Pennsylvania Code
Title 55 - HUMAN SERVICES
Part III - MEDICAL ASSISTANCE MANUAL
Chapter 1181 - NURSING FACILITY CARE
Subchapter B - MANUAL FOR ALLOWABLE COST REIMBURSEMENT FOR SKILLED NURSING AND INTERMEDIATE CARE FACILITIES
OTHER COST ITEMS
Section 1181.259a - Elimination of funded depreciation-statement of policy

(a) The Department has abolished at 55 Pa. Code §§ 1181.259(q) and 6211.79(q) (relating to depreciation allowance) the requirement that county and general nursing facilities fund the depreciation portion of their MA payment rate.

(b) The Department's decision to repeal the funded depreciation requirement permits many providers, currently required to fund depreciation, to eliminate funding, to liquidate present funded depreciation accounts, if they choose to do so, and to resolve present administrative appeals. It also eliminates the need of providers that choose to liquidate their funded depreciation accounts to complete Schedule M of the MA 11 in cost reporting periods following the period in which the funded depreciation account was liquidated. Providers that choose to liquidate their funded depreciation account should document their decision to do so for MA audit purposes; the funded depreciation account should then be liquidated prior to the start of their next fiscal year. The Department will treat the offset of investment income earned on the funded depreciation account of providers that choose to liquidate the account in accordance with the principles of Medicare's Health Insurance Manual 15 (HIM-15).

(c) Providers are not required to liquidate their funded depreciation accounts. They may choose to continue to maintain the funded depreciation accounts as a prudent fiscal management practice and in order to immunize income earned on the fund from offset against interest expense. To immunize the investment income earned on the funded depreciation account from offset, the account should be maintained in accordance with the principles of HIM-15. Income earned in an account maintained under the Department's guidelines between July 1, 1983, and the start of the provider's next fiscal year, will not be subject to offset as a result of an inconsistency between the Department's guidelines and the guidelines for funded depreciation accounts in HIM-15, as long as the income is retained in the account and the account itself is thereafter maintained according to HIM-15 guidelines. Providers who retain the funded depreciation account but have not maintained it in accordance with the HIM-15 principles, will have until the start of their next fiscal year to reorganize their account in order to maintain it in accordance with HIM-15 guidelines.

(d) The Office of Medical Assistance Programs will cease making disallowances based on the funding requirement.