Section 405 IAC 1-12-3 - Accounting records; retention schedule; audit trail; accrual basis; segregation of accounts by nature of business and by locationAuthority: IC 12-15-1-10; IC 12-15-21-2
Affected: IC 12-13-7-3; IC 12-15
Sec. 3.
(a) The basis of accounting used under this rule is a comprehensive basis of accounting other than GAAP. All cost and charges reported on the provider's cost report must also be recorded on the provider's financial statements. Costs must be reported in the cost report in accordance with the following authorities, in the hierarchical order listed:(1) Costs must be reported in accordance with the specific provisions as set forth in this rule, any financial report instructions, provider bulletins, and any other policy communications.(2) Costs must be reported in conformance with cost finding principles published in the Medicare Provider Reimbursement Manual, CMS 15-1.(3) Costs must be reported in conformance with GAAP.(b) Each provider must maintain financial records for a minimum period of three (3) years after the date of submission of financial reports to the office. Copies of any financial records or supporting documentation must be provided to the office upon request. The accrual basis of accounting shall be used in all data submitted to the office except for government operated providers that are otherwise required by law to use a cash system. The provider's accounting records must establish an audit trail from those records to the financial reports submitted to the office.(c) The auditor shall schedule the field audit visit with the provider. If the auditor and provider are unable to reach an agreement on a scheduled field audit date, the auditor will assign a date for the field audit to begin no earlier than sixty (60) days after the date that the provider was initially contacted to schedule the field visit. (1) The auditor will confirm the field audit date by providing a written notice identifying the date of the scheduled field audit and all information the provider is required to submit in advance of the field audit date. The notice will be provided at least sixty (60) days prior to the commencement of field work, and will allow the provider a minimum of thirty (30) days to submit the required information, which shall be due to the auditor no less than thirty (30) days prior to the date of the scheduled field audit.(2) After assignment of a field audit date, a provider may submit a one-time request that the scheduled field audit be postponed to a later date.(A) The office shall approve or deny the request in writing within fifteen (15) days of receiving the request.(B) Any delay of the scheduled field audit date does not extend the due date of the required information.(3) Failure to submit the required information by the due date in the written notice shall result in the following actions being taken: (A) The rate then currently being paid to the provider shall be reduced by ten percent (10%), effective on the first day of the month following the date the response was due.(B) The ten percent (10%) rate reduction shall remain in place until the first day of the month following the earlier of the receipt of information requested in the written notice or one (1) year after the effective date of the ten percent (10%) rate reduction.(C) No rate increases will be allowed until the first day of the month following the earlier of the receipt of information requested in the written notice, or one (1) year after the effective date of the ten percent (10%) rate reduction.(D) No reimbursement for the difference between the rate that would have otherwise been in effect and the reduced rate is recoverable by the provider.(d) When a field audit indicates that the provider's records are inadequate to support data submitted to the office or the additional requested documentation is not provided pursuant to the auditor's request, and the auditor is unable to complete the audit, the following actions shall be taken:(1) The auditor shall give a written notice listing all of the deficiencies in documentation.(2) The provider will be allowed thirty (30) days from the date of the notice to provide the documentation and correct the deficiencies.(3) Not later than thirty (30) days from the date of the notice described in subdivision (1), the provider may seek one (1) thirty (30) day extension to respond to the notice and shall describe the reason(s) the extension is necessary.(e) In the event that the deficiencies in documentation are not corrected within the time limit specified in subsection (d), the following actions shall be taken:(1) The rate then currently being paid to the provider shall be reduced by ten percent (10%), effective on the first day of the month following the date the response was due.(2) The ten percent (10%) reduction shall remain in place until the first day of the month following the receipt of a complete response.(3) If no response described in subdivision (2) is received, this reduction expires one (1) year after the effective date specified in subdivision (1).(4) No rate increases will be allowed until the first day of the month following the receipt of the response and requested documentation, or the expiration of the reduction.(5) No reimbursement for the difference between the rate that would have otherwise been in place and the reduced rate is recoverable by the provider.(f) In the event that the documentation submitted is inadequate or incomplete, the following additional actions shall be taken:(1) Appropriate adjustments to the applicable cost reports of the provider resulting from inadequate records shall be made.(2) The office shall document such adjustments in a finalized exception report.(3) The office shall incorporate such adjustments in the prospective rate calculations under section 1(d) of this rule.(g) If a provider has business enterprises other than those reimbursed by Medicaid under this rule, the revenues, expenses, and statistical and financial records for such enterprises shall be clearly identifiable from the records of the operations reimbursed by Medicaid. If a field audit establishes that records are not maintained so as to clearly identify Medicaid information, none of the commingled costs shall be recognized as Medicaid allowable costs and the provider's rate shall be adjusted to reflect the disallowance effective as of the date of the most recent rate change.(h) When multiple facilities or operations are owned by a single entity with a central office, the central office records shall be maintained as a separate set of records with costs and revenues separately identified and appropriately allocated to individual facilities. Each central office entity shall file an annual or historical financial report coincidental with the time period for any type of rate review for any individual facility that receives any central office allocation. Allocation of central office costs shall be reasonable, conform to GAAP, and be consistent between years. Any change of central office allocation bases must be approved by the office prior to the changes being implemented. Proposed changes in allocation methods must be submitted to the office at least ninety (90) days prior to the reporting period to which the change applies. Such costs are allowable only to the extent that the central office is providing services related to patient or resident care and the provider can demonstrate that the central office costs improved efficiency, economy, and quality of member care.(i) The burden of substantiating that costs are patient or resident related lies with the provider.Office of the Secretary of Family and Social Services; 405 IAC 1-12-3; filed Jun 1, 1994, 5:00p.m.: 17 IR 2316; readopted filed Jun 27, 2001, 9:40 a.m.: 24 IR 3822; readopted filed Sep 19, 2007, 12:16 p.m.: 20071010-IR- 405070311RFA; filed May 31, 2013, 8:52 a.m.: 20130626-IR-405120279FRA; readopted filed Oct 28, 2013, 3:18 p.m.: 20131127-IR-405130241RFAFiled 8/1/2016, 3:44 p.m.: 20160831-IR-405150418FRAFiled 10/13/2017, 12:09 p.m.: 20171108-IR-405160327FRAReadopted filed 5/30/2023, 11:54 a.m.: 20230628-IR-405230292RFA