Alabama Administrative Code › Title 560 - ALABAMA MEDICAID AGENCY › Chapter 560-X-42 - ICF/MR REIMBURSEMENT › Section 560-X-42-.11 - Property Costs

Current through Register Vol. 42, No. 9, June 28, 2024
This rule does not apply to state owned and operated facilities
				who are paid a use allowance in lieu of depreciation, for building and
				improvements. The annual use allowance for buildings and improvements shall be
				two percent of acquisition cost. Major movable equipment for State owned and
				operated facilities will be depreciated as in paragraph (10) of the
				Rule.
(1) Medicaid Approval. The
			 construction, sale or lease of any ICF/IID facility must be approved by
			 Medicaid for purposes of Medicaid reimbursement. Medicaid may, at its option,
			 elect not to approve any new construction, sale or lease of a facility entered
			 into without its prior approval; in which case, Medicaid will not reimburse any
			 property costs. Capital expenditures must be approved under applicable
			 Certificate of Need regulations by appropriate state and/or federal agencies.
			 When construction is accomplished without such approval, Medicaid will be able
			 to pay only operating costs; capital expenditures will not be an allowable cost
			 in these cases, as further explained in Rule
			 560-X-42-.04(3).
(2) New Construction. Construction costs [as
			 defined in Rule (9)] will be reimbursed on actual cost up to a maximum of
			 $16,600.00 per bed. This limitation is intended to discourage construction of
			 lavish facilities.
(3) Land. The
			 maximum allowable cost assigned to land upon which a newly constructed facility
			 is built, or upon which a purchased facility is located, shall use as a
			 guideline an amount not to exceed 5% of the construction costs (with respect to
			 a newly constructed facility) or of the allowable basis determined pursuant to
			 Rule 560-X-42-.11(4)
			 (with respect to a purchased facility) absent a showing by the provider that
			 the 5% is not a reasonable amount. Each such construction or purchase situation
			 shall be subject to the "prudent buyer" concept with each case to be considered
			 on its own merits.
(4) Sale of
			 Existing Facilities. Effective for sales closed on or after October 1, 1988,
			 the allowable basis to the purchaser of a facility participating in the
			 Medicaid program of those assets which would be includable as construction
			 costs pursuant to Rule
			 560-X-42-.11(9)
			 if the facility were being constructed rather than purchased, shall be the
			 lower of:
(a) The actual sales price
			 negotiated for the purchase of the facility. For purposes of this Rule,
			 including but not limited to this Section (a) and Section (7)(a) of this Rule,
			 sales price shall mean the total price agreed upon by the seller and purchaser
			 as evidenced by a signed copy of a final sales agreement. The stated sales
			 price agreed to by the seller and the buyer shall not be reduced by any
			 discount involved with issuance, by the purchaser of notes, mortgages, bonds,
			 or securities, and the acceptance of such debt instruments as part of the
			 agreed upon purchase price by the seller; or
(b) The current replacement cost of the
			 facility (based upon the current Alabama Medicaid ceiling on Construction Costs
			 of new facilities under Rule
			 560-X-42-.11(2)
			 reduced as follows:
Age of Facility
Write Down
1-10 yrs.
2.5% per year for each year of age up to 10
							 years
11 - 15 yrs.
25% plus 2.0% per year over 10 years
16 - 25 yrs.
35% plus 1.5% per year over 15 years
26 or older
50% plus 1.0% per year over 25 years
For purposes of this subsection (b), fractional years shall not
				be counted. Also, the maximum allowable basis of a facility, portions of which
				have been constructed at different times, will be calculated by considering
				separately each area of the building constructed at different times.
Example: Valuation of a 100 bed facility held 15
							 years
100 beds x $16,600 = Less: Depreciation
$1,660,000
($1,660,000 x 35% (25%) + (2% x 5)=35%)
(581,000)
Maximum allowable depreciable basis
$1,079,000
Land (limited to 5% of depreciable basis) (prior to
							 write down, if applicable)
83,000
Total Allowable Basis
$1,162,000
or;
(c) A
			 purchase price which would represent an increase over the sales price paid by
			 the seller of one-half of the percentage increase, from the date of acquisition
			 by the seller to the date of sale by seller, in the Dodge Construction Systems
			 Costs for Nursing Homes; or
(d) A
			 purchase price which would represent an increase over the sales price paid by
			 the seller of one-half of the percentage increase, from the date of acquisition
			 by the seller to the date of sale by seller, in the Consumer Price Index for
			 all Urban Consumers (United States city average).