C.M.R. 10, 144, ch. 115 - PRINCIPLES OF REIMBURSEMENT FOR RESIDENTIAL CARE FACILITIES - ROOM AND BOARD COSTS

1 Accrual Method of Accounting is when revenue is reported in the period when it is earned, regardless of when it is collected, and expenses are reported in the period in which they are incurred, regardless of when they are paid.

2 Allowable Costs are those operating costs remaining after the adjustments required by the Principles of Reimbursement have been applied to the provider's total operating costs reported in the annual cost reports.

3 Allowances are deductions granted for damages, delay, shortage, imperfections, or other causes, excluding discounts and returns.

4 Alzheimer's/Dementia Care Unitis a unit that provides care/services in a designated, separated area for residents with Alzheimer's disease or other dementia. The unit provides specialized programs, services and activities, and is locked, segregated or secured to provide or limit access by a resident outside the designated or separated area.

5 Average Annual Per Diem Cost for Routine Services is the average annual per diem cost for routine services for total allowable routine costs in accordance with applicable principles divided by total bed days.

6 Bed Days means the actual total occupied bed days for the year in accordance with applicable Principles of Reimbursement and including bed hold days for members, who because of need for medical care and/or visits with family or friends, are absent from the residence.

7 Common Ownership exists when an individual possesses significant ten percent (10%) ownership or equity in the provider and the institution or organization serving the provider.

8 Control exists where an individual or organization has the power, directly or indirectly to significantly influence or direct the actions or policies of an organization or institution.

9 Cost of Capital is the opportunity cost of all capital invested in an enterprise.

10 Cost Reimbursement is the term as used throughout these Principles that refers to the reimbursement methods established herein.

11 Department as used throughout these Principles refers to the State of Maine Department of Health and Human Services (DHHS).

12 Discrete Costing is the specific costing methodology that calculates the costs associated with new additions and/or renovations. In this methodology, none of the historical basis of costs from the original building is allocated to the addition/renovation.

13 Discounts as referred to in these Principles, are reductions granted for the settlement of debts.

14 Fair Market Value is the price that the asset would bring as a result of bona fide bargaining between well-informed buyers and sellers as of the date of acquisition. Usually the fair market value price will be based on the price at which bona fide sales of assets of like type, quality and quantity have occurred, under similar market conditions in a particular market as of the date of acquisition. The Department's determination of the fair market value of the asset will be based on the lower of the sale price or the amount determined by an appraisal. The appraisal must be a full narrative appraisal report prepared by an appraiser who is licensed in the State of Maine and qualified to appraise residential care facilities. The appraisal must provide two components of the historical cost: the current reproduction cost, adjusted for depreciation from all sources, and the fair market value. The Department, at its discretion, may require an alternative appraisal. The submission of an appraisal by a facility indicates the facility's agreement with the appraisal, and shall preclude any challenge to the appraisal by the facility.

15 Historical Cost, for facilities transferred after July 1, 2001, is the maximum amount the Department will reimburse an owner to acquire any asset within the following four (4) asset categories within the facility, which shall comprise of: land, land improvements, buildings and moveable equipment. Acquired assets within each category shall be evaluated based on the following calculation methods (a., b., and c.). The Historical Cost of the facility shall be derived by adding the lowest of the three figures calculated with in each asset category.

If there is no evaluation of the moveable equipment in accordance with a. orb. above, the net book value of the moveable equipment shall be its historical cost.

16 Interest is the cost incurred for the use of borrowed funds. Interest on capital indebtedness is the cost incurred for funds borrowed for capital purposes, such as acquisition of facilities and equipment, and capital improvements. Generally, loans for capital purposes are long-term loans.

17 Interim Payment Rate means the per diem rate that the provider uses to bill the Department for eligible members. The interim payment rate will be used to calculate over or underpayments to the provider after the provider submits a report of actual operating expenses and financial statements and the Department completes an audit of the provider's records. A new interim payment rate is established for each fiscal period of the provider.

18 Land (Non-Depreciable) includes the land owned and used in provider operations. Included in the cost of the land are the costs of such items as off-site sewer and water lines, public utility charges necessary to service the land, governmental assessments for street paving and sewers, the cost of permanent roadways and grading of a non-depreciable nature, the cost of curbs and sidewalks whose replacement is not the responsibility of the provider and other land expenditures of a non-depreciable nature. In the event a building is demolished, any remaining value, less demolition costs, would become part of non-depreciable land.

19 Land Improvements (Depreciable) include paving, tunnels, underpasses, onsite sewer and water lines, parking lots, shrubbery, fences, walls, etc. (if replacement is the responsibility of the provider.)

20 Leasehold Improvements include improvements and additions made by the lessee to the leased property. Such improvements become the property of the lessor after the expiration of the lease.

21 Licensed Capacity as referenced in these Principles consists of the total licensed beds of a residential care facility times the number of days available in the fiscal period (e.g., a facility licensed for one hundred (100) residential care beds and open for a period of three hundred sixty-five (365) days), would have its licensed capacity stated at thirty-six thousand and five hundred (36,500) bed days.

22 Licensed Residential Care Facility as used throughout these Principles refers to those facilities currently licensed by the Department and reimbursed pursuant to these rules. The term is also synonymous with "facility" and "provider" as used in this document.

23 Member is an individual who meets the financial eligibility of the MaineCare program as set forth in the MaineCare Eligibility Manual.Some members may have restrictions on the type and amount of services they are eligible to receive. Members must also meet medical eligibility criteria for specific services as set forth in the MaineCare Benefits Manual (MBM).

24 Necessary and Proper Costs are those that are appropriate in developing and maintaining the operation of residential care facilities and activities. They are costs which are common and accepted occurrences in the field of the provider's activity.

25 Necessary Interest requires that the interest:

26 Net Book Value of the asset is defined as the depreciable basis under the cost reimbursement program by the asset's last participating owner, less the depreciation recognized under the program.

27 Occupancy Level as referenced in these Principles consists of the total licensed beds of a residential care facility times the number of days available in the fiscal period (e.g., a facility licensed for one hundred (100) residential care beds and open for a full twelve (12) month period with the fiscal period covering the full twelve (12) months, would have its occupancy level stated at thirty-six thousand and five hundred (36,500). One hundred (100) beds multiplied by three hundred and sixty-five (365) days in the year equals thirty-six thousand and five hundred (36,500) days.) Occupancy level, as defined in these rules, is divided into the total number of bed days for the period to derive the occupancy ratio.

28 Owners include any individual(s) or organization(s) with equity interest in the provider's operation and any members of such individual's family or his or her spouse's family. Owners also include all partners and all stockholders in the provider's operation and all partners and stockholders or organizations that have an equity interest in the provider's operation.

29 Proper Interest requires that interest:

Proper Interest, as defined in 29, is subject to written prior approval as granted by the Division of Licensing and Certification before an expense is incurred. Retroactive approvals subsequent to an expenditure being incurred for energy efficient improvements, construction contingencies over five percent (5%), capital costs exceeding $500,000, loan refinancings, and additional motor vehicles will not be granted.

30 Reasonable Costs are those incurred by a provider that are reasonable and necessary in providing adequate care to members eligible for cost-reimbursement and which are within the requirements and limitations of these Principles of Reimbursement. The reasonableness and necessity of any costs shall be determined by reference to, or in comparison with, the cost of providing comparable services.

31 Refunds are amounts paid back or a credit allowed due to an over collection.

32 Related to the Provider means that the provider to a significant extent is associated or affiliated with or has control of or is controlled by the organization furnishing the services, facilities, or supplies.

33 Remote Island Facility for the purposes of this section, means a facility located on an island not connected to the mainland by a bridge.

34 State Seed refers to the State general funds required for payments to the facility for room and board costs as well as the State general funds required to pay the State's portion of Medical and Remedial Services costs, in accordance with Chapters II and III, Section 97 of the MBM.

35 Straight-Line Method of depreciation is when the cost or other basis (e.g., fair market value in the case of donated assets) of the asset, less its estimated salvage value, if any, is determined first. Then this amount is distributed in equal amounts over the period of the estimated useful life of the asset.

36 Theoretical Level of Occupancy is calculated at eighty percent (80%) for Level III residential care facilities and ninety percent (90%) for Level IV residential care facilities.

37 Provider Agreement encompasses the MaineCare Management Information System (MMIS) Provider/Supplier Agreement on file with the Office of MaineCare Services.

38 Service Agreement is a legally binding written document between DHHS Office of Aging and Disability Services (OADS) and a vendor for the provision of services to clients of DHHS OADS