurance for a loss incurred must be offset against the appropriate cost category, regardless of when or if the cost is incurred, if the facility did not adjust the basis for depreciable assets. e. "Interest or investment income". Interest received on investments, except amounts earned on funded depreciation or from earnings on gifts where the identity remains intact, must be offset to interest expense. f. "Laundry income". All amounts received for laundry services rendered to or on behalf of employees, doctors, or others must be offset to laundry costs. g. "Private duty nurse income". Income received for the providing of a private duty nurse must be offset to nursing salaries. h. "Rentals of facility space income". Income received from outside sources for the use of facility space and equipment must be offset to property costs. i. "Telephone income". Income received from residents, guests, or employees must be offset to administration costs. Income from emergency answering services need not be offset. j. "Therapy income". Except for income from Medicare part A, income from therapy services must be offset to therapy costs unless the provider has elected to make therapy costs nonallowable under subsection 39 of section 75-02-06-12.1. k. "Vending income". Income from the sale of beverages, candy, or other items must be offset to the cost of the vending items or, if the cost is not identified, all vending income must be offset to the cost category where vending costs are recorded. l. "Bad debt recovery". Income for bad debts previously claimed must be offset to property costs in total in the year of recovery. m. "Other cost-related income". Miscellaneous income, including amounts generated through the sale of a previously expensed or depreciated item, such as supplies or equipment, or the amount related to the default of a contractual agreement related to education expense assistance, must be offset, in total, to the cost category where the item was expensed or depreciated. n. "Medicare part B income". Income from Medicare part B must be offset to the cost category where the expense is recorded. Medicare part B therapy income must be offset unless the provider has elected to make therapy costs nonallowable under subsection 39 of section 75-02-06-12.1. 3. Payments to a provider by its vendor must ordinarily be treated as purchase discounts, allowances, refunds, or rebates, even though these payments may be treated as "contributions" or "unrestricted grants" by the provider and the vendor. Payments that represent a true donation or grant need not be treated as purchase discounts, allowances, refunds, or rebates. Examples of payments that represent a true donation or grant include contributions made by a vendor in response to building or other fundraising campaigns in which communitywide contributions are solicited or when the volume or value of purchases is so nominal that no relationship to the contribution can be inferred. The provider shall provide verification, satisfactory to the department, to support a claim that a payment represents a true donation. 4. When an owner, agent, or employee of a provider directly receives from a vendor monetary payments or goods or services for the owner's, agent's, or employee's own personal use as a result of the provider's purchases from the vendor, the value of the payments, goods, or services constitutes a type of refund or rebate and must be applied as a reduction of the provider's costs for goods or services purchased from the vendor. 5. When the purchasing function for a provider is performed by a central unit or organization, all discounts, allowances, refunds, and rebates must be credited to the costs of the provider and may not be treated as income by the central unit or organization or used to reduce the administrative costs of the central unit or organization. 6. Purchase discounts, allowances, refunds, and rebates are reductions of the cost of whatever was purchased. 7. For purposes of this section, "Medicare part B income" means the interim payment made by Medicare during the report year plus any cost settlement payments made to the provider or due from the provider for previous periods which are made during the report year and which have not been reported to the department prior to June 30, 1997.