Virginia Law

Chapter 90. Methods and Standards for Establishing Payment Rates for Long-Term Care

Part I
Methods and Standards for Establishing Payment Rates for Long-Term Care

12VAC30-90-10. Methods and standards for establishing payment rates for long-term care.

The policy and the method to be used in establishing payment rates for nursing facilities listed in § 1905(a) of the Social Security Act and included in this State Plan for Medical Assistance are described in the following paragraphs.

1. Reimbursement and payment criteria will be established which are designed to enlist participation of a sufficient number of providers of services in the Program so that eligible persons can receive the medical care and services included in the Plan to the extent these are available to the general population.

2. Participation in the Program will be limited to providers of services who accept, as payment in full, the amounts so paid.

3. Payment for care of service will not exceed the amounts indicated to be reimbursed in accord with the policy and the methods described in the Plan and payments will not be made in excess of the upper limits described in 42 CFR 447.253(b)(2).

4. Payments for services to nonstate-owned nursing facilities shall be based on methodologies set out in 12VAC30-90-44 of the Nursing Home Payment System (Part II (12VAC30-90-19 et seq.) of this chapter for nursing facilities and in Subpart XVII (12VAC30-90-264 et seq.) of the Nursing Home Payment System for specialized care facilities.

5. Facilities operated by the Department of Behavioral Health and Developmental Services and facilities operated by the Department of Veterans Services shall be reimbursed retrospectively based on cost.

6. Reimbursement to Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICF/IID) shall be retrospective on the basis of reasonable costs in accordance with Medicare principles of reimbursement. Nonstate facilities shall be limited to a ceiling based on the highest as filed rate paid to an ICF/IID institution in state fiscal year 2012 and annually adjusted thereafter with the application of the NF inflation factor, as set out in 12VAC30-90-41 B.

7. Except as specifically modified in this section, Medicare principles of reimbursement, as amended from time to time, shall be used to establish the allowable costs in the rate methodologies. Allowable costs shall be classified in accordance with the DMAS uniform chart of accounts (see 12VAC30-90-270 through 12VAC30-90-276) and shall be identifiable and verifiable by contemporaneous documentation. All matters of reimbursement that are part of the DMAS reimbursement system shall supersede Medicare principles of reimbursement. Wherever the DMAS reimbursement system conflicts with Medicare principles of reimbursement, the DMAS reimbursement system shall take precedence.

8. All nursing facilities and intermediate care facilities shall submit cost reports on the basis of reasonable cost in accordance with the standards and principles set forth in 42 CFR 447.252 as follows:

a. A uniform annual cost report which itemizes allowable cost will be required to be filed within 150 days of each provider's fiscal year end.

b. The determination of allowable costs will be in accordance with Medicare principles as established in the Provider Reimbursement Manual (PRM-15) except where otherwise noted in this Plan.

c. Field audits will be conducted on the cost data submitted by the provider to verify the accuracy and reasonableness of such data. Audits will be conducted for each facility on a periodic basis as determined from internal desk audits and more often as required. Audit procedures are in conformance with SSA standards set forth in PRM-13-2. Internal desk audits are conducted annually within six months of receipt of a completed cost report from the provider.

d. Reports of field audits are retained by the state agency for at least three years following submission of the report.

e. Modifications to the Plan for reimbursement will be submitted as Plan amendments.

f. Covered cost will include such items as:

(1) Cost of meeting certification standards.

(2) Routine services, which include items expense providers normally incur in the provision of services.

(3) The cost of such services provided by related organizations except as modified in the payment system at Subpart 2 (12VAC30-90-29 et seq.) of this chapter.

g. Bad debts, charity and courtesy allowances shall be excluded from allowable cost.

h. Payments will be made to facilities no less than monthly based on claims submitted by the facility.

i. Payments shall be adequate to reimburse in full such actual allowable costs that an economically and efficiently operated facility must incur.

j. In accordance with 42 CFR 447.205, an opportunity for public comment was permitted before final implementation of rate setting processes.

k. Return on equity capital to proprietary providers shall not be an allowable expense.

9. Reimbursement of nonenrolled long-term care facilities.

a. Nonenrolled providers of institutional long-term care services shall be reimbursed based upon the average per diem cost, updated annually, reimbursed to enrolled nursing facility providers.

b. Prior approval must be received from the DMAS for recipients to receive institutional services from nonenrolled long-term care facilities. Prior approval can only be granted:

(1) When the nonenrolled long-term care facility with an available bed is closer to the recipient's Virginia residence than the closest facility located in Virginia with an available bed;

(2) When long-term care special services, such as intensive rehabilitation services, are not available in Virginia; or

(3) If there are no available beds in Virginia facilities.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from VR460-02-4.1940, eff. August 12, 1992; amended, Virginia Register Volume 14, Issue 1, eff. December 1, 1997; Volume 18, Issue 18, eff. July 1, 2002; Volume 27, Issue 15, eff. April 27, 2011; Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-11. Public comment process.

The state has in place a public process which complies with the requirements of § 1902(a)(13)(A) of the Social Security Act.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 15, eff. June 1, 1998.

Part II
Nursing Home Payment System
Subpart I
General

12VAC30-90-19. Supplemental payments for government-owned nursing facilities.

Subpart I
General

A. In addition to payments made elsewhere, effective July 1, 2005, DMAS shall draw down federal funds to cover unreimbursed Medicaid costs for inpatient services provided by nonstate government-owned nursing facilities as certified by the provider through cost reports. A nonstate government-owned nursing facility is defined as a provider owned or operated by a county, city, or other local government agency, instrumentality, authority, or commission.

B. Effective July 1, 2014, DMAS shall make additional supplemental payments to nonstate government-owned nursing facilities that meet the requirements in subsection A of this section. Quarterly supplemental payment for each facility shall be calculated in the following manner:

1. Annually calculate for each nursing facility what Medicare would have paid for Medicaid services in the base year, which is the most recently available state fiscal year, using the Medicare skilled nursing facility prospective payment system updated for market basket adjustments and other rate changes to the rate year, which is the upcoming state fiscal year.

2. Annually calculate for each facility what Medicaid paid in the base year including any supplemental payments resulting from subsection A of this section updated for inflation and other rate changes to the rate year.

3. Calculate a per diem supplemental payment for each facility by subtracting Medicaid expenditures calculated in subdivision 2 of this subsection from what Medicare would have paid calculated in subdivision 1 of this subsection and dividing the result by the number of paid days for each facility in the base year.

4. At the end of each quarter of the rate year, calculate the number of paid days in the quarter for each facility and multiply it by the per diem supplemental payment for each facility.

C. Maximum aggregate payments to all qualifying nursing facilities shall not exceed the available upper payment in the current state fiscal year.

Statutory Authority

§§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001; amended, Virginia Register Volume 22, Issue 23, eff. August 23, 2006; Volume 33, Issue 3, eff. November 17, 2016.

12VAC30-90-20. (Repealed.)

Historical Notes

Derived from VR460-03-4.1940:1 Part I, eff. October 1, 1990; amended, Virginia Register Volume 11, Issue 18, eff. July 1, 1995; Volume 12, Issue 16, eff. July 1, 1996; Volume 13, Issue 1, eff. November 1, 1996; Volume 17, Issue 18, eff. July 1, 2001; Volume 18, Issue 18, eff. July 1, 2002; Volume 27, Issue 15, eff. April 27, 2011; Volume 32, Issue 6, eff. December 31, 2015; repealed, Virginia Register Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-21. Reimbursement for individuals in a disaster struck nursing facility.

Reimbursement to a disaster struck nursing facility for individuals who must be temporarily evacuated to another facility (resident accepting nursing facility) may continue for up to 30 days after the disaster event. Reimbursement will be the same as if the individual was residing in the disaster struck nursing facility. No other reimbursement will be made to either the disaster struck nursing facility or the resident accepting nursing facility. The disaster struck nursing facility must meet the following conditions:

1. The disaster struck nursing facility must have a contract with the resident accepting nursing facility. The contract must include (i) terms of reimbursement and mechanisms to resolve any contract disputes, (ii) protocols for sharing care and treatment information between the two facilities, and (iii) requirements that both facilities meet all conditions of Medicaid participation determined by the Virginia Department of Health. The Virginia Long-Term Mutual Aid Plan, which includes a Memorandum of Understanding, is an acceptable contract.

2. The disaster struck nursing facility must notify the Department of Medical Assistance Services (DMAS) of the disaster event; maintain records of evacuated individuals with names, dates, and destinations of evacuated residents; and update DMAS on the status of the repairs.

3. The disaster struck nursing facility must determine within 15 days of the event whether individuals will be able to return to the facility within 30 days of the disaster event. If the disaster struck nursing facility determines that it is not able to reopen within 30 days, it must discharge the individuals and work with them to choose admission to other facilities or alternative placements. Nothing shall preclude an individual from asking to be discharged and admitted to another facility or alternative placement. Reimbursement to the disaster struck nursing facility shall cease when an individual is discharged.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 34, Issue 25, eff. September 20, 2018.

12VAC30-90-28. Mid-year fair rental value rate determination.

A. New facilities and facilities undergoing a major renovation may apply for a mid-year fair rental value (FRV) rate determination or change if putting into service a major renovation or new beds. Providers are allowed only one mid-year FRV rate change during a state fiscal year (SFY).

1. New facilities. A new nursing facility is defined as a facility that is required to obtain a certificate of occupancy prior to the admittance of a resident. New nursing facilities should file a mid-year FRV report when the facility's certificate of occupancy has been issued. The nursing facility shall submit complete pro forma documentation at least 60 days prior to the certificate of occupancy effective date, and the new FRV rate shall be effective at the beginning of the month following the end of the 60 days, subject to confirmation that the new beds are operational.

a. For any facility whose FRV report has less than 12 months of experience, the department shall develop an occupancy schedule as defined in the nursing facility capital payment methodology (12VAC30-90-36) that represents 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. After the initial FRV report filing, actual occupancy data shall be used.

b. New facilities shall use the occupancy schedule developed by the Department of Medical Assistance Services (DMAS) to estimate patient days for their first FRV report until actual patient days are available. The occupancy percentage used to calculate estimated patient days shall be based on the number of months remaining within the calendar year from the month of receipt of the certificate of occupancy. For example, if the certificate of occupancy is received in February, then the number of months remaining in the calendar year would be 11, and the occupancy percentage to use would be 85.84% (see Table 1 in 12VAC30-90-36). The estimated patient days would be equal to the occupancy percentage times the annualized bed days available for the report period.

c. DMAS shall have 15 days from the date of the provider's submission to determine if the filing is complete for purposes of setting a rate for a new facility. The facility shall have 15 days from the date the filing is deemed incomplete to submit the required information. The deadline for setting the rate shall be extended for 30 days after the filing is deemed complete.

2. Major renovations. Facilities undergoing major renovations shall file a mid-year FRV report when there is an increase in capital expenditures of at least $3,000 per total number of beds. The nursing facility shall submit complete pro forma documentation at least 60 days prior to the effective occupancy date and the new rate shall be effective at the beginning of the month following the end of the 60 days, subject to confirmation that the renovated beds are operational. No mid-year rate changes shall be made for an effective date after April 30 of the SFY.

a. Any new beds or major renovations placed in service between the reporting year and the rate year shall be treated as a mid-year rate adjustment. No new FRV rate change will be made after April 30. Rate updates that fall between May 1 and June 30 shall be effective as stated below.

b. DMAS shall have 15 days from the date of the provider's submission to determine if the filing is complete for purposes of setting a rate for a renovated facility. The facility shall have 15 days from the date the filing is deemed incomplete to submit the required information.

c. Providers may propose a phased major renovation subject to approval by DMAS. The phased major renovation may include reductions to available beds. Any modifications to the proposed renovation are also subject to approval by DMAS. Phased major renovations include construction or major renovations that span more than one FRV report period. Only one annual FRV report and one mid-year FRV report can be filed in a SFY to change the plant rate. A mid-year FRV report can be filed only if capital cost per bed increases by a minimum of $3,000 per bed. Major renovation cost may only be included on Schedule R-1 as it is placed into service. Cost cannot be duplicated throughout the project on Schedule R-1. Major renovations for independent and assisted living are not allowed on the Schedule R-1.

B. The following are applicable to new facilities and facilities undergoing major renovation:

1. DMAS shall annualize real estate taxes, property taxes, and property insurance costs that do not represent a full year's cost.

a. Actual paid tax bills shall be provided to support real estate taxes and personal property taxes. When the taxing authority has not invoiced a new facility, building value per the most recent contractor invoice multiplied by the locality's mill rate shall be used to estimate real estate and tax liability for the period. Only the nursing facility's building value can be included in the calculation.

b. Actual paid insurance premiums shall be provided to support property insurance. For newly constructed nursing facilities, a reasonable estimate from the insurance company can be used to document property insurance cost until the first insurance policy and the premium are incurred. Only the nursing facility's property insurance can be included on the schedule.

2. Costs shall be based on currently available documentation at the time but are subject to audit. DMAS may use any reasonable method to estimate costs for which there is inadequate documentation. Reasonable method includes using tax rates from the taxing authority in the location of the facility, the most recent contractor's invoice to determine building cost, and estimates from insurance companies related to the nursing facility portion of the building. Any adjustments based on subsequent year documentation or audit for a current rate year shall be applied beginning July 1 of the next rate year.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 37, Issue 14, eff. April 15, 2021.

Article 1
Transition to New Capital Payment Methodology

12VAC30-90-29. Transition to new capital payment methodology.

Subpart 2
Rate Determination Procedures

Article 1
Transition to New Capital Payment Methodology

A. This section provides for a transition to a new capital payment methodology. The methodology that will be phased out for most facilities is described in Article 2 (12VAC30-90-30 et seq.) of this subpart. The methodology that will be phased in for most facilities is described in Article 3 (12VAC30-90-35 et seq.) of this subpart. The terms and timing of the transition are described in this section.

B. Nursing facilities enrolled in the Medicaid program prior to July 1, 2000, shall be paid for capital related costs under a transition policy from July 1, 2000, through June 30, 2012. Facilities and beds paid under the transition policy shall receive payments as follows:

1. During SFY 2001, each facility's capital per diem shall be the facility's capital per diem on June 30, 2000. The methodology under which this per diem is determined shall be the plant cost reimbursement methodology in effect as of June 30, 2000.

2. During SFY 2002, each facility subject to the transition policy shall be paid for capital costs under the methodology described in Article 2 (12VAC30-90-30 et seq.) of this subpart.

3. During SFY 2003 through SFY 2012, each facility subject to the transition policy shall have a capital per diem that is a percentage of the per diem described in Article 2 (12VAC30-90-30 et seq.) of this subpart plus a percentage of the per diem described in Article 3 (12VAC30-90-35 et seq.) of this subpart. The percentage associated with the per diem described in Article 2 shall be 90% for services provided in SFY 2003, 80% for services in SFY 2004, 70% for services in SFY 2005, and so on until the percentage is 0% for services in SFY 2012. The percentage associated with the per diem described in Article 3 shall be equal to 100% minus the percentage associated with the per diem described in Article 2. In SFY 2012, the capital per diem shall be based entirely on the per diem described in Article 3.

C. Return on equity (ROE) for leased facilities shall be phased out along with the methodology described in Article 2 (12VAC30-90-30 et seq.) of this subpart. Leased facilities shall be eligible for ROE after July 1, 2001, only if they were receiving ROE on June 30, 2000.

D. Effective July 1, 2001, newly constructed facilities and new and replacement beds of previously enrolled facilities completed after July 1, 2000, shall be paid entirely under the methodology described in Article 3 (12VAC30-90-35 et seq.) of this subpart without application of the transition policy. However, facilities and beds with COPN applications submitted as of June 30, 2000, shall be subject to the transition policy. Facilities changing ownership after June 30, 2000, shall be paid the per diem rate described in Article 3 if it has been owned by the selling owner for a period of eight years prior to the sale and during that period the facility being sold has not been part of a chain organization consisting of more than two health care facilities. For purposes of this provision, the number of facilities in a chain shall be determined by counting nursing facilities, hospitals, and any other health care facilities that are licensed to admit patients or residents, whether or not they participate in the Medicaid program. Facilities in Virginia and in other states shall be counted in determining the number of facilities in a chain. Facilities shall be considered to form a chain if there is common ownership of the physical assets, or a common operator, or both.

E. Emergency regulations effective July 1, 2000, provided for a facility specific fixed capital per diem applicable to services in SFY 2001 that is not to be adjusted at settlement. After SFY 2001, the per diem that would have been applicable to SFY 2001 under the methodology in Article 2 (12VAC30-90-30 et seq.) of this subpart shall be calculated. If there are two provider fiscal years that overlap SFY 2001, this per diem shall be a combination of the two applicable per diem amounts. If the per diem provided in the emergency regulations is lower than the per diem based on Article 2, the difference, multiplied by the days in SFY 2001, shall be paid to the facility. If the per diem provided in the emergency regulations is higher, the difference, multiplied by the days, shall be collected from the facility in the settlement of the provider year settled after the difference is calculated.

Statutory Authority

§§ 32.1-324 and 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001; amended, Virginia Register Volume 21, Issue 2, eff. November 3, 2004.

Article 2
Plant Cost Component

12VAC30-90-30. Plant cost.

A. This article describes a capital payment methodology that will be phased out for most nursing facilities by SFY 2012. The terms and timing of the transition to a different methodology are described in 12VAC30-90-29. The methodology that will eventually replace this one for most facilities is described in Article 3 (12VAC30-90-35 et seq.) of this subpart.

B. Plant cost shall include actual allowable depreciation, interest, rent or lease payments for buildings and equipment as well as property insurance, property taxes and debt financing costs allowable under Medicare principles of reimbursement or as defined herein.

C. Effective July 1, 2001, to calculate the reimbursement rate, plant cost shall be converted to a per diem amount by dividing plant cost by the greater of actual patient days or the number of patient days. Patient days shall be computed as the required occupancy percentage of the daily licensed bed complement during the applicable cost reporting period. The 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 for dates of service on or before June 30, 2013, shall be 90%, and for dates of service on or after July 1, 2013, the required occupancy percentage shall be 88%. For facilities with less than 12 months of occupancy experience, the required occupancy percentage shall be determined from the occupancy schedule in 12VAC30-90-36. For facilities that also provide specialized care services, see subdivision 9 of 12VAC30-90-264 for special procedures for computing the number of patient days required to meet the occupancy requirement.

D. Costs related to equipment and portions of a building or facility not available for patient care related activities are nonreimbursable plant costs.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from VR460-03-4.1940:1 Article 1, eff. April 1, 1992; amended, Virginia Register Volume 11, Issue 8, eff. March 1, 1995; Volume 11, Issue 18, eff. July 1, 1995; Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001; Volume 30, Issue 19, eff. June 18, 2014; Volume 37, Issue 14, eff. April 15, 2021.

12VAC30-90-31. New nursing facilities and bed additions.

A. Providers shall be required to obtain three competitive bids when (i) constructing a new physical plant or renovating a section of the plant when changing the licensed bed capacity, and (ii) purchasing fixed equipment or major movable equipment related to such projects.

All bids must be obtained in an open competitive market manner, and subject to disclosure to DMAS prior to initial rate setting. (Related parties see 12VAC30-90-51.)

B. Reimbursable costs for building and fixed equipment shall be based upon the 75th percentile square foot costs for NFs published annually in the R.S. Means Building Construction Cost Data as adjusted by the appropriate R.S. Means Square Foot Costs "Location Factor" for Virginia for the locality in which the NF is located. Where the specific location is not listed in the R.S. Means Square Foot Costs "Location Factor" for Virginia, the facility's zip code shall be used to determine the appropriate locality factor from the U.S. Postal Services National Five Digit Zip Code for Virginia and the R.S. Means Square Foot Costs "Location Factors." The provider shall have the option of selecting the construction cost limit which is effective on the date the Certificate of Public Need (COPN) is issued or the date the NF is licensed. Total cost shall be calculated by multiplying the above 75th percentile square foot cost by 385 square feet (the average per bed square footage). Effective July 1, 2007, the construction cost limit for children's ICF/MR facilities having 50 or more beds shall be calculated using up to 750 square feet per bed. Total costs for building additions shall be calculated by multiplying the square footage of the project by the applicable components of the construction cost in the R.S. Means Square Foot Costs, not to exceed the total per bed cost for a new NF. Reasonable limits for renovations shall be determined by the appropriate costs in the R.S. Means Repair and Remodeling Cost Data, not to exceed the total R.S. Means Building Construction Cost Data 75th percentile square foot costs for NFs. 12VAC30-90-28, Mid-year fair rental value rate determination, provides cost documentation requirements for new and renovated nursing homes.

C. New NFs and bed additions to existing NFs must have prior approval under the state's Certificate of Public Need Law and Licensure regulations in order to receive Medicaid reimbursement.

D. However in no case shall allowable reimbursed costs exceed 110% of the amounts approved in the original COPN, or 100% of the amounts approved in the original COPN as modified by any "significant change" COPN, where a provider has satisfied the requirements of the State Department of Health with respect to obtaining prior written approval for a "significant change" to a COPN which has previously been issued (see 12VAC5-220-10 et seq.).

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001; Volume 23, Issue 19, eff. July 1, 2007; Volume 37, Issue 14, eff. April 15, 2021.

12VAC30-90-32. Major capital expenditures.

A. Major capital expenditures include, but are not limited to, major renovations (without bed increase), additions, modernization, other renovations, upgrading to new standards, and equipment purchases. Major capital expenditures shall be any capital expenditures costing $100,000 or more each, in aggregate for like items, or in aggregate for a particular project. These include purchases of similar type equipment or like items within a one calendar year period (not necessarily the provider's reporting period).

B. Providers (including related organizations as defined in 12VAC30-90-51) shall be required to obtain three competitive bids and if applicable, a Certificate of Public Need before initiating any major capital expenditures. All bids must be obtained in an open competitive manner, and subject to disclosure to the DMAS prior to initial rate setting. (Related parties see 12VAC30-90-51.)

C. Useful life shall be determined by the American Hospital Association's Estimated Useful Lives of Depreciable Hospital Assets (AHA). If the item is not included in the AHA guidelines, reasonableness shall be applied to determine useful life.

D. Major capital additions, modernization, renovations, and costs associated with upgrading the NF to new standards shall be subject to cost limitations based upon the applicable components of the construction cost limits determined in accordance with 12VAC30-90-31 B.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-33. Financing.

A. DMAS shall continue its policy to disallow cost increases due to the refinancing of a mortgage debt, except when required by the mortgage holder to finance expansions or renovations. Refinancing shall also be permitted in cases where refinancing would produce a lower interest rate and result in a cost savings. The total net aggregate allowable costs incurred for all cost reporting periods related to the refinancing cannot exceed the total net aggregate costs that would have been allowable had the refinancing not occurred.

1. Refinancing incentive. Effective July 1, 1991, for mortgages refinanced on or after that date, DMAS will pay a refinancing incentive to encourage nursing facilities to refinance fixed-rate, fixed-term mortgage debt when such arrangements would benefit both the Commonwealth and the providers. The refinancing incentive payments will be made for the 10-year period following an allowable refinancing action, or through the end of the refinancing period should the loan be less than 10 years, subject to a savings being realized by application of the refinancing calculation for each of these years. The refinancing incentive payment shall be computed on the net savings from such refinancing applicable to each provider cost reporting period. Interest expense and amortization of loan costs on mortgage debt applicable to the cost report period for mortgage debt which is refinanced shall be compared to the interest expense and amortization of loan costs on the new mortgage debt for the cost reporting period.

2. Calculation of refinancing incentive. The incentive shall be computed by calculating two index numbers, the old debt financing index and the new debt financing index. The old debt financing index shall be computed by multiplying the term (months) which would have been remaining on the old debt at the end of the provider's cost report period by the interest rate for the old debt. The new debt index shall be computed by multiplying the remaining term (months) of the new debt at the end of the cost reporting period by the new interest rate. The new debt index shall be divided by the old debt index to achieve a savings ratio for the period. The savings ratio shall be subtracted from a factor of 1 to determine the refinancing incentive factor.

3. Calculation of net savings. The gross savings for the period shall be computed by subtracting the allowable new debt interest for the period from the allowable old debt interest for the period. The net savings for the period shall be computed by subtracting allowable new loan costs for the period from allowable gross savings applicable to the period. Any remaining unamortized old loan costs may be recovered in full to the extent of net savings produced for the period.

4. Calculation of incentive amount. The net savings for the period, after deduction of any unamortized old loan and debt cancellation costs, shall be multiplied by the refinancing incentive factor to determine the refinancing incentive amount The result shall be the incentive payment for the cost reporting period, which shall be included in the cost report settlement, subject to per diem computations under 12VAC30-90-30 B and C and 12VAC30-90-55 A.

5. Where a savings is produced by a provider refinancing his old mortgage for a longer time period, DMAS shall calculate the refinancing incentive and payment in accordance with subdivisions 1 through 4 of this subsection for the incentive period. Should the calculation produce both positive and negative incentives, the provider's total incentive payments shall not exceed any net positive amount for the entire incentive period. Where a savings is produced by refinancing with either a principal balloon payment at the end of the refinancing period, or a variable interest rate, no incentive payment will be made, since the true savings to the Commonwealth cannot be accurately computed.

6. All refinancings must be supported by adequate and verifiable documentation and allowable under DMAS regulations to receive the refinancing savings incentive.

7. Balloon loan reimbursement. This subdivision applies to the construction and acquisition of nursing facilities (as defined in 12VAC30-90-31 and 12VAC30-90-34) and major capital expenditures (as defined in 12VAC30-90-32) that are financed with balloon loans. A balloon loan requires periodic payments to be made that do not fully amortize the principal balance over the term of the loan; the remaining balance must be repaid at the end of a specified time period. Demand notes and loans with call provisions shall not be deemed to be balloon loans.

a. Incurred interest. Reimbursement for interest of a balloon loan and subsequent refinancings shall be considered a variable interest rate loan under subsection B of this section.

(1) A standard amortization period of 27 years, from the inception date of the original balloon loan, must be computed by the provider and submitted to DMAS and used as the amortization period for loans for renovation, construction, or purchase of a nursing facility.

(2) A standard amortization period of 15 years, from the inception date of the original balloon loan, must be used as the amortization period for loans on furniture, fixtures, and equipment.

(3) A loan which is used partially for the acquisition of buildings, land, and land improvements and partially for the purchase of furniture, fixtures, and equipment must be prorated for the purpose of determining the amortization period.

b. The allowable interest rate shall be limited to the interest rate upper limit in effect on the date of the original balloon loan, unless another rate is allowable under subsection B of this section.

c. Financing costs. The limitations on financing costs set forth in subsection B of this section shall apply to balloon loans. Financing costs exceeding the limitations set forth in these sections shall be allowed to the extent that such excess financing costs may be offset by any available interest savings.

(1) A 27-year amortization period must be used for deferred financing costs associated with the construction or purchase of a nursing facility.

(2) A 15-year amortization period must be used for deferred financing costs associated with financing of furniture, fixtures, and movable equipment.

(3) Financing costs associated with a loan used partially for the acquisition of buildings, land, and land improvements and partially for the purchase of furniture, fixtures, and equipment must be prorated for determination of the amortization period.

d. Cumulative credit computation. The computation of allowable interest and financing costs for balloon loans shall be calculated using the following procedures:

(1) A standard amortization schedule of allowable costs based upon the upper limits for interest and financing costs shall be computed by the provider and submitted to DMAS for the applicable 27-year or 15-year periods on the original balloon loan.

(2) For each cost reporting period, the provider shall be allowed the lesser of loan costs (interest and financing costs) computed in accordance with subdivision 7 a of this subsection, or the actual loan costs incurred during the period.

(3) To the extent that there is a "credit" created by the actual loan costs being less than the loan costs computed on the amortization schedule in some periods, the provider may recover any otherwise allowable costs which result from the refinancing, extension, or renewal of the balloon loan, and any loan costs which have been disallowed because the loan costs are over the limitation for some periods. However, the cumulative actual loan cost reimbursement may not exceed the cumulative allowable loan cost as computed on the amortization schedule to that date.

(4) In refinancing or refinancings of the original balloon loan which involve additional borrowings in excess of the balance due on the original balloon loan, the excess over the balance due on the balloon loan shall be treated as new debt subject to the DMAS financing policies and regulations. Any interest and financing costs incurred on the refinancing shall be allocated pro rata between the refinancing of the balloon loan and the new debt.

(5) In the event of a sale of the facility, any unused balance of cumulative credit or cumulative provider excess costs would follow the balloon loan or the refinancing of the balloon loan if the balloon loan or its refinancing is paid by the buyer under the same terms as previously paid by the seller. Examples of this are (i) the buyer assumes the existing instrument containing the same rates and terms by the purchaser; or (ii) the balance of the balloon loan or its refinancings is financed by the seller to the buyer under the same rates and terms of the existing loan as part of the sale of the facility. If the loan is otherwise paid in full at any time and the facility is sold before the full 27-year or 15-year amortization period has expired, the balance of unused cumulative credit or cumulative provider excess costs shall expire and not be considered an allowable cost.

e. In accordance with subdivision 5 of this subsection, no refinancing incentive shall be available for refinancings, extensions, or renewals of balloon loans.

f. The balloon loan and refinancing of the balloon loan shall be subject to all requirements for allowable borrowing, except as otherwise provided by this subsection.

B. Interest rate upper limit. Financing for all NFs and expansions which require a COPN and all renovations and purchases shall be subject to the following limitations:

1. Interest expenses for debt financing which is exempt from federal income taxes shall be limited to:

The average weekly rates for Baa municipal rated bonds as published in Cragie Incorporated Municipal Finance Newsletter as published weekly (Representative reoffering from general obligation bonds), plus one percentage point (100 basis points), during the week in which commitment for construction financing or closing for permanent financing takes place.

2. a. Effective on and after July 1, 1990, the interest rate upper limit for debt financing by NFs that are subject to prospective reimbursement shall be the average of the rate for 10-year and 30-year U.S. Treasury Constant Maturities, as published in the weekly Federal Reserve Statistical Release (H.15), plus two percentage points (200 basis points).

This limit (i) shall apply only to debt financing which is not exempt from federal income tax, and (ii) shall not be available to NF's which are eligible for such tax exempt financing unless and until a NF has demonstrated to DMAS that the NF failed, in a good faith effort, to obtain any available debt financing which is exempt from federal income tax. For construction financing, the limit shall be determined as of the date on which commitment takes place. For permanent financing, the limit shall be determined as of the date of closing. The limit shall apply to allowable interest expenses during the term of the financing.

b. The new interest rate upper limit shall also apply, effective July 1, 1990, to construction financing committed to or permanent financing closed after December 31, 1986, but before July 1, 1990, which is not exempt from federal income tax. The limit shall be determined as of July 1, 1990, and shall apply to allowable interest expenses for the term of the financing remaining on or after July 1, 1990.

3. Variable interest rate upper limit.

a. The limitation set forth in subdivisions 1 and 2 of this subsection shall be applied to debt financing which bears a variable interest rate as follows. The interest rate upper limit shall be determined on the date on which commitment for construction financing or closing for permanent financing takes place, and shall apply to allowable interest expenses during the term of such financing as if a fixed interest rate for the financing period had been obtained. A "fixed rate loan amortization schedule" shall be created for the loan period, using the interest rate cap in effect on the date of commitment for construction financing or the date of closing for permanent financing.

b. If the interest rate for any cost reporting period is below the limit determined in subdivision 3 a of this subsection, no adjustment will be made to the provider's interest expense for that period, and a "carryover credit" to the extent of the amount allowable under the "fixed rate loan amortization schedule" will be created, but not paid. If the interest rate in a future cost reporting period is above the limit determined in subdivision 3 a of this subsection, the provider will be paid this "carryover credit" from prior period(s), not to exceed the cumulative carryover credit or its actual cost, whichever is less.

c. The provider shall be responsible for preparing a verifiable and auditable schedule to support cumulative computations of interest claimed under the "carryover credit," and shall submit such a schedule with each cost report.

4. The limitation set forth in subdivisions 1, 2, and 3 of this subsection shall be applicable to financing for land, buildings, fixed equipment, major movable equipment, working capital for construction and permanent financing.

5. Where bond issues are used as a source of financing, the date of sale shall be considered as the date of closing.

6. The aggregate of the following costs shall be limited to 5.0% of the total allowable project costs:

a. Examination Fees.

b. Guarantee Fees.

c. Financing Expenses (service fees, placement fees, feasibility studies, etc.).

d. Underwriters Discounts.

e. Loan Points.

7. The aggregate of the following financing costs shall be limited to 2.0% of the total allowable project costs:

a. Legal Fees.

b. Cost Certification Fees.

c. Title and Recording Costs.

d. Printing and Engraving Costs.

e. Rating Agency Fees.

C. DMAS shall allow costs associated with mortgage life insurance premiums in accordance with § 2130 of the HCFA-Pub. 15, Provider Reimbursement Manual (PRM-15).

D. Interest expense on a debt service reserve fund is an allowable expense if required by the terms of the financing agreement. However, interest income resulting from such fund shall be used by DMAS to offset interest expense.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-34. Purchases of nursing facilities (NF).

A. In the event of a sale of a NF, the purchaser must have a current license and certification to receive DMAS reimbursement as a provider and must notify DMAS of the sale within 30 days of the date legal title passes to the purchaser. The notification shall include:

1. That a sale or transfer is about to be made or has already occurred;

2. The location and general description of the property; and

3. The names and addresses of the transferee and transferor and all such business names and addresses of the transferor for the last three years.

B. The following reimbursement principles shall apply to the purchase of a NF:

1. The allowable cost of a bona fide purchase of an existing nursing facility (whether or not the parties to the sale are, were, or will be providers of Medicaid services shall be the seller's allowable depreciated historical cost (net book value) as determined for Medicaid reimbursement. The amount of allowable debt or borrowing to finance such a purchase shall be limited to the greater of the amount of the seller's net book value of the assets purchased, or the seller's related allowable debt, both as determined for Medicaid reimbursement plus required financing costs limited in accordance with the provisions of 12VAC30-90-33 B 6 and B 7.

2. For purposes of Medicaid reimbursement, a "bona fide" purchase shall mean a transfer of title and possession for consideration between parties that are not related. Parties shall be deemed to be "related" if they are related by reasons of common ownership or control. If the parties are members of an immediate family, the sale shall be presumed to be between related parties if the ownership or control by immediate family members, when aggregated together, meets the definitions of "common ownership" or "control." See 12VAC30-90-51 C for definitions of "common ownership," "control," "immediate family," and "significant ownership or control."

3. The useful life of the fixed assets of the facility shall be the seller's remaining depreciable lives as determined for Medicaid reimbursement.

4. The seller must file a final cost report within 150 days of the date of sale.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

Article 3
Fair Rental Value Capital Payment System

12VAC30-90-35. General applicability.

Article 3
Fair Rental Value Capital Payment System

This article describes a capital payment methodology that will be phased in for most nursing facilities by SFY 2012. The terms and timing of the transition to a different methodology are described in 12VAC30-90-29. The methodology that this one will replace for most facilities is described in Article 2 (12VAC30-90-30 et seq.) of this subpart.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-36. Nursing facility capital payment methodology.

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.

"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.

"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.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001; amended, Virginia Register Volume 27, Issue 19, eff. July 1, 2011; Volume 29, Issue 23, eff. August 14, 2013; Volume 30, Issue 19, eff. June 18, 2014; Volume 32, Issue 9, eff. February 11, 2016; Volume 37, Issue 14, eff. April 15, 2021.

12VAC30-90-37. Calculation of FRV per diem rate for capital; calculation of FRV rental amount; change of ownership.

A. Calculation of FRV per diem rate for capital.

1. The facility FRV per diem rate shall be equal to the sum of the facility FRV rental amount and the facility's allowable property tax and insurance cost from the most recent settled cost report, divided by the greater of actual patient days or the required occupancy percentage of the potential patient days for all licensed beds throughout the cost reporting period. For facilities that also provide specialized care services, see subdivision 9 of 12VAC30-90-264 for special procedures for computing the number of patient days required to meet the required occupancy percentage requirement.

2. Effective July 1, 2014, facilities shall be required to submit a calendar year FRV report covering both NF and specialized care beds to be used to set a prospective FRV rate effective the following July 1 for both the NF and the specialized care facility. The calendar year FRV report shall be submitted by the end of February following the end of the calendar year. FRV reports shall be settled within 90 days of filing the FRV report. For late FRV reports, the prospective rate may be effective 90 days after the date of filing even if after July 1. No capital rate shall be paid between July 1 and the effective date of the prospective FRV rate for a late report.

3. New nursing facilities or major renovations that qualify for mid-year FRV rate adjustments must follow pro forma submission procedures as specified in 12VAC30-90-28.

B. Calculation of FRV rental amount. The facility FRV rental amount shall be equal to the facility prospective year total value times the rental rate. Effective July 1, 2014, fair rental value per diem rates for the prospective state fiscal year shall be calculated for all freestanding nursing facilities based on the prior calendar year information aged to the state fiscal year and using R.S. Means factors and rental rates corresponding to the state fiscal year. There shall be no separate calculation for beds subject to or not subject to transition.

1. The facility prospective year total value shall be equal to the facility prospective year replacement value minus FRV depreciation. FRV depreciation equals the prospective year replacement value multiplied by the product of facility average age and the depreciation rate. FRV depreciation cannot exceed 60% of the prospective year replacement value.

2. The facility prospective year replacement value shall be equal to the fixed capital replacement value plus the movable equipment replacement value.

C. Change of ownership. As provided in connection with schedule of assets reporting, the sale of nursing facility assets after June 30, 2000, shall not result in a change to the schedule of assets or to the calculation of average age for purposes of reimbursement under the FRV methodology. Therefore, any sale or transfer of assets after this date shall not affect the FRV per diem rate.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001; amended, Virginia Register Volume 30, Issue 19, eff. June 18, 2014; Volume 32, Issue 9, eff. February 11, 2016; Volume 37, Issue 14, eff. April 15, 2021.

12VAC30-90-38. Schedule of assets reporting.

A. For the calculation of facility average age, the department shall use a "schedule of assets" that lists, by year of acquisition, the allowable acquisition cost of facilities' assets, including land improvements, buildings and fixed equipment, and major movable equipment. This schedule shall be submitted annually by the provider on forms to be provided by the department, and shall be audited by the department. The principles of reimbursement for plant cost described in Article 2 (12VAC30-90-30 et seq.) of this subpart shall be used to determine allowable cost.

B. The schedule of assets used in the calculation of average age shall be submitted with the provider's cost report.

C. Facilities failing to submit the schedule of assets timely shall have their nursing facility per diem rate set to zero.

D. Capital expenditures are to be included on the schedule of assets. These do not include land purchases, but do include land improvements, renovations, additions, upgrading to new standards, and equipment purchases. Capital expenditures shall be capital related expenditures costing $50,000 or more each, in aggregate for like items, or in aggregate for a particular project. For facilities with 30 or fewer beds, an amount of $25,000, rather than $50,000, shall apply. The limits of $50,000 and $25,000 shall apply only to expenditures after July 1, 2000. For these purposes, like items means those items acquired within a 12-month period that are classified in one of the categories of land improvements, building improvements, or movable equipment. Additionally, capital-related expenditures that are part of a particular project may be included on the schedule of assets for the cost reporting that is after the date the assets have been placed into service, whether all the required $50,000 threshold of costs of the ongoing project have been incurred as of the reporting date.

E. Items reportable on the schedule of assets may be removed only when disposed of.

F. Acquisition costs related to any sale or change in the ownership of a nursing facility or the assets of a nursing facility shall not be included in the schedule of assets if the transaction occurred after June 30, 2000. Whether such a transaction is the result of a sale of assets, acquisition of capital stock, merger, or any other type of change in ownership, related costs shall not be reported on the schedule of assets.

G. In addition to verifying the schedule of assets, audits of NF allowable capital costs shall continue to be performed in accordance with regulations described in Article 2.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001; amended, Virginia Register Volume 18, Issue 18, eff. July 1, 2002.

12VAC30-90-39. Purchases of nursing facilities (NF).

A. In the event of a sale of a NF, the purchaser must have a current license and certification to receive DMAS reimbursement as a provider and must notify DMAS of the sale within 30 days of the date legal title passes to the purchaser. The notification shall include:

1. That a sale or transfer is about to be made or has already occurred;

2. The location and general description of the property;

3. The names and addresses of the transferee and transferor and all such business names and addresses of the transferor for the last three years.

B. The seller must file a final cost report within 150 days of the date of the facility sale.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

Article 4
Operating Cost Component

12VAC30-90-40. Operating cost.

Article 4
Operating Cost Component

Effective July 1, 2001, operating cost shall be the total allowable inpatient cost less plant cost or capital, as appropriate, and NATCEPs costs. See Subpart VII (12VAC30-90-170 et seq.) of this part for rate determination procedures for NATCEPs costs. Operating cost shall be made up of direct patient care operating cost and indirect patient care operating cost. Direct patient care operating cost is defined in 12VAC30-90-271. Indirect patient care operating cost includes all operating costs not defined as direct patient care operating costs or NATCEPs costs or the actual charges by the Central Criminal Records Exchange for criminal records checks for nursing facility employees (see 12VAC30-90-272). For purposes of calculating the reimbursement rate, the direct patient care operating cost per day shall be the Medicaid portion of the direct patient care operating cost divided by the nursing facility's number of Medicaid patient days in the cost reporting period. The indirect patient care operating cost per day shall be the Medicaid portion of the indirect patient care operating cost divided by the greater of the actual number of Medicaid patient days in the cost reporting period, or the required occupancy percentage of the potential patient days for all licensed beds throughout the cost reporting period times the Medicaid utilization percentage. The required occupancy percentage for dates of service on or before June 30, 2013, shall be 90%, and for dates of service on or after July 1, 2013, shall be 88%. For facilities that also provide specialized care services, see subdivision 9 of 12VAC30-90-264 for special procedures for computing the number of patient days required to meet the occupancy percentage requirement.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from VR460-03-4.1940:1 Article 2, eff. July 5, 1991; amended, Virginia Register Volume 11, Issue 18, eff. July 1, 1995; Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001; Volume 18, Issue 18, eff. July 1, 2002; Volume 30, Issue 19, eff. June 18, 2014.

12VAC30-90-41. Nursing facility reimbursement formula.

A. Effective on and after July 1, 2002, all NFs subject to the prospective payment system shall be reimbursed under "The Resource Utilization Group-III (RUG-III) System as defined in Appendix IV (12VAC30-90-305 through 12VAC30-90-307)." RUG-III is a resident classification system that groups NF residents according to resource utilization. Case-mix indices (CMIs) are assigned to RUG-III groups and are used to adjust the NF's per diem rates to reflect the intensity of services required by a NF's resident mix. See 12VAC30-90-305 through 12VAC30-90-307 for details on the Resource Utilization Groups.

1. Any NF receiving Medicaid payments on or after October 1, 1990, shall satisfy all the requirements of § 1919(b) through (d) of the Social Security Act as they relate to provision of services, residents' rights and administration and other matters.

2. Direct and indirect group ceilings and rates.

a. Direct patient care operating cost peer groups shall be established for the Virginia portion of the Washington DC-MD-VA MSA, the Richmond-Petersburg MSA, and the rest of the state. Direct patient care operating costs shall be as defined in 12VAC30-90-271.

b. Indirect patient care operating cost peer groups shall be established for the Virginia portion of the Washington DC-MD-VA MSA, for the rest of the state for facilities with less than 61 licensed beds, and for the rest of the state for facilities with more than 60 licensed beds.

3. Each facility's average case-mix index shall be calculated based upon data reported by that nursing facility to the Centers for Medicare and Medicaid Services (CMS) Minimum Data Set (MDS) System. See 12VAC30-90-306 for the case-mix index calculations.

4. The normalized facility average Medicaid CMI shall be used to calculate the direct patient care operating cost prospective ceilings and direct patient care operating cost prospective rates for each semiannual period of a NFs subsequent fiscal year. See 12VAC30-90-306 D 2 for the calculation of the normalized facility average Medicaid CMI.

a. A NF's direct patient care operating cost prospective ceiling shall be the product of the NF's peer group direct patient care ceiling and the NF's normalized facility average Medicaid CMI. A NF's direct patient care operating cost prospective ceiling will be calculated semiannually.

b. A CMI rate adjustment for each semiannual period of a nursing facility's prospective fiscal year shall be applied by multiplying the nursing facility's normalized facility average Medicaid CMI applicable to each prospective semiannual period by the nursing facility's case-mix neutralized direct patient care operating cost base rate for the preceding cost reporting period (see 12VAC30-90-307).

c. See 12VAC30-90-307 for the applicability of case-mix indices.

5. Direct and indirect ceiling calculations.

a. Effective for services on and after July 1, 2006, the direct patient care operating ceiling shall be set at 117% of the respective peer group day-weighted median of the facilities' case-mix neutralized direct care operating costs per day. The calculation of the medians shall be based on cost reports from freestanding nursing homes for provider fiscal years ending in the most recent base year. The medians used to set the peer group direct patient care operating ceilings shall be revised and case-mix neutralized every two years using the most recent reliable calendar year cost settled cost reports for freestanding nursing facilities that have been completed as of September 1.

b. The indirect patient care operating ceiling shall be set at 107% of the respective peer group day-weighted median of the facility's specific indirect operating cost per day. The calculation of the peer group medians shall be based on cost reports from freestanding nursing homes for provider fiscal years ending in the most recent base year. The medians used to set the peer group indirect operating ceilings shall be revised every two years using the most recent reliable calendar year cost settled cost reports for freestanding nursing facilities that have been completed as of September 1.

6. Reimbursement for use of specialized treatment beds. Effective for services on and after July 1, 2005, nursing facilities shall be reimbursed an additional $10 per day for those recipients who require a specialized treatment bed due to their having at least one Stage IV pressure ulcer. Recipients must meet criteria as outlined in 12VAC30-60-350, and the additional reimbursement must be preauthorized as provided in 12VAC30-60-40. Nursing facilities shall not be eligible to receive this reimbursement for individuals whose services are reimbursed under the specialized care methodology. Beginning July 1, 2005, this additional reimbursement shall be subject to adjustment for inflation in accordance with 12VAC30-90-41 B, except that the adjustment shall be made at the beginning of each state fiscal year, using the inflation factor that applies to provider years beginning at that time. This additional payment shall not be subject to direct or indirect ceilings and shall not be adjusted at year-end settlement.

B. Adjustment of ceilings and costs for inflation. Effective for provider fiscal years starting on and after July 1, 2002, ceilings and rates shall be adjusted for inflation each year using the moving average of the percentage change of the Virginia-Specific Nursing Home Input Price Index, updated quarterly, published by Standard & Poor's DRI. For state fiscal year 2003, peer group ceilings and rates for indirect costs will not be adjusted for inflation.

1. For provider years beginning in each calendar year, the percentage used shall be the moving average for the second quarter of the year, taken from the table published for the fourth quarter of the previous year. For example, in setting prospective rates for all provider years beginning in January through December 2002, ceilings and costs would be inflated using the moving average for the second quarter of 2002, taken from the table published for the fourth quarter of 2001.

2. Provider specific costs shall be adjusted for inflation each year from the cost reporting period to the prospective rate period using the moving average as specified in subdivision 1 of this subsection. If the cost reporting period or the prospective rate period is less than 12 months long, a fraction of the moving average shall be used that is equal to the fraction of a year from the midpoint of the cost reporting period to the midpoint of the prospective rate period.

3. Ceilings shall be adjusted from the common point established in the most recent rebasing calculation. Base period costs shall be adjusted to this common point using moving averages from the DRI tables corresponding to the provider fiscal period, as specified in subdivision 1 of this subsection. Ceilings shall then be adjusted from the common point to the prospective rate period using the moving averages for each applicable second quarter, taken from the DRI table published for the fourth quarter of the year immediately preceding the calendar year in which the prospective rate years begin. Rebased ceilings shall be effective on July 1 of each rebasing year, so in their first application they shall be adjusted to the midpoint of the provider fiscal year then in progress or then beginning. Subsequently, they shall be adjusted each year from the common point established in rebasing to the midpoint of the appropriate provider fiscal year. For example, suppose the base year is made up of cost reports from years ending in calendar year 2000, the rebasing year is SFY2003, and the rebasing calculation establishes ceilings that are inflated to the common point of July 1, 2002. Providers with years in progress on July 1, 2002, would receive a ceiling effective July 1, 2002, that would be adjusted to the midpoint of the provider year then in progress. In some cases this would mean the ceiling would be reduced from the July 1, 2002, ceiling level. The following table shows the application of these provisions for different provider fiscal periods.

The following table shows the DRI tables that would provide the moving averages for adjusting ceilings for different prospective rate years.

In this example, when ceilings are inflated for the second PFY after the rebasing date, the ceilings will be inflated from July 1, 2002, using moving averages from the DRI table specified for the second PFY. That is, the ceiling for years ending June 30, 2004, will be the June 30, 2002, base period ceiling, adjusted by 1/2 of the moving average for the second quarter of 2002, compounded with the moving average for the second quarter of 2003. Both these moving averages will be taken from the fourth quarter 2002 DRI table.

C. The RUG-III Nursing Home Payment System shall require comparison of the prospective operating cost rates to the prospective operating ceilings. The provider shall be reimbursed the lower of the prospective operating cost rate or prospective operating ceiling.

D. Nonoperating costs. Plant or capital, as appropriate, costs shall be reimbursed in accordance with Articles 1 (12VAC30-90-29), 2 (12VAC30-90-30 et seq.), and 3 (12VAC30-90-35 et seq.) of this subpart. Plant costs shall not include the component of cost related to making or producing a supply or service.

NATCEPs cost shall be reimbursed in accordance with 12VAC30-90-170.

E. The prospective rate for each NF shall be based upon operating cost and plant or capital cost components or charges, whichever is lower, plus NATCEPs costs. The disallowance of nonreimbursable operating costs in any current fiscal year shall be reflected in a subsequent year's prospective rate determination. Disallowances of nonreimbursable plant or capital, as appropriate, costs and NATCEPs costs shall be reflected in the year in which the nonreimbursable costs are included.

F. Effective July 1, 2001, for those NFs whose indirect operating cost rates are below the ceilings, an incentive plan shall be established whereby a NF shall be paid, on a sliding scale, up to 25% of the difference between its allowable indirect operating cost rates and the indirect peer group ceilings.

1. The following table presents four incentive examples:

2. Efficiency incentives shall be calculated only for the indirect patient care operating ceilings and costs. Effective July 1, 2001, a direct care efficiency incentive shall no longer be paid.

G. Quality of care requirement. A cost efficiency incentive shall not be paid for the number of days for which a facility is out of substantial compliance according to the Virginia Department of Health survey findings as based on federal regulations.

H. Sale of facility. In the event of the sale of a NF, the prospective base operating cost rates for the new owner's first fiscal period shall be the seller's prospective base operating cost rates before the sale.

I. Public notice. To comply with the requirements of § 1902(a)(28)(c) of the Social Security Act, DMAS shall make available to the public the data and methodology used in establishing Medicaid payment rates for nursing facilities. Copies may be obtained by request under the existing procedures of the Virginia Freedom of Information Act.

J. Effective July 1, 2005, the total per diem payment to each nursing home shall be increased by $3.00 per day. This increase in the total per diem payment shall cease effective July 1, 2006. Effective July 1, 2006, when cost data that include time periods before July 1, 2005, are used to set facility specific rates, a portion of the $3.00 per day amount identified in this subsection, based on the percentage of patient days in the provider's cost reporting period that fall before July 1, 2005, adjusted for appropriate inflation and multiplied times the provider's Medicaid utilization rate, shall be allocated to the facility specific direct and indirect cost per day prior to comparison to the peer group ceilings. For purposes of this subsection, $1.68 of the $3.00 shall be considered direct costs and $1.32 of the $3.00 shall be considered indirect costs.

K. Effective July 1, 2008, and ending after June 30, 2009, the operating rate for nursing facilities shall be reduced by 1.329%.

L. Effective July 1, 2009, through June 30, 2010, there will be no inflation adjustment for nursing facility operating rates and ceilings and specialized care operating rates and ceilings. Exempt from this are government-owned nursing facilities with Medicaid utilization of 85% or greater in provider fiscal year 2007.

M. Effective July 1, 2010, through June 30, 2012, there shall be no inflation adjustment for nursing facility and specialized care operating rates. Nursing facility and specialized care ceilings shall freeze at the same level as the ceilings for nursing facilities with provider fiscal year ends of June 30, 2010.

N. Effective July 1, 2010, through September 30, 2010, the operating rate for nursing facilities shall be reduced 3.0% below the rates otherwise calculated.

O. Effective July 1, 2012, through June 30, 2014, the inflation adjustment for nursing facility and specialized care operating rates shall be 2.2%. Nursing facility and specialized care ceilings in effect in SFY 2012 shall be increased 3.2% in SFY 2013 and 2.2% in SFY 2014.

P. The reimbursement methodology described in this section shall be utilized for dates of service through June 30, 2014. Effective July 1, 2014, nursing facilities shall be reimbursed the price-based methodology described in 12VAC30-90-44. The last cost report with a fiscal year end before June 30, 2014, shall be used to establish the operating per diem rates for payment for the remainder of state fiscal year 2014. The last cost report with a fiscal year end on or after June 30, 2014, shall be used to settle reimbursement for plant costs, NATCEPs, and criminal records check costs for periods in state fiscal year 2014. Reimbursement for these components shall be prorated based on the number of cost report months prior to July 1, 2014, as a percentage of total months in the cost report. Settlement for these components will be based on two months of run-out from the end of the provider's fiscal year. Claims for services paid after the cost report run-out period will not be settled.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001; Volume 18, Issue 18, eff. July 1, 2002; Volume 19, Issue 18, eff. July 1, 2003; Volume 21, Issue 15, eff. July 1, 2005; Volume 22, Issue 22, eff. August 9, 2006; Volume 23, Issue 20, eff. August 25, 2007; Volume 24, Issue 26, eff. October 15, 2008; Volume 26, Issue 12, eff. March 17, 2010; Volume 26, Issue 19, eff. July 1, 2010; Volume 27, Issue 19, eff. July 1, 2011; Volume 29, Issue 23, eff. August 14, 2013; Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-42. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; repealed, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-44. Nursing facility price-based reimbursement methodology.

A. Effective July 1, 2014, DMAS shall convert nursing facility operating rates in 12VAC30-90-41 to a price-based methodology. The department shall calculate prospective operating rates for direct and indirect costs in the following manner:

1. The department shall calculate the cost per day in the base year for direct and indirect operating costs for each nursing facility. The department shall use existing definitions of direct and indirect costs.

2. The initial base year for calculating the cost per day shall be cost reports ending in calendar year 2011. The department shall rebase prices in fiscal year 2018 and every three years thereafter using the most recent, reliable calendar year cost-settled cost reports for freestanding nursing facilities that have been completed as of September 1. No adjustments will be made to the base year data for purposes of rate setting after that date.

3. Each nursing facility's direct cost per day shall be neutralized by dividing the direct cost per day by the raw Medicaid facility case-mix that corresponds to the base year by facility.

4. Costs per day shall be inflated to the midpoint of the fiscal year rate period using the moving average Virginia Nursing Home inflation index for the fourth quarter of each year (the midpoint of the fiscal year). Costs in the 2011 base year shall be inflated from the midpoint of the cost report year to the midpoint of fiscal year 2012 by prorating fiscal year 2012 inflation and annual inflation after that. Annual inflation adjustments shall be based on the last available report prior to the beginning of the fiscal year and corrected for any revisions to prior year inflation. Effective July 1, 2015, through June 30, 2016, the inflation adjustment for nursing facility operating rates shall be 0.0%.

5. Prices will be established for the peer groups described in this section using a combination of Medicare wage regions and Medicaid rural and bed size modifications based on similar costs.

6. The following definitions shall apply to direct peer groups. The Northern Virginia peer group shall be defined as localities in the Washington DC-MD-VA MSA as published by the Centers for Medicare and Medicaid Services (CMS) for skilled nursing facility rates. The Other MSAs peer group includes localities in any MSA defined by CMS other than the Northern Virginia MSA and non-MSA designations. The Rural peer groups are non-MSA areas of the state divided into Northern Rural and Southern Rural peer groups based on drawing a line between the following points on the Commonwealth of Virginia map with the coordinates: 37.4203914 Latitude, 82.0201219 Longitude and 37.1223664 Latitude, 76.3457773 Longitude. Direct peer groups are:

a. Northern Virginia,

b. Other MSAs,

c. Northern Rural, and

d. Southern Rural.

7. The following definitions shall apply to indirect peer groups. The indirect peer group for Northern Virginia is the same as the direct peer group for Northern Virginia. Rest of State peer groups shall be defined as any localities other than localities in the Northern Virginia peer group for nursing facilities with greater than 60 beds or 60 beds or less. Rest of State - Greater than 60 Beds shall be further subdivided into Other MSAs, Northern Rural and Southern Rural peer groups using the locality definitions for direct peer groups. Indirect peer groups are:

a. Northern Virginia MSA,

b. Rest of State - Greater than 60 Beds,

c. Other MSAs,

d. Northern Rural, and

e. Southern Rural.

Rest of State - 60 Beds or Less.

8. Any changes to peer group assignment based on changes in bed size or MSA will be implemented for reimbursement purposes the July 1 following the effective date of the change. For rebasings effective on or after July 1, 2020, the department shall move nursing facilities located in the former Danville Metropolitan Statistical Area to the Other MSAs peer group.

9. The direct and indirect price for each peer group shall be based on the following adjustment factors:

a. Direct adjustment factor - 105.000% of the peer group day-weighted median neutralized and inflated cost per day for freestanding nursing facilities. Effective July 1, 2017, the direct adjustment factor shall be 106.8% of the peer group day-weighted median neutralized and inflated cost per day for freestanding nursing facilities.

b. Indirect adjustment factor - 100.735% of the peer group day-weighted median inflated cost per day for freestanding nursing facilities. Effective July 1, 2017, the indirect adjustment factor shall be 101.3% of the peer group day-weighted median inflated cost per day for freestanding nursing facilities.

10. Facilities with costs projected to the rate year below 95% of the price shall have an adjusted price equal to the price minus the difference between the facility's cost and 95% of the unadjusted price. Adjusted prices will be established at each rebasing. New facilities after the base year shall not have an adjusted price until the next rebasing.

11. Special circumstances.

a. Effective July 1, 2017, the department shall increase the direct and indirect operating rates under the nursing facility price based reimbursement methodology by 15% for nursing facilities where at least 80% of the resident population has one or more of the following diagnoses: quadriplegia, traumatic brain injury, multiple sclerosis, paraplegia, or cerebral palsy. In addition, a qualifying facility must have at least 90% Medicaid utilization and a nursing facility case-mix index of 1.15 or higher in fiscal year 2014.

b. Effective July 1, 2017, through June 30, 2020, nursing facilities located in the former Danville Metropolitan Statistical Area shall be paid the operating rates calculated for the Other MSAs peer group.

12. Individual claim payment for direct costs shall be based on each resident's Resource Utilization Group (RUG) during the service period times the facility direct price.

13. Resource Utilization Group (RUG) is a resident classification system that groups nursing facility residents according to resource utilization and assigns weights related to the resource utilization for each classification. The department shall use RUGs to determine facility case-mix for cost neutralization as defined in 12VAC30-90-306 in determining the direct costs used in setting the price and for adjusting the claim payments for residents.

a. The department shall neutralize direct costs per day in the base year using the most current RUG grouper applicable to the base year.

b. The department shall utilize RUG-III, version 34 groups and weights in fiscal years 2015 through 2017 for claim payments.

c. Beginning in fiscal year 2018, the department shall implement RUG-IV, version 48 Medicaid groups and weights for claim payments.

d. RUG-IV, version 48 weights used for claim payments will be normalized to RUG-III, version 34 weights as long as base year costs are neutralized by the RUG-III 34 group. In that the weights are not the same under RUG-IV as under RUG-III, normalization will ensure that total direct operating payments using the RUG-IV 48 weights will be the same as total direct operating payments using the RUG-III 34 grouper.

B. Transition. The department shall transition to the price-based methodology over a period of four years, blending the adjusted price-based rate with the facility-specific case-mix neutral cost-based rate calculated according to 12VAC30-90-41 as if ceilings had been rebased for fiscal year 2015. The cost-based rates are calculated using the 2011 base year data, inflated to 2015 using the inflation methodology in 12VAC30-90-41 and adjusted to state fiscal year 2015. In subsequent years of the transition, the cost-based rates shall be increased by inflation described in this section.

1. Based on a four-year transition, the rate will be based on the following blend:

a. Fiscal year 2015 - 25% of the adjusted price-based rate and 75% of the cost-based rate.

b. Fiscal year 2016 - 50% of the adjusted price-based rate and 50% of the cost-based rate.

c. Fiscal year 2017 - 75% of the adjusted price-based rate and 25% of the cost-based rate.

d. Fiscal year 2018 - 100% of the adjusted price-based (fully implemented).

2. During the first transition year for the period July 1, 2014, through October 31, 2014, DMAS shall case-mix adjust each facility's direct cost component of the rates using the average facility case-mix from the two most recent finalized quarters (September and December 2013) instead of adjusting this component claim by claim.

3. Cost-based rates to be used in the transition for facilities without cost data in the base year but placed in service prior to July 1, 2013, shall be determined based on the most recently settled cost data. If there is no settled cost report at the beginning of a fiscal year, then 100% of the price-based rate shall be used for that fiscal year. Facilities placed in service after June 30, 2013, shall be paid 100% of the price-based rate.

4. Effective July 1, 2015, nursing facilities whose licensed bed capacity decreased by at least 30 beds after 2011 and whose occupancy increased from less than 70% in 2011 to more than 80% in 2013 shall be reimbursed the price-based operating rate rather than the transition operating rate.

C. Prospective capital rates shall be calculated in the following manner:

1. Fair rental value (FRV) per diem rates for the fiscal year shall be calculated for all freestanding nursing facilities based on the prior calendar year information aged to the fiscal year and using RS Means factors and rental rates corresponding to the fiscal year as prescribed in 12VAC30-90-36. There will be no separate calculation for beds subject to or not subject to transition.

2. FRV per diem rates for new nursing facilities or major renovations that qualify for mid-year rate adjustments shall be calculated as prescribed in 12VAC30-90-28.

a. These FRV changes shall also apply to specialized care facilities.

b. The capital per diem rate for hospital-based nursing facilities shall be the last settled capital per diem.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Previously reserved; derived from Virginia Register Volume 32, Issue 9, eff. February 11, 2016; amended, Virginia Register Volume 33, Issue 4, eff. December 1, 2016; Volume 34, Issue 11, eff. February 21, 2018; Volume 37, Issue 14, eff. April 15, 2021.

12VAC30-90-45. Supplemental payments for state-owned nursing facilities.

A. Effective July 1, 2018, DMAS shall make supplemental payments to state-owned nursing facilities owned by a Type One hospital. Quarterly supplemental payments for each facility shall be calculated in the manner described in this section.

B. Reimbursement methodology. The supplemental payment shall equal inpatient nursing facility claim payments times the upper payment limit (UPL) gap percentage.

1. The annual UPL gap percentage is the percentage calculated where the numerator is the difference for each nursing facility between a reasonable estimate of the amount that would be paid under Medicare payment principles for nursing facility services provided to Medicaid patients calculated in accordance with 42 CFR 447.272 and what Medicaid paid for such services, and the denominator is Medicaid payments to each nursing facility for nursing facility services provided to Medicaid patients in the same year used in the numerator.

2. The UPL gap percentage will be calculated annually for each nursing facility using data for the most recent year for which comprehensive annual data are available and inflated to the state fiscal year for which payments are to be made.

3. Maximum aggregate payments to all qualifying nursing facilities shall not exceed the available UPL. If nursing facility payments for state nursing facilities would exceed the UPL, the numerator in the calculation of the UPL gap percentage shall be reduced proportionately.

C. Quarterly payments. After the close of each quarter, beginning with the July 1, 2018, to September 30, 2018, quarter, each qualifying nursing facility shall receive supplemental payments for the nursing facility services paid during the prior quarter. The supplemental payments for each qualifying nursing facility shall be calculated by multiplying Medicaid nursing facility payments paid in that quarter by the annual UPL gap percentage.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Previously reserved; amended, Virginia Register Volume 36, Issue 1, eff. October 2, 2019.

12VAC30-90-46. [Reserved]. (Reserved)

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Historical Notes:Previously reserved.

12VAC30-90-47. [Reserved]. (Reserved)

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Historical Notes:Previously reserved.

12VAC30-90-48. [Reserved]. (Reserved)

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Historical Notes:Previously reserved.

12VAC30-90-49. [Reserved]. (Reserved)

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Historical Notes:Previously reserved.

Article 5
Allowable Cost Identification

12VAC30-90-50. Allowable costs.

Article 5
Allowable Cost Identification

A. Costs which are included in rate determination procedures and final settlement shall be only those allowable, reasonable costs which are acceptable under the Medicare principles of reimbursement, except as specifically modified in the Plan and as may be subject to individual or ceiling cost limitations and which are classified in accordance with the DMAS uniform chart of accounts (see Appendix I (12VAC30-90-270 through 12VAC30-90-276) of Part III of this chapter).

B. Certification. The cost of meeting all certification standards for NF requirements as required by the appropriate state agencies, by state laws, or by federal legislation or regulations.

C. Operating costs.

1. Direct patient care operating costs shall be defined in 12VAC30-90-271.

2. Allowable direct patient care operating costs shall exclude (i) personal physician fees, and (ii) pharmacy services and prescribed legend and nonlegend drugs provided by nursing facilities which operate licensed in-house pharmacies. These services shall be billed directly to DMAS through separate provider agreements and DMAS shall pay directly in accordance with 12VAC30-80-10 et seq.

3. Indirect patient care operating costs include all other operating costs, not identified as direct patient care operating costs and NATCEPs costs in Appendix I (12VAC30-90-270 through 12VAC30-90-276) of Part III of this chapter, which are allowable under the Medicare principles of reimbursement, except as specifically modified herein and as may be subject to individual cost or ceiling limitations.

D. Allowances/goodwill. Bad debts, goodwill, charity, courtesy, and all other contractual allowances shall not be recognized as allowable costs.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1940:1 Article 3, eff. July 1, 1994; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-51. Purchases/related organizations.

A. Costs applicable to services, facilities, and supplies furnished to the provider by organizations related to the provider by common ownership or control shall be included in the allowable cost of the provider at the cost to the related organization, provided that such costs do not exceed the price of comparable services, facilities or supplies. Purchases of existing NFs by related parties shall be governed by the provisions of 12VAC30-90-34 B 1.

Allowable cost applicable to management services furnished to the provider by organizations related to the provider by common ownership or control shall be lesser of the cost to the related organization or the per patient day ceiling limitation established for management services cost. (See 12VAC30-90-290.)

B. "Related to the provider" shall mean that the provider is related by reasons of common ownership or control by the organization furnishing the services, facilities, or supplies.

C. Common ownership exists when an individual or individuals or entity or entities possess significant ownership or equity in the parties to the transaction. Control exists where an individual or individuals or entity or entities have the power, directly or indirectly, significantly to influence or direct the actions or policies of the parties to the transaction. Significant ownership or control shall be deemed to exist where an individual is a "person with an ownership or control interest" within the meaning of 42 CFR 455.101. If the parties to the transaction are members of an immediate family, as defined below, the transaction shall be presumed to be between related parties if the ownership or control by immediate family members, when aggregated together, meets the definitions of "common ownership" or "control," as set forth above. Immediate family shall be defined to include, but not be limited to, the following: (i) husband and wife; (ii) natural parent; child and sibling; (iii) adopted child and adoptive parent; (iv) step-parent, step-child, step-sister, and step-brother; (v) father-in-law, mother-in-law, sister-in-law, brother-in-law, son-in-law and daughter-in-law; and (vi) grandparent and grandchild.

D. Exception to the related organization principle.

1. Effective with cost reports having fiscal years beginning on or after July 1, 1986, an exception to the related organization principle shall be allowed. Under this exception, charges by a related organization to a provider for goods or services shall be allowable cost to the provider if all four of the conditions set out in subdivision 2 of this subsection are met.

2. The exception applies if the provider demonstrates by convincing evidence to the satisfaction of DMAS that the following criteria have been met:

a. The supplying organization is a bona fide separate organization. This means that the supplier is a separate sole proprietorship, partnership, joint venture, association or corporation and not merely an operating division of the provider organization.

b. A substantial part of the supplying organization's business activity of the type carried on with the provider is transacted with other organizations not related to the provider and the supplier by common ownership or control and there is an open, competitive market for the type of goods or services furnished by the organization. In determining whether the activities are of similar type, it is important to also consider the scope of the activity.

For example, a full service management contract would not be considered the same type of business activity as a minor data processing contract. The requirement that there be an open, competitive market is merely intended to assure that the item supplied has a readily discernible price that is established through arm's-length bargaining by well informed buyers and sellers.

c. The goods or services shall be those which commonly are obtained by institutions such as the provider from other organizations and are not a basic element of patient care ordinarily furnished directly to patients by such institutions. This requirement means that institutions such as the provider typically obtain the good or services from outside sources rather than producing the item internally.

d. The charge to the provider is in line with the charge for such services, or supplies in the open market and no more than the charge made under comparable circumstances to others by the organization for such goods or services. The phrase "open market" takes the same meaning as "open, competitive market" in subdivision 2 b of this subsection.

3. Where all of the conditions of this exception are met, the charges by the supplier to the provider for such goods or services shall be allowable as costs.

4. This exception does not apply to the purchase, lease or construction of assets such as property, buildings, fixed equipment or major movable equipment. The terms "goods and services" may not be interpreted or construed to mean capital costs associated with such purchases, leases, or construction.

E. Three competitive bids shall not be required for the building and fixed equipment components of a construction project outlined in 12VAC30-90-31. Reimbursement shall be in accordance with subsection A of this section with the limitations stated in 12VAC30-90-31 B.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-52. Administrator/owner compensation.

A. Administrators' compensation, whether administrators are owners or nonowners, shall be based on a schedule adopted by DMAS and varied according to facility bed size. The compensation schedule shall be adjusted annually to reflect cost-of-living increases and shall be published and distributed to providers annually. The administrator's compensation schedule covers only the position of administrator and assistants and does not include the compensation of owners employed in capacities other than the nursing facility administrator (see 12VAC30-90-290, Cost reimbursement limitations).

B. Administrator compensation shall mean remuneration paid regardless of the form in which it is paid. This includes, but shall not be limited to, salaries, professional fees, insurance premiums (if the benefits accrue to the employee/owner or his beneficiary), director fees, personal use of automobiles, consultant fees, management fees, travel allowances, relocation expenses in excess of IRS guidelines, meal allowances, bonuses, pension plan costs, and deferred compensation plans. Management fees, consulting fees, and other services performed by owners shall be included in the total compensation if they are performing administrative duties regardless of how such services may be classified by the provider.

C. Compensation for all administrators (owner and nonowner) shall be based upon a 40-hour week to determine reasonableness of compensation.

D. Owner/administrator employment documentation.

1. Owners who perform services for a nursing facility as an administrator and also perform additional duties must maintain adequate documentation to show that the additional duties were performed beyond the normal 40-hour week as an administrator. The additional duties must be necessary for the operation of the nursing facility and related to patient care.

2. Services provided by owners, whether in employee capacity, through management contracts, or through home office relationships shall be compared to the cost and services provided in arm's-length transactions.

3. Compensation for such services shall be adjusted where such compensation exceeds that paid in such arm's-length transactions or where there is a duplication of duties normally rendered by an administrator. No reimbursement shall be allowed for compensation where owner services cannot be documented and audited.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 14, Issue 22, eff. August 19, 1998.

12VAC30-90-53. Depreciation.

The allowance for depreciation shall be restricted to the straight line method with a useful life in compliance with AHA guidelines. If the item is not included in the AHA guidelines, reasonableness shall be applied to determine useful life.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-54. Rent/Leases.

Rent or lease expenses shall be limited by the provisions of 12VAC30-90-280.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-55. Provider payments.

A. Limitations and effective for dates of service beginning July 1, 2001, through June 30, 2014:

1. Payments to providers, shall not exceed charges for covered services except for (i) public providers furnishing services free of charge or at a nominal charge (ii) a nonpublic provider whose charges are 60% or less of the allowable reimbursement represented by the charges and that demonstrates its charges are less than allowable reimbursement because its customary practice is to charge patients based on their ability to pay. Nominal charge shall be defined as total charges that are 60% or less of the allowable reimbursement of services represented by these charges. Providers qualifying in this section shall receive allowable reimbursement as determined in this Plan.

2. Allowable reimbursement in excess of charges may be carried forward for payment in the two succeeding cost reporting periods. A new provider may carry forward unreimbursed allowable reimbursement in the five succeeding cost reporting periods.

3. Providers may be reimbursed the carry forward to a succeeding cost reporting period (i) if total charges for the services provided in that subsequent period exceed the total allowable reimbursement in that period (ii) to the extent that the accumulation of the carry forward and the allowable reimbursement in that subsequent period do not exceed the providers' direct and indirect care operating ceilings plus allowable plant cost.

B. Payment for service shall be based upon the rate in effect when the service was rendered.

C. For cost reports filed on or after August 1, 1992, and used for cost reimbursement or rate setting based on cost:

1. An interim settlement shall be made by DMAS within 180 days after receipt and review of the cost report. The word "review," for purposes of interim settlement, shall include verification that all financial and other data specifically requested by DMAS is submitted with the cost report. Review shall also mean examination of the cost report and other required submission for obvious errors, inconsistency, inclusion of past disallowed costs, unresolved prior year cost adjustments and a complete signed cost report that conforms to the current DMAS requirements herein.

2. An interim settlement shall not be made when one of the following conditions exists:

a. Cost report filed by a terminated provider;

b. Insolvency of the provider at the time the cost report is submitted;

c. Lack of a valid provider agreement and decertification;

d. Moneys owed to DMAS;

e. Errors or inconsistencies in the cost report; or

f. Incomplete/nonacceptable cost report.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001; Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-56. Legal fees/accounting.

A. Costs claimed for legal/accounting fees shall be limited to reasonable and customary fees for specific services rendered. Such costs must be related to patient care as defined by Medicare principles of reimbursement and subject to applicable regulations herein. Documentation for legal costs must be available at the time of audit.

B. Retainer fees shall be considered an allowable cost up to the limits established in 12VAC30-90-290. C. As mandated by the Omnibus Budget Reconciliation Act of 1990, effective November 5, 1990, reimbursement of legal expenses for frivolous litigation shall be denied if the action is initiated on or after November 5, 1990. Frivolous litigation is any action initiated by the nursing facility that is dismissed on the basis that no reasonable legal ground existed for the institution of such action.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-57. Documentation.

Adequate documentation supporting cost claims must be provided at the time of interim settlement, cost settlement, audit, and final settlement.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-58. Fraud and abuse.

Previously disallowed costs which are under appeal and affect more than one cost reporting period shall be disclosed in subsequent cost reports if the provider wishes to reserve appeal rights for such subsequent cost reports. The reimbursement effect of such appealed costs shall be computed by the provider and submitted to DMAS with the cost report. Where such disclosure is not made to DMAS, the inclusion of previously disallowed costs may be referred to the Medicaid Fraud Control Unit of the Office of the Attorney General.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-59. [Reserved]. (Reserved)

Article 6
New Nursing Facilities

12VAC30-90-60. Interim rate.

Article 6
New Nursing Facilities

A. A new facility shall be defined as follows:

1. A facility that is newly enrolled and new construction has taken place through the COPN process; or

2. A facility that is newly enrolled that was previously denied payments for new admissions and was subsequently terminated from the program.

B. The following provisions sunset effective July 1, 2015, when applied to indirect reimbursement but remain in effect when applied to capital reimbursement.

1. Upon a showing of good cause, and approval of DMAS, an existing NF that expands its bed capacity by 50% or more shall have the option of retaining its prospective rate or being treated as a new NF.

2. A replacement facility or one that has changed location may not be considered a new facility if it serves the same inpatient population. An exception may be granted by DMAS if the provider can demonstrate that the occupancy substantially changed as a result of the facility being replaced or changing location. A decline in the replacement facility's total occupancy of 20 percentage points, in the replacement facility's first cost reporting period, shall be considered to indicate a substantial change when compared to the lower of the old facility's previous two prior cost reporting periods. The replacement facility shall receive the previous operator's operating rates if it does not qualify to be considered a new facility.

3. A change in either ownership or adverse financial conditions (e.g., bankruptcy), or both, of a provider does not change a nursing facility's status to be considered a new facility.

4. Effective July 1, 2001, for all new NFs the required occupancy percentage for indirect and capital costs shall be waived for establishing the first cost reporting period interim rate. The required occupancy percentage for dates of service on or before June 30, 2013, shall be 90%, and for dates of service on or after July 1, 2013, shall be 88%. This first cost reporting period shall not exceed 13 months from the date of the NF's certification.

5. The required occupancy percentage for indirect and capital costs shall be applied to the first and subsequent cost reporting periods' actual indirect and capital costs for establishing such NFs second and future cost reporting periods' prospective reimbursement rates. The required occupancy percentage shall be considered as having been satisfied if the new NF achieved the required occupancy percentage at any point in time during the first cost reporting period.

a. The department may grant an exception to the minimum occupancy requirement for reimbursement purposes for beds taken out of service for the purpose of renovation. In this case, the occupancy requirement shall be calculated as the required occupancy percentage of available bed days for the period of the exception plus the required occupancy percentage of licensed bed days for the remainder of the cost report year.

b. The provider shall notify DMAS and the Virginia Department of Health (VDH), Division of Long Term Care Services, Office of Licensure and Certification in advance and present a renovation plan including a reasonable timetable for when the beds will be placed back into service.

c. The provider shall keep the appropriate documentation of available beds and days during the renovation period, which will provide the evidence of the beds and days taken out of service for renovation purposes. This supporting documentation, along with a copy of the provider's notification letter to the VDH Division of Long Term Care Services, Office of Licensure and Certification shall be submitted with the filing of the provider's cost report, as applicable. The provider's notification letter shall account for the number of beds not in use for the defined period of time.

6. A new NF's interim rate for the first cost reporting period shall be determined based upon the lower of its anticipated allowable cost determined from a detailed budget (or pro forma cost report) prepared by the provider and accepted by DMAS, or the appropriate operating ceilings or charges.

7. Effective July 1, 2001, on the first day of its second cost reporting period, a new nursing facility's interim plant or capital, as appropriate, rate shall be converted to a per diem amount by dividing its allowable plant or capital costs for its first cost reporting period by the required occupancy percentage of the potential number of patient days for all licensed beds during the first cost reporting period.

8. During its first semiannual period of operation, a newly constructed or newly enrolled NF shall have an assigned CMI based upon its peer group's normalized average Medicaid CMI for direct patient care. An expanded NF receiving new NF treatment shall receive the CMI calculated for its last semiannual period prior to obtaining new NF status.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 set seq.

Historical Notes

Derived from VR460-03-4.1940:1 Article 4 eff. July 1, 1994; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001; Volume 18, Issue 18, eff. July 1, 2002; Volume 27, Issue 15, eff. April 27, 2011; Volume 30, Issue 19, eff. June 18, 2014; Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-65. Final rate and effective for dates of services beginning July 1, 2001, through June 30, 2014.

A. This section shall apply to dates of services beginning July 1, 2001, through June 30, 2014.

B. DMAS shall reimburse the lower of the appropriate operating ceilings, charges or actual allowable cost for a new NF's first cost reporting period of operation, subject to the procedures outlined in subdivisions 4, 5, and 6 of 12VAC30-90-60.

C. Upon determination of the actual allowable operating cost for direct patient care and indirect patient care the per diem amounts shall be used to determine if the provider is below the peer group ceiling used to set its interim rate. If indirect costs are below the ceiling, an efficiency incentive shall be paid at settlement of the first year cost report.

D. This incentive will allow a NF to be paid up to 25% of the difference between its actual allowable indirect operating cost and the peer group ceiling used to set the interim rate. (Refer to 12VAC30-90-41 F.)

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001; Volume 32, Issue 9, eff. February 11, 2016.

Article 7
Cost Reports

12VAC30-90-70. Cost report submission.

Article 7
Cost Reports

A. Cost reports are due not later than 150 days after the provider's fiscal year end. If a complete cost report is not received within 150 days after the end of the provider's fiscal year, it is considered delinquent. The cost report shall be deemed complete for the purpose of cost settlement when DMAS has received all of the following (note that if the audited financial statements required by subdivisions 3 a and 7 b of this subsection are received not later than 120 days after the provider's fiscal year end and all other items listed are received not later than 90 days after the provider's fiscal year end, the cost report shall be considered to have been filed at 90 days):

1. Completed cost reporting forms provided by DMAS, with signed certifications;

2. The provider's trial balance showing adjusting journal entries;

3. a. The provider's audited financial statements including, but not limited to, a balance sheet, a statement of income and expenses, a statement of retained earnings (or fund balance), a statement of cash flows, the auditor's report in which he expresses his opinion or, if circumstances require, disclaims an opinion based on generally accepted auditing standards, footnotes to the financial statements, and the management report. Multi-facility providers shall be governed by subdivision 7 of this subsection;

b. Schedule of restricted cash funds that identify the purpose of each fund and the amount;

c. Schedule of investments by type (stock, bond, etc.), amount, and current market value;

4. Schedules that reconcile financial statements and trial balance to expenses claimed in the cost report;

5. Depreciation schedule;

6. Schedule of assets as defined in 12VAC30-90-38;

7. Nursing facilities that are part of a chain organization must also file:

a. Home office cost report;

b. Audited consolidated financial statements of the chain organization including the auditor's report in which he expresses his opinion or, if circumstances require, disclaims an opinion based on generally accepted auditing standards, the management report and footnotes to the financial statements;

c. The nursing facility's financial statements including, but not limited to, a balance sheet, a statement of income and expenses, a statement of retained earnings (or fund balance), and a statement of cash flows;

d. Schedule of restricted cash funds that identify the purpose of each fund and the amount;

e. Schedule of investments by type (stock, bond, etc.), amount, and current market value; and

8. Such other analytical information or supporting documentation that may be required by DMAS.

B. When cost reports are delinquent, the provider's interim rate shall be reduced to zero. For example, for a September 30 fiscal year end, payments will be reduced starting with the payment on and after March 1.

C. After the overdue cost report is received, desk reviewed, and a new prospective rate established, the amounts withheld shall be computed and paid. If the provider fails to submit a complete cost report within 180 days after the fiscal year end, a penalty in the amount of 10% of the balance withheld shall be forfeited to DMAS.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from VR460-03-4.1940:1 Article 5, eff. July 1, 1994; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 14, Issue 1, eff. December 1, 1997; Volume 17, Issue 18, eff. July 1, 2001; Volume 32, Issue 6, eff. December 31, 2015.

12VAC30-90-75. Reporting form; accounting method; cost report extensions; fiscal year changes.

A. All cost reports shall be submitted on uniform reporting forms provided by the DMAS, or by Medicare if applicable. Such cost reports, subsequent to the initial cost report period, shall cover a 12-month period. Any exceptions must be approved by the DMAS.

B. The accrual method of accounting and cost reporting is mandated for all providers.

C. Extension for submission of a cost report may be granted if the provider can document extraordinary circumstances beyond its control. Extraordinary circumstances do not include:

1. Absence or changes of chief finance officer, controller or bookkeeper;

2. Financial statements not completed;

3. Office or building renovations;

4. Home office cost report not completed;

5. Change of stock ownership;

6. Change of intermediary;

7. Conversion to computer; or

8. Use of reimbursement specialist.

D. All fiscal year end changes must be approved 90 days prior to the beginning of a new fiscal year.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

Article 8
Prospective Rates

12VAC30-90-80. Time frames.

Article 8
Prospective Rates

A. For cost reports filed on or after August 1, 1992, a prospective rate shall be determined by DMAS within 180 days of the receipt of a complete cost report. (See 12VAC30-90-70 A.) Rate adjustments shall be made retroactive to the first day of the provider's new cost reporting year. Where a field audit is necessary to set a prospective rate, DMAS shall have an additional 120 days to determine any appropriate adjustments to the prospective rate as a result of such field audit. This time period shall be extended if delays are attributed to the provider.

B. Subsequent to establishing the prospective rate DMAS shall conclude the desk audit of a providers' cost report and determine if further field audit activity is necessary. DMAS will seek repayment or make retroactive settlements when audit adjustments are made to costs claimed for reimbursement.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1940:1 Article 6, eff. August 1, 1993; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001.

Article 9
Retrospective Rates

12VAC30-90-90. Retrospective rates.

Article 9
Retrospective Rates

The retrospective method of reimbursement shall be used for mental health/mental retardation facilities.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 § 2.26, eff. October 1, 1990; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-100. [Reserved]. (Reserved)

Article 10
Record Retention

12VAC30-90-110. Record retention.

Article 10
Record Retention

A. Time frames. All of the NF's accounting and related records, including the general ledger, books of original entry, and statistical data must be maintained for a minimum of five years, or until all affected cost reports are final settled.

Certain information must be maintained for the duration of the provider's participation in the Medicaid program and until such time as all cost reports are settled. Examples of such information are set forth in subsection B of this section.

B. Types of records to be maintained. Information which must be maintained for the duration of the provider's participation in the Medicaid program includes, but is not limited to:

1. Real and tangible property records, including leases and the underlying cost of ownership;

2. Itemized depreciation schedules; and

3. Mortgage documents, loan agreements, and amortization schedules;

4. Copies of all cost reports filed with DMAS together with supporting financial statements.

C. Record availability. The records must be available for audits by DMAS staff. Where such records are not available, costs shall be disallowed.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1940:1 Article 8, eff. October 1, 1990; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001.

Article 11
Audits

12VAC30-90-120. Audit overview; scope of audit.

Article 11
Audits

A. Desk audits shall be performed to verify the completeness and accuracy of the cost report, and reasonableness of costs claimed for reimbursement. Field audits, as determined necessary by DMAS, shall be performed on the records of each participating provider to determine that costs included for reimbursement were accurately determined and reasonable, and do not exceed the ceilings or other reimbursement limitations established by DMAS.

B. The scope of the audit includes, but shall not be limited to: trial balance verification, analysis of fixed assets, schedule of assets, indebtedness, selected revenues, leases and the underlying cost of ownership, rentals and other contractual obligations, and costs to related organizations. The audit scope may also include various other analyses and studies relating to issues and questions unique to the NF and identified by DMAS. Census and related statistics, patient trust funds, and billing procedures are also subject to audit.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1940:1 Article 9, eff. October 1, 1990; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-121. Field audit requirements.

Field audits shall be required as follows:

1. For the first cost report on all new NF's.

2. For the first cost report in which costs for bed additions or other expansions are included.

3. When a NF is sold, purchased, or leased.

4. As determined by DMAS desk audit.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-122. Provider notification.

The provider shall be notified in writing of all adjustments to be made to a cost report resulting from desk or field audit with stated reasons and references to the appropriate principles of reimbursement or other appropriate regulatory cites.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-123. Field audit exit conference.

A. The provider shall be offered an exit conference to be executed within 15 days following completion of the on-site audit activities, unless other time frames are mutually agreed to by DMAS and the provider. Where two or more providers are part of a chain organization or under common ownership, DMAS shall have up to 90 days after completion of all related on-site audit activities to offer an exit conference for all such NFs. The exit conference shall be conducted at the site of the audit or at a location mutually agreeable to DMAS and the provider.

B. The purpose of the exit conference shall be to enable the DMAS auditor to discuss such matters as the auditor deems necessary, to review the proposed field audit adjustments, and to present supportive references. The provider will be given an opportunity during the exit conference to present additional documentation and agreement or disagreement with the audit adjustments.

C. All remaining adjustments, including those for which additional documentation is insufficient or not accepted by DMAS, shall be applied to the applicable cost report or reports regardless of the provider's approval or disapproval.

D. The provider shall sign an exit conference form that acknowledges the review of proposed adjustments.

E. After the exit conference DMAS shall perform a review of all remaining field audit adjustments. Within a reasonable time and after all documents have been submitted by the provider, DMAS shall transmit in writing to the provider a final field audit adjustment report (FAAR), if revised, which will include all remaining adjustments not resolved during the exit conference. The provider shall have 15 days from the date of the letter which transmits the FAAR, to submit any additional documentation which may affect adjustments in the FAAR.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-124. Audit delay.

In the event the provider delays or refuses to permit an audit to occur or to continue or otherwise interferes with the audit process, payments to the provider shall be reduced as stated in 12VAC30-90-70 B.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-125. Field audit time frames.

A. If a field audit is necessary after receipt of a complete cost report, such audit shall be initiated within three years following the date of the last notification of program reimbursement and the on site activities, including exit conferences, shall be concluded within 180 days from the date the field audit begins. Where audits are performed on cost reports for multiple years or providers, the time frames shall be reasonably extended for the benefit of the DMAS and subject to the provisions of 12VAC30-90-123.

B. Documented delays on the part of the provider will automatically extend the above time frames to the extent of the time delayed.

C. Extensions of the time frames shall be granted to the department for good cause shown.

D. Disputes relating to the timeliness established in 12VAC30-90-123 and 12VAC30-90-124, or to the grant of extensions to the DMAS, shall be resolved by application to the Director of the DMAS or his designee.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-126. [Reserved]. (Reserved)

12VAC30-90-130. (Repealed.)

Historical Notes

Derived from VR460-03-4.1940:1 §§ 3.1 through 3.6, eff. August 1, 1993; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; repealed, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-136. Elements of capital payment methodology not subject to appeal.

Subpart III
Appeals

Elements of the capital payment methodology that shall not be subject to appeal shall be:

1. The definitions provided in Article 3 (12VAC30-90-35 et seq.) of Subpart II of this chapter, and the application of those definitions to the FRV rate calculation.

2. The transition policy described in 12VAC30-90-29.

3. The formula for determining the FRV per diem rate described in Article 3 of Subpart II of this chapter.

4. The calculation of the FRV rental amount described in Article 3 of Subpart II of this chapter.

5. The exclusion of certain beds from the transition policy as provided in Article 3 of Subpart II of this chapter.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-137. [Reserved]. (Reserved)

12VAC30-90-140. Individual expense limitation.

Subpart IV
Individual Expense Limitation

In addition to operating costs being subject to peer group ceilings, costs are further subject to maximum limitations as defined in 12VAC30-90-290, Cost Reimbursement Limitations.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 Part IV, eff. August 1, 1993; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-150. Cost report preparation instructions.

Subpart V
Cost Report Preparation Instructions

Instructions for preparing NF cost reports will be provided by the DMAS.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 Part V, eff. August 1, 1993; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

Article 1
Plant Cost Applicable

12VAC30-90-160. Stock acquisition; merger of unrelated and related parties.

Subpart VI
Stock Transactions

Article 1
Plant Cost Applicable

A. The acquisition of the capital stock of a provider does not constitute a basis for revaluation of the provider's assets. Any cost associated with an acquisition of capital stock shall not be an allowable cost. The provider selling its stock continues as a provider after the sale, and the purchaser is only a stockholder of the provider.

B. In the case of a merger which combines two or more unrelated corporations under the regulations of the Code of Virginia, there will be only one surviving corporation. If the surviving corporation, which will own the assets and liabilities of the merged corporation, is not a provider, a Certificate of Public Need, if applicable, must be issued to the surviving corporation.

The nonsurviving corporation shall be subject to the policies applicable to terminated providers, including those relating to gain or loss on sales of NFs.

C. The statutory merger of two or more related parties or the consolidation of two or more related providers resulting in a new corporate entity shall be treated as a transaction between related parties. No revaluation shall be permitted for the surviving corporation.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1940:1 Part VI, eff. August 1, 1993; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001.

Article 2
Capital Cost Applicable

12VAC30-90-165. Stock acquisition; merger of unrelated and related parties.

Article 2
Capital Cost Applicable

A. The acquisition of the capital stock of a provider does not constitute a basis for revaluation of the provider's assets. Any cost associated with an acquisition of capital stock shall not be an allowable cost. The provider selling its stock continues as a provider after the sale, and the purchaser is only a stockholder of the provider.

B. In the case of a merger that combines two or more unrelated corporations under the Code of Virginia, there will be only one surviving corporation. If the surviving corporation that will own the assets and liabilities of the merged corporation is not a provider, a Certificate of Public Need, if applicable, must be issued to the surviving corporation.

The nonsurviving corporation shall be subject to the policies applicable to terminated providers, including those relating to gain or loss on sales of NFs.

C. The statutory merger of two or more related parties or the consolidation of two or more related providers resulting in a new corporate entity shall be treated as a transaction between related parties. No revaluation shall be permitted for the surviving corporation.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-170. NATCEPs costs.

Subpart VII
Nurse Aide Training and Competency Evaluation Programs (NATCEPs)

A. The Omnibus Budget Reconciliation Act of 1989 (OBRA 89) amended § 1903(a)(2)(B) of the Social Security Act to fund actual NATCEPs costs incurred by NFs separately from the NF's medical assistance services reimbursement rates.

B. NATCEPs costs shall be as defined in Appendix I (12VAC30-90-270 through 12VAC30-90-276).

C. To calculate the reimbursement rate, NATCEPs costs contained in the most recently filed cost report shall be converted to a per diem amount by dividing allowable NATCEPs costs by the actual number of NF's patient days.

D. The NATCEPs interim reimbursement rate determined in subsection C of this section shall be added to the prospective operating cost and plant cost components or charges, whichever is lower, to determine the NF's prospective rate. The NATCEPs interim reimbursement rate shall not be adjusted for inflation.

E. Reimbursement of NF costs for training and competency evaluation of nurse aides must take into account the NF's use of trained nurse aides in caring for Medicaid, Medicare and private pay patients. Medicaid shall not be charged for that portion of NATCEPs costs that is properly charged to Medicare or private pay services. The final retrospective reimbursement for NATCEPs costs shall be the reimbursement rate as calculated from the most recently filed cost report by the methodology in subsection C of this section times the Medicaid patient days from the DMAS MMR-240.

F. Disallowance of nonreimbursable NATCEPs costs shall be reflected in the year in which the nonreimbursable costs were claimed.

G. Payments to providers for allowable NATCEPs costs shall not be considered in the comparison of the lower allowable reimbursement or charges for covered services, as outlined in 12VAC30-90-55 A.

H. Effective July 1, 2014, prospective NATCEPs per diem rates for each facility shall be the NATCEPs per diem rate in the base year inflated to the rate year based on inflation in 12VAC30-90-44. To calculate the NATCEPs per diem rate, NATCEPs costs in the base year shall be converted to a per diem amount by dividing allowable NATCEPs costs by the actual number of NF's patient days. In non-rebasing years, the prospective rate calculation shall be revised annually using costs from the next available year. The NATCEPs reimbursement rate determined in this subsection shall be added to the prospective operating cost, criminal records checks, and plant cost components.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from VR460-03-4.1940:1 Part VII, eff. October 1, 1990; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001; Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-180. Criminal records checks.

Subpart VIII
Criminal Records Checks for Nursing Facility Employees

A. This section implements the requirements of § 32.1-126.01 of the Code of Virginia and Chapter 994 of the Acts of Assembly of 1993 (Item 313 T).

B. A licensed nursing facility shall not hire for compensated employment persons who have been convicted of:

1. Murder;

2. Abduction for immoral purposes as set out in § 18.2-48 of the Code of Virginia;

3. Assaults and bodily woundings as set out in Article 4 (§ 18.2-51 et seq.) of Chapter 4 of Title 18.2 of the Code of Virginia;

4. Arson as set out in Article 1 (§ 18.2-77 et seq.) of Chapter 5 of Title 18.2 of the Code of Virginia;

5. Pandering as set out in § 18.2-355 of the Code of Virginia;

6. Crimes against nature involving children as set out in § 18.2-361 of the Code of Virginia;

7. Taking indecent liberties with children as set out in §§ 18.2-370 or 18.2-370.1 of the Code of Virginia;

8. Abuse and neglect of children as set out in § 18.2-371.1 of the Code of Virginia;

9. Failure to secure medical attention for an injured child as set out in § 18.2-314 of the Code of Virginia;

10. Obscenity offenses as set out in § 18.2-374.1 of the Code of Virginia; or

11. Abuse or neglect of an incapacitated adult as set out in § 18.2-369 of the Code of Virginia.

C. The provider shall obtain a sworn statement or affirmation from every applicant disclosing any criminal convictions or pending criminal charges for any of the offenses specified in subsection B of this section regardless of whether the conviction or charges occurred in the Commonwealth.

D. The provider shall obtain an original criminal record clearance or an original criminal record history from the Central Criminal Records Exchange for every person hired. This information shall be obtained within 30 days from the date of employment and maintained in the employees' files during the term of employment and for a minimum of five years after employment terminates for whatever reason.

E. The provider may hire an applicant whose misdemeanor conviction is more than five years old and whose conviction did not involve abuse or neglect or moral turpitude.

F. Reimbursement to the provider will be handled through the cost reporting form provided by the DMAS and will be limited to the actual charges made by the Central Criminal Records Exchange for the records requested. Such actual charges will be a pass-through cost which is not a part of the operating or plant cost components.

G. Effective July 1, 2014, a prospective per diem rate shall be calculated. In a rebasing year, the calculation shall be based on the base year described in 12VAC30-90-44. In non-rebasing years, the prospective rate calculation shall be revised annually using the next available year. No adjustment for inflation shall be made. The criminal records checks rate shall be added to the prospective operating rate, nurse aide training and competency evaluation programs (NATCEPs), and plant cost components.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from VR460-03-4.1940:1 Part VIII, eff. July 1, 1994; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-190. Use of MMR-240.

Subpart IX
Use of MMR-240

All providers must use the data from computer printout MMR-240 based upon a 60-day accrual period.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 Part IX, eff. July 1, 1994; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-200. Commingled investment income.

Subpart X
Commingled Investment Income

DMAS shall treat funds commingled for investment purposes in accordance with PRM-15, § 202.6.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 Part X, eff. July 1, 1994; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-210. Provider notification.

Subpart XI
Provider Notification

DMAS shall notify providers of State Plan changes affecting reimbursement 30 days prior to the enactment of such changes.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 Part XI, eff. July 1, 1994; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-220. Start-up costs.

Subpart XII
Start-Up Costs and Organizational Costs

A. In the period of developing a provider's ability to furnish patient care services, certain costs are incurred. The costs incurred during this time of preparation are referred to as start-up costs. Since these costs are related to patient care services rendered after the time of preparation, they shall be capitalized as deferred charges and amortized over a 60-month time frame.

B. Start-up costs may include, but are not limited to, administrative and nursing salaries; heat, gas, and electricity; taxes, insurance; employee training costs; repairs and maintenance; housekeeping; and any other allowable costs incident to the start-up period. However, any costs that are properly identifiable as operating costs must be appropriately classified as such and excluded from start-up costs.

C. Start-up costs that are incurred immediately before a provider enters the Program and that are determined by the provider, subject to the DMAS approval, to be immaterial need not be capitalized but rather may be charged to operations in the first cost reporting period.

D. Where a provider incurs start-up costs while in the Program and these costs are determined by the provider, subject to the DMAS approval, to be immaterial, these costs shall not be capitalized but shall be charged to operations in the periods incurred.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 Part XII, eff. July 1, 1993; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-221. Time frames.

A. Start-up costs are incurred from the time preparation begins on a newly constructed or purchased building, wing, floor, unit, or expansion thereof to the time the first patient (whether Medicaid or non-Medicaid) is admitted for treatment, or where the start-up costs apply only to nonrevenue producing patient care functions or nonallowable functions, to the time the areas are used for their intended purposes.

B. If a provider intends to prepare all portions of its entire facility at the same time, start-up costs for all portions of the facility shall be accumulated in a single deferred charge account and shall be amortized when the first patient is admitted for treatment.

C. If a provider intends to prepare portions of its facility on a piecemeal basis (i.e., preparation of a floor or wing of a provider's facility is delayed), start-up costs shall be capitalized and amortized separately for the portion or portions of the provider's facility prepared during different time periods.

D. Moreover, if a provider expands its NF by constructing or purchasing additional buildings or wings, start-up costs shall be capitalized and amortized separately for these areas.

E. Depreciation time frames.

1. Costs of the provider's facility and building equipment shall be depreciated using the straight line method over the lives of these assets starting with the month the first patient is admitted for treatment.

2. Where portions of the provider's NF are prepared for patient care services after the initial start-up period, those asset costs applicable to each portion shall be depreciated over the remaining lives of the applicable assets. If the portion of the NF is a nonrevenue-producing patient care area or nonallowable area, depreciation shall begin when the area is opened for its intended purpose. Costs of major movable equipment, however, shall be depreciated over the useful life of each item starting with the month the item is placed into operation.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-222. Organizational costs.

A. Organizational costs are those costs directly incident to the creation of a corporation or other form of business. These costs are an intangible asset in that they represent expenditures for rights and privileges which have a value to the enterprise. The services inherent in organizational costs extend over more than one accounting period and thus affect the costs of future periods of operations.

B. Allowable organizational costs shall include, but not be limited to, legal fees incurred in establishing the corporation or other organization (such as drafting the corporate charter and by-laws, legal agreements, minutes of organizational meeting, terms of original stock certificates), necessary accounting fees, expenses of temporary directors and organizational meetings of directors and stockholders and fees paid to states for incorporation.

C. The following types of costs shall not be considered allowable organizational costs: costs relating to the issuance and sale of shares of capital stock or other securities, such as underwriters fees and commissions, accountant's or lawyer's fees, cost of qualifying the issues with the appropriate state or federal authorities, stamp taxes, etc.

D. Allowable organization costs shall generally be capitalized by the organization. However, if DMAS concludes that these costs are not material when compared to total allowable costs, they may be included in allowable indirect operating costs for the initial cost reporting period. In all other circumstances, allowable organization costs shall be amortized ratably over a period of 60 months starting with the month the first patient is admitted for treatment.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-223. [Reserved]. (Reserved)

12VAC30-90-230. Access to records.

Subpart XIII
DMAS Authorization

A. DMAS shall be authorized to request and review, either through a desk or field audit, all information related to the provider's cost report that is necessary to ascertain the propriety and allocation of costs (in accordance with Medicare and Medicaid rules, regulations, and limitations) to patient care and nonpatient care activities.

B. Examples of such information shall include, but not be limited to, all accounting records, mortgages, deeds, contracts, meeting minutes, salary schedules, home office services, cost reports, and financial statements.

C. This access also applies to related organizations as defined in 12VAC30-90-51 who provide assets and other goods and services to the provider.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1940:1 Part XIII, eff. October 1, 1990; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-240. Home office operating costs.

Subpart XIV
Home Office Costs

A. Home office operating costs shall be allowable to the extent they are reasonable, relate to patient care, and provide cost savings to the provider.

B. Provider purchases from related organizations, whether for services, or supplies, shall be limited to the lower of the related organizations actual cost or the price of comparable purchases made elsewhere.

C. Home office operating costs shall be allocated in accordance with § 2150.3, PRM-15.

D. Home office costs associated with providing management services to nonrelated entities shall not be recognized as allowable reimbursable cost.

E. Allowable and nonallowable home office costs shall be recognized in accordance with § 2150.2, PRM-15.

F. Item 398 D Chapter 723 of 1987 Acts of Assembly (as amended), effective April 8, 1987, eliminated reimbursement of return on equity capital to proprietary providers for periods or portions thereof on or after July 1, 1987.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1940:1 Part XIV, eff. October 1, 1990; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-250. Lump sum payment.

Subpart XV
Refund of Overpayments

When the provider files a cost report indicating that an overpayment has occurred, full refund shall be remitted with the cost report. In cases where DMAS discovers an overpayment during desk audit, field audit, or final settlement, DMAS shall promptly send the first demand letter requesting a lump sum refund.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1940:1 Part XV, eff. July 1, 1992; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-251. Offset.

If the provider has been overpaid for a particular fiscal year and has been underpaid for another fiscal year, the underpayment shall be offset against the overpayment. So long as the provider has an overpayment balance, any underpayments discovered by subsequent review or audit shall be used to reduce the balance of the overpayment.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-252. Payment schedule.

A. If the provider cannot refund the total amount of the overpayment (i) at the time it files a cost report indicating that an overpayment has occurred, the provider shall request in writing an extended repayment schedule at the time of filing, or (ii) within 30 days after receiving the DMAS demand letter, the provider shall promptly request in writing an extended repayment schedule.

B. DMAS may establish a repayment schedule of up to 12 months to recover all or part of an overpayment or, if a provider demonstrates that repayment within a 12-month period would create severe financial hardship, the Director of DMAS may approve a repayment schedule of up to 36 months.

C. A provider shall have no more than one extended repayment schedule in place at one time. If subsequent audits identify additional overpayment, the full amount shall be repaid within 30 days unless the provider submits further documentation supporting a modification to the existing extended repayment schedule to include the additional amounts.

D. If, during the time an extended repayment schedule is in effect, the provider ceases to be a participating provider or fails to file a cost report in a timely manner, the outstanding balance shall become immediately due and payable.

E. When a repayment schedule is used to recover only part of an overpayment, the remaining amount shall be recovered from interim payments to the provider or by lump sum payments.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-253. Extension request documentation.

In the written request for an extended repayment schedule, the provider shall document the need for an extended (beyond 30 days) repayment and submit a written proposal scheduling the dates and amounts of repayments. The provider must make payments in accordance with the proposed schedule while the schedule is pending approval. If DMAS approves the schedule, DMAS shall send the provider written notification of the approved repayment schedule, which shall be effective retroactive to the date the provider submitted the proposal.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-254. Interest charge on extended repayment.

A. Once an initial determination of overpayment has been made, DMAS shall undertake full recovery of such overpayment whether or not the provider disputes, in whole or in part, the initial determination of overpayment. If an appeal follows, interest shall be waived during the period of administrative appeal of an initial determination of overpayment.

B. Interest charges on the unpaid balance of any overpayment shall accrue pursuant to § 32.1-313 of the Code of Virginia from the date the director's determination becomes final.

C. The director's determination shall be deemed to be final on (i) the due date of any cost report filed by the provider indicating that an overpayment has occurred, or (ii) the issue date of any notice of overpayment, issued by DMAS, if the provider does not file an appeal, or (iii) the issue date of any administrative decision issued by DMAS after an informal fact finding conference, if the provider does not file an appeal, or (iv) the issue date of any administrative decision signed by the director, regardless of whether a judicial appeal follows. In any event, interest shall be waived if the overpayment is completely liquidated within 30 days of the date of the final determination. In cases in which a determination of overpayment has been judicially reversed, the provider shall be reimbursed that portion of the payment to which it is entitled, plus any applicable interest which the provider paid to DMAS.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 12, Issue 16, eff. July 1, 1996.

12VAC30-90-255. [Reserved]. (Reserved)

12VAC30-90-257. Credit balance reporting.

A. Definitions. The following words and terms when used in this regulation shall have the following meanings unless the context clearly indicates otherwise:

"Claim" means a bill consistent with 12VAC30-20-180 submitted by a provider to the department for services furnished to a recipient.

"Credit balance" means an excess or overpayment made to a provider by Medicaid as a result of patient billings.

B. Credit balances may occur when a provider's reimbursement for services it provides exceeds the allowable amount or when the reimbursement has been for unallowable costs, resulting in an overpayment. Credit balances also may occur when a provider receives payments from Medicaid or another third party payer for the same services.

C. For a credit balance arising on a Medicaid claim within three years of the date paid by the department, the NF shall submit an adjustment claim. For credit balances arising on claims over three years old, the NF shall submit a check for the balance due and a copy of the original DMAS payment.

D. A periodic audit shall be conducted of an NF's claim adjustments of Medicaid credit balance data. NFs shall maintain an audit trail back to the underlying accounts receivable records supporting each claim adjusted for credit balances.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 19, Issue 18, eff. July 1, 2003; amended, Virginia Register Volume 32, Issue 6, eff. December 31, 2015.

12VAC30-90-258. [Reserved]. (Reserved)

12VAC30-90-260. (Repealed.)

Subpart XVI
Revaluation of Assets [Repealed]

Historical Notes

Derived from VR460-03-4.1940:1 Part XVI, eff. July 1, 1992; amended, Virginia Register Volume 12, Issue 16, eff. July 1, 1996; repealed, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-264. Specialized care services.

Subpart XVII
Specialized Care Services

Specialized care services provided in conformance with 12VAC30-60-40 E and H, 12VAC30-60-320, and 12VAC30-60-340 shall be reimbursed under the following methodology. The nursing facilities that provide adult specialized care for the categories of Ventilator Dependent Care, will be placed in one group for rate determination. The nursing facilities that provide pediatric specialized care in a dedicated pediatric unit of eight beds or more will be placed in a second group for rate determination.

1. Routine operating cost. Routine operating cost shall be defined as in 12VAC30-90-271 and 12VAC30-90-272. To calculate the routine operating cost reimbursement rate, routine operating cost shall be converted to a per diem amount by dividing it by actual patient days. Effective July 1, 2016, the base year for routine operating cost shall be the most recently settled cost reports with a fiscal year ending in a calendar year for all specialized care facilities as of the end of the calendar year prior to the prospective rate year.

2. Allowable cost identification and cost reimbursement limitations. The provisions of Article 5 (12VAC30-90-50 et seq.) of Subpart II of Part II of this chapter and of Appendix III (12VAC30-90-290) of Part III of this chapter shall apply to specialized care cost and reimbursement.

3. Routine operating cost rates. Each facility shall be reimbursed a prospective rate for routine operating costs. This rate will be the lesser of the facility-specific prospective routine operating ceiling, or the facility-specific prospective routine operating cost per day plus an efficiency incentive. This efficiency incentive shall be calculated by the same method as in 12VAC30-90-41.

4. Facility-specific prospective routine operating ceiling. Each nursing facility's prospective routine operating ceiling shall be calculated as:

a. Statewide ceiling. The statewide routine operating ceiling shall be $415 as of July 1, 2002. This routine operating ceiling amount shall be adjusted for inflation based on 12VAC30-90-41. Effective July 1, 2016, the routine operating ceiling shall be $573.09 as of state fiscal year 2015 and shall be adjusted for inflation based on 12VAC-30-90-44 to the upcoming state fiscal year, the prospective rate year.

b. The portion of the statewide routine operating ceiling relating to nursing salaries (as determined by the 1994 audited cost report data, or 67.22%) will be wage adjusted using a normalized wage index. The normalized wage index shall be the wage index applicable to the individual provider's geographic location under Medicare rules of reimbursement for skilled nursing facilities, divided by the statewide average of such wage indices across the state. This normalization of wage indices shall be updated January 1, after each time the CMS publishes wage indices for skilled nursing facilities. Updated normalization shall be effective for fiscal years starting on and after the January 1 for which the normalization is calculated. Effective July 1, 2016, the normalized wage index for the federal fiscal year following the base year shall be applied to the state fiscal year ceiling.

5. Facility-specific prospective routine operating base cost per day. The facility-specific routine operating cost per day to be used in the calculation of the routine operating rate and the efficiency incentive shall be the actual routine cost per day from the most recent fiscal year's cost report, adjusted for inflation based on 12VAC30-90-41. Effective July 1, 2016, the routine operating base cost per day in subdivision 1 of this subsection shall be adjusted for inflation based on 12VAC30-90-44 to the upcoming state fiscal year, the prospective rate year.

6. Interim rates. Interim rates, for processing claims during the year, shall be calculated from the most recent settled cost report available at the time the interim rates must be set, except that failure to submit a cost report timely may result in adjustment to interim rates as provided elsewhere. Effective July 1, 2016, this subdivision is no longer applicable.

7. Ancillary costs. Specialized care ancillary costs will be paid on a pass-through basis for those Medicaid specialized care patients who do not have Medicare or any other sufficient third-party insurance coverage. Ancillary costs will be reimbursed as follows:

a. All covered ancillary services, except kinetic therapy devices, will be reimbursed for reasonable costs as defined in the current NHPS. Effective for specialized care days on or after January 15, 2007, reimbursement for reasonable costs shall be subject to a ceiling. The ceiling shall be $238.81 per day for calendar year 2004 (150% of average costs) and shall be inflated to the appropriate provider fiscal year. For cost report years beginning in each calendar year, ancillary ceilings will be inflated based on 12VAC30-90-41. See 12VAC30-90-290 for the cost reimbursement limitations. Effective July 1, 2016, the ancillary ceiling of $300.38 in state fiscal year 2015, inclusive of kinetic therapy devices, shall be adjusted for inflation to the prospective rate year based on 12VAC30-90-44.

b. Kinetic therapy devices will have a limit per day (based on 1994 audited cost report data inflated to the rate period). See 12VAC30-90-290 for the cost reimbursement limitations.

c. Kinetic therapy devices will be reimbursed only if a resident is being treated for wounds that meet the following wound care criteria. Residents receiving this wound care must require kinetic bed therapy (that is, low air loss mattresses, fluidized beds, or rotating or turning beds) and require treatment for a grade (stage) IV decubitus, a large surgical wound that cannot be closed, or second to third degree burns covering more than 10% of the body.

8. Covered ancillary services are defined as follows: laboratory, X-ray, medical supplies (e.g., infusion pumps, incontinence supplies), physical therapy, occupational therapy, speech therapy, inhalation therapy, IV therapy, enteral feedings, and kinetic therapy. The following are not specialized care ancillary services and are excluded from specialized care reimbursement: physician services, psychologist services, total parenteral nutrition (TPN), and drugs. These services must be separately billed to DMAS. An interim rate for the covered ancillary services will be determined (using data from the most recent settled cost report) by dividing allowable ancillary costs by the number of patient days for the same cost reporting period. The interim rate will be retroactively cost settled based on the specialized care nursing facility cost reporting period.

9. Capital costs. Effective July 1, 2016, capital cost reimbursement rate shall be based on subsection C of 12VAC30-90-44 in accordance with 12VAC30-90-35, 12VAC30-90-36, and 12VAC30-90-37, except that the required occupancy percentage shall not be separately applied to specialized care. To determine the capital cost related to specialized care patients, the following calculation shall be applied.

a. Licensed beds, including specialized care beds, multiplied by days in the cost reporting period, shall equal available days.

b. The required occupancy days shall equal the required occupancy percentage multiplied by available days.

c. The required occupancy days minus actual resident days, including specialized care days, shall equal the shortfall of days. If the shortfall of days is negative, the shortfall of days shall be zero.

d. Actual resident days, not including specialized care days, plus the shortfall of days shall equal the minimum number of days to be used to calculate the capital cost per day.

10. Nurse aide training and competency evaluation programs (NATCEP) costs. NATCEP costs will be paid on a pass-through basis in accordance with the current NHPS. Effective July 1, 2016, NATCEP costs shall be paid on a prospective basis in accordance with 12VAC30-90-170.

11. Pediatric routine operating cost rate. For pediatric specialized care in a distinct part pediatric specialized care unit, one routine operating cost ceiling will be developed. The routine operating cost ceiling will be $418 as of July 1, 2002. Effective July 1, 2016, the pediatric routine operating cost ceiling shall be $577.24.

a. The statewide operating ceiling shall be adjusted for each nursing facility in the same manner as described in subdivision 4 of this section.

b. The final routine operating cost reimbursement rate shall be computed as described for other than pediatric units in subdivision 3 of this section.

12. Pediatric unit capital cost. Pediatric unit capital costs will be reimbursed in accordance with subdivision 9 of this section, except that the occupancy requirement shall be 70% rather than the required occupancy percentage.

13. The cost reporting requirements of 12VAC30-90-70 and 12VAC30-90-80 shall apply to specialized care providers.

14. Effective July 1, 2020, through June 30, 2022, specialized care operating rates shall be increased annually by inflation based on 12VAC30-90-44.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001; Volume 20, Issue 19, eff. July 1, 2004; Volume 23, Issue 14, eff. April 18, 2007; Volume 25, Issue 3, eff. November 27, 2008; Volume 30, Issue 19, eff. June 18, 2014; Volume 34, Issue 11, eff. February 21, 2018; Volume 37, Issue 7, eff. December 23, 2020.

12VAC30-90-266. Traumatic Brain Injury (TBI) payment.

DMAS shall provide a fixed per day payment for nursing facility residents with TBI served in the program in accordance with resident and provider criteria, in addition to the reimbursement otherwise payable under the provisions of the Nursing Home Payment System. Effective for dates of service on and after August 19, 1998, a per day rate add-on shall be paid for recipients who meet the eligibility criteria for these TBI payments and who are residents in a designated nursing facility TBI unit of 20 beds or more that meets the provider eligibility criteria. The rate add-on for any qualifying provider's fiscal year shall be reviewed annually to determine the appropriateness of the amount, not to exceed $50 per patient day, and any changes will be published and distributed to the providers. (Refer to 12VAC30-90-330, Traumatic brain injury diagnoses, for related resident and provider requirements.)

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 14, Issue 22, eff. August 19, 1998; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-267. Private room differential.

A. Payment shall be made for a private room or other accommodations more expensive than semi-private (two or more bed accommodations) only when such accommodations are medically necessary. Private rooms will be considered necessary when the resident's condition requires the resident to be isolated for his own health or that of others.

B. Physician certification justifying the private room must be on file prior to the resident's discharge from the semi-private room. The term "isolation" applies when treating a number of physical and mental conditions. These conditions include communicable diseases that require isolation of the resident for certain periods. Private room accommodations may also be necessary for residents whose symptoms or treatments are likely to alarm or disturb others in the same room.

C. Reimbursement for private rooms will only be made when authorized by the Virginia Department of Medical Assistance Services.

D. The Medicaid private room differential shall be calculated by applying the percentage difference between the facility's private and semi-private room charges to the total case-mix neutral Medicaid rate for the facility.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 32, Issue 9, eff. February 11, 2016.

Part III
Nursing Home Payment System Appendices
Appendix I
Uniform Expense Classification

12VAC30-90-270. Uniform Expense Classification.

Appendix I
Uniform Expense Classification

This appendix describes the classification of expenses applicable to the Nursing Facility Payment System.

Allowable expenses shall meet all of the following requirements: necessity, reasonableness, nonduplication, related to patient care, not exceeding the limits and/or ceilings established in the Payment System and meet applicable Medicare principles of reimbursement. All of the references to 12VAC30-90-270 occurring in previous Part II shall be understood to include 12VAC30-90-270 through 12VAC30-90-276.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 319 (II) of Chapter 1073 of the 2000 Acts of Assembly.

Historical Notes

Derived from VR460-03-4.1941:1, eff. July 1, 1994; amended, Virginia Register Volume 14, Issue 1, eff. December 1, 1997; Volume 17, Issue 18, eff. July 1, 2001.

12VAC30-90-271. Direct patient care operating.

A. Nursing service expenses.

1. Salary -- nursing administration. Gross salary (includes sick pay, holiday pay, vacation pay, staff development pay and overtime pay) of all licensed nurses in supervisory positions defined as follows (Director of Nursing, Assistant Director of Nursing, nursing unit supervisors, patient care coordinators and MDS coordinators).

2. Salaries -- RNs. Gross salary of registered nurses.

3. Salaries -- LPNs. Gross salary of licensed practical nurses.

4. Salaries -- Nurse aides. Gross salary of certified nurse aides.

5. Salaries -- Quality assurance nurses. Gross salary of licensed nurses who function as quality assurance coordinators and are responsible for quality assurance activities and programs. Quality assurance activities and programs are concerned with resident care and not with the administrative support that is needed to document the care. If a quality assurance coordinator is employed by the home office and spends a percentage of time at nursing facilities, report directly allocated costs to the nursing facility in this category rather than under the home office operating costs.

6. Nursing employee benefits. Benefits related to registered nurses, licensed practical nurses, certified nurse aides, quality assurance nurses, and nursing administration personnel as defined in subdivision 1 of this subsection. See 12VAC30-90-272 B for description of employee benefits.

7. Contract nursing services. Cost of registered nurses, licensed practical nurses, certified nurse aides, and quality assurance nurses on a contract basis.

8. Supplies. Cost of supplies, including nursing and charting forms, medication and treatment records, physician order forms.

9. Professional fees. Medical director and pharmacy consultant fees.

B. Minor medical and surgical supplies.

1. Salaries -- medical supply. Gross salary of personnel responsible for procurement, inventory and distribution of minor medical and surgical supplies.

2. Medical supply employee benefits. Benefits related to medical supply personnel. See 12VAC30-90-272 B for description of employee benefits.

3. Supplies. Cost of items for which a separate identifiable charge is not customarily made, including, but not limited to, colostomy bags; dressings; chux; rubbing alcohol; syringes; patient gowns; basins; bed pans; ice-bags and canes, crutches, walkers, wheel chairs, traction equipment and other durable medical equipment for multi-patient use.

4. Oxygen. Cost of oxygen for which a separate charge is not customarily made.

5. Nutrient/tube feedings. Cost of nutrients for tube feedings.

6. Incontinence services. Cost of disposable and nondisposable incontinence supplies. The laundry supplies or purchased commercial laundry service for nondisposable incontinent services.

C. Ancillary service cost. Allowable ancillary service costs represents gross salary and related employee benefits of those employees engaged in covered ancillary services to Medicaid recipients, cost of all supplies used by the respective ancillary service departments, cost of ancillary services performed on a contract basis by other than employees and all other costs allocated to the ancillary service cost centers in accordance with Medicare principles of reimbursement.

Following is a listing of all covered ancillary services:

1. Radiology

2. Laboratory

3. Respiratory therapy

4. Physical therapy

5. Occupational therapy

6. Speech therapy

7. EKG

8. EEG

9. Medical supplies charged to patient

10. Kinetic therapy devices.

11. IV therapy.

Statutory Authority

§§ 32.1-324 and 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997; amended, Virginia Register Volume 18, Issue 18, eff. July 1, 2002; Volume 20, Issue 19, eff. July 1, 2004; Volume 23, Issue 20, eff. August 25, 2007.

12VAC30-90-272. Indirect patient care operating costs.

A. Administrative and general.

1. Administrator/owner assistant administrator. Compensation of individuals responsible for administering the operations of the nursing facility. (See 12VAC30-90-50 and Appendix III (12VAC30-90-290) for limitations.)

2. Other administrative and fiscal services. Gross salaries of all personnel in administrative, personnel, fiscal, billing and admitting, communications and purchasing departments.

3. Management fees. Cost of fees for providing necessary management services related to nursing facility operations. (See Appendix III (12VAC30-90-290) for limitations.)

4. Professional fees -- accounting. Fees paid to independent outside auditors and accountants.

5. Professional fees -- legal. Fees paid to attorneys. (See Appendix III (12VAC30-90-290) for limitations.)

6. Professional fees -- other. Fees, other than accounting or legal, for professional services related to nursing facility patient care.

7. Director's fees. Fees paid for attendance at scheduled meetings which serve as reimbursement for time, travel, and services provided. (See Appendix III (12VAC30-90-290) for limitations.)

8. Membership fees. Fees related to membership in health care organizations which promote objectives in the providers' field of health care activities. (See Appendix III (12VAC30-90-290) for limitations.)

9. Advertising (classified). Cost of advertising to recruit new employees and yellow pages advertising.

10. Public relations. Cost of promotional expenses including brochures and other informational documents regarding the nursing facility.

11. Telephone. Cost of telephone service used by employees of the nursing facility.

12. Subscriptions. Cost of subscribing to newspapers, magazines, and periodicals.

13. Office supplies. Cost of supplies used in administrative departments (e.g., pencils, papers, erasers, staples).

14. Minor furniture and equipment. Cost of furniture and equipment which does not qualify as a capital asset.

15. Printing and postage. Cost of reproducing documents which are reasonable, necessary and related to nursing facility patient care and cost of postage and freight charges.

16. Travel. Cost of travel (airfare, auto mileage, lodging, meals, etc. by administrator or other authorized personnel on official nursing facility business). (See 12VAC30-90-290 for limitations.)

17. Auto. All costs of maintaining nursing facility vehicles, including gas, oil, tires, licenses, maintenance of such vehicles.

18. License fees. Fees for licenses, including state, county, and local business licenses, and VHSCRC filing fees.

19. Liability insurance. Cost of insuring the facility against liability claims, including malpractice.

20. Interest. Other than mortgage and equipment.

21. Amortization/start-up costs. Amortization of allowable Start-Up Costs (See 12VAC30-90-220).

22. Amortization/organizational costs. Amortization of allowable organization costs (See 12VAC30-90-220).

B. Employee benefits.

1. FICA (Social Security). Cost of employer's portion of Social Security Tax.

2. State unemployment. State unemployment insurance costs.

3. Federal unemployment. Federal unemployment insurance costs.

4. Workers' compensation. Cost of workers' compensation insurance.

5. Health insurance. Cost of employer's contribution to employee health insurance.

6. Group life insurance. Cost of employer's contribution to employee group life insurance.

7. Pension plan. Employer's cost of providing pension program for employees.

8. Other employee benefits. Cost of awards and recognition ceremonies for recognition and incentive programs, disability insurance, child care, and other commonly offered employee benefits which are nondiscriminatory.

C. Dietary expenses.

1. Salaries. Gross salary of kitchen personnel, including dietary supervisor, cooks, helpers and dishwashers.

2. Supplies. Cost of items such as soap, detergent, napkins, paper cups, and straws.

3. Dishes and utensils. Cost of knives, forks, spoons, plates, cups, saucers, bowls and glasses.

4. Consultants. Fees paid to consulting dietitians.

5. Purchased services. Costs of dietary services performed on a contract basis.

6. Food. Cost of raw food.

7. Nutrient oral feedings. Cost of nutrients in oral feedings.

D. Housekeeping expenses.

1. Salaries. Gross salary of housekeeping personnel, including housekeepers, maids and janitors.

2. Supplies. Cost of cleaners, soap, detergents, brooms, and lavatory supplies.

3. Purchased services. Cost of housekeeping services performed on a contract basis.

E. Laundry expenses.

1. Salaries. Gross salary of laundry personnel.

2. Linen. Cost of sheets, blankets, and pillows.

3. Supplies. Cost of such items as soap, detergent, starch and bleach.

4. Purchased services. Cost of other services, including commercial laundry service.

F. Maintenance and operation of plant.

1. Salaries. Gross salary of personnel involved in operating and maintaining the physical plant, including maintenance men or plant engineer and security services.

2. Supplies. Cost of supplies used in maintaining the physical plant, including light bulbs, nails, lumber, glass.

3. Painting. Supplies and contract services.

4. Gardening. Supplies and contract services.

5. Heating. Cost of heating oil, natural gas, or coal.

6. Electricity. Self-explanatory.

7. Water, sewer, and trash removal. Self-explanatory.

8. Purchased services. Cost of maintaining the physical plant, fixed equipment, movable equipment and furniture and fixtures on a contract basis.

9. Repairs and maintenance. Supplies and contract services involved with repairing the facility's capital assets.

G. Medical records expenses.

1. Salaries -- medical records. Gross salary of licensed medical records personnel and other department personnel.

2. Utilization review. Fees paid to physicians attending utilization review committee meetings.

3. Supplies. All supplies used in the department.

4. Purchased services. Medical records services provided on a contract basis.

H. Social service expenses.

1. Salaries. Salary of personnel providing medically-related social services. A facility with more than 120 beds must employ a full-time qualified social worker.

2. Purchased services. Cost of medically-related social services provided on a contract basis.

3. Supplies. Cost of all supplies used in the department.

I. Patient activity expenses.

1. Salaries. Gross salary of personnel providing recreational programs to patients, such as arts and crafts, church services and other social activities.

2. Supplies. Cost of items used in the activities program (i.e., games, art and craft supplies and puzzles).

3. Purchased services. Cost of services provided on a contract basis.

J. Educational activities expenses. (Other than NATCEPs costs, see 12VAC30-90-270.)

1. Salaries. Gross salaries of training personnel.

2. Supplies. Cost of all supplies used in this activity.

3. Purchased services. Cost of training programs provided on a contract basis.

K. Other nursing administrative costs.

1. Salaries -- other nursing administration. Gross salaries of ward clerks and nursing administration support staff.

2. Subscriptions. Cost of subscribing to newspapers, magazines and periodicals.

3. Office supplies. Cost of supplies used in nursing administrative departments (e.g., pencils, papers, erasers, staples).

4. Purchased services. Cost of nursing administrative consultants, ward clerks, nursing administration support staff performed on a contract basis.

5. Advertising (classified). Cost of advertising to recruit all nursing service personnel.

L. Home office costs. Allowable operating costs incurred by a home office which are directly assigned to the nursing facility or pooled operating costs, with the exception of quality assurance coordinator salary and employee benefits that are reported under direct patient care operating, that are allocated to the nursing facility in accordance with 12VAC30-90-240.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001; Volume 18, Issue 18, eff. July 1, 2002.

12VAC30-90-273. Plant costs.

A. Interest.

1. Building interest. Interest paid or accrued on notes, mortgages and other loans, the proceeds of which were used to purchase the nursing facility's real property. (See 12VAC30-90-30 for Limitations.)

2. Equipment interest. Interest paid or accrued on notes, chattel mortgages and other loans, the proceeds of which were used to purchase the nursing facility's equipment. (See 12VAC30-90-30 for Limitations.)

B. Depreciation (12VAC30-90-50).

1. Building depreciation. Depreciation on the nursing facility's building.

2. Building improvement depreciation. Depreciation on major additions or improvements to the nursing facility (i.e., new laundry or dining room).

3. Land improvement depreciation. Depreciation of improvements made to the land occupied by the facility (i.e., paving, landscaping).

4. Fixed and movable equipment depreciation. Depreciation on capital assets classified as fixed and movable equipment in compliance with American Hospital Association Guidelines.

5. Leasehold improvement depreciation. Depreciation on major additions or improvements to building or plant where the facility is leased and the costs are incurred by the lessee (tenant).

6. Automobile depreciation. Depreciation of those vehicles utilized solely for facility/patient services.

C. Lease/rental.

1. Building rental. Rental amounts paid by the provider on all rented or leased real property (land and building).

2. Equipment rental. Rental amounts paid by the provider on leased or rented furniture and equipment.

D. Taxes.

1. Property taxes. Amount of taxes paid on the facility's property, plant and equipment.

E. Insurance.

1. Property insurance. Cost of fire and casualty insurance on buildings and equipment.

2. Mortgage insurance. Premiums required by the lending institution, if the lending institution is made a direct beneficiary and if premiums meet Medicare principles of reimbursement criteria for allowability.

F. Amortization -- deferred financing costs. Amortization of deferred financing costs (those costs directly incident to obtaining financing of allowable capital costs related to patient care services such as legal fees; guarantee fees; service fees; feasibility studies; loan points; printing and engraving costs; rating agency fees). These deferred financing costs should be capitalized and amortized over the life of the mortgage.

G. Home office capital costs. Allowable plant costs incurred by a home office which are directly identified to the nursing facility or pooled capital costs that are allocated to the nursing facility in accordance with 12VAC30-90-240.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 322(D)(2a) of Chapter 912 of the 1996 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997.

12VAC30-90-274. Nonallowable expenses.

Nonallowable expenses include but are not limited to the following:

A. Barber and beautician. Direct and indirect operating and capital costs related to the provision of beauty and barber services to patients.

B. Personal items. Cost of personal items, such as cigarettes, toothpaste, and shaving cream sold to patients.

C. Vending machines. Cost of items sold to employees and patients including candy bars and soft drinks.

D. Television/telephones. Cost of television sets and telephones used in patient rooms.

E. Gift shop. Direct and indirect operating and capital cost related to the provision of operating a gift shop.

F. Insurance -- officers. Cost of life insurance on officers, owners and key employees where the provider is a direct or indirect beneficiary.

G. Income taxes. Taxes on net income levied or expected to be levied by any governmental entity.

H. Contributions. Amounts donated to charitable or other organizations which have no direct effect on patient care.

I. Deductions from revenue. Accounts receivable written off as bad debts, charity, courtesy, or from contractual agreements are nonallowable expenses.

J. Advertising. The cost of advertisements in magazines, newspapers, trade publications, radio, and television and certain home office expenses as defined in PRM-15.

K. Cafeteria. Cost of meals to other than patients.

L. Pharmacy. Cost of all prescribed legend and nonlegend drugs.

M. Medical supplies. Cost of medical supplies to other than patients.

N. Plant costs. All plant costs not available for nursing facility patient care-related activities are nonreimbursable plant costs.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 322(D)(2a) of Chapter 912 of the 1996 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997.

12VAC30-90-275. Nurse Aide Training and Competency Evaluation Programs (NATCEPs) costs.

A. Facility-based NATCEPs costs.

1. Salary -- staff development. Gross salary of personnel conducting the nurse aide training and competency evaluation programs.

2. Employee benefits. Benefits related to personnel conducting the nurse aide training and competency evaluation programs. See 12VAC30-90-272 B for description of employee benefits.

3. Contract services. Cost of state qualified nurse aide instructors paid on a contract basis.

4. Supplies. Cost of supplies used in conducting NATCEPs (e.g., pencils, papers, erasers, staples, textbooks and other required course materials).

5. License fees. Cost of nurse aide registry application fees and competency evaluation testing fees paid by the nursing facilities on behalf of the certified nurse aides.

6. Housekeeping expenses. Housekeeping expense as defined in 12VAC30-90-272 D, for nursing facilities which dedicate space in the facility to NATCEPs activities 100%. Housekeeping expenses shall be allocated to the NATCEPs operations in accordance with Medicare Principles of Reimbursement.

7. Maintenance and operation of plant. Maintenance and operation of plant as defined in 12VAC30-90-272 F, for nursing facilities which dedicate space in the facility to NATCEPs activities 100%.

Maintenance and operation of plant expense shall be allocated to the NATCEPs operations in accordance with Medicare Principles of Reimbursement.

8. Other direct expenses. Any other direct costs associated with the operation of the NATCEPs. There shall be no allocation of indirect patient care operating costs as defined in 12VAC30-90-272, except housekeeping and maintenance and operation of plant expenses.

B. Nonfacility-based NATCEPs costs.

1. Contract services. Cost of training and competency evaluation of nurse aides paid to an outside state approved nurse aide education program.

2. Supplies. Cost of supplies of textbooks and other required course materials provided during the nurse aide education programs by the nursing facility.

3. License fees. Cost of nurse aide registry application fees and competency evaluation testing fee paid by the nursing facility on behalf of the certified nurse aides.

4. Travel. Cost for transportation provided to the nurse aides to the training or competency evaluation testing site.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 322(D)(2a) of Chapter 912 of the 1996 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997.

12VAC30-90-276. Criminal records background checks.

Included in the Uniform Expense Classifications is the cost of obtaining criminal records checks from the Central Criminal Records Exchange for all persons hired for compensated employment after July 1, 1993.

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 322(D)(2a) of Chapter 912 of the 1996 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997.

12VAC30-90-280. Leasing of facilities.

Appendix II
Leasing of Facilities

The substance of this appendix shall apply only to Article 2 (12VAC30-90-30 et seq.) of Subpart II of Part II of this chapter.

I. DETERMINATION OF ALLOWABLE LEASE COSTS.

A. The provisions of this appendix shall apply to all lease agreements, including sales and leaseback agreements and lease purchase agreements, and including whether or not such agreements are between parties which are related (as defined in 12VAC30-90-50 of the Nursing Home Payment System (NHPS)).

B. Reimbursement of lease costs pursuant to a lease between parties which are not related shall be limited to the DMAS allowable cost of ownership as determined in subsection I E of this section. Reimbursement of lease costs pursuant to a lease between parties which are related (as defined in 12VAC30-90-50) shall be adjusted to the DMAS allowable cost of ownership. Whether the lease is between parties which are or are not related, the computation of the allowable annual lease expense shall be subject to DMAS audit.

C. The DMAS allowable cost of ownership shall be determined by the historical cost of the facility to the owner of record at the date the lease becomes effective. When a lease agreement is in effect, whether during the original term or a subsequent renewal, no increase in the reimbursement shall be allowed as a result of a subsequent sale of the facility.

D. When a bona fide sale has taken place, the facility must have been held by the seller for a period of no less than five years for a lease effected subsequent to the sale date to be compared to the buyer's cost of ownership. Where the facility has been held for less than five years, the allowable lease cost shall be computed using the seller's historical cost.

E. Reimbursement of lease costs pursuant to a lease between parties which are not related (as defined in 12VAC30-90-50) shall be limited to the DMAS allowable cost of ownership. The following reimbursement principles shall apply to leases, other than those covered in 12VAC30-90-50 and subsection IV of this appendix, entered into on or after October 1, 1990:

1. An "Allowable Cost of Ownership" schedule shall be created for the lease period to compare the total lease expense to the allowable cost of ownership.

2. If the lease cost for any cost reporting period is below the cost of ownership for that period, no adjustment shall be made to the lease cost, and a "carryover credit" to the extent of the amount allowable for that period under the "Allowable Cost of Ownership" schedule shall be created but not paid.

3. If the lease cost for a future cost reporting period is greater than the "Cost of Ownership" for that period, the provider shall be paid this "carryover credit" from prior period(s), not to exceed the cumulative carryover credit or his actual lease cost, whichever is less. At no time during the lease period shall DMAS reimbursement exceed the actual cumulative "Cost of Ownership."

4. Once DMAS has determined the allowable cost of ownership, the provider shall be responsible for preparing a verifiable and auditable schedule to support cumulative computations of cost of ownership vs. lease cost to support the "carryover credit" as reported in the "Allowable Cost of Ownership" schedule, and shall submit such a schedule with each cost report.

II. DOCUMENTATION OF COSTS OF OWNERSHIP.

A. Leases shall provide that the lessee or DMAS shall have access to any and all documents required to establish the underlying cost of ownership.

B. In those instances where the lessor will not share this information with the lessee, the lessor can forward this information direct to DMAS for confidential review.

III. COMPUTATION OF COST OF OWNERSHIP.

A. Before any rate determination for allowable lease costs is made, the lessee must supply a schedule comparing lease expense to the underlying cost of ownership for the life of the lease. Supporting documentation, including but not limited to, the lease and the actual cost of ownership (mortgage instruments, financial statements, purchase agreements, etc.) must be included with this schedule.

B. The underlying straight-line depreciation, interest, property taxes, insurance, and amortization of legal and commitment fees shall be used to determine the cost of ownership for comparison to the lease costs. Any cost associated with the acquisition of a lease other than those outlined herein shall not be considered allowable unless specifically approved by the Department of Medical Assistance Services.

1. Straight line depreciation.

a. Depreciation shall be computed on a straight line basis only.

b. New or additions facilities shall be depreciated in accordance with AHA Guidelines.

c. Allowable depreciation for on-going facilities shall be computed on the historical cost of the facility determined in accordance with limits on allowable building and fixed equipment cost.

d. The limits contained in 12VAC30-90-30, and Part VI (12VAC30-90-160) shall apply, as appropriate, whether the facility is newly constructed or an on-going facility.

2. Interest. Interest expense shall be limited to actual expense incurred by the owner of the facility in servicing long-term debt and shall be subject to the interest rate limitations stated in 12VAC30-90-30.

3. Taxes and insurance. Taxes are limited to actual incurred real estate and property taxes. Insurance is limited to the actual cost of mortgage insurance, fire and property liability insurance. When included in the lease as the direct responsibility of the lessee, such taxes and insurance shall not be a part of the computation of the cost of ownership.

4. Legal and commitment fees. Amortization of actual incurred closing costs paid by the owner, such as attorney's fees, recording fees, transfer taxes and service or "finance" charges from the lending institution may be included in the comparison of the cost of ownership computation. Such fees shall be subject to limitations and tests of reasonableness stated in these regulations. These costs shall be amortized over the life of the mortgage.

5. Return on Equity.

a. Return on equity will be limited to the equity of the facility's owner when determining allowable lease expense. Return on equity shall be equal to the rental rate percentage used in connection with the fair rental value (FRV) methodology described in Article 3 (12VAC30-90-35 et seq.) of Subpart II of Part II of this chapter. For the purpose of determining allowable lease expense, equity will be computed in accordance with PRM-15 principles. The allowable base will be determined by monthly averaging of the annual equity balances. The base will be increased by the amount of paid up principal in a period but will be reduced by depreciation expense in that period.

b. Item 398D of the 1987 Appropriations Act (as amended), effective April 8, 1987 eliminated reimbursement of return on equity capital to proprietary providers for periods or portions thereof on or after July 1, 1987.

c. Leased facilities shall be eligible for return on equity capital after July 1, 2001, only if they were receiving return on equity capital on June 30, 2000.

IV. LEASES APPROVED PRIOR TO AUGUST 18, 1975.

A. Leases approved prior to August 18, 1975, shall have the terms of those leases honored for reimbursement throughout the duration of the lease.

B. Renewals and extensions to these leases shall be honored for reimbursement purposes only when the dollar amount negotiated at the time of renewal does not exceed the amount in effect at the termination date of the existing lease. No escalation clauses shall be approved.

C. Payments of rental costs for leases reimbursed pursuant to subsection IV A of this section shall be allowed whether the provider occupies the premises as a lessee, sublessee, assignee, or otherwise. Regardless of the terms of any present or future document creating a provider's tenancy or right of possession, and regardless of whether the terms thereof or the parties thereto may change from time to time, future reimbursement shall be limited to the lesser of (i) the amount actually paid by the provider, or (ii) the amount reimbursable by DMAS under these regulations as of July 1, 2002. In the event extensions or renewals are approved pursuant to subsection IV B of this section, no escalation clauses shall be approved or honored for reimbursement purposes.

V. NOTHING IN THIS APPENDIX SHALL BE CONSTRUED AS ASSURING PROVIDERS THAT REIMBURSEMENT FOR RENTAL COSTS WILL CONTINUE TO BE REIMBURSABLE UNDER ANY FURTHER REVISIONS OF OR AMENDMENT TO THESE REGULATIONS.

Statutory Authority

§ 31.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1942:1, eff. October 1, 1990; amended, Virginia Register Volume 17, Issue 18, eff. July 1, 2001; Volume 18, Issue 18, eff. July 1, 2002.

12VAC30-90-290. Cost reimbursement limitations.

Appendix III
Cost Reimbursement Limitations

A. This appendix outlines operating, NATCEPs and plant cost limitations that are not referenced in previous sections of these regulations. All of the operating cost limitations are further subject to the applicable operating ceilings.

B. Directors' fees.

1. Although Medicaid does not require a board of directors (Medicare requires only an annual stockholders' meeting), the Program will recognize reasonable costs for directors' meetings related to patient care.

2. It is not the intent of DMAS to reimburse a facility for the conduct of business related to owner's investments, nor is it the intent of the Program to recognize such costs in a closely held corporation where one person owns all stock, maintains all control, and approves all decisions.

3. To receive reimbursement for directors' meetings, the written minutes must reflect the name of the facility for which the meeting is called, the content and purpose of the meeting, members in attendance, the time the meeting began and ended, and the date. If multiple facilities are discussed during a meeting, total allowable director fees, as limited herein, shall be pro-rated between such facilities.

4. Bona fide directors may be paid an hourly rate of $125 up to a maximum of four hours per month. These fees include reimbursement for time, travel, and services performed.

5. Compensation to owner/administrators who also serve as directors shall include any director's fees paid, subject to the above referenced limit set forth in these regulations.

C. Membership fees.

1. These allowable costs will be restricted to membership in health care organizations and appropriate professional societies which promote objectives in the provider's field of health care activities.

2. Membership fees in health care organizations and appropriate professional societies will be allowed for the administrator, owner, and home office personnel.

3. Comparisons will be made with other providers to determine reasonableness of the number of organizations to which the provider will be reimbursed for such membership and the claimed costs, if deemed necessary.

D. Management fees.

1. External management services shall only be reimbursed if they are necessary, cost effective, and nonduplicative of existing nursing facility internal management services.

2. Costs to the provider, based upon a percentage of net and/or gross revenues or other variations thereof, shall not be an acceptable basis for reimbursement. If allowed, management fees must be reasonable and based upon rates related to services provided.

3. Management fees paid to a related party may be recognized by the Program as the owner's compensation subject to administrator compensation guidelines.

4. A management fees service agreements exists when the contractor provides nonduplicative personnel, equipment, services, and supervision.

5. A consulting service agreement exists when the contractor provides nonduplicative supervisory or management services only.

6. Limits will be based upon comparisons with other similar size facilities and/or other DMAS guidelines and information.

Effective for all providers' cost reporting periods ending on or after October 1, 1990, a per patient day ceiling for all full service management service costs shall be established. The ceiling limitation for cost reporting periods ending on or after October 1, 1990, through December 31, 1990, shall be the median per patient day cost as determined from information contained in the most recent cost reports for all providers with fiscal years ending through December 31, 1989. These limits will be adjusted annually by a Consumer Price Index effective January 1 of each calendar year to be effective for all providers' cost reporting periods ending on or after that date. The limits will be published and distributed to providers annually. Effective July 1, 2006, these limits apply only to related parties.

E. Pharmacy consultants fees. Costs will be allowed to the extent they are reasonable and necessary.

F. Physical therapy fees (for outside services). Limits are based upon current PRM-15 guidelines.

G. Inhalation therapy fees (for outside services). Limits are based upon current PRM-15 guidelines.

H. Medical directors' fees. Costs will be allowed up to the established limit per year to the extent that such fees are determined to be reasonable and proper. This limit will be escalated annually by the CPI-U January 1 of each calendar year to be effective for all providers' cost reporting periods ending on or after that date. The limits will be published and distributed to providers annually. Effective July 1, 2006, these limits apply only to related parties. The following limitations apply to the time periods as indicated:

I. Reimbursement for physical therapy, occupational therapy, and speech-language therapy services shall not be provided for any sums that the rehabilitation provider collects, or is entitled to collect, from the nursing facility or any other available source, and provided further, that this amendment shall in no way diminish any obligation of the nursing facility to DMAS to provide its residents such services, as set forth in any applicable provider agreement.

J. Personal automobile.

1. Use of personal automobiles when related to patient care will be reimbursed at the maximum of the allowable IRS mileage rate when travel is documented.

2. Flat rates for use of personal automobiles will not be reimbursed.

K. Seminar expenses.

These expenses will be treated as allowable costs, if the following criteria are met:

1. Seminar must be related to patient care activities, rather than promoting the interest of the owner or organization.

2. Expenses must be supported by:

a. Seminar brochure,

b. Receipts for room, board, travel, registration, and educational material.

3. Only the cost of two persons per facility will be accepted as an allowable cost for seminars which involve room, board, and travel.

L. Legal retainer fees. DMAS will recognize legal retainer fees if such fees do not exceed the following:

The expense to be allowed by DMAS shall be supported by an invoice and evidence of payment.

M. Architect fees. Architect fees will be limited to the amounts and standards as published by the Virginia Department of General Services.

N. Administrator/owner compensation.

These limits will be escalated annually by the CPI-U effective January 1 of each calendar year to be effective for all providers' cost reporting periods ending on or after that date. The limits will be published and distributed to providers annually. Effective July 1, 2006, these limits apply only to related parties.

O. Kinetic therapy. For specialized care reimbursement effective December 1, 1996, a limitation per patient day on kinetic therapy shall be established based on historical data. This limit shall be reviewed annually by January 1 of each calendar year and compared to actual cost data, then revised if appropriate, to be effective for all providers' cost reporting periods ending on or after that date. The limit will be published and distributed to providers annually. It shall be:

Statutory Authority

§§ 32.1-324 and 32.1-325 of the Code of Virginia.

Historical Notes

Derived from VR460-03-4.1943:1 §§ 1.1 through 1.7, eff. October 1, 1990; amended, Virginia Register Volume 12, Issue 5, eff. November 29, 1995; Volume 14, Issue 1, eff. December 1, 1997; Volume 23, Issue 20, eff. August 25, 2007.

12VAC30-90-300. (Repealed.)

Historical Notes

Derived from VR460-03-4.1944:1 §§ 1.1 through 1.6, eff. August 12, 1992; amended, Virginia Register Volume 14, Issue 1, eff. December 1, 1997 repealed, Virginia Register Volume 18, Issue 18, eff. July 1, 2002.

12VAC30-90-305. Resource Utilization Groups (RUGs).

Appendix IV
Resource Utilization Groups (RUGs)

A. The Resource Utilization Groups-III (RUG-III), Version 5.12, 34-group, index maximizing model shall be used as the resident classification system to determine the RUG-III group for each resident assessment. RUG-III classifies resident assessments according to the intensity of each resident's needs. Data from the minimum data set (MDS) submitted by each facility to the Centers for Medicare and Medicaid Services (CMS) shall be used to classify the resident assessments into RUG-III groups.

B. Definitions. The following words and terms when used in this appendix shall have the following meanings unless the context clearly indicates otherwise.

"Base year" means the calendar year for which the most recent reliable nursing facility cost settled cost reports are available in the DMAS database as of September 1 of the year prior to the year in which the rebased rates will be used. (See also definition of rebasing.)

"Case-mix index (CMI)" means a numeric score that identifies the relative resources used by similar residents and represents the average resource consumption of those residents.

"Case-mix neutralization" means the process of removing cost variations for direct patient care costs associated with different levels of resident case mix.

"Day-weighted median" means a weighted median where the weight is Medicaid days.

"Medicaid average case-mix index" means a simple average, carried to four decimal places, of all resident case mix indices where Medicaid is known to be the per diem payor source on the last day of the calendar quarter.

"Minimum data set (MDS)" means a federally required resident assessment instrument. Information from the MDS is used to determine the facility's case-mix index.

"Normalization" means the process by which the average case mix for the state is set to 1.0.

"Nursing facility" means a facility, not including intermediate care facilities for the mentally retarded, licensed by the Department of Health and certified as meeting the participation requirements of the Medicaid program.

"Rebasing" means the process of updating cost data used to calculate peer group ceilings for subsequent base years.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 18, eff. July 1, 2002.

12VAC30-90-306. Case-mix index (CMI).

A. Effective for dates of service beginning July 1, 2001, through June 30, 2014, nursing facility case-mix indices shall be applied as described in this subsection. Each resident in a Virginia Medicaid certified nursing facility on the last day of the calendar quarter with an effective assessment date during the respective quarter shall be assigned to one of the RUG-III 34 groups.

B. Effective for dates of service on or after July 1, 2014, nursing facility reimbursement described in 12VAC30-90-44 shall be based on the case-mix or RUG weights as described in this subsection. Standard case-mix indices, developed by CMS for the Medicaid population (B01), shall be assigned to each of the RUG-III 34 groups as indicated in Table III.

C. There shall be four "picture dates" for each calendar year: March 31, June 30, September 30 and December 31. Each resident in each Medicaid-certified nursing facility on the picture date with a completed assessment that has an effective assessment date within the quarter shall be assigned a case-mix index based on the resident's most recent assessment for the picture date as available in the DMAS MDS database.

D. Using the individual Medicaid resident case-mix indices, a facility average Medicaid case-mix index shall be calculated four times per year for each facility. The facility average Medicaid case-mix indices shall be used for case-mix neutralization of resident care costs and for case-mix adjustment.

1. During the time period beginning with the implementation of RUG-III up to the ceiling and rate setting effective July 1, 2004, the case-mix index calculations shall be based on assessments for residents for whom Medicaid is the principal payer. The statewide average Medicaid case-mix index shall be a simple average, carried to four decimal places, of all case-mix indices for nursing facility residents in Virginia Medicaid certified nursing facilities for whom Medicaid is the principal payer on the last day of the calendar quarter. The facility average Medicaid case-mix index shall be a simple average, carried to four decimal places, of all case-mix indices for nursing facility residents in the Virginia Medicaid-certified nursing facility for whom Medicaid is the principal payer on the last day of the calendar quarter.

2. The facility average Medicaid case-mix index shall be normalized across all of Virginia's Medicaid-certified nursing facilities for each picture date. To normalize the facility average Medicaid case-mix index, the facility average Medicaid case-mix index is divided by the statewide average Medicaid case-mix index for the same picture date.

3. The department shall monitor the case-mix, including the case-mix normalization and the neutralization processes, indices during the first two years following implementation of the RUG-III system. Effective July 1, 2004, the statewide average case-mix index may be changed to recognize the fact that the costs of all residents are related to the case-mix of all residents. The statewide average case-mix index of all residents, regardless of principal payer on the effective date of the assessment, in a Virginia Medicaid certified nursing facility may be used for case-mix neutralization. The use of the facility average Medicaid case-mix index to adjust the prospective rate would not change.

4. There shall be a correction period for Medicaid-certified nursing facilities to submit correction assessments to the CMS MDS database following each picture date. A report that details the picture date RUG category and CMI score for each resident in each nursing facility shall be mailed to the facility for review. The nursing facility shall have a 30-day time period to submit any correction assessments to the MDS database or to contact the Department of Medical Assistance Services regarding other corrections. Corrections submitted in the 30-day timeframe shall be included in the final report of the CMI scores that shall be used in the calculation of the nursing facility ceilings and rates. Any corrections submitted after the 30-day timeframe shall not be included in the final report of the CMI scores that shall be used in the calculation of the nursing facility ceilings and rates.

5. Assessments that cannot be classified to a RUG-III group due to errors shall be assigned the lowest case-mix index score.

6. Assessments shall not be used for any out-of-state nursing facility provider that is enrolled in the Virginia Medical Assistance Program and is required to submit cost reports to the Medicaid program.

Statutory Authority

§ 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Historical Notes

Derived from Virginia Register Volume 18, Issue 18, eff. July 1, 2002; Errata, 18:20 VA.R. 2681 June 17, 2002; amended, Virginia Register Volume 32, Issue 9, eff. February 11, 2016.

12VAC30-90-307. Applicability of case-mix indices (CMI).

A. The CMI shall be used to adjust the direct patient care cost ceilings and rates for application to individual nursing facilities. Indirect patient care cost ceilings and rates shall not be case-mix adjusted. The CMI shall be calculated using MDS data taken from picture dates as specified in this section.

B. When a facility's direct patient care cost ceiling is compared to its facility specific direct patient care cost rate to determine the direct patient care prospective rate, both the ceiling and the rate shall be case-mix neutral. The direct patient care cost ceiling shall be case-mix neutral because it shall be calculated using base year facility direct patient care cost data that have been case-mix neutralized. To accomplish this neutralization, each facility's base year direct patient care operating cost shall be divided by the facility's average normalized Medicaid CMI developed for the two semiannual periods of assessment data that most closely match the provider's cost reporting year that ends in the base year (see Table IV below). This shall be the facility's case-mix neutral direct patient care per diem for the base year and shall be used in the calculation of the peer group direct patient care cost ceilings. Table IV shows an example of the picture dates used to case-mix neutralize facility specific direct costs for the ceiling calculation. For the first few provider fiscal years for which cost neutralization will be done, a data limitation affects the picture dates that can be used. Accurate case-mix data are available starting with the fourth quarter of calendar year (CY) 1999. For providers with cost reporting periods ending during the first, second, and third quarters of CY 2000, the picture dates used in cost neutralization shall be modified to reflect only accurate case-mix data. For provider cost reporting periods ending in the fourth quarter of 2000 and afterward, this limitation no longer exists and assessment data shall be used that most closely match the cost reporting period.

C. When direct patient care prospective rates are set, the direct patient care ceilings used in the calculation shall be the case-mix neutralized ceiling described in subsection B of this section, adjusted for inflation to the midpoint of the prospective period. However, the facility-specific direct patient care cost rates used in the calculation shall not be from the base year, but shall be from the provider fiscal year prior to the period for which a prospective rate is being calculated. Therefore, the provider's direct patient care rate from the previous cost reporting period shall be case-mix neutralized using the facility average normalized Medicaid CMI developed for the two semiannual periods of assessment data that most closely match the cost reporting period prior to the prospective period for which a rate is being calculated. Each year when a new prospective rate is developed, the provider specific direct patient care rate shall be case-mix neutralized using CMI data that uses picture dates that correspond to the cost reporting period used to develop the rate. The relationship between provider cost reporting period and picture dates shall be that illustrated in Table IV, except that in the time period when rates will first be set, the data limitation that affected the picture dates shown in Table IV will not apply. Therefore, for all provider cost reporting periods, picture dates that correspond to the cost reporting period shall be used.

D. After the case-mix neutral direct patient care ceiling (adjusted for inflation from the base year to the prospective period) is compared to the case-mix neutralized facility-specific direct patient care rate (adjusted for inflation from the previous cost reporting period to the prospective period), the lower of the two shall be chosen. This lower amount shall be the case-mix neutral prospective rate per diem for the prospective period. It shall then be adjusted for the CMI intended to correspond as closely as possible to the prospective period. Because of the manner in which the necessary data are reported, there shall be a lag between the picture dates used to develop the CMI information and the prospective period to which the CMI shall apply. The relationship between picture dates and prospective rate periods is illustrated in Table V.

E. Any out-of-state nursing facility provider that is enrolled in the Virginia Medical Assistance Program and is required to submit a cost report to the Virginia Medical Assistance Program will be assigned the Virginia statewide normalized CMI of 1.0. This CMI of 1.0 will be used to adjust the direct patient care cost ceilings and rates.

F. Example of case-mix adjustment of direct operating rate.

1. Following is an illustration of how a nursing facility's case-mix index is used to make direct patient care semiannual rate adjustments to the prospective direct patient care operating cost base rate.

2. Assumptions.

a. The nursing facility's fiscal year is January 1, 2002, through December 31, 2002.

b. The average allowable direct patient care operating rate for the year is $50.

c. The allowance for inflation is 4.0% for the fiscal year beginning January 1, 2003.

d. The nursing facility's case-mix neutral direct peer group ceiling for the fiscal year beginning January 1, 2003, is $60.

e. The nursing facility's normalized case-mix scores are as follows:

3. Calculation of nursing facility's Direct Patient Care Operating Cost Rate.

a. Direct Patient Care Operating Cost Rate:

b. Calculation of case-mix factor used for case-mix neutralization:

c. Case-mix neutralized average allowable direct patient care operating rate: Average Allowable Direct Patient Care Operating Rate for FY 2003 $52

Case-mix neutralization factor ÷ 1.0152

Case-mix neutralized Direct Patient Care Operating Rate for FY 2003 = $51.22

d. Lower of case-mix neutralized cost or ceiling:

The case-mix neutralized Direct Patient Care Operating Rate, $51.22, is lower than the case-mix neutral ceiling, $60. $51.22 will be used in the rate calculation.

e. Calculation of case-mix rate adjustments:

(1) Case-mix rate adjustment for the period January 1, 2003, through June 30, 2003:

First semiannual rate adjustment %68 Average of (6/30/2002 CMI, 9/30/2002 CMI) = Average(1.0098,1.0305) = 1.0202

(2) Case-mix rate adjustment for the period July 1, 2003 through December 31, 2003:

Second semiannual rate adjustment %68 Average of (12/31/2002 CMI, 3/31/2003 CMI) = Average(1.0355,1.0400) =1.0378

f. Rates for semiannual periods:

(1) Case-mix adjusted rate for the period January 1, 2003, through June 30, 2003:

First semiannual rate = 1.0202 * $51.22 = $52.25

(2) Case-mix adjusted rate for the period July 1, 2003 through December 31, 2003:

Second semiannual rate = 1.0378 * $51.22 = $53.15

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 18, eff. July 1, 2002.

12VAC30-90-310. Normalized Case Mix Index (NCMI).

Appendix V
Normalized Case Mix Index

A. This appendix illustrates how a specialized care provider's Normalized Case Mix Index (NCMI) is used to adjust the prospective routine operating cost base rate and prospective operating ceiling.

B. Assumptions.

1. The nursing facility's fiscal years are December 31, 1996, and December 31, 1997.

2. The average allowable routine nursing labor and nonlabor base rate for December 31, 1996, is $205.

3. The average allowable indirect patient care operating base rate for December 31, 1996, is $90.

4. The allowance for inflation is 3.0% for the fiscal year end beginning January 1, 1997.

5. The nursing facility's statewide ceiling for the fiscal year end beginning January 1, 1997, is $300.

6. The nursing facility's normalized HCFA nursing wage index is 1.0941 for the fiscal year end beginning January 1, 1997.

7. The nursing facility's semiannual normalized NCMIs are as follows:

C. Calculation of nursing facility's operating ceiling.

1. Period January 1, 1997, through June 30, 1997.

2. Period July 1, 1997, through December 31, 1997.

D. Calculation of nursing facility's prospective operating cost rate.

1. Prospective operating cost base rate.

2. Calculation of FYE 1996 Average NCMI.

3. Calculation of FYE 1997 NCMI Rate Adjustments.

a. Rate adjustment for the period January 1, 1997, through June 30, 1997.

b. Rate Adjustment for the Period July 1, 1997, through December 31, 1997.

D. In this illustration the nursing facility's operating reimbursement rate for FYE 1997 would be as follows:

1. For the period January 1, 1997, through June 30, 1997, the operating reimbursement rate would be $307.31 since the prospective operating cost rate is lower than the nursing facility's NCMI adjusted ceiling of $374.69 (from subdivision C 1 of this section).

2. For the period July 1, 1997, through December 31, 1997, the operating reimbursement rate would be $310.78 since the prospective operating cost rate is lower than the nursing facility's NCMI adjusted ceiling of $379.33 (from subdivision C 2 of this section).

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 322(D)(2a) of Chapter 912 of the 1996 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997.

12VAC30-90-320. National RUG-III categories and weights.

Appendix VI
National RUG-III Categories and Weights

Statutory Authority

§ 32.1-325 of the Code of Virginia and Item 322(D)(2a) of Chapter 912 of the 1996 Acts of Assembly.

Historical Notes

Derived from Virginia Register Volume 14, Issue 1, eff. December 1, 1997.

Part IV
Traumatic Brain Injury Payment System

12VAC30-90-330. Traumatic brain injury diagnoses.

A. Consistent with the Nursing Home Payment System, DMAS shall provide a fixed per day payment for nursing facility residents with traumatic brain injury diagnoses. The residents and facilities must meet the criteria set out in this section.

B. Resident criteria. To meet the criteria for admission and continued stay for the TBI program, there shall be documented evidence in the resident's medical record of all of the following:

1. The resident shall meet the minimum nursing facility criteria, as well as meet the preadmission screening requirements for nursing facility level of care as specified in 12VAC30-60-300, Nursing facility criteria;

2. The resident has a physician's diagnosis of TBI which is also recorded on the Patient Intensity Rating System Review (DMAS-80) form by diagnosis code 85000 (trauma to the brain);

3. Abusive, aggressive, or disruptive behavior has been documented within 30 days prior to admission and also recorded on the Patient Intensity Rating System Review (DMAS-80) form by coding of behavior pattern 3 or 4. Behavior coding on the Patient Intensity Rating System Review form must also be supported by documentation in the medical record;

4. The resident is at least 14 years old; and

5. The resident must be appropriate for nursing facility placement and the facility must be able to safeguard him such that the resident will not be a physical or emotional danger to himself or other residents on the unit.

C. Provider criteria. Nursing facilities which may be approved to provide this service shall operate a dedicated unit of 20 beds or more and provide additional professional services to support the special needs of these individuals. These criteria shall concentrate individuals with TBI into specially dedicated facilities thereby satisfying safety concerns and achieving economies of scale necessary for the nursing facilities. At a minimum, the provider shall meet all of the criteria outlined below to receive the add-on reimbursement for the TBI program for residents who meet the TBI program resident criteria.

1. Provide all services that are available to the general nursing facility population in accordance with established standards and regulations for nursing facilities to include programming that is individualized and geared toward the needs and interests of the unit's population;

2. Provide a dedicated unit of at least 20 beds that is physically separated by a doorway that shall be either locked or maintained with an alarm system that sounds at the unit nursing station when opened;

3. Certify all beds on this dedicated unit for licensed nursing facility care. To receive payment the resident must reside in a Medicaid certified bed;

4. Locate at least one nursing station on the unit and that nursing station must serve the dedicated unit only;

5. Maintain a contractual agreement with a physiatrist and a neuropsychologist to serve the resident population as needed;

6. Provide a registered nurse to function in a charge nurse capacity on the unit whose sole responsibility is for the care and oversight of the designated unit. This registered nurse cannot have other responsibilities outside of the unit during the period for which she is designated as the charge nurse for the dedicated unit. The registered nurse working in a charge nurse capacity must have sufficient experience working with the population with head injuries before serving in this capacity. Temporary agency nurses cannot be used to fulfill the charge nurse requirement;

7. Ensure that each resident on the unit is evaluated on an annual basis by a licensed clinical psychologist with expertise in neuropsychology or a neurologist. If a resident is admitted and has not been evaluated by a neuropsychologist or neurologist in the past calendar year, an evaluation must be completed within the first 30 days of the resident's stay in the TBI program; and

8. Coordinate educational services for the resident with the appropriate public school system if the resident has not completed all educational requirements for high school education as specified by the State Board of Education. Coordination is defined as making the necessary contacts and providing necessary information to the appropriate school division. The facility shall keep records of such coordination contacts.

Statutory Authority

§ 32.1-325 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 22, eff. August 19, 1998.

Forms (12VAC30-90)

Certificate of Medical Necessity -- Durable Medical Equipment and Supplies, DMAS-352 (rev. 8/95).

Cost Reporting Forms for Nursing Facility with Multiple Level of Care or Hospital-Based Nursing Facilities (RUGS 1090 Series).

Facility Description, Schedule A-1 (eff. 7/93).

Computation of Base Operating Costs, Schedule A-3 (eff. 7/93).

Computation of Direct Patient Care Nursing Service Costs, Schedule A-4 (rev. 7/00).

Computation of Title XIX Direct Patient Care Ancillary Service Costs, Schedule C (eff. 7/93).

Statement of Compensation of Owners, Schedule E (eff. 10/90).

Statement of Compensation of Administrators and/or Assistant Administrators, Schedule F (eff. 10/90).

Computation of Title XIX (Medicaid) Base Costs and Prospective Rate/ RUGS, Schedule H (rev. 7/00).

Calculation of Medical Service Reimbursement Settlement, Schedule J (rev. 7/00).

Calculation of NATCEPs Reimbursement Settlement, Schedule J-1 (eff. 7/92).

Calculation of Criminal Record Check Costs Reimbursement, Schedule J-2 (eff. 7/93).

Debt and Interest Expense, Schedule K (eff. 7/93).

Nurse Aide Training and Competency Evaluation Program Costs and Competency Evaluation Programs (NATCEPs), Schedule N (eff. 10/90).

Compilation of Nursing Salaries, Benefits and Hours, Schedule S-1 (eff. 7/00).

Cost Reporting Forms for Nursing Facility (Single Level of Care) (RUGS 1090 Series).

Facility Description and Statistical Data, Schedule A (eff. 10/90).

Certification by Officer or Administrator of Provider, Schedule A-2 (eff. 10/90).

Reclassification and Adjustment of Trial Balance of Expenses, Schedule B (not dated).

Reclassifications, Schedule B-1 (not dated).

Analysis of Administrative and General -- Other, Schedule B-2 (eff. 10/90).

Adjustment to Expenses, Schedule B-4 (eff. 10/90).

Cost Allocation -- Employee Benefits, Schedule B-5, Part I (eff. 7/93).

Cost Allocation -- Employee Benefits Statistical Basis, Schedule B-5, Part II (eff. 7/93).

Computation of Title XIX Direct Patient Care Ancillary Service Costs, Schedule C (eff. 7/93).

Statement of Cost of Services from Related Organizations, Schedule D (eff. 10/90).

Statement of Compensation of Owners, Schedule E (eff. 10/90).

Statement of Compensation of Administrators and/or Assistant Administrators, Schedule F (eff. 10/90).

Balance Sheet, Schedule G (not dated).

Statement of Patient Revenues, Schedule G-1 (eff. 10/90).

Statement of Operations, Schedule G-2 (eff. 10/90).

Computation of Title XIX (Medicaid) Base Costs and Prospective Rate (RUGs), Schedule H (rev. 7/00).

Calculation of Medical Service Reimbursement Settlement, Schedule J (rev. 7/00).

Calculation of NATCEPs Reimbursement Settlement, Schedule J-1 (eff. 7/92).

Calculation of Criminal Record Check Costs Reimbursement, Schedule J-2 (eff. 7/93).

Debt and Interest Expense, Schedule K (eff. 7/93).

Limitation on Federal Participation for Capital Expenditures Questionnaire, Schedule L (eff. 10/90).

Nurse Aide Training and Competency Evaluation Program Costs and Competency Evaluation Programs (NATCEPs), Schedule N (eff. 10/90).

Compilation of Nursing Salaries, Benefits and Hours, Schedule S-1 (eff. 7/00).

Computation of Specialized Care Base Operating Costs, Pediatric, Schedule SC-3 (rev. 7/98).

Computation of Specialized Care Direct Patient Care Nursing Service Costs, Pediatric, Schedule SC-4 (rev. 7/98).

Computation of Specialized Care Kinetic Therapy Ancillary Service Costs, Pediatric, Schedule SC-5 (rev. 7/98).

Computation of Specialized Care Direct Patient Care Ancillary Service Costs, Pediatric, Schedule SC-6 (rev. 7/98).

Computation of Specialized Care Base Costs and Prospective Rate, Pediatric, Schedule SC-7P (rev. 7/00).

Computation of Prospective Specialized Care Operating Efficiency Incentive Rates, Pediatric, Schedule SC-8P (rev. 7/98).

Part I Computation of Nursing Facility Specialized Care Settlement, Part II Analysis of Nursing Facility Specialized Care Interim Payments for Title XIX Services, Part III Analysis of Quarterly Title XIX (Medicaid) Specialized Care Patient Days, Pediatric, Schedule SC-9 (rev. 7/00).

Computation of Specialized Care Base Operating Costs, Adult, Schedule SC-3 (rev. 7/98).

Computation of Specialized Care Direct Patient Care Nursing Service Costs, Adult, Schedule SC-4 (rev. 7/98).

Computation of Specialized Care Kinetic Therapy Ancillary Service Costs, Adult, Schedule SC-5 (rev. 7/98).

Computation of Specialized Care Direct Patient Care Ancillary Service Costs, Adult, Schedule SC-6 (rev. 7/98).

Computation of Specialized Care Base Costs and Prospective Rate, Adult, Schedule SC-7 (rev. 7/98).

Computation of Prospective Specialized Care Operating Efficiency Incentive Rates, Adult, Schedule SC-8 (rev. 7/98).

Part I Computation of Nursing Facility Specialized Care Settlement, Part II Analysis of Nursing Facility Specialized Care Interim Payments for Title XIX Services, Part III Analysis of Quarterly Title XIX (Medicaid) Specialized Care Patient Days, Adult, Schedule SC-9 (rev. 1/00).

Cost Reporting Forms for Nursing Facilities with Other Long-Term Care Services, HCPA-2540-96 Worksheets (eff. 7/96).

Documents Incorporated by Reference (12VAC30-90)

R.S. Means Building Construction Cost Data, 59th Annual Edition, 2001.

R.S. Means Square Foot Costs, 22nd Annual Edition, 2001.

R.S. Means Repair and Remodeling Cost Data, 22nd Annual Edition, 2001.

Estimated Useful Lives of Depreciable Assets, rev. 1993 Edition, American Hospital Association.

Federal Reserve Statistical Release (H. 15), updated daily.

Provider Reimbursement Manual, HCFA-Pub. 15 (PRM-15), Health Care Financing Administration.

Virginia Input Price Indexes, Updated Quarterly.

Nursing Facility Reimbursement Report, MMR-240, updated monthly, Department of Medical Assistance Services.