Current through Register Vol. 48, No. 38, September 20, 2024
a) Capital rates for all long term care
facilities - except State Institutions, Specialized Living Centers and campus
facilities, shall be reimbursed in the manner described in Sections
140.570
through
140.573.
Capital rates for Specialized Living Centers are set forth in
140.579.
Campus facilities are reimbursed in accordance with
140.583.
b) The terms used in Sections
140.570
through
140.574
are defined as follows.
1) "Arm's-length
transaction" means a transaction between a buyer and a seller both free to act,
each seeking his own best economic interest. A transaction between related
parties as defined in Section
140.537
is not considered to be an arm's-length transaction.
2) "Base Year" refers to the weighted average
year of investment in the actual construction of the building. The Base Year is
determined using the components of the building cost, which are included in the
Original Building Base Cost, and the corresponding years of acquisition or
construction. The year of each component of the total investment is multiplied
by the cost of each year's investment. The sum of these products is then
divided by the total Original Building Base Cost to yield an average year of
construction. Any fractional portion of the Base Year derived from this
calculation will be truncated. The Base Year will not change due to sale or
lease of the building subsequent to January 1, 1978.
3) "Capital Days" are used to convert all
capital items to per diem amounts unless otherwise specified. If a facility's
occupancy rate is above 93 percent, then capital days shall be equal to the
actual patient days. If occupancy is below 93 percent, then 93 percent of
available bed days (the number of licensed beds multiplied by the number of
calendar days in a period) shall be the capital days.
4) Building Basis:
A) "Original Building Base Cost" means either
the cost of construction or the cost of the latest purchase of the building in
an arm's-length transaction prior to January 1, 1978. The allowable cost of
subsequent improvements to the building will be included in the original
building base cost. The original building base cost will not change due to
sales or leases of the facility after January 1, 1978. In the case of a nursing
home building constructed after January 1, 1978, the allowable construction
cost plus the cost of subsequent improvements will be the original building
base cost.
B) If a portion of the
building is vacant or is used for functions other than a nursing home, then a
portion of the building's original building base cost will not be used in the
rate calculation. This cost allocation will be based upon the proportion of the
total square feet in the building being used for nursing home
functions.
5) "Rate of
Return" will be 11.0 percent for base years which are 1979 and later and 9.13
percent for base years which are 1978 and earlier.
6) "Means Construction Index" means the index
of changes in construction costs from year-to-year developed from the annual
publication Means Building Construction Cost data as published by R.S. Means
Company, Inc.
7) "Means New
Construction Cost Per Square Foot" is defined as the costs published by the
R.S. Means Company, Inc. Data will come from the most recent edition of the
Means Square Foot Costs publication. The cost used per square foot for new
construction is based upon nursing home construction projections using 40,000
square foot category with face brick with concrete block back-up and steel
joists. The Means New Construction Cost Per Square Foot will be adjusted where
necessary to ensure an increase of at least a three percent from the previous
year but no more than a seven percent increase.
8) "Square Feet Per Bed" is defined as 316
square feet per bed. This was the average for existing long term care
facilities in Illinois.
9)
"Location". The long term care facilities will be separated into one of the
following areas:
Northeast area - HSAs 6, 7, 8, 9
Downstate area - HSAs 1, 2, 3, 4, 5, 10, 11
10) "Uniform Building Value" is calculated
using the following steps:
A) The Means New
Construction Cost Per Square Foot is multiplied by 316 square feet per bed to
obtain a preliminary cost per bed. For example, $68.65 cost per square foot
times 316 equals a $21,693 preliminary cost per bed.
B) The preliminary cost per bed is multiplied
by an adjustment factor to obtain the revised cost per bed for new
construction. The adjustment factor is
1.30 for the
northeast area and 1.19 for the downstate area. For example, a $21,693
preliminary cost per bed times the
1.30 factor
equals a $28,200 revised cost per bed for the northeast area.
C) The revised cost per bed for new
construction will be the uniform building value for any facility for which the
base year is the same as the current year. The current year is the calendar
year in which the rate year starts. The uniform building value for facilities
with a base year which is older than the current year will have the revised
cost per bed for new construction discounted by a three percent obsolescence
factor for each year between the base year and the current year. The uniform
building value will be no lower than ten percent of the revised cost per bed
for new construction. For example:
|
Base Year
|
Factor
|
Uniform Building Value
|
|
1991
|
100%
|
$28,200
|
|
1990
|
97%
|
$27,354
|
|
1989
|
94%
|
$26,508
|
|
1988
|
91%
|
$25,662
|
|
1987
|
88%
|
$24,816
|
|
1986
|
85%
|
$23,970
|
|
-
|
|
1975
|
52%
|
$14,664
|
|
-
|
|
1960
|
10%
|
$ 2,820
|
11) "Building Specific Historical Cost Per
Bed" is the inflated original building base cost divided by the number of
licensed beds on the cost report used to calculate rates for the rate year. If
licensed beds changed during the cost report period, the licensed beds on the
last day of the cost report period will be used as the divisor. The original
building base cost is inflated based upon the Means Construction Index and the
base year.
12) The "ERVWC" factor
relates to equipment, rent, vehicle and working capital cost. The ERVWC factor
will be the greater of $1.75
per diem or the amount from the following calculation based upon a sample of 50
percent or more of all long term care facilities:
A) Working Capital: Allowable support costs,
nursing or program costs and administrative costs will be updated for inflation
and be divided by capital days and multiplied by 60 days to yield two months of
working capital investment on a per diem basis.
B) The per diem investment in equipment and
vehicle will be added to the working capital investment on a per diem basis
(the vehicle investment is limited to fifty cents per diem). This total
investment is multiplied by 9.13 percent.
C) The result of Step B is added to the per
diem equipment rent cost to obtain an ERVWC base factor.
c) Any items of fixed equipment
which are no longer in use or are not providing significant value for inpatient
long term care purposes must not be reported on the cost report fixed asset
schedules for land, buildings, equipment and vehicle. For example, portions of
a building not being used for nursing home operations must not be reported. Any
assets which were removed from the cost report depreciation schedules prior to
the 1986 cost report due to the asset being fully depreciated may not now be
included in the building or equipment basis. Also, if a vehicle is used
partially for personal purposes or purposes other than operation of the nursing
home then this portion of the cost must not be included in the vehicle cost
section of the cost report.
d) No
asset may be included in the building or equipment basis unless complete
documentation for the cost and year of purchase or construction is maintained.
This data must be maintained to facilitate efficient audit reviews by
representatives of the Department.
