AN
ACT Relating to the medicaid related payment of property costs in licensed
nursing facilities; amending RCW 74.46.020, 74.46.360, 74.46.421, 74.46.431,
74.46.506, 74.46.511, 74.46.515, 74.46.521, 74.46.350, and 74.46.370; amending
1998 c 322 s 29 (uncodified); adding new sections to chapter 74.46 RCW;
repealing RCW 74.46.350 and 74.46.370; repealing 1998 c 322 s 29 (uncodified);
providing an effective date; and declaring an emergency.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
74.46.020 and 1998 c 322 s 2 are each amended to read as follows:
Unless
the context clearly requires otherwise, the definitions in this section apply
throughout this chapter.
(1)
"Accrual method of accounting" means a method of accounting in which
revenues are reported in the period when they are earned, regardless of when
they are collected, and expenses are reported in the period in which they are
incurred, regardless of when they are paid.
(2)
"Appraisal" means the process of estimating the fair market value or
reconstructing the historical cost of an asset acquired in a past period as
performed by a professionally designated real estate appraiser with no
pecuniary interest in the property to be appraised. It includes a systematic,
analytic determination and the recording and analyzing of property facts,
rights, investments, and values based on a personal inspection and inventory of
the property.
(3)
"Arm's-length transaction" means a transaction resulting from
good-faith bargaining between a buyer and seller who are not related
organizations and have adverse positions in the market place. Sales or
exchanges of nursing home facilities among two or more parties in which all
parties subsequently continue to own one or more of the facilities involved in
the transactions shall not be considered as arm's-length transactions for
purposes of this chapter. Sale of a nursing home facility which is
subsequently leased back to the seller within five years of the date of sale
shall not be considered as an arm's-length transaction for purposes of this
chapter.
(4)
"Assets" means economic resources of the contractor, recognized and
measured in conformity with generally accepted accounting principles.
(5)
"Audit" or "department audit" means an examination of the
records of a nursing facility participating in the medicaid payment system,
including but not limited to: The contractor's financial and statistical
records, cost reports and all supporting documentation and schedules,
receivables, and resident trust funds, to be performed as deemed necessary by
the department and according to department rule.
(6)
"Bad debts" means amounts considered to be uncollectible from
accounts and notes receivable.
(7)
"Beneficial owner" means:
(a)
Any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares:
(i)
Voting power which includes the power to vote, or to direct the voting of such
ownership interest; and/or
(ii)
Investment power which includes the power to dispose, or to direct the
disposition of such ownership interest;
(b)
Any person who, directly or indirectly, creates or uses a trust, proxy, power
of attorney, pooling arrangement, or any other contract, arrangement, or device
with the purpose or effect of divesting himself or herself of beneficial
ownership of an ownership interest or preventing the vesting of such beneficial
ownership as part of a plan or scheme to evade the reporting requirements of
this chapter;
(c)
Any person who, subject to (b) of this subsection, has the right to acquire
beneficial ownership of such ownership interest within sixty days, including
but not limited to any right to acquire:
(i)
Through the exercise of any option, warrant, or right;
(ii)
Through the conversion of an ownership interest;
(iii)
Pursuant to the power to revoke a trust, discretionary account, or similar
arrangement; or
(iv)
Pursuant to the automatic termination of a trust, discretionary account, or
similar arrangement;
except
that, any person who acquires an ownership interest or power specified in
(c)(i), (ii), or (iii) of this subsection with the purpose or effect of
changing or influencing the control of the contractor, or in connection with or
as a participant in any transaction having such purpose or effect, immediately upon
such acquisition shall be deemed to be the beneficial owner of the ownership
interest which may be acquired through the exercise or conversion of such
ownership interest or power;
(d)
Any person who in the ordinary course of business is a pledgee of ownership
interest under a written pledge agreement shall not be deemed to be the
beneficial owner of such pledged ownership interest until the pledgee has taken
all formal steps necessary which are required to declare a default and
determines that the power to vote or to direct the vote or to dispose or to
direct the disposition of such pledged ownership interest will be exercised;
except that:
(i)
The pledgee agreement is bona fide and was not entered into with the purpose
nor with the effect of changing or influencing the control of the contractor,
nor in connection with any transaction having such purpose or effect, including
persons meeting the conditions set forth in (b) of this subsection; and
(ii)
The pledgee agreement, prior to default, does not grant to the pledgee:
(A)
The power to vote or to direct the vote of the pledged ownership interest; or
(B)
The power to dispose or direct the disposition of the pledged ownership
interest, other than the grant of such power(s) pursuant to a pledge agreement
under which credit is extended and in which the pledgee is a broker or dealer.
(8)
"Capital portion of the rate" means the sum of the property and
financing allowance rate allocations, as established in part E of this chapter.
(9)
"Capitalization" means the recording of an expenditure as an asset.
(((9)))
(10) "Case mix" means a measure of the intensity of care and
services needed by the residents of a nursing facility or a group of residents
in the facility.
(((10)))
(11) "Case mix index" means a number representing the average
case mix of a nursing facility.
(((11)))
(12) "Case mix weight" means a numeric score that identifies
the relative resources used by a particular group of a nursing facility's
residents.
(((12)))
(13) "Contractor" means a person or entity licensed under
chapter 18.51 RCW to operate a medicare and medicaid certified nursing
facility, responsible for operational decisions, and contracting with the
department to provide services to medicaid recipients residing in the facility.
(((13)))
(14) "Default case" means no initial assessment has been
completed for a resident and transmitted to the department by the cut‑off
date, or an assessment is otherwise past due for the resident, under state and
federal requirements.
(((14)))
(15) "Department" means the department of social and health
services (DSHS) and its employees.
(((15)))
(16) "Depreciation" means the systematic distribution of the
cost or other basis of tangible assets, less salvage, over the estimated useful
life of the assets.
(((16)))
(17) "Direct care" means nursing care and related care
provided to nursing facility residents. Therapy care shall not be considered
part of direct care.
(((17)))
(18) "Direct care supplies" means medical, pharmaceutical, and
other supplies required for the direct care of a nursing facility's residents.
(((18)))
(19) "Entity" means an individual, partnership, corporation,
limited liability company, or any other association of individuals capable of
entering enforceable contracts.
(((19)))
(20) "Equity" means the net book value of all tangible and
intangible assets less the recorded value of all liabilities, as recognized and
measured in conformity with generally accepted accounting principles.
(((20)))
(21) "Facility" or "nursing facility" means a
nursing home licensed in accordance with chapter 18.51 RCW, excepting nursing
homes certified as institutions for mental diseases, or that portion of a
multiservice facility licensed as a nursing home, or that portion of a hospital
licensed in accordance with chapter 70.41 RCW which operates as a nursing home.
(((21)))
(22) "Fair market value" means the replacement cost of an
asset less observed physical depreciation on the date for which the market
value is being determined.
(((22)))
(23) "Financial statements" means statements prepared and
presented in conformity with generally accepted accounting principles
including, but not limited to, balance sheet, statement of operations,
statement of changes in financial position, and related notes.
(((23)))
(24) "Generally accepted accounting principles" means
accounting principles approved by the financial accounting standards board
(FASB).
(((24)))
(25) "Goodwill" means the excess of the price paid for a
nursing facility business over the fair market value of all net identifiable
tangible and intangible assets acquired, as measured in accordance with
generally accepted accounting principles.
(((25)))
(26) "Grouper" means a computer software product that groups
individual nursing facility residents into case mix classification groups based
on specific resident assessment data and computer logic.
(((26)))
(27) "Historical cost" means the actual cost incurred in
acquiring and preparing an asset for use, including feasibility studies,
architect's fees, and engineering studies.
(((27)))
(28) "Imprest fund" means a fund which is regularly
replenished in exactly the amount expended from it.
(((28)))
(29) "Joint facility costs" means any costs which represent
resources which benefit more than one facility, or one facility and any other
entity.
(((29)))
(30) "Lease agreement" means a contract between two parties
for the possession and use of real or personal property or assets for a
specified period of time in exchange for specified periodic payments.
Elimination (due to any cause other than death or divorce) or addition of any
party to the contract, expiration, or modification of any lease term in effect
on January 1, 1980, or termination of the lease by either party by any means
shall constitute a termination of the lease agreement. An extension or renewal
of a lease agreement, whether or not pursuant to a renewal provision in the
lease agreement, shall be considered a new lease agreement. A strictly formal
change in the lease agreement which modifies the method, frequency, or manner
in which the lease payments are made, but does not increase the total lease payment
obligation of the lessee, shall not be considered modification of a lease term.
(((30)))
(31) "Medical care program" or "medicaid program"
means medical assistance, including nursing care, provided under RCW 74.09.500
or authorized state medical care services.
(((31)))
(32) "Medical care recipient," "medicaid recipient,"
or "recipient" means an individual determined eligible by the
department for the services provided under chapter 74.09 RCW.
(((32)))
(33) "Minimum data set" means the overall data component of
the resident assessment instrument, indicating the strengths, needs, and
preferences of an individual nursing facility resident.
(((33)))
(34) "Net book value" means the historical cost of an asset
less accumulated depreciation.
(((34)))
(35) "Net invested funds" means the net book value of tangible
fixed assets employed by a contractor to provide services under the medical
care program, including land, buildings, and equipment as recognized and
measured in conformity with generally accepted accounting principles((, plus
an allowance for working capital which shall be five percent of the product of
the per patient day rate multiplied by the prior calendar year reported total
patient days of each contractor)).
(((35)))
(36) "Noncapital portion of the rate" means the sum of the direct
care, therapy care, operations, support services, and variable return rate
allocations, as established in part E of this chapter.
(37)
"Operating lease" means a lease under which rental or lease expenses
are included in current expenses in accordance with generally accepted
accounting principles.
(((36)))
(38) "Owner" means a sole proprietor, general or limited
partners, members of a limited liability company, and beneficial interest
holders of five percent or more of a corporation's outstanding stock.
(((37)))
(39) "Ownership interest" means all interests beneficially
owned by a person, calculated in the aggregate, regardless of the form which
such beneficial ownership takes.
(((38)))
(40) "Patient day" or "resident day" means a
calendar day of care provided to a nursing facility resident, regardless of
payment source, which will include the day of admission and exclude the day of
discharge; except that, when admission and discharge occur on the same day, one
day of care shall be deemed to exist. A "medicaid day" or
"recipient day" means a calendar day of care provided to a medicaid
recipient determined eligible by the department for services provided under
chapter 74.09 RCW, subject to the same conditions regarding admission and
discharge applicable to a patient day or resident day of care.
(((39)))
(41) "Professionally designated real estate appraiser" means
an individual who is regularly engaged in the business of providing real estate
valuation services for a fee, and who is deemed qualified by a nationally
recognized real estate appraisal educational organization on the basis of
extensive practical appraisal experience, including the writing of real estate
valuation reports as well as the passing of written examinations on valuation
practice and theory, and who by virtue of membership in such organization is
required to subscribe and adhere to certain standards of professional practice
as such organization prescribes.
(((40)))
(42) "Qualified therapist" means:
(a)
A mental health professional as defined by chapter 71.05 RCW;
(b)
A mental retardation professional who is a therapist approved by the department
who has had specialized training or one year's experience in treating or
working with the mentally retarded or developmentally disabled;
(c)
A speech pathologist who is eligible for a certificate of clinical competence
in speech pathology or who has the equivalent education and clinical
experience;
(d)
A physical therapist as defined by chapter 18.74 RCW;
(e)
An occupational therapist who is a graduate of a program in occupational
therapy, or who has the equivalent of such education or training; and
(f)
A respiratory care practitioner certified under chapter 18.89 RCW.
(((41)))
(43) "Rate" or "rate allocation" means the medicaid
per-patient-day payment amount for medicaid patients calculated in accordance
with the allocation methodology set forth in part E of this chapter.
(((42)))
(44) "Real property," whether leased or owned by the
contractor, means the building, allowable land, land improvements, and building
improvements associated with a nursing facility.
(((43)))
(45) "Rebased rate" or "cost-rebased rate" means a
facility-specific component rate assigned to a nursing facility for a
particular rate period established on desk-reviewed, adjusted costs reported
for that facility covering at least six months of a prior calendar year
designated as a year to be used for cost-rebasing payment rate allocations
under the provisions of this chapter.
(((44)))
(46) "Records" means those data supporting all financial
statements and cost reports including, but not limited to, all general and
subsidiary ledgers, books of original entry, and transaction documentation,
however such data are maintained.
(((45)))
(47) "Related organization" means an entity which is under
common ownership and/or control with, or has control of, or is controlled by,
the contractor.
(a)
"Common ownership" exists when an entity is the beneficial owner of
five percent or more ownership interest in the contractor and any other entity.
(b)
"Control" exists where an entity has the power, directly or
indirectly, significantly to influence or direct the actions or policies of an
organization or institution, whether or not it is legally enforceable and
however it is exercisable or exercised.
(((46)))
(48) "Related care" means only those services that are
directly related to providing direct care to nursing facility residents. These
services include, but are not limited to, nursing direction and supervision,
medical direction, medical records, pharmacy services, activities, and social
services.
(((47)))
(49) "Resident assessment instrument," including federally
approved modifications for use in this state, means a federally mandated,
comprehensive nursing facility resident care planning and assessment tool,
consisting of the minimum data set and resident assessment protocols.
(((48)))
(50) "Resident assessment protocols" means those components of
the resident assessment instrument that use the minimum data set to trigger or
flag a resident's potential problems and risk areas.
(((49)))
(51) "Resource utilization groups" means a case mix
classification system that identifies relative resources needed to care for an
individual nursing facility resident.
(((50)))
(52) "Restricted fund" means those funds the principal and/or
income of which is limited by agreement with or direction of the donor to a
specific purpose.
(((51)))
(53) "Secretary" means the secretary of the department of
social and health services.
(((52)))
(54) "Support services" means food, food preparation, dietary,
housekeeping, and laundry services provided to nursing facility residents.
(((53)))
(55) "Therapy care" means those services required by a nursing
facility resident's comprehensive assessment and plan of care, that are
provided by qualified therapists, or support personnel under their supervision,
including related costs as designated by the department.
(((54)))
(56) "Title XIX" or "medicaid" means the 1965
amendments to the social security act, P.L. 89‑07, as amended and the
medicaid program administered by the department.
Sec.
2. RCW
74.46.360 and 1997 c 277 s 1 are each amended to read as follows:
(1)
For all partial or whole rate periods after December 31, 1984, the cost basis
of land and depreciation base of depreciable assets 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, if applicable, which has been
incurred during periods that the assets have been used in or as a facility by
any contractor, such accumulated depreciation to be measured in accordance with
subsections (4), (5), and (6) 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
cost basis of land and depreciation base of depreciable assets will not exceed
such fair market value.
(2)
For new or replacement building construction or for substantial building
additions requiring the acquisition of land and which commenced to operate on
or after July 1, 1997, the department shall determine allowable land costs of
the additional land acquired for the replacement construction or building
additions to be the lesser of:
(a)
The contractor's or lessor's actual cost per square foot; or
(b)
The square foot land value as established by an appraisal that meets the latest
publication of the Uniform Standards of Professional Appraisal Practice (USPAP)
and the financial institutions reform, recovery, and enhancement act (FIRREA).
(3)
Subject to the provisions of subsection (2) of this section, if, in the course
of financing a project, an arm's-length lender has ordered a Uniform Standards
of Professional Appraisal Practice appraisal on the land that meets financial
institutions reform, recovery, and enhancement act standards and the
arm's-length lender has accepted the ordered appraisal, the department shall
accept the appraisal value as allowable land costs for calculation of payment.
If
the contractor or lessor is unable or unwilling to provide or cause to be
provided to the department, or the department is unable to obtain from the
arm's-length lender, a lender-approved appraisal that meets the standards of
the Uniform Standards of Professional Appraisal Practice and financial institutions
reform, recovery, and enhancement act, the department shall order such an
appraisal and accept the appraisal as the allowable land costs. If the
department orders the Uniform Standards of Professional Appraisal Practice and
financial institutions reform, recovery, and enhancement act appraisal, the
contractor shall immediately reimburse the department for the costs incurred.
(4)
The historical cost of depreciable and nondepreciable donated assets, or of
depreciable and nondepreciable 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.
(5)
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.
(6)(a)
For facilities, other than those described under subsection (2) of this
section, operating prior to July 1, 1997, where land or depreciable assets are
acquired that were used in the medical care program subsequent to January 1,
1980, the cost basis or 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)
The provisions of (a) of this subsection 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 cost basis or 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. For all partial or whole rate periods after July 17, 1984, this
subsection is inoperative for any transfer of ownership of any asset, depreciable
or nondepreciable, occurring on or after July 18, 1984, leaving (a) of this
subsection to apply alone to such transfers: PROVIDED, HOWEVER, That this
subsection shall apply to transfers of ownership of assets occurring prior to
January 1, 1985, if the costs of such assets have never been reimbursed under
medicaid cost reimbursement on an owner-operated basis or as a related-party
lease: PROVIDED FURTHER, That for any contractor that can document in writing
an enforceable agreement for the purchase of a nursing home dated prior to July
18, 1984, and submitted to the department prior to January 1, 1988, the cost
basis of allowable land and the depreciation base of the nursing home, for
rates established after July 18, 1984, shall not exceed the fair market value
of the assets at the date of purchase as determined by the department of
general administration through an appraisal procedure. For medicaid cost
reimbursement purposes, an agreement to purchase a nursing home dated prior to
July 18, 1984, is enforceable, even though such agreement contains no legal
description of the real property involved, notwithstanding the statute of
frauds or any other provision of law.
(c)
In the case of land or depreciable assets leased by the same contractor since
January 1, 1980, in an arm's-length lease, and purchased by the
lessee/contractor, the lessee/contractor shall have the option:
(i)
To have the provisions of subsection (b) of this section apply to the purchase;
or
(ii)
To have the reimbursement for property and ((return on investment continue
to be)) financing allowance calculated pursuant to ((the
provisions contained in RCW 74.46.530(1) (e) and (f))) this chapter
based upon the provisions of the lease in existence on the date of the
purchase, but only if the purchase date meets one of the following criteria:
(A)
The purchase date is after the lessor has declared bankruptcy or has defaulted
in any loan or mortgage held against the leased property;
(B)
The purchase date is within one year of the lease expiration or renewal date
contained in the lease;
(C)
The purchase date is after a rate setting for the facility in which the
reimbursement rate set pursuant to this chapter no longer is equal to or
greater than the actual cost of the lease; or
(D)
The purchase date is within one year of any purchase option in existence on
January 1, 1988.
(d)
For all rate periods past or future where land or depreciable assets are
acquired from a related organization, the contractor's cost basis and
depreciation base shall not exceed the base the related organization had or
would have had under a contract with the department.
(e)
Where the land or depreciable asset is a donation or distribution between
related organizations, the cost basis or depreciation base shall be the lesser
of (i) fair market value, less salvage value, or (ii) the cost basis or
depreciation base the related organization had or would have had for the asset
under a contract with the department.
Sec.
3. RCW
74.46.421 and 1998 c 322 s 18 are each amended to read as follows:
(1)
The purpose of part E of this chapter is to determine nursing facility medicaid
payment rates that, in the aggregate for all participating nursing facilities,
are in accordance with the biennial appropriations act.
(2)(a)
The department shall use the nursing facility medicaid payment rate
methodologies described in this chapter to determine initial component rate
allocations for each medicaid nursing facility.
(b)
The initial component rate allocations shall be subject to adjustment as
provided in this section in order to assure that the state-wide average payment
rate to nursing facilities is less than or equal to the state-wide average
payment rate specified in the biennial appropriations act.
(3)
Nothing in this chapter shall be construed as creating a legal right or
entitlement to any payment that (a) has not been adjusted under this section or
(b) would cause the state-wide average payment rate to exceed the state-wide
average payment rate specified in the biennial appropriations act.
(4)(a)
The state-wide average payment rate for the capital portion of the rate
for any state fiscal year under the nursing facility medicaid payment system,
weighted by patient days, shall not exceed the annual state-wide weighted
average nursing facility payment rate for the capital portion of the rate
identified for that fiscal year in the biennial appropriations act.
(b)
If the department determines that the weighted average nursing facility payment
rate for the capital portion of the rate calculated in accordance with
this chapter is likely to exceed the weighted average nursing facility payment
rate for the capital portion of the rate identified in the biennial
appropriations act, then the department shall adjust all nursing facility property
and financing allowance payment rates proportional to the amount by which
the weighted average rate allocations would otherwise exceed the budgeted capital
portion of the rate amount. Any such adjustments shall only be made prospectively,
not retrospectively, and shall be applied proportionately to each component
rate allocation for each facility.
(5)(a)
The state-wide average payment rate for the noncapital portion of the rate for
any state fiscal year under the nursing facility payment system, weighted by
patient days, shall not exceed the annual state-wide weighted average nursing
facility payment rate for the noncapital portion of the rate identified for
that fiscal year in the biennial appropriations act.
(b)
If the department determines that the weighted average nursing facility payment
rate for the noncapital portion of the rate calculated in accordance with this
chapter is likely to exceed the weighted average nursing facility payment rate
for the noncapital portion of the rate identified in the biennial
appropriations act, then the department shall adjust all nursing facility
direct care, therapy care, support services, operations, and variable return
payment rates proportional to the amount by which the weighted average rate
allocations would otherwise exceed the budgeted noncapital portion of the rate
amount. Any such adjustments shall only be made prospectively, not
retrospectively, and shall be applied proportionately to each direct care,
therapy care, support services, operations, and variable return rate allocation
for each facility.
Sec.
4. RCW
74.46.431 and 1998 c 322 s 19 are each amended to read as follows:
(1)
Effective ((October 1, 1998)) July 1, 1999, nursing facility
medicaid payment rate allocations shall be facility-specific and shall have ((six))
seven components: Direct care, therapy care, support services,
operations, property, financing allowance, and variable return ((on
investment)). The department shall establish and adjust each of these
components, as provided in this section and elsewhere in this chapter, for each
medicaid nursing facility in this state.
(2)
All component rate allocations shall be based upon a minimum facility occupancy
of eighty-five percent of licensed beds, regardless of how many beds are set up
or in use.
(3)
Information and data sources used in determining medicaid payment rate
allocations, including formulas, procedures, cost report periods, resident assessment
instrument formats, resident assessment methodologies, and resident
classification and case mix weighting methodologies, may be substituted or
altered from time to time as determined by the department.
(4)(a)
Direct care component rate allocations shall be established using adjusted cost
report data covering at least six months. Adjusted cost report data from 1996
will be used for October 1, 1998, through June 30, 2001, direct care component
rate allocations; adjusted cost report data from 1999 will be used for July 1,
2001, through June 30, 2004, direct care component rate allocations.
(b)
Direct care component rate allocations based on 1996 cost report data shall be
adjusted annually for economic trends and conditions by a factor or factors
defined in the biennial appropriations act. A different economic trends and
conditions adjustment factor or factors may be defined in the biennial
appropriations act for facilities whose direct care component rate is set equal
to their adjusted June 30, 1998, rate, as provided in RCW 74.46.506(5)(k).
(c)
Direct care component rate allocations based on 1999 cost report data shall be
adjusted annually for economic trends and conditions by a factor or factors
defined in the biennial appropriations act. A different economic trends and
conditions adjustment factor or factors may be defined in the biennial
appropriations act for facilities whose direct care component rate is set equal
to their adjusted June 30, 1998, rate, as provided in RCW 74.46.506(5)(k).
(5)(a)
Therapy care component rate allocations shall be established using adjusted
cost report data covering at least six months. Adjusted cost report data from
1996 will be used for October 1, 1998, through June 30, 2001, therapy care
component rate allocations; adjusted cost report data from 1999 will be used
for July 1, 2001, through June 30, 2004, therapy care component rate
allocations.
(b)
Therapy care component rate allocations shall be adjusted annually for economic
trends and conditions by a factor or factors defined in the biennial
appropriations act.
(6)(a)
Support services component rate allocations shall be established using adjusted
cost report data covering at least six months. Adjusted cost report data from
1996 shall be used for October 1, 1998, through June 30, 2001, support services
component rate allocations; adjusted cost report data from 1999 shall be used
for July 1, 2001, through June 30, 2004, support services component rate
allocations.
(b)
Support services component rate allocations shall be adjusted annually for
economic trends and conditions by a factor or factors defined in the biennial
appropriations act.
(7)(a)
Operations component rate allocations shall be established using adjusted cost
report data covering at least six months. Adjusted cost report data from 1996
shall be used for October 1, 1998, through June 30, 2001, operations component
rate allocations; adjusted cost report data from 1999 shall be used for July 1,
2001, through June 30, 2004, operations component rate allocations.
(b)
Operations component rate allocations shall be adjusted annually for economic
trends and conditions by a factor or factors defined in the biennial
appropriations act.
(8)
For July 1, 1998, through September 30, 1998, a facility's property and return
on investment component rates shall be the facility's June 30, 1998, property
and return on investment component rates, without increase. For October 1,
1998, through June 30, 1999, a facility's property and return on investment
component rates shall be rebased utilizing 1997 adjusted cost report data
covering at least six months of data.
(9)
Total payment rates under the nursing facility medicaid payment system shall
not exceed facility rates charged to the general public for comparable services.
(10)
Medicaid contractors shall pay to all facility staff a minimum wage of the
greater of five dollars and fifteen cents per hour or the federal minimum wage.
(11)
The department shall establish in rule procedures, principles, and conditions
for determining component rate allocations for facilities in circumstances not
directly addressed by this chapter, including but not limited to: The need to
prorate inflation for partial-period cost report data, newly constructed
facilities, existing facilities entering the medicaid program for the first
time or after a period of absence from the program, existing facilities with
expanded new bed capacity, existing medicaid facilities following a change of
ownership of the nursing facility business, facilities banking beds or
converting beds back into service, facilities having less than six months of
either resident assessment, cost report data, or both, under the current
contractor prior to rate setting, and other circumstances.
(12)
The department shall establish in rule procedures, principles, and conditions,
including necessary threshold costs, for adjusting rates to reflect capital
improvements or new requirements imposed by the department or the federal
government. Any such rate adjustments are subject to the provisions of RCW
74.46.421.
Sec.
5. RCW
74.46.506 and 1998 c 322 s 25 are each amended to read as follows:
(1)
The direct care component rate allocation corresponds to the provision of
nursing care for one resident of a nursing facility for one day, including
direct care supplies. Therapy services and supplies, which correspond to the
therapy care component rate, shall be excluded. The direct care component rate
includes elements of case mix determined consistent with the principles of this
section and other applicable provisions of this chapter.
(2)
Beginning October 1, 1998, the department shall determine and update quarterly
for each nursing facility serving medicaid residents a facility-specific
per-resident day direct care component rate allocation, to be effective on the
first day of each calendar quarter. In determining direct care component rates
the department shall utilize, as specified in this section, minimum data set
resident assessment data for each resident of the facility, as transmitted to,
and if necessary corrected by, the department in the resident assessment
instrument format approved by federal authorities for use in this state.
(3)
The department may question the accuracy of assessment data for any resident
and utilize corrected or substitute information, however derived, in
determining direct care component rates. The department is authorized to
impose civil fines and to take adverse rate actions against a contractor, as
specified by the department in rule, in order to obtain compliance with
resident assessment and data transmission requirements and to ensure accuracy.
(4)
Cost report data used in setting direct care component rate allocations shall
be 1996 and 1999, for rate periods as specified in RCW 74.46.431(4)(a).
(5)
Beginning October 1, 1998, the department shall rebase each nursing facility's
direct care component rate allocation as described in RCW 74.46.431, adjust its
direct care component rate allocation for economic trends and conditions as
described in RCW 74.46.431, and update its medicaid average case mix index,
consistent with the following:
(a)
Reduce total direct care costs reported by each nursing facility for the
applicable cost report period specified in RCW 74.46.431(4)(a) to reflect any
department adjustments, and to eliminate reported resident therapy costs and
adjustments, in order to derive the facility's total allowable direct care
cost;
(b)
Divide each facility's total allowable direct care cost by its adjusted
resident days for the same report period, increased if necessary to a minimum
occupancy of eighty-five percent; that is, the greater of actual or imputed
occupancy at eighty-five percent of licensed beds, to derive the facility's
allowable direct care cost per resident day;
(c)
Adjust the facility's per resident day direct care cost by the applicable
factor specified in RCW 74.46.431(4) (b) and (c) to derive its adjusted
allowable direct care cost per resident day;
(d)
Divide each facility's adjusted allowable direct care cost per resident day by
the facility average case mix index for the applicable quarters specified by
RCW 74.46.501(7)(b) to derive the facility's allowable direct care cost per
case mix unit;
(e)
Divide nursing facilities into two peer groups: Those located in metropolitan
statistical areas as determined and defined by the United States office of
management and budget or other appropriate agency or office of the federal
government, and those not located in a metropolitan statistical area;
(f)
Array separately the allowable direct care cost per case mix unit for all
metropolitan statistical area and for all nonmetropolitan statistical area
facilities, and determine the median allowable direct care cost per case mix
unit for each peer group;
(g)
Except as provided in (k) of this subsection, from October 1, 1998, through
June 30, 2000, determine each facility's quarterly direct care component rate
as follows:
(i)
Any facility whose allowable cost per case mix unit is less than eighty-five
percent of the facility's peer group median established under (f) of this
subsection shall be assigned a cost per case mix unit equal to eighty-five
percent of the facility's peer group median, and shall have a direct care
component rate allocation equal to the facility's assigned cost per case mix
unit multiplied by that facility's medicaid average case mix index from the
applicable quarter specified in RCW 74.46.501(7)(c);
(ii)
Any facility whose allowable cost per case mix unit is greater than one hundred
fifteen percent of the peer group median established under (f) of this
subsection shall be assigned a cost per case mix unit equal to one hundred
fifteen percent of the peer group median, and shall have a direct care
component rate allocation equal to the facility's assigned cost per case mix
unit multiplied by that facility's medicaid average case mix index from the
applicable quarter specified in RCW 74.46.501(7)(c);
(iii)
Any facility whose allowable cost per case mix unit is between eighty-five and
one hundred fifteen percent of the peer group median established under (f) of
this subsection shall have a direct care component rate allocation equal to the
facility's allowable cost per case mix unit multiplied by that facility's
medicaid average case mix index from the applicable quarter specified in RCW
74.46.501(7)(c);
(h)
Except as provided in (k) of this subsection, from July 1, 2000, through June
30, 2002, determine each facility's quarterly direct care component rate as
follows:
(i)
Any facility whose allowable cost per case mix unit is less than ninety percent
of the facility's peer group median established under (f) of this subsection
shall be assigned a cost per case mix unit equal to ninety percent of the
facility's peer group median, and shall have a direct care component rate
allocation equal to the facility's assigned cost per case mix unit multiplied
by that facility's medicaid average case mix index from the applicable quarter
specified in RCW 74.46.501(7)(c);
(ii)
Any facility whose allowable cost per case mix unit is greater than one hundred
ten percent of the peer group median established under (f) of this subsection
shall be assigned a cost per case mix unit equal to one hundred ten percent of
the peer group median, and shall have a direct care component rate allocation
equal to the facility's assigned cost per case mix unit multiplied by that
facility's medicaid average case mix index from the applicable quarter
specified in RCW 74.46.501(7)(c);
(iii)
Any facility whose allowable cost per case mix unit is between ninety and one
hundred ten percent of the peer group median established under (f) of this
subsection shall have a direct care component rate allocation equal to the
facility's allowable cost per case mix unit multiplied by that facility's
medicaid average case mix index from the applicable quarter specified in RCW
74.46.501(7)(c);
(i)
From July 1, 2002, through June 30, 2004, determine each facility's quarterly
direct care component rate as follows:
(i)
Any facility whose allowable cost per case mix unit is less than ninety-five
percent of the facility's peer group median established under (f) of this
subsection shall be assigned a cost per case mix unit equal to ninety-five
percent of the facility's peer group median, and shall have a direct care
component rate allocation equal to the facility's assigned cost per case mix
unit multiplied by that facility's medicaid average case mix index from the
applicable quarter specified in RCW 74.46.501(7)(c);
(ii)
Any facility whose allowable cost per case mix unit is greater than one hundred
five percent of the peer group median established under (f) of this subsection
shall be assigned a cost per case mix unit equal to one hundred five percent of
the peer group median, and shall have a direct care component rate allocation
equal to the facility's assigned cost per case mix unit multiplied by that
facility's medicaid average case mix index from the applicable quarter
specified in RCW 74.46.501(7)(c);
(iii)
Any facility whose allowable cost per case mix unit is between ninety-five and
one hundred five percent of the peer group median established under (f) of this
subsection shall have a direct care component rate allocation equal to the
facility's allowable cost per case mix unit multiplied by that facility's
medicaid average case mix index from the applicable quarter specified in RCW
74.46.501(7)(c);
(j)
Beginning July 1, 2004, determine each facility's quarterly direct care
component rate by multiplying the facility's peer group median allowable direct
care cost per case mix unit by that facility's medicaid average case mix index
from the applicable quarter as specified in RCW 74.46.501(7)(c).
(k)(i)
Between October 1, 1998, and June 30, 2000, the department shall compare each
facility's direct care component rate allocation calculated under (g) of this
subsection with the facility's nursing services component rate in effect on
June 30, 1998, less therapy costs, plus any exceptional care offsets as
reported on the cost report, adjusted for economic trends and conditions as
provided in RCW 74.46.431. A facility shall receive the higher of the two
rates;
(ii)
Between July 1, 2000, and June 30, 2002, the department shall compare each
facility's direct care component rate allocation calculated under (h) of this
subsection with the facility's direct care component rate in effect on June 30,
2000. A facility shall receive the higher of the two rates.
(6)
The direct care component rate allocations calculated in accordance with this
section shall be adjusted to the extent necessary to comply with RCW
74.46.421. ((If the department determines that the weighted average rate
allocations for all rate components for all facilities is likely to exceed the
weighted average total rate specified in the state biennial appropriations act,
the department shall adjust the rate allocations calculated in this section
proportional to the amount by which the total weighted average rate allocations
would otherwise exceed the budgeted level. Such adjustments shall only be made
prospectively, not retrospectively.))
Sec.
6. RCW
74.46.511 and 1998 c 322 s 26 are each amended to read as follows:
(1)
The therapy care component rate allocation corresponds to the provision of
medicaid one-on-one therapy provided by a qualified therapist as defined in
this chapter, including therapy supplies and therapy consultation, for one day
for one medicaid resident of a nursing facility. The therapy care component
rate allocation for October 1, 1998, through June 30, 2001, shall be based on
adjusted therapy costs and days from calendar year 1996. The therapy component
rate allocation for July 1, 2001, through June 30, 2004, shall be based on
adjusted therapy costs and days from calendar year 1999. The therapy care
component rate shall be adjusted for economic trends and conditions as
specified in RCW 74.46.431(5)(b), and shall be determined in accordance with this
section.
(2)
In rebasing, as provided in RCW 74.46.431(5)(a), the department shall take from
the cost reports of facilities the following reported information:
(a)
Direct one-on-one therapy charges for all residents by payer including charges
for supplies;
(b)
The total units or modules of therapy care for all residents by type of therapy
provided, for example, speech or physical. A unit or module of therapy care is
considered to be fifteen minutes of one-on-one therapy provided by a qualified
therapist or support personnel; and
(c)
Therapy consulting expenses for all residents.
(3)
The department shall determine for all residents the total cost per unit of
therapy for each type of therapy by dividing the total adjusted one-on-one
therapy expense for each type by the total units provided for that therapy
type.
(4)
The department shall divide medicaid nursing facilities in this state into two
peer groups:
(a)
Those facilities located within a metropolitan statistical area; and
(b)
Those not located in a metropolitan statistical area.
Metropolitan
statistical areas and nonmetropolitan statistical areas shall be as determined
by the United States office of management and budget or other applicable
federal office. The department shall array the facilities in each peer group
from highest to lowest based on their total cost per unit of therapy for each
therapy type. The department shall determine the median total cost per unit of
therapy for each therapy type and add ten percent of median total cost per unit
of therapy. The cost per unit of therapy for each therapy type at a nursing
facility shall be the lesser of its cost per unit of therapy for each therapy
type or the median total cost per unit plus ten percent for each therapy type
for its peer group.
(5)
The department shall calculate each nursing facility's therapy care component
rate allocation as follows:
(a)
To determine the allowable total therapy cost for each therapy type, the
allowable cost per unit of therapy for each type of therapy shall be multiplied
by the total therapy units for each type of therapy;
(b)
The medicaid allowable one-on-one therapy expense shall be calculated taking
the allowable total therapy cost for each therapy type times the medicaid
percent of total therapy charges for each therapy type;
(c)
The medicaid allowable one-on-one therapy expense for each therapy type shall
be divided by total adjusted medicaid days to arrive at the medicaid one-on-one
therapy cost per patient day for each therapy type;
(d)
The medicaid one-on-one therapy cost per patient day for each therapy type
shall be multiplied by total adjusted patient days for all residents to
calculate the total allowable one-on-one therapy expense. The lesser of the
total allowable therapy consultant expense for the therapy type or a reasonable
percentage of allowable therapy consultant expense for each therapy type, as
established in rule by the department, shall be added to the total allowable
one-on-one therapy expense to determine the allowable therapy cost for each
therapy type;
(e)
The allowable therapy cost for each therapy type shall be added together, the
sum of which shall be the total allowable therapy expense for the nursing
facility;
(f)
The total allowable therapy expense will be divided by the greater of adjusted
total patient days from the cost report on which the therapy expenses were
reported, or patient days at eighty-five percent occupancy of licensed beds.
The outcome shall be the nursing facility's therapy care component rate allocation.
(6)
The therapy care component rate allocations calculated in accordance with this
section shall be adjusted to the extent necessary to comply with RCW
74.46.421. ((If the department determines that the weighted average rate
allocations for all rate components for all facilities is likely to exceed the
weighted average total rate specified in the state biennial appropriations act,
the department shall adjust the rate allocations calculated in this section
proportional to the amount by which the total weighted average rate allocations
would otherwise exceed the budgeted level. Such adjustments shall only be made
prospectively, not retrospectively.))
Sec.
7. RCW
74.46.515 and 1998 c 322 s 27 are each amended to read as follows:
(1)
The support services component rate allocation corresponds to the provision of
food, food preparation, dietary, housekeeping, and laundry services for one
resident for one day.
(2)
Beginning October 1, 1998, the department shall determine each medicaid nursing
facility's support services component rate allocation using cost report data
specified by RCW 74.46.431(6).
(3)
To determine each facility's support services component rate allocation, the
department shall:
(a)
Array facilities' adjusted support services costs per adjusted resident day for
each facility from facilities' cost reports from the applicable report year,
for facilities located within a metropolitan statistical area, and for those
not located in any metropolitan statistical area and determine the median
adjusted cost for each peer group;
(b)
Set each facility's support services component rate at the lower of the
facility's per resident day adjusted support services costs from the applicable
cost report period or the adjusted median per resident day support services
cost for that facility's peer group, either metropolitan statistical area or
nonmetropolitan statistical area, plus ten percent; and
(c)
Adjust each facility's support services component rate for economic trends and
conditions as provided in RCW 74.46.431(6).
(4)
The support services component rate allocations calculated in accordance with
this section shall be adjusted to the extent necessary to comply with RCW
74.46.421. ((If the department determines that the weighted average rate
allocations for all rate components for all facilities is likely to exceed the
weighted average total rate specified in the state biennial appropriations act,
the department shall adjust the rate allocations calculated in this section
proportional to the amount by which the total weighted average rate allocations
would otherwise exceed the budgeted level. Such adjustments shall only be made
prospectively, not retrospectively.))
Sec.
8. RCW
74.46.521 and 1998 c 322 s 28 are each amended to read as follows:
(1)
The operations component rate allocation corresponds to the general operation
of a nursing facility for one resident for one day, including but not limited
to management, administration, utilities, office supplies, accounting and
bookkeeping, minor building maintenance, minor equipment repairs and
replacements, and other supplies and services, exclusive of direct care,
therapy care, support services, property, financing allowance, and variable
return ((on investment)).
(2)
Beginning October 1, 1998, the department shall determine each medicaid nursing
facility's operations component rate allocation using cost report data
specified by RCW 74.46.431(7)(a).
(3)
To determine each facility's operations component rate the department shall:
(a)
Array facilities' adjusted general operations costs per adjusted resident day
for each facility from facilities' cost reports from the applicable report
year, for facilities located within a metropolitan statistical area and for
those not located in a metropolitan statistical area and determine the median
adjusted cost for each peer group;
(b)
Set each facility's operations component rate at the lower of the facility's
per resident day adjusted operations costs from the applicable cost report
period or the adjusted median per resident day general operations cost for that
facility's peer group, metropolitan statistical area or nonmetropolitan statistical
area; and
(c)
Adjust each facility's operations component rate for economic trends and
conditions as provided in RCW 74.46.431(7)(b).
(4)
The operations component rate allocations calculated in accordance with this
section shall be adjusted to the extent necessary to comply with RCW
74.46.421. ((If the department determines that the weighted average rate
allocations for all rate components for all facilities is likely to exceed the
weighted average total rate specified in the state biennial appropriations act,
the department shall adjust the rate allocations calculated in this section
proportional to the amount by which the total weighted average rate allocations
would otherwise exceed the budgeted level. Such adjustments shall only be made
prospectively, not retrospectively.))
NEW
SECTION. Sec. 9. (1)
The department shall establish for each medicaid nursing facility a variable
return component rate allocation. In determining the variable return allowance:
(a)
The variable return array and percentage assigned at the October 1, 1998, rate
setting shall remain in effect until June 30, 2001.
(b)
The department shall then compute the variable return allowance by multiplying
the appropriate percentage amounts, which shall not be less than one percent
and not greater than four percent, by the sum of the facility's direct care,
therapy care, support services, and operations rate components. The percentage
amounts will be based on groupings of facilities according to the rankings
prescribed in (a) of this subsection, as applicable. Those groups of
facilities with lower per diem costs shall receive higher percentage amounts
than those with higher per diem costs.
(2)
The variable return rate allocation calculated in accordance with this section
shall be adjusted to the extent necessary to comply with RCW 74.46.421.
Sec.
10. 1998
c 322 s 29 (uncodified) is amended to read as follows:
(1)
The property component rate allocation for each facility shall be determined by
dividing the sum of the reported allowable prior period actual depreciation,
subject to RCW 74.46.310 through 74.46.380, adjusted for any capitalized
additions or replacements approved by the department, and the retained savings
from such cost center, by the greater of a facility's total resident days for
the facility in the prior period or resident days as calculated on eighty-five
percent facility occupancy. If a capitalized addition or retirement of an
asset will result in a different licensed bed capacity during the ensuing
period, the prior period total resident days used in computing the property
component rate shall be adjusted to anticipated resident day level.
(2)
A nursing facility's property component rate allocation shall be rebased
annually, effective July 1st or October 1st as applicable, in accordance with
this section and this chapter.
(3)
When a certificate of need for a new facility is requested, the department, in
reaching its decision, shall take into consideration per-bed land and building
construction costs for the facility which shall not exceed a maximum to be
established by the secretary.
(4)
For the purpose of calculating a nursing facility's property component rate, if
a contractor elects to bank licensed beds or to convert banked beds to active
service, under chapter 70.38 RCW, the department shall use the facility's
anticipated resident occupancy level subsequent to the decrease or increase in
licensed bed capacity. However, in no case shall the department use less than
eighty-five percent occupancy of the facility's licensed bed capacity after
banking or conversion.
(5)
The property component rate allocations calculated in accordance with this
section shall be adjusted to the extent necessary to comply with ((section
18 of this act)) RCW 74.46.421. ((If the department determines
that the weighted average rate allocations for all rate components for all
facilities is likely to exceed the weighted average total rate specified in the
state biennial appropriations act, the department shall adjust the rate
allocations calculated in this section proportional to the amount by which the
total weighted average rate allocations would otherwise exceed the budgeted
level. Such adjustments shall only be made prospectively, not retrospectively.))
NEW
SECTION. Sec. 11. (1)
Beginning July 1, 1999, the department shall establish for each medicaid
nursing facility a financing allowance component rate allocation. The
financing allowance component rate shall be rebased annually, effective July
1st, in accordance with the provisions of this section and this chapter.
(2)
The financing allowance shall be determined by multiplying the net invested
funds of each facility by .10, and dividing by the greater of a nursing
facility's total resident days from the most recent cost report period or
resident days calculated on eighty-five percent facility occupancy. However,
assets acquired on or after the effective date of this section shall be grouped
in a separate financing allowance calculation that shall be multiplied by
.085. The financing allowance factor of .085 shall not be applied to the net
invested funds pertaining to new construction or major renovations receiving
certificate of need approval or an exemption from certificate of need
requirements under chapter 70.38 RCW, or to working drawings that have been
submitted to the department of health for construction review approval, prior
to the effective date of this section. If a capitalized addition or retirement
of an asset will result in a different licensed bed capacity during the ensuing
period, the prior period total resident days used in computing the financing
allowance shall be adjusted to the greater of the anticipated resident day
level or eighty-five percent of the new licensed bed capacity.
(3)
In computing the portion of net invested funds representing the net book value
of tangible fixed assets, the same assets, depreciation bases, lives, and
methods referred to in RCW 74.46.330, 74.46.350, 74.46.360, 74.46.370, and
74.46.380, including owned and leased assets, shall be utilized, except that
the capitalized cost of land upon which the facility is located and such other
contiguous land which is reasonable and necessary for use in the regular course
of providing resident care shall also be included. Subject to provisions and
limitations contained in this chapter, for land purchased by owners or lessors
before July 18, 1984, capitalized cost of land shall be the buyer's capitalized
cost. For all partial or whole rate periods after July 17, 1984, if the land
is purchased after July 17, 1984, capitalized cost shall be that of the owner
of record on July 17, 1984, or buyer's capitalized cost, whichever is lower.
In the case of leased facilities where the net invested funds are unknown or
the contractor is unable to provide necessary information to determine net invested
funds, the secretary shall have the authority to determine an amount for net
invested funds based on an appraisal conducted according to RCW 74.46.360(1).
(4)
For the purpose of calculating a nursing facility's financing allowance
component rate, if a contractor elects to bank licensed beds or to convert
banked beds to active service, under chapter 70.38 RCW, the department shall
use the facility's anticipated resident occupancy level subsequent to the
decrease or increase in licensed bed capacity. However, in no case shall the
department use less than eighty-five percent occupancy of the facility's
licensed bed capacity after banking or conversion.
(5)
The financing allowance rate allocation calculated in accordance with this
section shall be adjusted to the extent necessary to comply with RCW 74.46.421.
NEW
SECTION. Sec. 12. (1)
In the case of a facility that was leased by the contractor as of January 1,
1980, in an arm's-length agreement, which continues to be leased under the same
lease agreement, and for which the annualized lease payment, plus any interest
and depreciation expenses associated with contractor-owned assets, for the
period covered by the prospective rates, divided by the contractor's total
resident days, minus the property component rate allocation, is more than the
sum of the financing allowance and the variable return rate determined
according to this chapter, the following shall apply:
(a)
The financing allowance shall be recomputed substituting the fair market value
of the assets as of January 1, 1982, as determined by the department of general
administration through an appraisal procedure, less accumulated depreciation on
the lessor's assets since January 1, 1982, for the net book value of the assets
in determining net invested funds for the facility. A determination by the
department of general administration of fair market value shall be final unless
the procedure used to make such a determination is shown to be arbitrary and
capricious.
(b)
The sum of the financing allowance computed under (a) of this subsection and
the variable return rate shall be compared to the annualized lease payment,
plus any interest and depreciation associated with contractor-owned assets, for
the period covered by the prospective rates, divided by the contractor's total
resident days, minus the property component rate. The lesser of the two
amounts shall be called the alternate return on investment rate.
(c)
The sum of the financing allowance and variable return rate determined
according to this chapter or the alternate return on investment rate, whichever
is greater, shall be added to the prospective rates of the contractor.
(2)
In the case of a facility that was leased by the contractor as of January 1,
1980, in an arm's-length agreement, if the lease is renewed or extended under a
provision of the lease, the treatment provided in subsection (1) of this
section shall be applied, except that in the case of renewals or extensions
made subsequent to April 1, 1985, reimbursement for the annualized lease
payment shall be no greater than the reimbursement for the annualized lease
payment for the last year prior to the renewal or extension of the lease.
(3)
The alternate return on investment component rate allocations calculated in
accordance with this section shall be adjusted to the extent necessary to
comply with RCW 74.46.421.
Sec.
13. RCW
74.46.350 and 1980 c 177 s 35 are each amended to read as follows:
(1)
Buildings, land improvements, and fixed equipment shall be depreciated using
the straight-line method of depreciation. For new or replacement building
construction or for major renovations, either of which receives certificate of
need approval or certificate of need exemption under chapter 70.38 RCW on or
after the effective date of this section, the number of years used to
depreciate fixed equipment shall be the same number of years as the life of the
building to which it is affixed. Major-minor equipment shall be
depreciated using either the straight-line method, the sum-of-the-years' digits
method, or declining balance method not to exceed one hundred fifty percent of
the straight line rate. Contractors who have elected to take either the
sum-of-the-years' digits method or the declining balance method of depreciation
on major-minor equipment may change to the straight-line method without
permission of the department.
(2)
The annual provision for depreciation shall be reduced by the portion allocable
to use of the asset for purposes which are neither necessary nor related to
patient care.
(3)
No further depreciation shall be claimed after an asset has been fully
depreciated unless a new depreciation base is established pursuant to RCW
74.46.360.
Sec.
14. RCW
74.46.370 and 1997 c 277 s 2 are each amended to read as follows:
(1)
Except for new buildings, major remodels, and major repair projects, as defined
in subsection (2) of this section, the contractor shall use lives which reflect
the estimated actual useful life of the asset and which shall be no shorter
than guideline lives as established by the department. Lives shall be measured
from the date on which the assets were first used in the medical care program
or from the date of the most recent arm's-length acquisition of the asset,
whichever is more recent. In cases where RCW 74.46.360(6)(a) does apply, the
shortest life that may be used for buildings is the remaining useful life under
the prior contract. In all cases, lives shall be extended to reflect periods,
if any, when assets were not used in or as a facility.
(2)
Effective July 1, 1997, for asset acquisitions and new facilities, major
remodels, and major repair projects that begin operations on or after July 1,
1997, the department shall use the most current edition of Estimated Useful
Lives of Depreciable Hospital Assets, or as it may be renamed, published by the
American Hospital Publishing, Inc., an American hospital association company,
for determining the useful life of new buildings, major remodels, and major
repair projects, however, the shortest life that may be used for new buildings receiving
certificate of need approval or certificate of need exemptions under chapter
70.38 RCW on or after the effective date of this section, is ((thirty))
forty years. New buildings, major remodels, and major repair projects
include those projects that meet or exceed the expenditure minimum established
by the department of health pursuant to chapter 70.38 RCW.
(3)
Building improvements, other than major remodels and major repairs, shall be
depreciated over the remaining useful life of the building, as modified by the
improvement.
(4)
Improvements to leased property which are the responsibility of the contractor
under the terms of the lease shall be depreciated over the useful life of the
improvement.
(5)
A contractor may change the estimate of an asset's useful life to a longer life
for purposes of depreciation.
(6)
For new or replacement building construction or for major renovations, either
of which receives certificate of need approval or certificate of need exemption
under chapter 70.38 RCW on or after the effective date of this section, the
number of years used to depreciate fixed equipment shall be the same number of
years as the life of the building to which it is affixed.
NEW
SECTION. Sec. 15. If a
contractor experiences an increase in state or county property taxes as a
result of new building construction, replacement building construction, or
substantial building additions that require the acquisition of land, then the
department shall adjust the contractor's prospective rates to cover the
medicaid share of the tax increase. The rate adjustments shall only apply to
construction and additions completed on or after July 1, 1997. The rate
adjustments authorized by this section are effective on the first day after
July 1, 1999, on which the increased tax payment is due. Rate adjustments made
under this section are subject to all applicable cost limitations contained in
this chapter.
NEW
SECTION. Sec. 16.
Sections 9 through 12 and 15 of this act are each added to part E of chapter
74.46 RCW.
NEW
SECTION. Sec. 17. The
following acts or parts of acts, as now existing or hereafter amended, are each
repealed, effective June 30, 2001:
(1)
RCW 74.46.--- and 1999 c . . . s 9 (section 9 of this act);
(2)
RCW 74.46.--- and 1999 c . . . s 10 (section 10 of this act) &
1998 c 322 s 29 (uncodified);
(3)
RCW 74.46.--- and 1999 c . . . s 11 (section 11 of this act);
(4)
RCW 74.46.--- and 1999 c . . . s 12 (section 12 of this act);
(5)
RCW 74.46.350 (Methods of depreciation) and 1999 c . . . s 13
(section 13 of this act) & 1980 c 177 s 35;
(6)
RCW 74.46.370 (Lives of assets) and 1999 c . . . s 14 (section 14 of
this act), 1997 c 277 s 2, & 1980 c 177 s 37; and
(7)
RCW 74.46.--- and 1999 c . . . s 15 (section 15 of this act).
NEW SECTION. Sec. 18. This
act is necessary for the immediate preservation of the public peace, health, or
safety, or support of the state government and its existing public
institutions. Section 11 of this act takes effect immediately, and sections 1
through 10 and 12 through 17 take effect July 1, 1999.
