Virginia Law

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.