N.J. Admin. Code § 8:85-3.11

Current through Register Vol. 56, No. 11, June 3, 2024

Section 8:85-3.11 - Fair rental value rate allowance

(a) The Department shall determine the facility fair rental value allowance for each Class I NF and Class II NF.

1. The new construction value per bed shall be $ 89,000.

2. The age of each NF for the July 1, 2010 through June 30, 2011 rate year shall be determined using the FRV Data Report adjusted to calculate the initial effective age as of 2010.

3. If complete auditable FRV Data Reports are not available for each facility by June 15, 2010, the nursing facility shall be assigned an initial age of 40 years that can only be adjusted by a complete auditable FRV Data Report.

4. For years after 2010, the age of each facility shall be adjusted each July 1 to make the facility one year older to a maximum of 40 years, as well as to make the following adjustments for allowable capitalized costs and other data submitted on the FRV Re-age Request:

i. If an NF places new beds in service during the cost report period, these new beds shall be averaged into the adjusted age of the prior existing beds to arrive at the facility's re-age.

(1) New licensed beds that have allowable capitalized costs of at least the new construction value per bed as stated in (a)1 above shall be re-aged using zero as their age. Allowable capitalized costs in excess of the construction value per bed shall be considered for additional re-aging pursuant to (a)4ii below.

(2) New licensed beds that have allowable capitalized costs less than the new construction value per bed as stated in (a)1 above shall be considered to be the same age as the existing licensed beds for the purpose of the re-aging process described pursuant to (a)4ii below. Allowable capitalized costs in excess of the construction value per bed related to the calculated age of the beds prior to submission of the FRV Re-age Request shall be considered for re-aging pursuant to (a)4ii below; or

ii. If an NF completes a major renovation project or major replacement project, defined as a project with allowable capitalized costs equal to or greater than $ 1,000 per bed in service during the cost report period, the cost of the project shall be represented by an equivalent number of new beds.

5. A major renovation or replacement project shall have been started within the 24 months preceding the completion date reported on an FRV Re-age Request for the reporting period used for the July 1 rate year and shall be related to the reasonable functioning of the NF.

i. Major renovations and replacement projects unrelated to either the direct or indirect functioning of the NF shall not be used to adjust the facility's age.

ii. Adjustments to a facility's age due to major renovations or replacement projects that result in fewer licensed beds at completion of the project shall be calculated using the number of licensed beds at the beginning of the project.

6. The equivalent number of new beds shall be determined by dividing the capitalized cost of the project, exclusive of the costs attributable to the construction of new beds, by the accumulated depreciation per bed of two percent per year of the facility's existing beds immediately before the project was completed.

7. The Department shall calculate an adjusted age of the facility by taking the equivalent number of new beds determined in (a)6 above plus the number of new beds aged at zero pursuant to (a)4i(1) above and the result shall be subtracted from the total licensed beds, and the result therefor shall be multiplied by the age of the facility, as adjusted for prior additions, major renovations and replacements. The product of this calculation shall then be divided by the number of licensed beds after the completion of the project to arrive at the adjusted age of the facility.

i. An example of the calculation follows:

Licensed Beds Before Re-aging - 100

Licensed Beds After Re-aging - 110

Number of New Licensed Beds - 10

Age of Beds Prior to Re-age - 10

Allowable Capitalized Costs - $ 1,150,000

Calculations:

Are Allowable Capitalized Costs [GREATER THAN]/= New construction value?

10 beds x $ 89,000 = $ 890,000; Answer is "yes."

Additional re-aging:

$ 1,150,000 - $ 890,000 = $ 260,000 (greater than $ 1,000 per bed)

Current accumulated Depreciation per Bed: 10 Years @ 2% = 20%

Bed Value: $ 89,000 x 20% = $ 17,800 Depreciation per Bed

Equivalent New Beds: $ 260,000 / $ 17,800 = 14.61

Old Beds: 110 beds - 14.61 equivalent new beds - 10 new beds = 85.39 at 10 years old

24.61 beds zero years old - Accum. Age = 0 years

85.39 beds 10 years old - Accum. Age = 853.90 years

853.90 years / 110 licensed beds = 7.76 (Round to 8)

8. If an existing structure is converted for use as a nursing facility, the provider must submit a completed FRV data report.

i. If a complete auditable FRV data report is not submitted, that nursing facility shall be deemed to have an age of 40 years for the purposes of the FRV calculation.

9. For each nursing facility, the facility per bed value shall be calculated as the difference between the new bed value and the new bed value multiplied by the weighted age of the NF (not to exceed 40 years) multiplied by two percent depreciation.

10. The facility total value shall be calculated as the facility per bed value multiplied by the number of licensed beds for the nursing facility.

11. The fair rental value allowance shall be calculated by multiplying the facility total value by an eight percent rental factor and dividing that result by the higher of actual resident days or 95 percent of available days from the cost report used in the database established at 8:85-3.8 for the direct care limit.

i. For Class I NFs and Class II NFs not represented in the database established at 8:85-3.8 for the direct care limit, the fair rental value allowance shall be calculated by dividing the facility fair rental value by 95 percent of available days, calculated as licensed beds times 365 days.

N.J. Admin. Code § 8:85-3.11

As amended, R. 1983 d.73, effective 3/21/1983.
See: 14 N.J.R. 743(a), 15 N.J.R. 443(a).
Language concerning financing through a governmental authority.
As amended, R.1984 d.573, effective 12/16/1984.
See: 16 N.J.R. 2484(a), 16 N.J.R. 3437(a).
New (e); recodified (e)-( o) as (f)-(p).
Amended by R.1985 d.705, effective 1/21/1986.
See: 17 N.J.R. 2331(a), 18 N.J.R. 189(a).
(n)2 deleted; 3 recodified to 2.
Amended by R.1987 d.6, effective 1/5/1987.
See: 18 N.J.R. 257(a), 19 N.J.R. 126(a).
Recodified from 10:63-3.10 and amended by R.1994 d.624, effective 1/3/1995.
See: 26 N.J.R. 3614(a), 27 N.J.R. 156(a).
Amended by R.1995 d.174, effective 3/20/1995 (operative April 1, 1995).
See: 27 N.J.R. 281(a), 27 N.J.R. 1307(a).
Amended by R.1996 d.147, effective 3/18/1996.
See: 27 N.J.R. 3314(a), 28 N.J.R. 1535(a).
Amended by R.2001 d.120, effective 4/2/2001.
See: 32 N.J.R. 3710(a), 33 N.J.R. 1108(a).
In (a)2, inserted references to new and replacement NFs; in (c), inserted references to Class I, II and III NFs; rewrote (d); in (k), substituted "NFs" for "LCTF's", "that" for "which" and "costs" for "cots".
Recodified from N.J.A.C. 10:63-3.11 by R.2005 d.389, effective 1/17/2006.
See: 36 N.J.R. 4700(a), 37 N.J.R. 1185(a), 38 N.J.R. 674(a).
Repeal and New Rule, R.2011 d.121, effective 4/18/2011.
See: 42 N.J.R. 1793(a), 43 N.J.R. 961(c).
Section was "Buildings and fixed equipment".