Ala. Admin. Code r. 560-X-22-.14
Current through Register Vol. 43, No. 1, October 31, 2024
Section 560-X-22-.14 - Property Costs(1) In order for any property costs to be reimbursed through the Medicaid program, capital expenditures must be approved under applicable Certificate of Need regulations by appropriate state and/or federal agencies. Capital expenditures, as used in this chapter, means new construction, major renovations, bed additions, or replacement beds in a nursing facility.(2) Effective September 1, 1991, a Fair Rental System will be used to reimburse property costs. The Fair Rental System reduces the wide disparity in the cost of capital payments for basically the same service and makes the cost of capital payment fairer to all participants in the program. The Fair Rental System is a rate of return on current asset values and will be used in lieu of depreciation and/or lease payments on land, buildings, and major movable equipment normally used in providing patient care.(3) The following factors will be used to arrive at a "Rate of Return on Current Asset Values": The current yield on 30 year U. S. Treasury Bonds*
A risk premium for ownership 1.5%
A Gross Rental Factor 2.5%
*Latest yield as of June 30
(4) The amount of $25,000 per bed will be used to reflect the standard value per bed as of September 1, 1991. This standard value reflects the allowable cost of a newly constructed facility to include land, buildings, and all major movable equipment needed to place the facility in operation.(5) Current asset values are found by taking the standard value of $25,000 per bed and reducing that amount by 1% for each year, or fraction thereof for partial years, of age for a maximum of 50 years. A minimum value of $12,500 per bed will be applied as a floor. Once these values have been set, they will be subject to rebasing yearly using the Marshall-Swift Valuation Service data. They will not be subject to further reduction for age.(6) Net asset values are found by taking current asset values and reducing them by outstanding allowable debt for land, building, and equipment. Allowable debt is determined by subtracting any escrow funds related to the debt from the current balance due. The remainder will be considered allowable debt up to the amount of the facility's current asset value.(7) The following property costs will normally not be reimbursed under this Fair Rental System: (b) rent for land, buildings, and equipment.(8) Sale of Existing Facilities: Effective for sales closed on or after September 1, 1991, the allowable basis to the purchaser of an existing facility in the Medicaid Program will be the Current Asset Value of the previous owner.(9) New Facilities. In the year in which a new facility is opened, the most recently computed standard asset value will be used to determine fair rental values.(10) Renovations. If a provider makes a major improvement or renovation to the facility, the current asset value of the facility may be adjusted by Medicaid. Renovations for the purpose of this chapter shall be defined as real and fixed property changes to a nursing facility. The American Hospital Association publication, "Estimated Useful Lives of Depreciable Hospital Assets," tables 2, 3 and 4 will be used to determine real and fixed property affected by this rule. Facilities wishing to make renovations must submit the renovation project to Medicaid for approval. Facilities submitting a renovation project must fully define the project and include all anticipated and projected costs of the project. At the time of completion of the renovation project, the cost projections should not exceed the original costs submitted plus fifteen percent (15%). Medicaid will approve or disapprove the renovation project within thirty (30) days of receipt. Renovation projects receiving disapproval will be given the reason for disapproval. Facilities receiving a disapproval will be given an opportunity for an appeal in accordance with Rule No. 560-X-22-.27. Renovation projects approved will be issued a certificate of approval. The certificate of approval will be valid for a period of twelve (12) months from the date of approval. If a facility, due to unexpected circumstances, is unable to complete the renovation project within the original twelve (12) months, the Medicaid Agency may grant an extension of no more than twelve (12) additional months. Medicaid will adjust the current asset value and set an interim rate for the facility during the month in which the renovation project is complete and all final invoices are submitted to Medicaid. Improvements and/or renovations costing less than five percent (5%) of the current asset value at the time of the renovation and/or improvement will normally not be considered for adjustment, as the provider's return from the Fair Rental payment has been designed to cover them. Any improvement and/or renovation with a cost in excess of five percent (5%) of the current asset value at the time of such improvement and/or renovation must be submitted to Medicaid for review and adjustment to the current asset value, as appropriate. If a provider feels that a renovation or improvement not meeting the above requirements should be considered for an adjustment to the current asset value and interest base, as appropriate, they may request an exception to policy from Medicaid. Such consideration for exception will be limited to unexpected or unanticipated events, such as acts of nature or latent damages to the facility.(11) Rebasing. The current asset value of all facilities participating in the Alabama Medicaid program will be rebased each year as of July 1. Rebasing will consist of adjusting the current asset value by indexing to reflect changes in construction cost. The Marshall-Swift Evaluation Service will be used to compute the change as of June 30 of each year. The index adjustment will be limited to no more than 3% each year.(12) Depreciation. Depreciation expense on buildings, fixed equipment, and major movable equipment normally used in providing patient care and operation of a nursing facility will not be an allowable expense. The American Hospital Association publication, "Estimated Useful Lives of Depreciable Hospital Assets," will be used to determine the assets affected by this rule. Specialized equipment purchased by a facility for use in the treatment of heavy care patients will be depreciated over its useful life, and such depreciation expense will be an allowable cost for reimbursement. This equipment will be limited to those items listed in paragraph (19) below and the useful life indicated.(13) Equipment Rental. Rental expense related to equipment normally used in providing patient care or operation of a nursing facility is not an allowable expense. Rental expense for specialized equipment acquired to treat heavy care patients will be allowed for reimbursement. This equipment will be limited to those items listed in paragraph (19) below.(14) Insurance on Building and Contents. The reasonable costs of insurance on buildings and their contents used in the rendition of covered services purchased from a commercial carrier or a limited purpose insurer subject to the provisions of HIM-15, Section 2162(2) will be considered as allowable costs.(15) Property Taxes. Ad Valorem and personal property taxes on property used in the rendition of covered services are allowable under this section. Fines, penalties, or interest related to those taxes are not allowable.(16) Nursing Facility Privilege Tax. Taxes, interest and penalties established by Code of Ala. 1975, Section 40-26B-20, et seq., on nursing facility beds are allowable through December 31, 1992. Beginning January 1, 1993, such taxes are allowable. Interest and penalties related to these taxes are not allowable.(17) Life and Rental Insurance. Premium payments for life insurance required by a lender or otherwise required pursuant to a financing arrangement will not be an allowable cost. Loss of rental insurance will also be considered an unallowable cost.(18) Minor Equipment. Minor equipment purchases may be expensed and claimed for reimbursement. Minor equipment, for the purposes of reimbursement is any equipment that has a unit cost of $300 or less (beds, at any cost, are not to be reimbursed as minor equipment). Minor equipment expenses are to be included in the cost area in which the equipment is normally used. Group purchases of minor equipment, either in a single purchase or through periodic purchases throughout the reporting year, with an aggregate cost of $5,000 or more, must be capitalized and depreciated over the useful life of the assets. The depreciation expense must go on Schedule D, line 55-4 of the cost report.(19) Expense related to the purchase and/or rental of the below listed items may be claimed by the provider in addition to the prevailing fair rental reimbursement. The provider shall maintain adequate records to substantiate any rentals, depreciation and interest expenses. | Item | Life |
1. | Feeding pump | 10 years |
2. | IPPB machine | 5 years |
3. | Ventilator | 10 years |
4. | Apnea monitor | 5 years |
5. | Oxygen Concentrator 3 Lpm. | 5 years |
6. | Oxygen Concentrator 5 Lpm. | 5 years |
7. | Oxygen nubulizer + heater | 10 years |
8. | Clinitron | 15 years |
9. | Aerosol machine without compressor | 10 years |
10. | Aerosol machine with compressor | 10 years |
11. | I vac pump | 10 years |
12. | ProCare System | 3 years |
This list is not intended to be all-inclusive. Additions will be made on an as needed basis. Requests for additions must be submitted to Chief Auditor, Provider Audit for approval. The amount of reimbursement will be determined by dividing the cost of rentals, depreciation, and interest incurred for equipment used by Medicaid recipients by the reported Medicaid days. The resulting per diem will be added to the provider's property cost per diem.
Ala. Admin. Code r. 560-X-22-.14
Rule effective 10/1/1982. Amended effective 5/15/1983; July 9, 1984; December 6, 1984. Emergency rule effective 11/20/1984. Amended effective 2/8/1985; June 10, 1987; November 17, 1987; March 12, 1988; May 12, 1989. Emergency rule effective 5/1/1990. Amended effective 8/14/1990; October 1, 1990. Emergency rule effective 9/12/1991. Amended effective 12/12/1991; August 12, 1992. Emergency Rule effective 7/1/1993. Emergency Rule effective 10/28/1993 through December 31, 1993. This amendment effective 12/14/1993. Amended: Filed November 7, 1995 effective 12/12/1995. Amended: Filed December 8, 1997; effective 1/12/1998. Amended: Filed April 6, 1998; effective 5/11/1998.Author: Susan Mims, Bob Murphy
Statutory Authority: State Plan; Title XIX, Social Security Act; 42 C.F.R. §§ 447.200 - .272, et seq.