(1)
Purpose. Except for new non-acute hospitals which have
not yet been assigned a base year, the commission will determine Allowed base
year Operating Cost for the purpose of establishing a hospital's RFR pursuant
to 114.1 CMR 40.07.
(2)
Calculation of Allowed Base Year Operating Cost.
(a) For DMH and DPH hospitals only the base
year for operating costs shall be FY 1993, and the Division shall utilize the
costs reported in audited FY 1993 RSC-403 cost report. For all other hospitals,
the base year for operating costs shall be the year recognized by the Division
as the base year during FY 1996. For hospitals with a later base year assigned
pursuant to 114.1 CMR 40.09, the Division shall utilize the costs reported in
the audited RSC-403 cost report for that year.
1. Allowable operating costs include only
costs incurred or to be incurred in the provision of hospital care and
services, supplies and accommodations and determined in accordance with the
Principles of Reimbursement for Provider Costs under
42 U.S.C. §§
1395
et seq. as set forth in
42 CFR 413et seq. and the Provider Reimbursement Manual, the
HURM Manual and Generally Accepted Accounting Principles.
2. Allowable operating costs do not include
costs of personnel or consultants where the primary purpose is, either directly
or indirectly, to persuade or seek to persuade hospital employees to support or
oppose unionization.
(b)
The Division will make a one time adjustment to base year costs to reflect the
following:
1. Audit adjustments when the
audit is complete.
2. Annualization
of partial year costs for which the hospital received adjustments in the RFR
approved in the base year.
3.
Annualization of partial year reductions in costs as a result of transfers off
of costs and discontinued services during the base year.
(3)
Calculation of
Allowed Base Year Capital Cost. The base year for capital cost is
the year recognized as the base year for operating costs. The base year capital
cost is calculated by adjusting the hospital's actual base year capital cost
for historical depreciation for buildings and fixed equipment, for reasonable
interest expense, for amortization and for leases and rentals of facilities.
The following limitations apply in the determination of allowable capital costs
and, in addition, shall apply to any projected capital acquisitions as set
forth in 114.1 CMR 40.08(6).
(a) The Division
shall not allow interest expense attributable to balloon payments on financed
debt. Balloon payments are those in which the final payment on a partially
amortized debt is scheduled to be larger than all preceding payments. Requests
for interest associated with balloontype payments must be adjusted to conform
to the time period for conventional regular installment loans.
(b) Where there has been a change of
ownership after July 18, 1984, the allowable basis of the fixed assets to be
used in the determination of the depreciation and interest expense shall be the
lower of the acquisition cost to the new owner or the basis allowed for
reimbursement purposes to the immediate prior owner. The allowed depreciation
expense shall be calculated using the full useful lives of the
assets.
(c) All costs (including
legal fees, accounting, and administrative costs, travel costs, and the costs
of feasibility studies) attributable to the negotiation or settlement of the
sale or purchase of any capital asset after July 18, 1984 (by acquisition or
merger), for which payment has previously been made by any payer, and which
have been included in any portion of the RFR, shall be subtracted from the
capital requirement.
