FINAL BILL REPORT

SSB 6437

                                  C 208 L 88

BYSenate Committee on Ways & Means (originally sponsored by Senators Deccio, Kreidler, Sellar, Fleming and Johnson)

Changing provisions relating to the investment allowance for nursing homes.

Senate Committee on Health Care & Corrections and Committee on Ways & Means

House Committe on Ways & Means/Appropriations

SYNOPSIS AS ENACTED

BACKGROUND:

In 1980, the Legislature enacted the Nursing Home Auditing and Cost Reimbursement Act authorizing the state to purchase nursing home care for Medicaid patients through a system of cost reimbursement. A system developed whereby lessees, as of the date of the act, were to be reimbursed on property costs and return on their investment based on the net book value of assets in the facility.  If they purchased those assets, a re-evaluation was done (permitted only once every 10 years) and reimbursement increased to reflect the increased value due to the new purchase price.

A subgroup of lessees became known as "grandfathered lessees".  Their leases existed on January 1, 1980, and could not be renegotiated.  Many of them faced a potential shortfall in reimbursement which would not cover their lease costs. Therefore, they were grandfathered into the system by continuing to reimburse them in full for lease costs instead of basing the reimbursement on property and investment costs.

In 1986, the reimbursement system was changed to bring the law into conformance with federal legislation which prohibited any upward re-evaluation of property due to change of ownership.

Under this system, some of the "grandfathered lessees" who choose to purchase their facility face a potentially substantial decrease in the reimbursement rate and subsequent difficulty in financing the purchase.

New federal legislation brought about yet another change which now allows a limited upward re-evaluation on property when ownership changes.

SUMMARY:

Nursing home lessees whose leases existed prior to January 1, 1980, and who subsequently purchase the leased assets may continue to be reimbursed for property and return on their investment costs at the rate which they currently receive as lessees when the purchase date meets certain criteria.  These are:  after the lessor's bankruptcy or default on the facility's loan or mortgage, within two years of the lease expiration or renewal date, after the actual cost of the lease has become greater than the reimbursement rate, and within one year of any purchase option in existence on January 1, 1988.

VOTES ON FINAL PASSAGE:

      Senate    45     0

      House 97   0 (House amended)

      Senate    43     0 (Senate concurred)

EFFECTIVE:June 9, 1988