Virginia Administrative Code › Title 12 - HEALTH › Agency 30 - DEPARTMENT OF MEDICAL ASSISTANCE SERVICES › Chapter 90 - METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES FOR LONG-TERM CARE › Part II - Nursing Home Payment System › Subpart II - Rate Determination Procedures › Article 3 - Fair Rental Value Capital Payment System › Section 12VAC30-90-36 - Nursing facility capital payment methodology

Current through Register Vol. 40, No. 24, July 15, 2024
A. Applicability. The capital payment
						methodology described in this article shall be applicable to freestanding
						nursing facilities and specialized care facilities but not to hospital-based
						facilities. Hospital-based facilities shall continue to be reimbursed under the
						methodology contained in Article 2 (12VAC30-90-30 et seq.)
						of this subpart. For purposes of this provision, a hospital-based nursing
						facility shall be one for which a combined cost report is submitted on behalf
						of both the hospital and the nursing facility.
B. Definitions. The following words and terms
						when used in this article shall have the following meaning unless the context
						clearly indicates otherwise:
"Capital costs" means costs that include the cost
						  elements of depreciation, interest, financing costs, rent and lease costs for
						  property, building and equipment, property insurance and property taxes.
"Date of acquisition" means the date legal title passed
						  to the buyer. If a legal titling date is not determinable for a nursing
						  facility building, date of acquisition shall be considered to be the date a
						  certificate of occupancy was issued by the appropriate licensing or building
						  inspection agency of the locality where the nursing facility is located.
"Facility average age" means for a facility the
						  weighted average of the ages of all capitalized assets of the facility, with
						  the weights equal to the expenditures for those assets. The calculation of
						  average age shall take into account land improvements, building and fixed
						  equipment, and major movable equipment. The basis for the calculation of
						  average age shall be the schedule of assets submitted annually to the
						  department in accordance with the provisions of this section.
"Facility imputed gross square feet" means a number
						  that is determined by multiplying the facility's number of nursing facility
						  beds licensed by the Virginia Department of Health by the imputed number of
						  gross square feet per bed. The imputed number of gross square feet per bed
						  shall be 461 for facilities of 90 or fewer beds, and 438 for facilities of more
						  than 90 beds. The number of licensed nursing facility beds shall be the number
						  on the last day of the provider's most recent fiscal year end for which a cost
						  report has been filed.
"Factor for land and soft costs" means a factor
						  equaling 1.429 that adjusts the construction cost amount to recognize land and
						  capitalized costs associated with construction of a facility that is not part
						  of the R.S. Means construction cost amount.
"Fixed capital replacement value" means an amount equal
						  to the R.S. Means 75th percentile nursing home construction cost per square
						  foot, times the applicable R.S. Means historical cost index factor, times the
						  factor for land and soft costs, times the applicable R.S. Means location factor
						  times facility imputed gross square feet.
"FRV depreciation rate" means a depreciation rate equal
						  to 2.86% per year.
"Hospital-based facility" means one for which a single
						  combined Medicare cost report is filed that includes the costs of both the
						  hospital and the nursing home.
"Major renovation" means an increase in capital of
						  $3,000 per bed.
"Movable capital replacement value" means a value equal
						  to $3,475 per bed in SFY 2001, and shall be increased each July 1 by the same
						  R.S. Means historical cost index factor that is used to calculate the fixed
						  capital replacement value. Each year's updated movable capital replacement
						  value shall be used in the calculation of each provider's rate for the provider
						  year beginning on or after the date the new value becomes effective.
"Occupancy schedule" means a table created to represent
						  the average statewide occupancy by month of operation for use in calculating
						  the per diem rate in lieu of a minimum occupancy requirement or actual
						  occupancy for facilities with less than 12 months of experience. The occupancy
						  schedule is shown in Table 1.
Table 1. Occupancy Schedule
Initial Operating Period
Occupancy Percentage
3 Months
58.10%
4 Months
65.68%
5 Months
70.01%
6 Months
73.69%
7 Months
76.69%
8 Months
79.23%
9 Months
81.60%
10 Months
83.88%
11 Months
85.84%
12 Months
88.00%
"R.S. Means 75th percentile nursing construction cost
						  per square foot" means the 75th percentile value published in the 59th Annual
						  Edition of the R.S. Means Building Construction Cost Data, 2001. In the 2000
						  edition of the R.S. Means publication this value is $110, which is reported as
						  a January 2000 value.
"R.S. Means historical cost index factor" means the
						  ratio of the two most recent R.S. Means Historical Cost Indexes published in
						  the 59th Annual Edition of the R.S. Means Building Construction Cost Data,
						  2001. In the 2000 edition of this R.S. Means publication these two values are
						  117.6 (for 1999) and 115.1 (for 1998). The ratio of these values, and therefore
						  the factor to be used, would be 1.022. This factor would be used to adjust the
						  January 2000 value for the one year of change from January 2000 to January
						  2001, the mid-point of the prospective rate year (SFY 2001). The resulting cost
						  value that would be used in SFY 2001 is $112.42. The indexes used in this
						  calculation do not match the time period for which a factor is needed. They
						  relate to 1998 and 1999, while 2000 and 2001 would be ideal. However, R.S.
						  Means does not publish index forecasts, so the most recent available indexes
						  shall be used.
"R.S. Means location factors" means those published in
						  the 22nd Annual Edition of the R.S. Means Square Foot Costs, 2001. The 2000
						  location factors are shown in Table 2. The calculation will use the most
						  recently available location factors, which will also be published on the
						  Department of Medical Assistance Services (DMAS) website.
TABLE 2.R.S. MEANS COMMERCIAL CONSTRUCTION
										COST LOCATION FACTORS (2000).
Zip Code
Principal City
Location Factor
220-221
Fairfax
0.90
222
Arlington
0.90
223
Alexandria
0.91
224-225
Fredericksburg
0.85
226
Winchester
0.80
227
Culpeper
0.80
228
Harrisonburg
0.77
229
Charlottesville
0.82
230-232
Richmond
0.85
233-235
Norfolk
0.82
236
Newport News
0.82
237
Portsmouth
0.81
238
Petersburg
0.84
239
Farmville
0.74
240-241
Roanoke
0.77
242
Bristol
0.75
243
Pulaski
0.70
244
Staunton
0.76
245
Lynchburg
0.77
246
Grundy
0.70
"Rental rate" means for a prospective year a rate equal
						  to two percentage points plus the yield on U.S. Treasury Bonds with maturity
						  over 10 years, averaged over the most recent three calendar years for which
						  data are available, as published by the Federal Reserve (Federal Reserve
						  Statistical Release H.15 Selected Interest Rates (
www.Federalreserve.gov/releases/
)).
						  The rate will be published and distributed to providers annually. Changes in
						  the rental rate shall be effective for the provider's fiscal year beginning on
						  or after July 1. Rental rates may not fall below 9.0% or exceed 11% and will be
						  updated annually on or about July 1 each year. Effective July 1, 2010, through
						  September 30, 2010, the floor for the nursing facility rental rates may not
						  fall below 8.75%. Effective October 1, 2010, through June 30, 2011, the floor
						  for the nursing facility rental rates may not fall below 9.0%. Effective July
						  1, 2011, through June 30, 2012, the floor for the nursing facility rental rates
						  may not fall below 8.0%. Effective July 1, 2012, through June 30, 2014, the
						  floor for the nursing facility rental rates may not fall below 8.5%. Effective
						  July 1, 2014, the floor for the nursing facility rental rates may not fall
						  below 8.0%. The rate will be published and distributed to providers
						  annually.Changes in the rental rate shall be effective for the provider's
						  fiscal year beginning on or after July 1. Effective July 1, 2014, the rental
						  rate shall be effective for the state fiscal year.
"Required occupancy percentage" means the ratio of
						  nursing facility total patient days to total potential patient days for all
						  available licensed beds. The required occupancy percentage shall be 90% for
						  dates of service on or before June 30, 2013. The required occupancy percentage
						  for dates of service on or after July 1, 2013, shall be 88%. Facilities whose
						  fair rental value report indicates less than 12 months of experience must use
						  the occupancy schedule shown in Table 1 to determine the required occupancy
						  percentage.
"SFY" means State Fiscal Year (July 1 through June
						  30).
C. Fair rental value
						(FRV) payment for capital.
1. Effective for
						dates of service on or after July 1, 2001, DMAS shall pay nursing facility
						capital related costs under a FRV methodology. The payment made under this
						methodology shall be the only payment for capital related costs, and no
						separate payment shall be made for depreciation or interest expense, lease
						costs, property taxes, insurance, or any other capital related cost, including
						home office capital costs. This payment is considered to cover costs related to
						land, buildings and fixed equipment, major movable equipment, and any other
						capital related item. This shall be the case regardless of whether the property
						is owned or leased by the operator.
2. FRV rate year. The FRV payment rate shall
						be a per diem rate determined each year for each facility using the most recent
						available data from settled cost reports, or from other verified sources as
						specified herein. The per diem rate shall be determined prospectively and shall
						apply for the entire fiscal year. Each provider shall receive a new capital per
						diem rate each year effective at the start of the provider's fiscal year,
						except that the capital per diem rate shall be revised for the rental rate
						changes effective July 1, 2010, through June 30, 2012. Data elements that are
						provider specific shall be revised at that time and shall rely on the settled
						cost report and schedule of assets of the previous year. Data elements that are
						not provider specific, including those published by R.S. Means and the rental
						rate, shall be determined annually on or about July 1, and shall apply to
						provider fiscal years beginning on or after July 1. That is, each July 1 DMAS
						shall determine the R.S. Means values and the rental rate, and these shall
						apply to all provider fiscal years beginning on or after July 1. Effective July
						1, 2014, the FRV rate year shall be the same as the state fiscal
						year.
3. Mid-year FRV rate change.
						Facilities requiring a mid-year FRV rate change must follow the procedures as
						specified in 12VAC30-90-28.
4. The
						capital per diem rate for hospital-based nursing facilities shall be the last
						settled capital per diem.