Ill. Admin. Code tit. 89, § 140.537 - Payments to Related Organizations
a) Related organizations include those with
overlapping ownership and organizations with any ownership interest held by
relatives of the owners of the reporting facility. Relatives include spouses,
children, parents, brothers, sisters, grandparents, grandchildren,
parents-in-law, sister or brother-in-law, son or daughter-in-law, aunt, uncle,
and cousins. Where the overlapping ownership or interest held by relatives is 5
percent or more, a related organization exists for cost reporting purposes. An
organization which has any control over operating policy of the reporting
facility shall also be considered a related organization.
b) The following criteria govern costs
regarding payments to related organizations:
1) Where facility makes rental payments to a
related organization the rental payments are not allowable. The capital costs
of the related organization must be used.
2) Interest paid by a facility to a related
organization is allowable to the extent it does not exceed the prime rate of
interest. The funds borrowed must be directly related to patient care. Interest
is not allowed on loans from related parties in order to compensate or pay
dividends to related parties, or to replace working capital used to pay for
non-allowable expenses. Funds provided by owners to replace operating losses
are contributions to capital and not allowable.
3) The cost of supplies or services purchased
from a related organization are allowable if the following conditions are met:
A) Supplying organization is a bona fide
separate organization;
B) At least
95 percent of the business activity of the type carried on with the facility is
conducted with unrelated organizations;
C) The charge to the facility is in line with
charges to unrelated customers; and
D) The charge to the facility does not exceed
fair market value.
c) If all the above criteria are not met, the
cost of the related organization must be used.
Notes
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