Ch. 7, § 17. Real Property Rental Rates

(a) A nursing facility will be paid a rental rate for the building(s) in which it operates. The property rental rate is paid in lieu of payment for capital costs defined in Section 9. The property rental rate does not reimburse for property taxes and property insurance. Property taxes and property insurance will be paid as an exempt cost as defined in Section 9. (b) A property rental rate is determined using building age as of July 1, 2015. After the building age is determined, the adjustment is applied to the rate calculation based on the table below. (c) The age of a building will increase by one (1) year every July 1, beginning on July 1, 2016. (d) Annually on July 1, the age of each building age will be further adjusted by the percentage change published in the Marshall Swift Index. The percentage change will be determined using in the "Annual Cost Changes" published in the "Current Building Cost Indexes" section of the Marshall Swift Valuation service publication, or its successor. The Annual Cost Changes category used will be for the Western Region, Class D, Nursing Home (convalescent hospital) group in the most recent publication available of the Marshall Swift Index or its successor at the time of rate setting will be used for the annual rate adjustment. (e) Age of the building. If a building was assigned an age based on the results of a capital cost survey that was conducted in 2013 and updated in 2015, the assigned age as adjusted in accordance with this section will be used to determine the rental rate for the building. (f) The rental rate for buildings with an adjusted age greater than forty years will be set as a forty year old building. (g) Age of Building for New Providers. (i) The age of a building is determined based on reliable documentation the nursing facility submits to the Department that shows the building's historical construction date, square footage, and costs of material capital additions. (ii) If the nursing facility does not submit reliable documentation thirty days before the beginning of the next rate adjustment quarter, the building age will be set at forty years. If the nursing facility submits reliable documentation of the building's age, the Department will accordingly adjust the building's age at the next rate adjustment quarter. (h) The effective age of a building may be adjusted based on major repairs, replacement, remodeling, or renovation to the building. (i) It is the nursing facility's responsibility to notify the Department within one year of completion of any major repairs, replacement, remodeling or renovation of the building. The notification must be in writing with documented costs, square footage, and any other items needed for the review at least 45 days prior to the next rate adjustment quarter. (ii) Re-age adjustments will be effective on the first day of the next rate adjustment quarter after the re-age calculation was completed. The re-age adjustment shall not apply retroactively. (iii) A building will not qualify for a re-age adjustment until all of the costs have been capitalized and the changes to the building are in service. (iv) The re-age adjustment is calculated using the following formula: R = 40 x E / S x C, where R = Re-age adjustment. The reduction of age of the facility in years. E = Actual expenses for the construction Expenses related to capitalized assets for fixed assets including landscaping, sidewalks, egresses, retaining walls, and parking lots. The total costs must have been incurred within twenty-four (24) months of the completion of the construction. For larger construction projects or additions, 36 months may be granted at the State's discretion. S = Total square footage in the building Gross square feet including common area at the end of the construction. C = The cost of construction for the building in the year the construction was completed. Source is from costs published by Marshall & Swift Valuation Service or its successor. Costs reflect current construction costs for average Class D Nursing Home (convalescent hospital) using the most current publication. If the publication is late at the time of rate setting, the prior year amount will be inflated forward using the "Annual Cost Changes" figure identified in Section 18 (d). (v) If the result of this calculation is "R" is equal to or greater than 1.0, the age of the building in years will be reduced by this number, rounded to the nearest whole number for rate setting purposes. In no case will the age be less than zero. (vi) The beginning age of a building minus the re-age adjustment is the "re-age adjusted building age." This age is used to select the rental rate based on the age of the building. (i) If at the time the July 1 rates are being calculated using the base year building adjusted to the current rate year results in total property rental rate that is more than 10% of the total allocated budget, the property rental rates will be rebased to a lower amount to shift more funds to the healthcare costs and operating costs.