S-4027               _______________________________________________

                                                   SENATE BILL NO. 4921

                        _______________________________________________

State of Washington                              49th Legislature                              1986 Regular Session

By Senators Bottiger, Craswell, Wojahn and Thompson

Read first time 1/23/86 and referred to Committee on Ways & Means.

AN ACT Relating to nursing home auditing and cost reimbursement; and amending RCW 74.46.360.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

        Sec. 1.  Section 36, chapter 177, Laws of 1980 and RCW 74.46.360 are each amended to read as follows:

          (1) The depreciation base shall be the historical cost of the contractor or lessor, when the assets are leased by the contractor, in acquiring the asset in an arm's-length transaction and preparing it for use, less goodwill, and less accumulated depreciation which has been incurred during periods that the assets  have been used in or as a facility by the contractor, such accumulated depreciation to be measured in accordance with subsections (2), (3), and (4) of this section and RCW 74.46.350 and 74.46.370.  If the department challenges the historical cost of an asset, or if the contractor cannot or will not provide the historical costs, the department will have the department of general administration, through an appraisal procedure, determine the fair market value of the assets at the time of purchase.  The depreciation base of the assets will not exceed such fair market value.

          (2) The historical cost of donated assets, or of assets received through testate or intestate distribution, shall be the lesser of:

          (a) Fair market value at the date of donation or death; or

          (b) The historical cost base of the owner last contracting with the department, if any.

          (3) Estimated salvage value of acquired, donated, or inherited assets shall be deducted from historical cost where the straight-line or sum-of-the-years' digits method of depreciation is used.

          (4) (a) Where depreciable assets are acquired that were used in the medical care program subsequent to January 1, 1980, the depreciation base of the assets will not exceed the net book value which did exist or would have existed had the assets continued in use under the previous contract with the department; except that depreciation shall not be assumed to accumulate during periods when the assets were not in use in or as a facility.

          (b) Subparagraph (4)(a) of this section shall not apply to the most recent arm's-length acquisition if it occurs at least ten years after the ownership of the assets has been previously transferred in an arm's-length transaction nor to the first arm's-length acquisition that occurs after January 1, 1980, for facilities participating in the medical care program prior to January 1, 1980.  The new depreciation base for such acquisitions shall not exceed the fair market value of the assets as determined by the department of general administration through an appraisal procedure.  A determination by the department of general administration of fair market value shall be final unless the procedure used to make such determination is shown to be arbitrary and capricious.

          (c) Where depreciable assets are acquired from a related organization, the contractor's depreciation base shall not exceed the base the related organization had or would have had under a contract with the department.

          (d) Where the depreciable asset is a donation or distribution between related organizations, the base shall be the lesser of (i) fair market value, less salvage value, or (ii) the depreciation base the related organization had or would have had for the asset under a contract with the department.

(5) If the net book value of the assets in the nursing home as of January 1, 1985, is below one thousand dollars per licensed bed using the standard lives and methods as stated in RCW 74.46.350 and 74.46.370, the depreciation base shall be redetermined from an appraisal by the department of general administration of the fair market value on January 1, 1985.