Current through September 17, 2024
This subsection replaces Medicare regulations on depreciation
in their entirety, except those provisions concerning sale-leaseback and
lease-purchase agreements, Medicare's Provider Reimbursement Manual, HIM-15,
Section 110, are retained, subject to the following Medicaid depreciation
regulations. At the time of an asset acquisition, the nursing facility must use
the American Hospital Association Estimated Useful Lives of Depreciable
Hospital Assets, 2004 edition, to determine the useful life span. In the event
that the nursing facility determines a useful life shorter than a life shown in
the tables, the facility must have documentation available to justify the
unique circumstances that required the shorter life.
008.01
CAPITALIZATION
GUIDELINES. Providers must devise and follow a written
capitalization policy within the following guidelines. A copy of the policy
must be available upon request by the Department.
008.01(A)
CAPITALIZATION
THRESHOLD. The capitalization threshold is a predetermined amount
at which asset purchases must be capitalized rather than expensed. Each
provider determines the capitalization threshold for their facility, but the
threshold amount must be at least $100 and no greater than $5,000.
008.01(B)
ACQUISITIONS. If a depreciable asset has at the time
of its acquisition an estimated useful life of at least two years and an
allowable cost equal to or exceeding the capitalization threshold, its cost
must be capitalized and written off ratably over the estimated useful life of
the asset. If a depreciable asset has an allowable cost less than the
capitalization threshold, or if the asset has a useful life of less than 2
years, its cost is allowable in the year it is acquired.
008.01(C)
ACQUISITIONS UNDER
$100. Acquisitions after July 1, 2005, with a per unit cost of
less than $100 cannot be depreciated. Costs of these items are included in the
applicable operating cost category on the cost report in the current
period.
008.01(D)
INTEGRATED SYSTEM PURCHASES. When items are purchased
as an integrated system, all items must be considered as a single asset when
applying the capitalization threshold.
008.01(E)
MULTIPLE ITEMS WITH PER
UNIT COST GREATER THAN OR EQUAL TO $100. Items that have a
stand-alone functional capability may be considered on an item-by-item basis or
as an aggregate single purchase. Each provider's capitalization policy must
describe how the provider elects to treat these items.
008.01(F)
NON-CAPITAL
PURCHASES. Purchases of equipment and furnishings over $100 per
item and under the provider's capitalization threshold are included in the
Plant Related cost category on the Cost Report in the current period.
008.01(G)
BETTERMENTS AND
IMPROVEMENTS. Betterments and improvements extend the life,
increase the productivity, or significantly improve the safety of an asset as
opposed to repairs and maintenance which either restore the asset to, or
maintain it at, its normal or expected service life. Repair and maintenance
costs are always allowed in the current accounting period.
008.02 BUILDINGS AND EQUIPMENT. An
appropriate allowance for depreciation on buildings and equipment is an
allowable cost. The depreciation must be:
(A)
Identifiable and recorded in the provider's accounting records;
(B) Based on book value of the asset or
assets in use before July 1, 1976. Book value for these purposes is defined as
cost less depreciation allowed or allowable per American Hospital Association
or Internal Revenue Service guidelines;
(C) Based on the lesser of cost or fair
market value at the time of purchase for a facility purchased or constructed
after June 30, 1976. The basis for facility purchases or new construction may
be subject to limitation;
(D) Based
on the fair market value at the time of donation for donated assets without a
prior Medicaid basis; or based on the donor's Medicaid net book value at the
time of the donation for donated assets with a prior Medicaid basis.
Depreciation on donated assets must be funded in order to be allowed; this
requires that money be segregated and specifically dedicated for the purpose of
replacing the asset; and
(E)
Prorated over the estimated useful life of the asset using the straight-line
method of depreciation.
008.03
OTHER GAINS AND LOSSES ON
DISPOSITION OF ASSETS. Losses on the sale of real property are not
recognized under Medicaid. Losses on the disposal of replaced building
components that have been specifically identified in the nursing facility's
depreciation schedule since acquisition will be included in the allowable fixed
cost for the report period. Gains or losses on personal property will be
reduced from or included in allowable fixed costs for the report period. Gains
in excess of the other allowable fixed costs will result in a negative fixed
cost component of the facility's rate.
008.04
SALE OR TRANSFER OF
CORPORATE STOCK. Where the existing corporation continues after
the sale or transfer of corporate stock, the depreciable basis of assets used
under the program will be that of the then existing corporation. No revaluation
of assets is allowed when only an acquisition of stock is involved.
