New Jersey Administrative Code › Title 8 - HEALTH › Chapter 85 - LONG-TERM CARE SERVICES › Subchapter 3 - COST REPORT, RATE CALCULATION AND REPORTING SYSTEM FOR LONG-TERM CARE FACILITIES › Section 8:85-3.11 - Fair rental value rate allowance

Current through Register Vol. 56, No. 14, July 15, 2024
(a) The Department shall
				determine the facility fair rental value allowance for each Class I NF and Class II
				NF.
1. The new construction value per bed shall be
				$ 89,000.
2. The age of each NF for the
				July 1, 2010 through June 30, 2011 rate year shall be determined using the FRV Data
				Report adjusted to calculate the initial effective age as of 2010.
3. If complete auditable FRV Data Reports are not
				available for each facility by June 15, 2010, the nursing facility shall be assigned
				an initial age of 40 years that can only be adjusted by a complete auditable FRV
				Data Report.
4. For years after 2010,
				the age of each facility shall be adjusted each July 1 to make the facility one year
				older to a maximum of 40 years, as well as to make the following adjustments for
				allowable capitalized costs and other data submitted on the FRV Re-age Request:
i. If an NF places new beds in service during the
				cost report period, these new beds shall be averaged into the adjusted age of the
				prior existing beds to arrive at the facility's re-age.
(1) New licensed beds that have allowable
				capitalized costs of at least the new construction value per bed as stated in (a)1
				above shall be re-aged using zero as their age. Allowable capitalized costs in
				excess of the construction value per bed shall be considered for additional re-aging
				pursuant to (a)4ii below.
(2) New
				licensed beds that have allowable capitalized costs less than the new construction
				value per bed as stated in (a)1 above shall be considered to be the same age as the
				existing licensed beds for the purpose of the re-aging process described pursuant to
				(a)4ii below. Allowable capitalized costs in excess of the construction value per
				bed related to the calculated age of the beds prior to submission of the FRV Re-age
				Request shall be considered for re-aging pursuant to (a)4ii below; or
ii. If an NF completes a major
				renovation project or major replacement project, defined as a project with allowable
				capitalized costs equal to or greater than $ 1,000 per bed in service during the
				cost report period, the cost of the project shall be represented by an equivalent
				number of new beds.
5. A
				major renovation or replacement project shall have been started within the 24 months
				preceding the completion date reported on an FRV Re-age Request for the reporting
				period used for the July 1 rate year and shall be related to the reasonable
				functioning of the NF.
i. Major renovations and
				replacement projects unrelated to either the direct or indirect functioning of the
				NF shall not be used to adjust the facility's age.
ii. Adjustments to a facility's age due to major
				renovations or replacement projects that result in fewer licensed beds at completion
				of the project shall be calculated using the number of licensed beds at the
				beginning of the project.
6.
				The equivalent number of new beds shall be determined by dividing the capitalized
				cost of the project, exclusive of the costs attributable to the construction of new
				beds, by the accumulated depreciation per bed of two percent per year of the
				facility's existing beds immediately before the project was completed.
7. The Department shall calculate an adjusted age
				of the facility by taking the equivalent number of new beds determined in (a)6 above
				plus the number of new beds aged at zero pursuant to (a)4i(1) above and the result
				shall be subtracted from the total licensed beds, and the result therefor shall be
				multiplied by the age of the facility, as adjusted for prior additions, major
				renovations and replacements. The product of this calculation shall then be divided
				by the number of licensed beds after the completion of the project to arrive at the
				adjusted age of the facility.
i. An example of the
				calculation follows:
Licensed Beds Before Re-aging - 100
Licensed Beds After Re-aging - 110
Number of New Licensed Beds - 10
Age of Beds Prior to Re-age - 10
Allowable Capitalized Costs - $ 1,150,000
Calculations:
Are Allowable Capitalized Costs [GREATER THAN]/= New construction
				  value?
10 beds x $ 89,000 = $ 890,000; Answer is "yes."
Additional re-aging:
$ 1,150,000 - $ 890,000 = $ 260,000 (greater than $ 1,000 per
				  bed)
Current accumulated Depreciation per Bed: 10 Years @ 2% =
				  20%
Bed Value: $ 89,000 x 20% = $ 17,800 Depreciation per Bed
Equivalent New Beds: $ 260,000 / $ 17,800 = 14.61
Old Beds: 110 beds - 14.61 equivalent new beds - 10 new beds =
				  85.39 at 10 years old
24.61 beds zero years old - Accum. Age = 0 years
85.39 beds 10 years old - Accum. Age = 853.90 years
853.90 years / 110 licensed beds = 7.76 (Round to 8)
8. If an existing structure
				is converted for use as a nursing facility, the provider must submit a completed FRV
				data report.
i. If a complete auditable FRV data
				report is not submitted, that nursing facility shall be deemed to have an age of 40
				years for the purposes of the FRV calculation.
9. For each nursing facility, the facility per bed
				value shall be calculated as the difference between the new bed value and the new
				bed value multiplied by the weighted age of the NF (not to exceed 40 years)
				multiplied by two percent depreciation.
10. The facility total value shall be calculated
				as the facility per bed value multiplied by the number of licensed beds for the
				nursing facility.
11. The fair rental
				value allowance shall be calculated by multiplying the facility total value by an
				eight percent rental factor and dividing that result by the higher of actual
				resident days or 95 percent of available days from the cost report used in the
				database established at
				8:85-3.8 for the direct care limit.
i. For Class I NFs and Class II NFs not
				represented in the database established at
				8:85-3.8 for the direct care limit, the
				fair rental value allowance shall be calculated by dividing the facility fair rental
				value by 95 percent of available days, calculated as licensed beds times 365
				days.