(C) Appraisals for the buildings and fixed equipment
shall be performed using the Marshall-Swift segmented
cost method. A nursing facility shall be appraised every
4 years.
(D) The Secretary shall utilize an annual allowance
of $3,500 per bed for major movable equipment for a
nursing facility. The Secretary shall review the annual al-
lowance for major movable equipment every 5 years to de-
termine its accuracy.
(E) If a nursing facility has commenced a renovation
to a building and fixed equipment between appraisals the
cost of which constitutes at least 5 percent of the total
value of the existing building and the fixed equipment,
such facility may submit documentation as to the cost of
the renovation during the previous year. The Secretary
shall add the reasonable costs of the major renovation for
the previous year to the fair asset value of the facility.
This new asset value is to be the base for indexing until
the next full appraisal.
(F) The value of the assets is determined through
appraisals, indexing, and the application of allowances,
and is, therefore, unaffected by sales transactions, refi-
nancing, or other changes in financing. Accordingly, the
concept of recapture of depreciation is inapplicable to fa-
cilities whose payment is established under this title.
(3) The value of the land, buildings, and fixed equip-
ment shall be indexed annually between reappraisals as
follows:
(A) The land shall be indexed using Consumer
Price Index Urban.
(B) The buildings and fixed equipment shall be
indexed annually using the R. S. Means Index.
(4) The annual allowance for major movable equip-
ment shall be indexed annually using the hospital equip-
ment index of the Marshall Swift Valuation Service.
(5) The Secretary shall adjust the indexes used for
the land, buildings and fixed equipment, and major mov-
able equipment for the different geographic regions.
(b)(1) The Secretary shall establish a per bed limit
on the fair asset value of a nursing facility for each geo-
graphic region, as designated in section 105(c). The per
bed limit shall be equal to the average indexed costs in-
curred by all recently constructed nursing facilities in the
geographic region which have been designed and con-
structed in an efficient manner.
(2) The per bed limit on the fair asset value shall
be indexed annually using the R. S. Means Index.
(3) The per bed limit shall be recalculated every 5
years.
(c) The total annual rental shall constitute the prod-
uct of the lower of the indexed fair asset value or the in-
dexed per bed limit and a rental rate which shall be based
on the average yield for 20 year United States Treasury
Bonds during the prior year plus a risk premium of 3 per-
centage points.
(d)(1) The per resident day rental shall be obtained
by dividing the total annual rental by 90 percent of the
annual licensed bed days. The per resident day rental shall
constitute the per diem rate attributable to the property
cost center.
(2) The per resident day rental rate for a newly-con-
structed facility during such facility’s first year of oper-
ation shall be based on the total annual rental divided by
the greater of 50 percent of available resident days or ac-
tual annualized resident days up to 90 percent of annual
licensed bed days during such facility’s first year of oper-
ation.
(e) Facilities in operation prior to the effective date
of this title shall receive the per resident day rental or
actual costs, as determined in accordance with HCFA–
Pub. 15, whichever is greater, except that a nursing facil-
ity shall be reimbursed the per resident day rental on and
after the earlier of—
(1) the date upon which the nursing facility
changes ownership;
(2) the date the nursing facility accepts the per
resident day rental; or
(3) the date of the renegotiation of the lease for
the land and/or buildings, not including the exercise
of optional extensions specifically included in the
original lease agreement or valid extensions thereof.
SEC. 113. MID-YEAR RATE ADJUSTMENTS.
(a)(1) The Secretary shall establish by regulation, a
procedure for granting mid-year rate adjustments for the
nursing service, administrative and general, and fee-for-
service ancillary services cost centers.
(2) The mid-year rate adjustment procedure shall re-
quire the Secretary to grant adjustments on an industry-
wide basis, without the need for nursing facilities to apply
for such adjustments, based on the following cir-
cumstances:
(A) Statutory or regulatory changes affecting
nursing facilities (e.g., new staffing standards or ex-
panded services).
(B) Changes to the Federal minimum wage.
(C) General labor shortages with high regional
wage impacts.
(3) The midyear rate adjustment procedure shall per-
mit specific facilities or groups of facilities to apply for
an adjustment based on the following factors:
(A) Local labor shortages.
(B) Regulatory changes that apply to only a
subset of the nursing facility industry.
(C) Economic conditions created by natural dis-
asters or other events outside of the control of the
provider.
(D) Other cost producing factors, except case-
mix variation, to be specified by the Secretary by
regulation.
(4)(A) A nursing facility which applies for a mid-year
rate adjustment pursuant to subsection (a)(3) shall be re-
quired to show that the adjustment will result in a greater
than 2 percent deviation in the per diem rate for any indi-
vidual cost service center or a deviation of greater than
$5,000 in the total projected and indexed costs for the
rate year, whichever is less.
(B) A nursing facility application for a midyear rate
adjustment must be accompanied by recent cost experi-
ence data and/or budget projections.
SEC. 114. EXCEPTION TO PAYMENT METHODS FOR NEW
AND LOW-VOLUME NURSING FACILITIES.
(a) A low-volume nursing facility shall constitute a
nursing facility having fewer than 2,500 medicare part A
resident days per year.
(b) A new nursing facility shall constitute a newly
constructed, licensed, and certified nursing facility and/or
a nursing facility that is in its first 3 years of operation
as a medicare part A provider. A nursing facility that has
operated for more than 3 years but has a change of owner-
ship shall not constitute a new facility.
(c) Low-volume nursing facilities shall have the op-
tion of submitting a cost report to receive retrospective
payment for all of the cost centers, other than the property
cost center, or accepting a per diem rate which shall be
based on the sum of—
(1) the median indexed resident day facility
unit value for the appropriate geographic region for
the nursing service cost center during the base year
as identified in section 108(b)(2),
(2) the median indexed resident day administra-
tive and general per diem costs of all nursing facili-
ties in the appropriate geographic region as identi-
fied in section 109(a)(5)(E),
(3) the median indexed resident day costs per
unit of service for fee-for-service ancillary services
which shall be obtained using the cost information
from the nursing facilities in the appropriate geo-
graphic region during the base year, excluding low-
volume and new nursing facilities, and which shall
be based on an array of such costs from lowest to
highest, and
(4) the median indexed resident day per diem
costs for selected ancillary services and other costs
which shall be obtained using information from the
nursing facilities in the appropriate geographic re-
gion during the base year, excluding low-volume and
new nursing facilities, and which shall be based on
an array of such costs from lowest to highest.
(d) New nursing facilities shall have the option of
being paid on a retrospective cost pass-through basis for
all cost centers, or in accordance with paragraphs (1)
through (4) of subsection (c).
SEC. 115. APPEAL PROCEDURES.
(a)(1) Any person or legal entity aggrieved by a deci-
sion of the Secretary under this title, and which results
in an amount in controversy of $10,000 or more, shall
have the right to appeal such decision directly to the Pro-
vider Reimbursement Review Board (hereinafter referred
to as the ‘‘Board’’) authorized under section 1878 of title
XVIII of the Social Security Act.