Opinion ID: 4537297
Heading Depth: 2
Heading Rank: 1

Heading: Basis for Adjustment to Methodist’s NBV

Text: ¶28. Methodist argues that NBVs are based on what it would currently cost to build a new facility and that the 175 percent add-on adjustment to the standard NBV that it receives was not based on what it would cost to build a new NFSD in 2015. Methodist argues that the DOM came up with the new 175 percent adjustment based on what it felt would be a fair and reasonable property rate for Methodist or came up with this percentage based on Methodist’s reported costs. But the AHO found that this 175 percent add-on would fairly reimburse Methodist for what it would cost to construct an NFSD today. Additionally, the record provides that the DOM’s discovery that Methodist had nearly recouped its entire initial investment for constructing the NFSD in just eleven years under the old adjustment rate coupled with the DOM’s fear that Methodist would receive a windfall from the rebased NBVs led the DOM to make one of its last few changes to the SPA. The dissent mistakenly claims that the DOM’s logic asks why the DOM pays Methodist, or any other facility that has fully recouped the cost of building it, any amount for a property payment under the fair-rental system after the facility has been completely reimbursed for what it actually cost to construct 13 the facility. But this is clearly not the DOM’s logic because Methodist has nearly received the total amount that it cost to construct it, and the DOM never suggests ceasing Methodist’s property payments. The DOM merely seeks to analyze the property-payment data that had been collected the past ten years for the state’s only NFSD to check that the NBV adjustment that was agreed upon by the DOM and Methodist in 2004, when Methodist first opened, is adequately reimbursing the NFSD and to reevaluate the NBV adjustment rate if not. ¶29. The DOM explains that the Committee used actual reported costs listed in recently issued CONs to determine that the standard NBV of a nursing facility should be increased to $91,200. The DOM explained that the standard NBV is the starting point for every nursing facility’s fair-rental per diem calculation, then improvements are considered and a depreciation factor is applied. All of this is done in an effort to reimburse providers for construction costs based upon the age of the facility. The age of the facility is considered to provide an incentive for facilities to continuously invest in and improve their facilities. The dissent claims that the DOM’s position ignores the fair-rental system’s intention to promote renovations and improvement to facilities, but this claim contradicts the language that the dissent earlier quoted from the DOM’s own argument, stating that the “DOM calculated a rate which would continue to compensate Methodist and encourage it to invest in and maintain its facility.” Diss. Op. ¶¶ 104, 109. ¶30. We find Methodist’s claim that all percentage-adjustment rates that are afforded to certain categories of nursing facilities’ NBVs must be based on what it would cost to construct a new facility of that type today to be without merit. Methodist has cited no 14 relevant authority to support that contention. While it is clear that NBVs are based on what it would cost to construct a nursing facility today, no authority has been cited that mandates that the additional percentage adjustments that NFSDs, ICF/IIDs, PRTFs or Alzheimer’s units receive in their property-payment calculations must be based on construction costs. ¶31. Notwithstanding Methodist’s failure to cite authority to support its claim, we find that the DOM’s final decision to calculate Methodist’s NBV adjustment with a 175 percent addon was reached by considering what it would cost to build a new NFSD today. Therefore, Methodist’s argument that its new NBV-adjustment rate was reached in error because it was not based on new-construction costs is moot. Any error the DOM may have originally made in determining Methodist’s NBV adjustment in SPA 15-004 was ultimately harmless because, as the AHO explained in his opinion, the 175 percent add-on would reasonably compensate Methodist for what Methodist’s own expert estimated it would cost to construct an NFSD today. The AHO’s reasoned analysis for why the 175 percent add-on reasonably compensates Methodist for what it would cost to construct a new NFSD in 2015 was adopted by the DOM as its final decision. Therefore, the DOM’s final decision reasoned that Methodist’s new-construction costs would be met by adjusting Methodist’s NBV with a 175 percent add-on.