N.J. Admin. Code § 8:31B-4.25

Current through Register Vol. 56, No. 11, June 3, 2024

Section 8:31B-4.25 - Related organizations

(a) Auxiliaries, guilds, fund raising groups and other related organizations frequently assist hospitals. In addition, hospitals frequently use self-insurance trusts and captives to manage their insurance obligations. Such organizations are independent if they are so characterized by their own charter, by-laws, tax-exempt status and governing board or a sufficient combination of these characteristics to demonstrate their independent existence from the hospital. The financial reporting of these organizations should be separate from or combined with reports of the hospitals in accordance with the AICPA's Hospital Audit Guide, as amended and supplemented, available from the AICPA Order Department, 1211 Avenue of the Americas, New York, NY 10036 or at www.AICPA.org.

(b) A hospital itself may be a subsidiary to or under the control of a large organization such as a university, governmental entity or parent corporation. It is typical in such situations for hospitals to receive services from these related organizations. Examples of services received are administration, purchasing, general accounting and menu planning. In addition, related organizations lease property, plant and equipment to hospitals as well as paying for various other items such as insurance. The related organization then usually charges for the service either directly or through a management fee. To be included as Costs Related to Patient Care all such charges must be similar to those which would have been charged if the transacting organizations were not related. The direct charges must be recorded in the appropriate cost centers as billed, and the management fee must be distributed to the functional centers where services are provided. The hospital shall maintain documentation of the actual management service for which a management fee is recorded.

(c) Disclosure of information by hospitals dealing with related firm(s):

1. For the purpose of insuring prudent buying, hospitals will report the existence of a related organization and each type of service provided, to the Department, if the total transactions amount to greater than $ 10,000 per year.

2. Hospitals may be related to one or more separate organizations if:

i. The hospital controls through contracts or other legal documents the authority to direct the separate organization's management or policies;

ii. The separate organization controls through contracts or other legal documents the authority to direct the hospital's management or policies;

iii. The hospital is for all practical purposes the primary beneficiary of the separate organization.

(d) At the Department's request relevant information reported to the Department may include:

1. The nature of the legal relationship between the hospital and the related firm(s).

2. Frequency of business transactions between the hospital and the firm(s); and

3. Purchase or lease contractual arrangements between the hospital and firms;

4. The amount of money involved; and

5. The financial statements of all related organizations.

(e) For self-insurance trusts and captives, hospitals must indicate that they have complied with the reporting requirements of the New Jersey Health Care Facilities Financing Authority, where applicable.

N.J. Admin. Code § 8:31B-4.25

Amended by R.1983 d.596, effective 12/19/1983.
See: 15 New Jersey Register 1334(a), 15 New Jersey Register 2166(a).
(c) and (d) added.
Amended by R.1993 d.593, effective 11/15/1993.
See: 25 New Jersey Register 3117(a), 25 New Jersey Register 5149(a).
Amended by R.2006 d.27, effective 1/17/2006.
See: 37 New Jersey Register 2165(a), 38 New Jersey Register 667(a).
In (a), added second sentence, and corrected address to AICPA Order Department and added its website address; added (e).