471 Neb. Admin. Code, ch. 45, § 008

Current through June 17, 2024

Section 471-45-008 - DEPRECIATION

This subsection replaces Medicare regulations on depreciation in their entirety, except those provisions concerning sale-leaseback and lease-purchase agreements, Medicare's Provider Reimbursement Manual, HIM-15, Section 110, are retained, subject to the following Medicaid depreciation regulations. At the time of an asset acquisition, the nursing facility must use the American Hospital Association Estimated Useful Lives of Depreciable Hospital Assets, 2004 edition, to determine the useful life span. In the event that the nursing facility determines a useful life shorter than a life shown in the tables, the facility must have documentation available to justify the unique circumstances that required the shorter life.

008.01CAPITALIZATION GUIDELINES. Providers must devise and follow a written capitalization policy within the following guidelines. A copy of the policy must be available upon request by the Department.

008.01(A)CAPITALIZATION THRESHOLD. The capitalization threshold is a predetermined amount at which asset purchases must be capitalized rather than expensed. Each provider determines the capitalization threshold for their facility, but the threshold amount must be at least $100 and no greater than $5,000.

008.01(B)ACQUISITIONS. If a depreciable asset has at the time of its acquisition an estimated useful life of at least two years and an allowable cost equal to or exceeding the capitalization threshold, its cost must be capitalized and written off ratably over the estimated useful life of the asset. If a depreciable asset has an allowable cost less than the capitalization threshold, or if the asset has a useful life of less than 2 years, its cost is allowable in the year it is acquired.

008.01(C)ACQUISITIONS UNDER $100. Acquisitions after July 1, 2005, with a per unit cost of less than $100 cannot be depreciated. Costs of these items are included in the applicable operating cost category on the cost report in the current period.

008.01(D)INTEGRATED SYSTEM PURCHASES. When items are purchased as an integrated system, all items must be considered as a single asset when applying the capitalization threshold.

008.01(E)MULTIPLE ITEMS WITH PER UNIT COST GREATER THAN OR EQUAL TO $100. Items that have a stand-alone functional capability may be considered on an item-by-item basis or as an aggregate single purchase. Each provider's capitalization policy must describe how the provider elects to treat these items.

008.01(F)NON-CAPITAL PURCHASES. Purchases of equipment and furnishings over $100 per item and under the provider's capitalization threshold are included in the Plant Related cost category on the Cost Report in the current period.

008.01(G)BETTERMENTS AND IMPROVEMENTS. Betterments and improvements extend the life, increase the productivity, or significantly improve the safety of an asset as opposed to repairs and maintenance which either restore the asset to, or maintain it at, its normal or expected service life. Repair and maintenance costs are always allowed in the current accounting period.

008.02 BUILDINGS AND EQUIPMENT. An appropriate allowance for depreciation on buildings and equipment is an allowable cost. The depreciation must be:

(A) Identifiable and recorded in the provider's accounting records;

(B) Based on book value of the asset or assets in use before July 1, 1976. Book value for these purposes is defined as cost less depreciation allowed or allowable per American Hospital Association or Internal Revenue Service guidelines;

(C) Based on the lesser of cost or fair market value at the time of purchase for a facility purchased or constructed after June 30, 1976. The basis for facility purchases or new construction may be subject to limitation;

(D) Based on the fair market value at the time of donation for donated assets without a prior Medicaid basis; or based on the donor's Medicaid net book value at the time of the donation for donated assets with a prior Medicaid basis. Depreciation on donated assets must be funded in order to be allowed; this requires that money be segregated and specifically dedicated for the purpose of replacing the asset; and

(E) Prorated over the estimated useful life of the asset using the straight-line method of depreciation.

008.03OTHER GAINS AND LOSSES ON DISPOSITION OF ASSETS. Losses on the sale of real property are not recognized under Medicaid. Losses on the disposal of replaced building components that have been specifically identified in the nursing facility's depreciation schedule since acquisition will be included in the allowable fixed cost for the report period. Gains or losses on personal property will be reduced from or included in allowable fixed costs for the report period. Gains in excess of the other allowable fixed costs will result in a negative fixed cost component of the facility's rate.

008.04SALE OR TRANSFER OF CORPORATE STOCK. Where the existing corporation continues after the sale or transfer of corporate stock, the depreciable basis of assets used under the program will be that of the then existing corporation. No revaluation of assets is allowed when only an acquisition of stock is involved.

471 Neb. Admin. Code, ch. 45, § 008

Adopted effective 6/6/2022

Amended effective 6/2/2024