114.2 CMR2.00:RATESOFPAYMENTTOLONG-Termcarefacilitiessection

114.2 CMR2.00:RATESOFPAYMENTTOLONG-TERMCAREFACILITIESSection

2.01: / GeneralProvisions
2.02: / GeneralDefinitions
2.03: / RequiredReports
2.04: / PrinciplesforDeterminingFinalRateofPayment
2.05: / PrinciplesforEstablishingInterimRates ofPayment
2.06: / ReasonableOperatingCosts
2.07: / AdministrationandPolicyPlanningAllowance
2.08: / NursingCosts
2.09: / RateAdjustmentforAverageEquityCapital
2.10: / Interest Expense
2.11: / Depreciation
2.12: / LimitationofBasisforDepreciation,Interest andEquity
2.13: / NewFacilitiesandMajorAdditions
2.14: / PetitionsforAdjustmenttoInterimRates ofPayment
2.15: / Appeals
2.16: / SpecialProvisions
2.17: / LifeSafetyandPhysicalEnvironmentCode--CorrectionofDeficiencies
2.18: / RateFilings
2.19: / UseandOccupancyAllowanceforCertainNonprofitProviders
2.20: / Petitions toIncreasetheInterimRatePursuanttoSt. 1986, c. 279
2.21: / Petitions toIncreasetheInterimRatePursuant
2.01 / GeneralProvisions
(1)ScopeandEffectiveDate. 114.2CMR2.00shallgoverninterimratesofpaymenteffective
October1, 1990 andfinalrates ofpaymenteffectiveJanuary1, 1990.
(2) Authority.114.2 CMR2.00 isadoptedpursuanttoM.G.L.c.6A, §§ 31 through74.
(3) DescriptionofRateSettingSystem.Theinterimrateyear foralllong-termcare facilitiesisthe12
monthperiodbeginning October1,exceptfortheperiodfromOctober1,1990throughDecember
31,1990,forthoseprovidersreceiving an extendedinterimrate,asdefinedin114.2CMR2.02,
GeneralDefinitions,andasdeterminedinaccordancewith114.2CMR2.05(1).Theproviderreceives
aninterimratebasedontheadjustedcostsoftheprecedingcalendaryear,updatedbyacost
adjustmentfactor,exceptfortheperiodfromOctober1,1990throughDecember31,1990for
providersreceivinganextendedinterimrate. Followingthecloseofthecalendar year,theprovider
reportsactualcostsforthecost-reportingyear,andafinalrateiscomputedforthecalendar year.For
thesamecalendaryear,theproviderhaspreviouslyreceivedtwointerimrates: onecoveringtheperiod
January1 throughSeptember30 andthesecondcoveringtheperiodOctoberthroughDecember31.
Thedifferencebetween thefinalrateandeachofthetwointerimrateswillresultintwodifferential
rates. Theproviderthenreceivesfromor pays totheCommonwealththedifferentialratemultiplied
bythenumberofpublicly-aidedpatientdaysforeachperiod. BeginningJanuary1,1990,those
facilitieswhichhavebeen designatedbytheDepartmentofPublicWelfaretoreceiveprospective
case-mixratespursuantto114.2CMR5.00,ProspectiveRatesofPaymenttoLong-TermCare
Facilities,willhaverates setonaprospectivebasiswithoutfinalsettlement.
2.02: / GeneralDefinitions
MeaningofTerms.Asusedin114.2CMR2.00,unlessthecontext requiresotherwise,termsshall
havethemeaningsascribedin114.2 CMR2.02.

2.02: continued

Accurate,DetailedFinancialRecords.Completedocumentationcontainingclearandcompellingevidenceofallofthefinancial transactionsoftheproviderandaffiliatedentitiesaswellascensusactivity,includingbutnotlimitedtothebooks,invoices,bankstatements,canceledchecks,payrollrecords,includingcopiesofgovernmentalfilingsandtimerecords,suchastimecardsandanyotherrecordwhichisnecessarytoprovidetheCommissionwiththehighestdegreeofconfidenceinthereliabilityoftheclaimforreimbursement.Forpurposesofthisdefinition,affiliatedentitiesshallextendtorealty,managementandotherentitiesforwhomanyreimbursementisdirectlyorindirectlyclaimedwhetheror not theyfallwithinthedefinitionofrelatedparties.

AdministrativeDay.Adayofacuteinpatienthospitalizationonwhichanappropriateplacementisnotavailable.

AdministrationFunction.Thosedutieswhicharenecessarytothegeneralsupervisionanddirectionofthecurrentoperationsofalong-termcarefacility,including,butnotlimitedto:thehiringandfiringofpersonnel;supervisingofnursing,dietary,andotherpersonnel;maintainingpatientandotherrecords; supervisingthemaintenanceofandrepairstothehomeandprocuringnecessarysupplies.

Administrator-in-Training. ApersonregisteredwiththeBoardofRegistrationofNursingHome Administratorsandinvolvedinacourseoftrainingasdescribedin245 CMR.

AllowableOperatingCosts.Theoperatingcostsaftertheadjustmentsrequired by114.2 CMR2.00havebeenappliedtotheprovider's totaloperatingcostsasreported ontheRSC-1 report.

AverageEquityCapital.Theaverageofthedifferencebetweenaprovider'sallowablefixedassetbasis calculatedpursuantto114.2CMR2.12andtheallowablelong-termliabilitiesthereonatthebeginningoftheyearandattheend oftheyearinaccordancewith114.2CMR2.09.Mortgageacquisitioncostssuchascapitalizedlegalfees andprepaidinterestonlong-termobligationswillbeconsideredallowablefixedassetsforpurposesofaverageequitycapitalprovidedthatsuchcostsareamortizedoverthelifeofthemortgage.However,capitalizedinterestincomewhichhasbeengeneratedfromsuchfundsshallnot beincludedinaverageequitycapital.

Commission.TheRateSettingCommissionestablishedunderM.G.L.c.6A, § 32.Department.TheMassachusetts DepartmentofPublicHealth.

EquitySupplement.Anamountequalto the annualbuildingdepreciationallowedbytheCommission, incurredfromJuly1, 1976, orthe date ofconstructionofthefacility, orthe date ofacquisitionofthefacilitybythecurrent owner,whicheverislater,throughDecember 31, 1982.

ExtendedInterimRate ofPayment.Theper diemrateeffectiveOctober1, 1990 toDecember 31,1990forthosefacilitieswhichhave beendesignatedbytheDepartmentofPublicWelfaretoreceiveprospectivecase-mixrates effectiveJanuary1, 1991. TheinterimrateeffectiveOctober1, 1990 toDecember31, 1990 shallbecomputedinaccordancewith114.2 CMR2.05(1).

FinalRate ofPayment.Theper diemrateeffectiveJanuary1 throughDecember 31, determined byapplyingtheprovisionsof114.2 CMR2.04 toauditedcostsandotherdata,asreportedontheformsRSC-1,RSC-2,RSC-3andaccompanyingscheduleswhichtheCommissionmayrequire,forthecalendaryear.

2.2: continued

FixedCosts.Indirectpatientcarecosts,asdeterminedbytheCommission,which areindependentoflevelofoccupancy,includinginterestassociatedwithlong-termdebt,depreciationofbuildings, buildingimprovements andequipment,insuranceonbuildingsandequipment,realestatetaxes,rent,andthenon-incomerelatedportionoftheMassachusetts corporateexcisetax.

GenerallyAvailableEmployeeBenefits.Theemployeebenefitswhicharebothreasonableandnecessaryfortheefficientoperationofthefacility.Suchbenefitsmustbenondiscriminatoryandmaybeavailabletopart-timeemployeesonaproratedbasis.

HeavyCarePatient.Apatientnotinneedof hospitallevelservices but whoisaccordingtocriteriaestablishedbytheDepartmentofPublicWelfare:

(a)totallydependentintransferring,ambulating,bathing,dressing,andtoiletingandhasnoreasonableexpectationsofimprovement;or

(b)totallydependentintransferring,bathing,dressing,andtoileting,butable toambulatewithpartialassistanceorassistancedevicesandeitherconsistentlyincontinentorextensivelyconfused.

HeavyCase-MixIntensityFacility.Afacilityorunitsthereofprovidingnursing,restorativeandothertherapeuticservicesandwhoseaveragemanagementminutesis148.1minutesormore.

InterestExpense.Thenecessaryandproper expenseincurredfortheuseoflegitimateloanstosatisfyneedsoftheprovider directlyrelatedtotheprovisionofadequatepatientcare.Interestpaymentsorchargesbaseduponprovider'sreceiptsorincomeshallnot beconsideredasinterestexpense.

InterimRate ofPayment.Theperdiemrateeffective October1throughSeptember30,determinedbyapplyingtheprovisionsof114.2CMR2.05tothecostsoftheproviderandsuchotherdatareportedtotheCommissionforthemostrecentlycompletedcalendaryear.

LicensedBedCapacity.Theavailablepatient days,computed by multiplyingthenumberofdaysintheapplicableperiodbythenumberofbedslicensedbytheDepartmentforuseintheprovider'slong-termcare facility.

LightCase-MixIntensityFacility.Afacilityorunitsthereofprovidingnursing,restorativeandothertherapeuticservicesandwhoseaveragemanagementminutesrangefromzerominutesto132.0minutes.

Long-TermCareFacility.AnursingorconvalescenthomeasdefinedinM.G.L.c. 111, § 71, oranursingfacilityoflight,moderateorheavycase-mixintensity,operatingunderahospitallicenseissuedbytheDepartment pursuant toM.G.Lc.111,whichiscertified bytheDepartment forparticipationintheStatemedicalassistanceprogram.Forpurposesof114.2CMR2.00,long-termcarefacilitiesshallincludethosethatoperate alicensedresidentialcareunitwithinthenursingfacility.

ManagementMinutes. Amethodofmeasuringpatientcareintensity,orcasemix,bydiscretecare-givingactivitiesorthecharacteristicsofpatientsfoundtorequireagivenamountofcare.

ModerateCase-MixIntensityFacility.Afacilityorunitsthereof providingnursing,restorativeandothertherapeuticservicesandwhoseaveragemanagement minutesrangefrom132.1minutesto148.0 minutes.

2.2: continued

NetAverageMedicaidAccountsReceivable.AveragemonthlyamountsbilledtotheCommonwealthof Massachusettsandforwhichpaymenthasnotvetbeenreceived.TheseshallbereducedbyamountsduetotheCommonwealthbecauseofoverpayments.NetAverageMedicaidAccountsReceivableshallnotincludeanyresourcemoneyorfundsto bereceivedfromother sources.

NursingCosts.Directpatient care personnelcosts.Thefollowingare examplesofnursingcosts:

(a)SupervisorofNurses

(b)RegisteredNurses

(c)LicensedPracticalNurses

(d)RehabilitationNursingAssistants

(e)Nurses'Aides

(f)Orderlies

(g)PurchasedService-Nursing

(h)PayrollTaxesandFringeBenefitsoftheabovePersonnelcostsofWardClerksandMedicalrecords Librarianswillnotbeconsiderednursingcosts.

PatientDays.Thenumberofdaysofoccupancybypatientsinafacility.Includedinthecomputationofpatientdayswillbetheday ofadmissionbutnottheday ofdischarge.Whereadmissionanddischargeoccuronthesameday,onepatientdaywillbeused.Thosedaysonwhicha bed isheldvacantandreservedforapublicly-aidedpatienttemporarilyplacedinadifferentcaresituation,pursuanttoanagreementbetweentheproviderandtheDepartmentofPublicWelfareinaccordancewithdulyestablishedpoliciesofsaidDepartment,shallalsobeincludedaspatientdays.Thosedaysonwhicha bedisheldvacantandreservedforanonpublicly-aidedpatientshallalsobeincluded as patientdays.

Personnel.DefinitionssetoutintheDepartment'sRulesandRegulationsfortheLicensingofLong-TermCareFacilities(1977)(105 CMR150.000)oritsmostrecentapplicableregulationshallapplyforthefollowingterms:

(a)RegisteredNurse

(b)LicensedPracticalNurse

(c)Nurses'Aideor Orderly

(d)Dietitian

(e)PhysicalTherapist

(f)OccupationalTherapist

(g)SpeechPathologist orAudiologist

(h)B.A.SocialWorkerandM.S.W. SocialWorkerorSocialWorkercomplyingwithequivalencystandardsestablishedbytheDepartment

(i)Food ServiceSupervisor

(j)HealthServiceSupervisor

(k)DirectorofNurses

(1)SupervisorofNurses

(m) MedicalDirector

PolicyPlanningFunction.Thepolicy-making,planningand decision-makingactivitiesnecessaryfor the generalandlong-termmanagementoftheaffairsofalong-termcarefacility,includingbutnotlimited tothefollowing:thefinancialmanagementofthefacility,includingthecostoffinancialaccountingandmanagementadvisoryconsultants,theestablishmentofpersonnelpolicies,theplanningofpatientadmissionpoliciesandtheplanningoftheexpansionandfinancingofthefacility.

Provider. Along-termcare facilityprovidingcare topublicly-aidedpatients.

2.02: continued

PrudentBuyerConcept.Theassumptionthatanyamount paidbyaproviderabovethemarketpriceforasupplyorserviceisanunreasonablecostandshallbeexcludedfromreimbursablecosts.

PublicMedicalInstitutions (PMI).Long-termcarefacilitieswhichareoperated byamunicipality.

Publicly-Aided Patients.Apersonforwhose careinalong-termcarefacilitytheCommonwealthor apoliticalsubdivisionoftheCommonwealthisinwholeorinpartfinanciallyliable.

ReasonableOperatingCosts.Thosecostsincurredbyaproviderwhicharereasonableandnecessaryinprovidingadequatecaretopublicly-aidedpatientsandwhicharewithintherequirementsandlimitationsof114.2 CMR2.00.Thereasonablenessandnecessityofanycostshallbedetermined byreferencetoorincomparisonwiththe costofprovidingcomparableservicesand byreferencetothe prudent buyerconcept.

RelatedParty. Apersonororganizationwhichis associated oraffiliatedwithorhascontroloforiscontrolledbytheproviderorisrelatedtotheprovideroranydirector,stockholder,trustee,partneroradministratoroftheprovider bycommonownership orcontrolorinamannerspecifiedinsections267(b)and(c)oftheInternalRevenueCodeof1954asamendedprovided,however,that10%shallbetheoperativefactorassetoutinsections267(b)(2)and(3)andprovidedfurtherthatthedefinitionof"familymembers"foundinsection267(c)(4)ofsaidcodeshallinclude,forthepurposesof

114.2CMR2.00,spousesandlinealdescendantsoftheindividuals'brothersandsisters,brothersand sistersoftheindividual'sspouseaswellasspousesandlinealdescendantsofsameandlinealancestorsoftheindividual'sspouse.

Reports. Theannualfilingsprovideforin114.2 CMR2.03.

RequiredEducation.Educational activities,conductedwithintheCommonwealthofMassachusettsby arecognizedschoolorauthorizedorganization,thatarerequiredformaintainingaprofessionallicenseofemployeesdeliveringand/orimprovingpatientcaretopublicly-aidedpatients.Requirededucationalsoincludesthetrainingofallnurses'aides.

SpecialCarePatient.Apatientnotinneedofhospitallevel servicesbutwho,accordingtocriteriaestablished bytheDepartmentofPublicWelfare,needsoneormoreofthefollowing:

(a)intensivefeedingassistance(requires40+ minutespermajorfeeding)and/or tubefeeding;

(b)decubitusulcerdebridement/dressingchanges(requiresatleasttwoskilled nursinghomehours perday);

(c)short-termIVtherapy(requiresuseofIVfluidsand/or medicationsintermittentlyas neededorcontinuouslyfor notlongerthantendays);or

(d)chronicrespiratory/pulmonarytherapy(suctioning,pulmonarytoileting,inhalationtherapy).

(e)controlofaseverebehaviormanagementproblem(requiresnursingornurse'saidestaff tocalm,support, orprotectthepatientorothersinthenursinghomebecauseofaconsistent patternofassaultiveand/orcombativebehavior,frequentlyrecurringburstsofscreaming,orfrequentlyoccurringrefusaltocomplywithotherrequirementsofthehome;suchstaffservicesare utilizedinstead oftightrestraintsorinconjunctionwithlooserestraints).

TotalBedCapacity.Thenumberofpatientdaysobtained by multiplying thenumberofdaysintheapplicableperiod bythemaximumnumberofbedswhichafacilitymayaccommodateconsistentwiththefiresafetyandother physicalenvironmentstandardsapplicabletoitunderstateandfederallaw,whetherornotthefacilityispresentlylicensedtooperateallsuchbeds.Innocase,however,shalltotal bedcapacitybeconsideredlessthanlicensedbedcapacity.

2.2: continued

Unit.UnitshallhavethesamedefinitionasintheDepartment'sRulesandRegulationsfortheLicensingofLong-TermCareFacilities(1977)(105 CMR150.000)oritsmost recentapplicableregulation.

VariableCosts. Directpatientcare costswhicharedependentonlevelofoccupancy. Thefollowing are examplesofitemswhichshallnotbeconsideredvariablecosts:

(a)administrators'salaries

(b)realestatetaxes

(c)interestassociatedwithlong-termdebt

(d)buildingimprovement andequipmentdepreciation

(e)badaccounts

(f)Massachusettsandfederaltaxes,refundsandallowances

(g)ownersandofficers'salaries

(h)rentalexpenses

WageSurvey:Twodifferentsurveyswillbecollectedeachyearinalllong-termcarefacilitiesintheCommonwealth.

(a)Aquarterlysurveythat collectspayrollinformationonnursing,non-nursing,andtemporary poolpersonnel.

(b)Anannualsurveythatcollectspayrollinformationforaspecificperiod,onadministrationandpolicyplanningpersonnel.

2.3: RequiredReports

(1)AnnualFilings.Providersshallannuallycompleteonanaccrualbasis,andfiletheCommission'sRSC-1reportand,ifapplicable,theRSC-2reportforrealtycompaniesandRSC-3reportformanagementcompaniescollectivelyreferredtoastheReports.ProvidersshallalsocompleteandfiletheCommission'sWageSurveys.CopiesoftheReportsandWageSurveysareattachedheretoandincorporatedhereinbyreference.Accuratedetailedfinancialrecordssubstantiatingthereportedcostsmustbemaintainedforaperiodofatleastthreeyearsfollowingthesubmissionof suchReportsoruntilthefinalresolutionofany appealinvolvingarate fortheperiodcoveredintheReport,whicheverislater.Providersthatclaimmanagementorcentralofficeexpensemustfile anRSC-3form.If additionalmanagementor centralofficeexpenseisclaimedthroughmorethanoneentity,eachadditionalentitymustfile amanagementorcentralofficeexpensereportwhichshouldbe identifiedasRSC-3A,B,etc.Whenfilingtheseformsandincorporatingsuchcostsintotheclaim forreimbursement,theprovidermustcertifythat suchcostsarebothreasonableandnecessaryforthe careofpublicly-aidedpatientsinMassachusetts.Managementorcentralofficeorganizationsaresubjecttothesamepersonnelandadministrativestandardsasindividualfacilities. Forexample,writtenjobdescriptionsforallpositionsincludingqualifications,duties,responsibilitiesandtimerecordsasrequiredby105CMR150.002(D)(1)willbemaintained bymanagementcompaniesinorderto havepersonnelcostsconsidered for reimbursement.

(2)FilingDates.

(a)Reports.Eachlong-termcarefacility,includingpublicmedicalinstitutions,shallsubmittheReportsforthecalendaryearandotherinformationwhichtheCommissionmayrequireonorbeforeMay1ofeachyear.Wheretherehasbeenachangeinownership,thetransferorshallfiletheReportswithin45daysafter thetransferofownership.Newfacilitiesandadditionsreceivingaspecialinterimrateunder114.2CMR2.13mustfileacostreportwithin30daysaftercompletionofthefirstsixmonthsofoperation.WhereafacilityisunderthesupervisionofaPatientProtectorReceiverpursuanttoM.G.L.c.111,§72Norinthecaseofatrusteeinbankruptcy,allcosts reports fortheperiodpriortothedateofsuchappointmentshallbefiledwithin45daysofsaidappointment.ReportswhicharefiledafterMay1shallbesubjecttosanctionsasdescribedin114.2 CMR2.03(7).

2.03: continued

(b)WageSurveys.Eachlong-termcarefacilityshallfiletwowagesurveysforthecalendar yearasfollows:

1.TheannualAdministrator'sWageSurveyshallbesubmitted onorbeforeJuly18.

2.Thequarterlywagesurveyofnursing, non-nursingandtemporarypoolpersonnelshallbe filed onorbeforeJanuary18, April18, July18, andOctober18whereinthefacilityreportspayrollinformationfromthequarter prior tosubmission.

(3)ExtensionofFilingDate.TheChairmanoftheCommissionmaygrantanextensionoftimeforsubmissionoftheReports andother informationwhichtheCommissionmayrequire.Noextensionisrequiredforreports filedbetweenMarch31andMay1.ForextensionsbeyondMay1,theprovidermustshowthatexceptionalcircumstancesexistprecludingsaidprovider fromsubmittingtheReportsbyMay1.ThefilingofsuchrequestmustbesubmittedtotheCommissionbyApril1inorderfortheprovidertobenotifiedoftheCommission'sfindingsbyMay1.Innocase shallextensionsbe grantedformorethan30 dayspastMay1 ofeachyear.TheChairmanmayalsoextend,upto30days,filingdates forwagesurveys.

(4)CompleteSubmission.Within60daysofreceipt oftheReports,theCommissionshallnotifytheproviderifitfindsthesubmissiontobeincompleteandshall specifywhatadditional informationisrequiredtocompletethesubmission.Uponreceiptofacompletesubmission,theReportsandallaccompanyingschedulesshallbedeemedtobefiledwiththeCommission.IftheCommissionfailstonotifytheproviderwithinthe60dayperiod,thesubmissionshallbeconsideredcompleteandtheReportsandallaccompanyingschedulesshallbedeemedfiledwiththeCommissionasofthe date ofreceipt.

(5)AmendedReports.ForthepurposeofestablishingtheinterimrateofpaymenteffectiveOctober1,amendedReportswillbeacceptednolaterthantheprecedingJuly15. Forthepurposeofestablishingthefinalrateofpaymenteffectiveforthecalendaryear,amendedReportswillbeacceptednolaterthanJuly15 oftheyear followingthecloseofsaidcalendaryear.Amendedreports mustbeaccompanied byacompletelistofallchangesandanexplanationofthereasons therefor.

(6)AdditionalInformation.Anyproviderwhofailsto maintainrecords, asrequired by114.2 CMR 2.03(1), includingtimerecordsforallpersonnelasrequiredin105CMR150.002(D)(1),shallhaveexcludedfromits rateany costoritemforwhichsuchreports werenotmaintained.AnyrecordnotproducedattherequestofCommissionpersonnel during an auditorthrougharequestpursuantto

114.2CMR2.03shallbedeemednottohavebeen maintainedforpurposesoftheapplicationof

114.2 CMR2.03.

(7)FailuretoFileTimely.

(a)Where along-termcareproviderhasfailedtofiletherequiredReportsbyMay1, nointerimratewillbepromulgated.Insuchcases,aninterimratewillbepromulgatedeffectivethefirstdayofthesixthmonthfollowingthereceipt ofanacceptablecostreport.

Example:Whereaprovider filestheReports onMay17, 1990, aninterimratewhichwouldnormallybeeffectiveon October1,1990willbeeffectiveonNovember 1,1990.Whereaprovider filestheReports onJune8, 1990,aninterimratewhichwouldnormallybeeffectiveonOctober1, 1990willbeeffectiveonDecember1,1990.Thedeferraloftheeffectivedateshallnot applyincaseswhenthenewly-establishedrateislower thanthepriorrate.IncaseswheretheCommissionhasnotifiedtheproviderthattheReportsareincomplete,theapplicationofthisprovisionshallbedeferred30daysfromthedateofsuchnotice.

Example:WhereaproviderfilestheReportsonApril3,1990andtheCommissionnotifiestheprovideronApril13,1990thatitfindsthesubmissionincomplete,iftheproviderrefilescorrectedReports byMay13,1990,thedeferraloftheeffective date ofthenextinterimrateshallnot apply.

2.3: continued

Whereaprovider hasfailedtofilereports or other requiredinformationforaperiodofninemonthsafterthefilingdate,theCommissionshallnotifytheproviderofthisfailureandofthesanctionswhichshallbeimposed.Notificationsshallbesentregisteredmail,returnreceiptrequested. 30 days followingsaidnotice,theCommissionshallreducetheprovider'sratetozerounlessthefailuretofileiscuredwithinsaid 30 days.

(b)WageSurveys.Providersfailingto file thenursingandtheadministrationwagesurveystimely,shallbenotifiedbytheCommissionofthisfailurebyregisteredmail,returnreceiptrequested.WheretheCommissionhas approved aprovider'srequest forextension,thewagesurveywillbeconsideredtimely-filediftheproviderfilesthewagesurveybytheextensiondeadline.Thesanction foreachmonthaquarterlysurveyislateshallbeonemonth'slossofeligibilityforincentives,describedin114.2CMR2.16(7),intheprovider's1990finalrates.Thesanctionshallbeappliedseparatelyforeachrequiredquarterlywagesurvey.

Example:WheretheproviderfilesthenursingwagesurveydueonJuly18, 1990 onJuly20,1990,theprovidershallloseeligibilityfor anyincentivesforthemonthofJanuary1990.Iftheproviderdoesnot file thesurveyuntilAugust20,1990,theprovidershallloseeligibilityforanyincentivesforthemonthsofJanuaryandFebruary1990.Furthermore,iftheprovider filesthewagesurveydueonOctober18, 1990 onOctober20,1990,theprovidershallloseeligibilityforanyincentivesforanadditionalmonth,thuslosingit forJanuary,FebruaryandMarchof1990.

(8)TerminationofProviderContract.WhenaprovidercontractbetweentheproviderandtheDepartmentofPublicWelfarehasbeenterminated,theprovidershallfilereportscoveringthecurrentreportingperiod orportionthereofcoveredbythecontract,andanyotherReportsrequiredbytheCommission,within60 daysofsuchtermination.WhentheproviderfailstofiletherequiredReportsinatimelyfashion,theCommissionshall establishazerofinalrateforeach periodforwhichtheproviderhasfailedtofiletheReports.SuchzerofinalrateswillbeamendedwhentherequestedReportsarefiled.FacilitiesthatareunderthesupervisionofaPatientProtectorReceiver appointedpursuanttoM.G.L.c.111,§72Noratrusteeinbankruptcywillbetreatedasaterminationofprovidercontractforpurposesof114.2CMR2.03(8).Forexample,ifaPatientProtectorReceiverisappointedonAugust15, 1990, thecostreport fortheperiodJanuary1, 1990 toAugust14,1990andallprior reportsare dueonOctober14, 1990. Afterthatdate,theabovezerorateprocesswillbegin.

(9)QuarterlyReports.EachprovidershallfileacopyoftheDivisionofEmploymentSecurityEmployer'sQuarterlyTaxReportForm1.ReportsforquartersendingMarch31,June30,September30andDecember31mustbefilednotlaterthanApril 30,July31,October31andJanuary31,respectively.Nonprofit providersthatarenotsubjecttoEmploymentSecurityrequirementsshallfileForm941, Employer'sQuarterlyFederalTaxReturninlieuoftheEmploymentSecurityform.

2.4: PrinciplesforDeterminingFinalRate ofPayment

(1)FinalPerDiemRate.Thefinalrateofpaymenteffectiveforlong-termcarefacilitiesforthe12monthperiodbeginningJanuary1shallrepresentthesumoftheelementssetoutin114.2 CMR2.06through2.11 and,whereappropriate, 114.2 CMR2.16(7),eachcomputedforthecalendaryearonaper diembasis.Costsandexpensesincludedindeterminingaprovider'sfinalrateofpayment aresubjecttoalllimitationsandconditionssetforthin114.2 CMR2.00.Inthecaseoflong-termcarefacilitieswhichincluderesident careunits,separateper diemrates shallbecomputedfor thosebedslicensedforresident care.Wheretherehasbeenachangeinownership,separatefinalrates shallbeestablishedfortheperiodofownershipofthetransferorandfortheperiodofownershipofthetransferee.

2.04: continued

(2)ComputationofFinalPerDiemRate.Whenthelicensed bed capacityisequaltothetotalbedcapacity,theallowable costsandexpensesunder114.2CMR2.06and2.08 through2.11 shallbedividedbythelargerofa)theprovider'sactualpatientdaycensusorb)96%oftheprovider'slicensedbedcapacity.Theallowablecostsandexpensesunder114.2CMR2.07shallbedividedbytheprovider'slicensed bedcapacityforthecalendaryear.Thefinalratecomputedunder114.2 CMR2.04(2)mayalsobeincreasedbytheamountofanyper diemadjustmentspursuantto 114.2 CMR2.16(7).

(3)SegregatedCosts.Whenthelicensed bed capacityislessthanthetotalbed capacity,thefinalrateshallbebased onthesegregationoffixedand variable costs. Thefixed costs shallbedivided by thelargeroftheprovider'sactual patientdaycensusor96%oftotalbedcapacity.Theallowablenursingandvariable costsandaverageequitycapitalshallbedividedbythelargerofa)theprovider'sactualpatientdaycensusorb)96%oftheprovider'slicensedbedcapacity.ForfacilitiesconstructedafterJanuary1,1979,thefixedandvariable costsattributabletothefirst12 monthsofoperationonlywillbedividedby96%ofthelicensedbedcapacityoractualpatientdaycensus,whicheverisgreater.

(4)Audits.Costsand expensestobeincluded inthefinalrateofpaymentshallbeestablishedonthe basisofeitheradeskauditoftheprovider'sReports andaccompanyingmaterialsoranon-siteauditofthebooksandrecords oftheprovider andrelatedparties.

(5)ExcessNursingCosts.Ifaportionofaprovider'snursingcostsaredisallowed under114.2CMR

2.08andtheproviderreceivesnodisallowanceforexcessvariablecosts,thedisallowedexcessnursingcostsmaybeincludeduptoanamountequal tothedifferencebetweenthevariablecostceiling establishedunder114.2 CMR2.06 andtheprovider'sactualvariablecosts.

(6)RateLimitation.Nofinalrateofpaymentestablishedunder114.2 CMR2.00 shallexceedtheratechargedbytheprovidertoprivatepayersforthesameorsimilarservices.Whenalong-termcareproviderfailstosatisfythisrequirement,theCommissionshallrecoupthedifferencebetweenthefinalrateandtheratechargedtoprivatepatientsmultipliedbythenumberofpatientdaysforthosediscountedprivatepatients.ThelimitationshallnotapplytotheportionofarateestablishedforPatientProtectorReceiversappointedpursuanttoM.G.L.c.111,s.72N whichreimbursesfortheReceiver'scompensationandbondasdeterminedin114.2 CMR2.16(8).

((7) Reserved)

(8)Payments toRelatedParties.Expensesotherwiseallowableshallnot beincludedforpurposesofdeterminingafinalrateunder114.2CMR2.00wheresuchexpensesarepaidtoarelatedpartyunlesstheprovideridentifiesanysuchrelatedpartyandexpensesattributabletoitintheReportssubmittedunder114.2 CMR2.00 anddemonstratesthat suchexpensesdonotexceedthelowerofthecosttotherelatedpartyorthepriceofcomparableservices,facilitiesorsuppliesthatcouldbepurchasedelsewhere.TheCommissionmayrequesteithertheproviderortherelatedparty, orboth,tosubmitinformation,booksandrecordsrelatingtosuchexpensesforthepurposeofdeterminingtheirallowability.Rentalandleaseholdexpensesarefurtherlimitedunder114.2 CMR2.06.

(9)FinalSettlement.Thedifferencebetweentheinterimratesofpaymentforthecalendaryearandthefinalrateofpaymentshallresultinafinalsettlementbetweentheappropriategovernmentalunit andeachprovider.Whereatransferofthefacilityhas occurred,theliabilityofthetransfereeandofthetransferorforanydecreasebetweentheinterimandfinalratesshallbegovernedbythepoliciesandregulationsoftheDepartmentofPublicWelfare,asamendedfromtimetotime.Therecordingofanassetorliabilityresultingfromafinalsettlementorfromarateappealdeterminationunder114.2 CMR

2.15shallbereflectedintheReportsfortheyearinwhichthefinalrateorthe appealrateiscertifiedbytheCommission.

2.4: continued

Example:IftheCommissionin1988 certifiesafinalratefor1986, theaccrualresultingfrom thedifferentialbetweenthefinalrateandtheinterimratesfor1986, whetheranassetorliability,willbereflected onthebooksandrecordsoftheproviderin1988andreportedontheRSC-1 reportfor1988.

Thecomputationofthedifferencebetweentheinterimrates ofpaymentforthecalendaryearandthefinalrateofpaymentasitappliesto114.2CMR2.10(1)(a)shallnotconsideranypatient-specificinterimorfinalrates.

(10)NoticeofProposedRate.Atleasttendaysprior toscheduledCommissionactioncertifyingafinalrateforaprovider,anoticeoftheproposedrateandacopyofadjustmentstotheprovider'scosts shallbesenttotheprovider.AprovidermaycommentinwritingontheproposedrateandadjustmentsduringtheperiodbetweennoticeandscheduledCommissionaction.Ifadditionaltimeisrequiredtoformulateawrittencomment,theprovidermayrequestapostponementofscheduledCommissionaction.

(11)DeterminationofReasonableCapitalExpenditureforFacilitiesBuildinginUrbanUnderbeddedAreas. Forthepurposesofestablishingfinalratesofpayment,specialprovisions,asdefinedin

114.2 CMR2.12(6),willbeutilizedtodetermineMaximumCapitalExpendituresforfacilitiesexemptfromtheDepartmentofPublicHealthDeterminationofNeed processpursuanttoits"GuidelinesForDeterminationofNeedExemptionsforLong-TermCare BedsConstructedinUrbanUnderbeddedAreas".

2.5: PrinciplesforEstablishingInterimRatesofPayment

(1)InterimPerDiemRate.Theinterimrateofpaymenteffectiveforthe12-monthperiodbeginningOctober1shallbethesumoftheelementssetoutin114.2CMR2.06through2.11, eachcomputedfortheprecedingcalendaryearonaper diembasiswithmodificationsset forthin114.2 CMR2.05exceptthat,forfacilitieswhichhavechangedownership,theprecedingcalendaryearshallincludeonlytheperiodduringwhichthenewownerownedthefacility.Theinterimrateofpaymentshallbeestablishedwheneverpossibleon thebasisofon-siteauditeddata;otherwise,theinterimrateofpaymentshallbeestablished onthebasisofdatawhichhasbeenthesubjectofadeskaudit.Costsand expensesincluded indeterminingaprovider'sinterimrateofpaymentaresubject to all limitations andconditionssetforthin114.2 CMR2.00 unlessspecificexpectationsaresetforthin114.2 CMR

2.05.Inthecaseofmultilevelfacilitieswhichincluderesident care units,separate interimper diemratesshallbecomputedforthosebedslicensedforresidentialcare.Nointerimrateofpaymentestablishedunder114.2CMR2.05shallexceedtheratechargedbytheprovidertoprivatepartypayersforthesameorsimilarservices.TheextendedinterimrateeffectiveOctober1,1990to December31,1990forthosefacilitieswhichhavebeen designatedbytheDepartmentofPublicWelfaretoreceiveprospectivecase-mixrates pursuantto114.2CMR5.00,ProspectiveRatesofPaymenttoLong-TermCareFacilities,effectiveJanuary1, 1991shallbetheinterimrateineffectonSeptember30, 1990.

(2)CostAdjustmentFactors. Forlong-termcareproviders,thereshallbeaddedincalculatingtheinterimrateacostadjustmentfactorwhichshallbeanannually-determinedpercentageoftheallowable costsexclusiveofinterest,depreciationandlegalfees,forthecalendaryearprecedingtheeffectivedate oftheinterimrate.Theamountdeterminedbysuchpercentageshallbedividedbythelargerofa)theprovider'sactual patientday censusorb)96%oftheprovider'slicensedbedcapacity.Thecostadjustmentfactorshallbe determined bymultiplyingtheweightof severalcategoriesasdeterminedfromthesubmittedreportssuchassalaries,food,plantexpense,medicalsuppliesandotherexpensesbyits correspondingeconomicchangeindicatorestablishedbyDataResources,Inc.tomeasuretheanticipatedchangesincostsfrom thereportingyeartorateyear.Wheretherehasbeenachangeinownershipintheprecedingcalendar year andtheinterimratehasbeenbaseduponthenewowner'sreportingperiodpursuantto114.2 CMR2.05(1),InterimPer DiemRate,thecostadjustmentfactorshallbemodifiedtoreflectthenumberofmonthsfrom themidpointofthereportingperiodtothemidpointoftheinterimrateperiod.

2.05: continued

(3)ComputationoftheInterimPerDiemRate.Whenthelicensed bed capacityisequaltothetotalbed capacity,theallowablecosts andexpensesasreportedintheReportsfortheprecedingcalendaryearunder114.2CMR2.06and2.08through2.11asmodifiedin114.2 CMR2.00shallbe dividedbythelargerofa)theprovider'sactualpatientdaycensusorb)96%oftheprovider'slicensed bedcapacity.Theallowablecostsandexpensesunder114.2CMR2.07shallbedividedbytheprovider's licensedbedcapacityforthecalendaryear.Theallowanceunder114.2CMR2.10(1)(a)shallbedivided bythepublicly-aidedpatientdays.

(4)SegregatedCosts.Whenthelicensedbedcapacityislessthanthetotalbedcapacity,theinterimrateshallbebased onthesegregationoffixedand variable costs. Thefixed costs shallbedivided by thelargeroftheprovider'sactualdaycensusor96%oftotalbedcapacity.Thevariableandnursingcostsand average equitycapitalshallbedividedbythelargerofa)theactualpatientdaycensusorb) 96%oftheprovider'slicensedbedcapacity.Forfacilitiesconstructedafter January1,1979,thefixedandvariablecostsattributabletothefirst12monthsofoperationsonlywillbedividedby96%oflicensedbedcapacityoractualpatientdaycensus,whicheverisgreater.

(5)ReasonableOperatingCosts.Theprovisionsandlimitationssetforthin114.2CMR2.06shallapplyforpurposes ofdeterminingtheinterimrateofpayment foraprovider,exceptthat reasonableoperatingcostsshallbebasedupontheReportssubmittedfortheprecedingcalendaryearandexcludedfromsuchcostsshallbevariable costsincurredbytheproviderduringsaidcalendaryearinexcessofonestandarddeviationabovethemeanallowablecostsincurredbyarepresentativesampling,asdeterminedbytheCommission,ofprovidersinthesamegroup.Forpurposes ofthislimitation,thecomputationofonestandarddeviationabovethemeanallowablevariable costsshallbebasedonthemostrecentdatacompiledbytheCommissionandshallexcludeworkingcapitalinterest.

(6)ReasonableNursingCosts.Theprovisionsandlimitationssetforthin114.2CMR2.08shallapplyforpurposes ofdeterminingtheinterimrateforaprovider,exceptthatcostsshallbebasedupontheReports submittedforthesecondprecedingcalendar year andexcludedfromsuchcostsshallbecostsincurredbytheproviderduringsaidcalendar year inexcessofonestandarddeviationabovethemeancosts incurred byarepresentativesampling,asdetermined bytheCommission, ofprovidersinthesamegroup. Forpurposesofthislimitation,thecomputationofonestandarddeviationabovethemeancostsshallbebased onthemost recentdata compiled bytheCommission.

(7)RateAdjustmentforAverageEquityCapital.TheamountofaverageequitycapitalforcomputationoftheinterimrateshallbebasedontheReportsforthesecondprecedingcalendar yearsubjecttothedefinitionin114.2CMR2.02andthelimitationsonacquisitioncostsetforthin

114.2CMR2.12.Theinterimperdiemrateofaproprietaryprovider whichhasapositiveequitypositionshallbeincreasedbyanannually-determinedpercentageoftheaverageequitycapitaldivided bythelargeroftheprovider'sactualpatientdaycensusor96%ortheprovider'slicensedbedcapacityforthe calendaryear.Theannually-determinedpercentagefortheinterimrate effectiveOctober1, 1990 shallbeapproximately9.80%.Thispercentagewillbeupdatedwiththemost currentavailabledata prior toOctober1, 1990.

(8)AccruedUnpaidExpenses.Whenaprovider fails topayexpenseswhichhavebeenaccruedatyearendformorethan120daysandwhichhavebeenincludedintheinterimrate,theCommissionmay adjusttheinterimratedownwardtoreflectonlythose costswhichhavebeenpaid.

2.5: continued

(9)Payments toRelatedParties.Expensesotherwiseallowableshallnotbeincludedforpurposesofdetermininganinterimrateunder114.2CMR2.00wheresuchexpensesarepaidtoarelatedparty, unlesstheprovideridentifiesanysuchrelatedpartyandexpensesattributabletoitintheReportssubmittedunder114.2 CMR2.00 anddemonstratesthat suchexpensesdo notexceedthelowerofthecosttotherelatedpartyorthepriceofcomparableservice,facilitiesorsuppliesthatcouldbe purchasedelsewhere.TheCommissionmayrequesteithertheprovider ortherelatedparty,orboth,tosubmitinformation,booksandrecordsrelatingtosuchexpensesforthepurposeofdeterminingtheirallowability.Rentalandleaseholdexpensesarefurtherlimitedunder114.2 CMR2.06.

(10)RateLimitation.

(a)PrivatePayor RateLimitation. Nointerimrateforaproviderestablishedunder114.2CMR

2.00 shallexceedtheloweroftheratecharged bytheprovider toprivatepayorsforthesameorsimilarservicesoraccommodations.Whenalong-termcareproviderfailstosatisfythisrequirement,theCommissionshallrecoupthedifferencebetweentheinterimrateandtherate chargedtoprivatepatientsmultipliedbythenumberofpatientdaysforthediscountedprivate patients.

(b)OutsideBudgetLimitationPursuanttoSt.1989,c.240,§102.Nointerimratesshallbecertified bytheCommissiontotheSecretaryofState untilsuchrates havebeenapproved bytheSecretaryofAdministrationandFinance.NosuchratesshallbeapprovedbysaidSecretaryunlesstheweightedaverageofratescomputedunder114.2CMR2.00andratescomputedunder

114.2CMR5.00isdeterminednottoexceedthecomparableratesfortheprecedingyearbymorethantheannualincreaseofthemedicalcarecomponentoftheNationalConsumer PriceIndexasprojectedbyDataResources,Inc.

(c)ExceptionstoRateLimitations.NosuchlimitationshallapplytotheportionofarateestablishedforPatientProtectorReceiversappointedpursuanttoM.G.L.c.111,§73,whichreimbursesfortheReceiver'scompensationandbond.NosuchlimitationshallapplytotherateofaparticularnursinghomewhichotherwisewouldexceedsuchlimitiftheSecretaryfinds,afterconsultationwiththeCommissionandtheSecretary ofHumanServices,thatarevisedrateisrequiredtocomplywiththeprovisionsofTitleXIXoftheSocialSecurityAct.

(11)FailuretoFileReports.

(a)Whenalong-termcareproviderhasfailedtofiletherequiredReportsbyMay1, nointerimrateshallbecalculateduntiltherequiredreportshavebeenfiled.Insuchcases,aninterimratewillbepromulgatedeffectivethefirstdayofthesixthmonthfollowingthereceiptofanacceptablecostreport.

Example:Aproviderfilestherequiredreports onJuly10, 1989.Theinterimratebased onthosereports willbeeffectiveJanuary1, 1990.

(b)Thedeferraloftheeffectivedateshallnot applyincaseswhenthenewly-establishedrateislower thanthepriorrate.

(12)DeterminationofReasonableCapitalExpenditureforFacilitiesBuildinginUrbanUnderbeddedAreas. Forthepurposesofestablishinginterimratesofpayment,specialprovisionsasdefinedin

114.2CMR2.12(6),willbeutilizedtodetermineMaximumCapitalExpendituresforfacilitiesexemptfromtheDepartmentofPublicHealthDeterminationofNeed processpursuant to its"GuidelinesFor DeterminationofNeedExemptionsforLong-TermCare BedsConstructedinUrbanUnderbeddedAreas".

2.6: ReasonableOperatingCosts

(1)ReasonableOperating Costs.Reimbursementforreasonableoperatingcostsbasedontheprovider'sReportsshallbeallowed,subjecttothelimitationsandconditionssetforthin114.2 CMR2.06.

2.06: continued

(2)LimitationonReasonableOperatingCosts.Thereshallbeexcludedallallowablevariablecostsinexcessofonestandarddeviationabovethemeanallowablevariablecostsincurred byarepresentativesampling,asdeterminedbytheCommission,ofprovidersinthesamegroup.Forpurposesof114.2CMR2.06(2),variablecostsshallnotincludenursingcosts,motor vehicle costsorinterestonshort-termorworkingcapital loans.Whereagroupincludeslessthan15providers,variablecostsinexcessofthe84thpercentileshallbeexcluded.Theselimitationswillbedeterminedwheneversufficientdata isavailabletotheCommissionandatthesametimeasthecomputationsofefficiencygroupsestablishedpursuantto114.2CMR2.16(7)(b)2.,AcceptableComplianceIncentive.

(3)GroupingsforRepresentativeSampling. Forpurposesofcomputingthelimitationonreasonable operatingcosts, providersshallbegroupedasfollows:

(a)HeavyCase-MixIntensityFacilities;

(b)LightCase-MixIntensityFacilities;

(c)ModerateCase-MixIntensityFacilities;

(d)Facilitiesorunitsthereofprovidingexclusivelypediatriccare;

(e)Certifiedlongtermcarenursingunitsofacuteandchroniccarehospitals; and

(f)PublicMedicalInstitutions.

Provided,however,thattheHealthCareFinancingAdministrationallowscontinueduseofthepreviouslyapprovedlimitationsforatransitionperiodnot toextendbeyondDecember 31, 1990, thelimitationsdescribedaboveshallnot beusedincomputingthelimitationonreasonablevariablecostsuntilJanuary1, 1991.FortheperiodofOctober1throughDecember31,1990,facilitiesshallbereimbursedaccordingtothegroupingineffectonSeptember30, 1990.

((4) Reserved)

(5)ExclusionsformReasonableOperating Costs.Thefollowingare examplesofexclusionsfromreasonableoperatingcosts:

(a)Expenses,fees,salaries,orothercompensationfortheadministrationorpolicyplanningfunctions;

(b)Prescribedlegenddrugsforindividualpatients;

(c)Baddebts,refunds,charityandcourtesyallowancesandcontractualadjustmenttothestateandother thirdparties;

(d)Recoveryofexpenseitems,that is,expenseswhichare reducedoreliminated byapplicableincomeincludingbutnot limitedto,rentalofquarterstoemployeesandothers,incomefrommealssoldtopersonsotherthanpatients,telephoneincomeandmedical recordsincome.Vendingmachineincomeshallberecoveredagainstallowableexpenses.Laundryincomeshallnotberecoveredagainst expensesunlesstheprovider hasfailedtoidentifyandexcludealllaundrycostswhichare speciallyprovidedtoprivatepatients;

(e)Federalandstateincometaxes(but not thenonincomerelatedportionoftheMassachusettscorporate excisetax);

(f)Expenseswhicharenotdirectlyrelatedtotheprovisionofpatientcareincluding,butnotlimitedto,expensesrelatedtootherbusinessactivitiesandfundraising,giftshopexpenses, researchexpense,rentalexpenseforspacenotrequiredbytheDepartmentandexpenditureoffundsreceivedunderfederalgrantsforcompensationpaidfortrainingpersonnelandexpensesrelatedtograntsofcontractsfor specialprojects;

(g)Compensationandfringebenefitsforpatientsorresidentsonaprovider'spayroll;

(h)Anyamountsinexcessofanyscheduleorlimitationcontainedin114.2 CMR2.00;

(i)Costsofancillaryservicesrequiredby114.2CMR2.00orbyagovernmentalunittobe billedonadirect basistothepurchasinggovernmentunit;

(j)Penaltiesandinterest,incurredbecauseoflatepaymentofloansor other indebtedness,latefilingoffederalandstatetaxreturns,orfromlatepaymentofmunicipaltaxes;

2.06: continued

(k)Anyincreaseincompensationorfringebenefitswhich,afterafinaladjudicationbythecourtoflastresorthavingjurisdictionthereof,isgrantedasaresultofanunfair laborpractice;

(l)Accruedexpenseswhichremainunpaidoneyearafterthecloseofthecostreportingyearshallnot beincludedinthefinalrate.Suchcostsmaybeincludedinthenextfinalrateasanexpense,ifallowable,iftheyarepaidinthenextyear;

(m)ExclusionsfromReasonableOperatingCosts.Noindividualsalaryorfeepluspayrolltaxes,fringebenefitsandotherincrementsrelatedtosuchcompensationpaidbytheprovider,oraccruedbytheproviderforthebenefitofanyperson,shallexceedtheAdministrationandPolicyPlanningAllowancedeterminedforthefacilitypursuantto114.2CMR2.07(2)exceptthat,innursingfacilitieswhicharelicensedfor50bedsorless,thislimitationshallnotapplytothepositionofDirectorofNurses.

(n)Interestonworkingcapitalobligations.

(o)PurchasedServiceNursingexpensesthatarepurchasedfromtemporarynursingagenciesthat are notregisteredwiththeDepartment ofPublicHealthunder105 CMR157.000.

(6)ExclusionsfromReasonableOperatingCosts--Costs ofServicesBilledDirectly.

(a)Thefollowingmedicalsuppliesorservicesshallbebilleddirectlytothegovernmentalunitwhichpurchasestheserviceinaccordancewiththeapplicableprogrampolicies,requirements,andbenefitlimitationsestablishedbythegovernmentalunitresponsibleforpaymentatratesgovernedbytheapplicableregulationsoftheCommission,andthecosts ofsuchsuppliesorservicesshallnotbeincludedinrates establishedunder114.2 CMR2.00:

1.Directphysician servicestoindividualpatients,including emergencyphysicianservices requiredbytheDepartment'sRulesandRegulationsfortheLicensingofLong-TermCareFacilities(1977)oritsmostrecentapplicableregulations;

2.Pharmacycostsrelatedtolegenddrugprescriptions; and

3.Direct restorativeservicesinphysicaltherapy,occupationaltherapy,andspeechoraudittherapy,exceptinthecaseoffacilitiesorunitsoffacilitiesprovidingexclusivelypediatriccare.Directrestorativeservicesarethosewhichareprovidedonlyuponwrittenorderofaphysician.

(b)TheCommissionmayallow theinclusionofdirectmedicalservicesorsuppliesforcertifiedlong-termcareunitsof acuteandchroniccarehospitalsinaccordancewiththeregulationsorwrittenpolicyofthegovernmentalunitresponsibleforpayingforsuchservicesorsuppliesintheperdiemratewhereinclusionofsuchcostsaremoreefficientandpracticablefortheestablishmentoffair,reasonableandadequaterates.

(7)IndirectRestorativeTherapyServices.Indirectrestorativetherapyservices,suchascaseconferencesorin-serviceeducationprograms,arereimbursableasreasonableoperatingcostsprovided theyaredocumentedinawrittensummaryavailableforinspectioninthefacility.Thissummaryshouldbeintheformofaconsultantbookforeachdisciplineandshould beupdatedatleastmonthly.

(8)LegalExpenses.Onlythefollowinglegalfeesshallbeincludedasreasonableoperatingcosts:

(a)Reasonableandnecessarylegalfeesandexpensesdirectlyrelatedtothecollectivebargainingprocess subsequent tounionizationshallbeincludedasreasonableoperatingcosts.

(b)Reasonableandnecessarylegal feesandexpensesincurredinobtainingarealestatetaxabatementshallbeincludedasreasonableoperatingcostsuptoadollaramountnotexceedingthesavingsrealizedandshallbeamortizedovertheperiodinwhichthesavingsare realized.

(c)LegalfeesandexpensesdirectlyapplicabletothepreparationofanactualparticipationinappealsbeforetheDivisionofAdministrativeLawAppealsorlitigationbeforethecourts,orotherproceedingsarisingundertheprovisionsofM.G.L.c.6A,§36,shallnot bereimbursableaslegalexpenses but shallbetreatedasAppealExpensesunder114.2CMR2.06(28).

2.06: continued

(9)AccountingandAuditingExpenses.Reasonableandnecessaryaccountingandauditingexpensesincurredbyaproviderinmattersdirectlyrelatedtotheprovisionofadequatepatientcaretopublicly-aidedpatientsshallbeincludedasareasonableoperatingcost,providedthat thebooksandrecords oftheprovider are maintainedinaccordancewithgenerally-acceptedaccountingprinciples,exceptthataccountingfeesandexpensesdirectlyapplicabletothepreparationofandactualparticipationinappealsbeforetheDivisionofAdministrativeLawAppealsorlitigationbeforethecourts,orotherproceedingsarisingundertheprovisionsofM.G.L.c.6A,§36,shallnotbereimbursableasaccountingexpensesbutshallbetreatedasAppealExpensesunder114.2CMR2.06(28).

(10)EducationExpenses-Limitation.Thenetcostoftheprovider'scontributiontothecostofrequirededucationalactivitiesoffull-timeemployeesshallbeincluded asareasonableoperatingcost. EducationalactivitiesmustbeconductedwithintheCommonwealthofMassachusetts and bedirectlyrelatedtoimprovingpatientcare topublicly-aidedpatientsandconducted byarecognizedschoolorotherauthorizedorganization.Thenetcostisthecostofrequirededucationalactivitieslessanyreimbursementfromgrants,tuition,specificdonations,employeecontributions,orothersources.EducationexpensesforAdministrators-in-Trainingshallnotbereimbursable.Educationexpensesfor ContinuingEducationforlicensedadministratorsshallbeconsideredpartoftheAdministrationandPolicyPlanningAllowance.

(11)EducationalExpenses-Verification.In ordertoobtainreimbursementunder114.2CMR2.06(10),providersmustmaintainrecordsofeducationalexpenseswhichincludethenamesoftheschoolsorotherorganizationssponsoringtheeducationalactivity,thenamesandpositionsofemployeesattending,thedateandlocationoftheactivity,thenumberofcontinuingprofessionalcredits earned,ifany,and acopyoftheoutlineofsubjects covered.

(12)EmploymentAgencyFees.ExpensespaidtoemploymentagenciesorconsultantsforthepurposeofrecruitingpersonnelshallbeconsideredpartoftheAdministrationandPolicyPlanningAllowance.

(13)AdvertisingExpenses.Thereasonableandnecessaryexpensesofnewspaperor other publicmediaadvertisementsforthepurposeofsecuringnecessaryemployeesshallbeincludedasareasonableoperatingcost.Nootheradvertisingexpensesshallbeincludedasreasonableoperatingcosts.

(14)GenerallyAvailableEmployeeBenefits.Totheextentoftheprovider'scontribution,GenerallyAvailableEmployeeBenefitsshallbeincludedinreasonableoperatingcosts.ToqualifyforreimbursementforaGenerallyAvailableEmployeeBenefit,theprovidermustestablishandmaintainevidenceofitsnondiscriminatorynature.GenerallyAvailableEmployeeBenefitsshallincludegrouphealthandlifeinsurance,pensionplans,seasonalbonusesandnon-requiredjob-relatededucationalbenefits.Bonusesrelatedtoprofit,privateoccupancyordirectlyorindirectlytoreimbursementratesshallnotbereimbursable.Benefitswhichare relatedtosalariesshallbelimitedtoallowablesalaries.BenefitswhicharerelatedtotheadministratorshallbeconsideredpartoftheAdministrationandPolicyPlanningAllowance.Requirededucationalandpensionbenefitsshallbereimbursedseparatelyunder

114.2CMR2.06(10)and 2.06(23), respectively.

(15)MembershipDues.Reasonableandnecessarymembershipduesshallbeincludedasreasonableoperatingcostssolongastheorganization'sfunctionandpurposesaredirectlyrelatedtothedevelopmentandoperationoftheprovider'sfacilitiesandprogramsandtherenderingofadequatepatientcare.Membershipdues shallnot include:

(a)Amounts,assessments,accrualsorcontributionswhichareforthepurposeofdirectlyorindirectlyfinancingorotherwisesupportingpoliticalorlobbyingactivitiesregardinglegislationtoaffectgovernmentregulatoryactivities,orreimbursement methods;

(b)Campaigncontributions;

2.06: continued

(c)Advertisingtoaffectlegislationorcreategoodwillortootherwiseaffectpaymentsmadebygovernmentalunits;and

(d)Amounts,assessments,accrualsorcontributionswhichareforthepurposeofdirectlyorindirectlyfinancingorotherwisesupportinglitigationregardinggovernmentregulatoryactivitiesorreimbursement methods.

(16)RentalandLeaseholdExpense--Limitation.

(a)Rentalandleaseholdexpenseforland,buildingandequipmentshallbeallowedasareasonableoperatingcost intheloweramountofaveragerentalorownershipcostsofcomparable providersorthereasonableandnecessarycostsincludinginterest,depreciation,realpropertytaxes andinsuranceoftheproviderandlessor.Inaddition, areturnonaverageequitycapitalmayalsobe allowedtoproprietarylessorsifitwouldotherwisehavebeenallowedhadtheprovider ownedthefacility.Forrecognitionoftheseexpensesandallowancesinlieuofrent,theprovidermustfile,orinthe caseofaleasefromanonrelatedparty,mustarrangeforthelessor tofileaformRSC-2,RealPropertyReport.

(b)Providerswhorent orleasecentralofficespaceoutsideofthefacilityandcandemonstratethatsuchspacecontributestotheefficiencyoftheprovidershallhavesuchrentallowedasareasonableoperatingcostatthelowerofaveragerentalofcomparableprovidersorthelowestrentpaidforcomparablespaceatthatlocation.Insuchinstances,aformRSC-2,RealPropertyReport,neednot befiled.InlieuofformRSC-2, theprovidershallfileacopyoftheleasewiththeCommissiontogetherwithastatementwhichdescribestherentedcentralofficelocationincludingthetotalsquarefootageactuallyusedandnecessaryforcurrentoperations.

(c)Providerswhorentorleaseincidentalofficeequipmentsuchastypewriters,copyingmachinesorcomputersshallhavesuchrentallowedasareasonableoperatingcostsubjecttotheprudentbuyerconceptprovidedthatsuchrentalisnecessaryanditcanbedemonstratedthatitcontributestotheefficiencyoftheprovider.

(17)RentBased onIncome. Additionalrentalpaymentsorchargesbased uponreceiptsorincome shallnot beconsideredasadditionalrentalexpense.

(18)MotorVehicleExpenses.The costsofoperationofanymotorvehicleshallbeareasonableoperating costifthevehicleisuseddirectlyintheoperationofaprovidersubjecttothefollowinglimitation:Themaximumallowanceforeachvehicleshallbethegreaterofanamountequalto $30.00 perbedor$600.00perprovider,buttheallowanceforallvehiclesshallnot exceed$1,500.00perprovider.Motorvehicleexpensesshallincludedepreciation,mileagepayments,repairs,insurance,excisetaxes,financecharges,salestax,andallother relatedexpenses.

(19)ServicesofNon-Paid Workers.Subjectto114.2CMR2.06(20)thenetvalueofservicesfor non-paidpersonsinpositionscustomarilyheld bypaidemployees,whoperformsuchservicesonaregularbasisasnon-paidmembersofreligiousorotherorganizationsshallbeallowableasanoperatingexpenseifotherwiseallowableasareasonableoperatingcostunder114.2CMR2.00.Suchservicesshallbeperformedunderanagreementbetweentheorganizationandtheproviderfortheperformanceoftheserviceswithoutdirectpaymentfromtheprovidertothemember.The valueofservicesnormally provided onavoluntarybasis,suchasdistributionofmagazinesandnewspapers topatients,shallnotconstituteareasonableoperatingcost.

(20)ServicesofNon-PaidWorkers--Requirement.Toqualify asareasonableoperatingcost,servicesofnon-paidworkersunder114.2 CMR2.06(19)must meetthefollowingrequirements:

(a)Theamountallowedshallnotexceedthatwhichwould bepaidothersforsimilarwork;

2.06: continued

(b)Theamountpaid bytheprovider totheorganizationmustbeidentifiableintherecordsoftheproviderasalegalobligation; and

(c)Theservicesmustbeperformedonaregular,scheduledbasisandmustbenecessaryfortheprovisionofadequatepatientcaretopublicly-aidedpatients andfortheefficientoperationoftheprovider.

Example:Assumethattheprevailingsalaryofaregisterednurseis$22,000peryearforfull-timeservices.Anunpaidworker,asdescribedabove,receivesmaintenanceandother benefitsequaltoavalueof$5,000butnosalary.Theproviderwouldthenincludeinitsrecordsanadditional$17,000tobringthevalueofthe servicesrendered upto$22,000.The amountof$17,000wouldbeallowablewheretheproviderassumesan obligationforthe

$5,000expenseunderawrittenagreementwiththeorganizationforpaymentbytheproviderfortheservices.

(21)Administrators-in-Training. Reasonablecompensation,includingfringebenefits,paidbya provider tono morethantwo administrators-in-trainingshallberecognizedasareasonableoperating costinadditiontoscheduledallowancesunder 114.2 CMR2.07,iftheproviderislicensedbytheDepartmenttooperate nolessthan60 beds,whichmustincludeskillednursingfacilitybeds,andtheadministrators-in-trainingare:

(a)enrolledinatrainingcourseapprovedbytheBoardofRegistrationofNursingHomeAdministrators,

(b)underthe directsupervisionofafull-time administrator, and

(c)copiesofthe preceptor'sreportsaremaintainedatthefacility.

(22)Non-LegendDrugs.Thereasonableandnecessarycostsofprovidingthe non-legenddrugslisted intheDepartment'sCircularLetterLTCFP:1-75-71,asamended bytheDepartmentfromtimetotime,includingthosenon-legenddrugswhichareorderedbyadoctor,shallbeincludedasreasonableoperatingcostsandtheprovisionsofthesesuppliesshallnotbebilleddirectlytoanygovernmentalunitorchargedagainstthepersonalcarefundsofanypatient.

(23)PensionPlan--Limit.Reasonableandnecessaryexpensesincurred byaprovider relatingtoapensionplanshallbeincludedasaGenerallyAvailableEmployeeBenefittotheextentthattheprovider'spaymentsrepresentanamountbased uponfair,reasonableandnecessarycompensationfor servicesperformedbyemployees. Innoeventshallreimbursablepensionexpensecauseanindividual's totalcompensationtoexceedthelimitscontainedin114.2 CMR2.06 (5)(m).

(24)PensionPlans--Prior Years'Service.Reasonableandnecessaryexpensesincurredbytheproviderrelatingtoapensionplanshallmeancostsincurredoncurrentaggregateyear'spayrollandshallnotincludepaymentsfor prior year'sservices.

(25)PensionPlan--Requirements.Apensionplanmust provideforeitherafixed,determinableamountto becontributedbytheemployeronaregular basisorforafixed,determinablebenefitto bereceivedbytheemployeeatretirement.Costgeneratedbyanypensionplanwhichdoesnot meettheserequirementsorwhichprovidesthatcontributionbytheprovider totheplaniscontingentonaprofitbytheproviderorisatthediscretionofthemanagementofthefacilityshallnotqualify asareasonableoperatingcost.Anyforfeitureby anemployeemustbeappliedtoreducethepremiumamountpaidbytheemployer.EverypensionplanforwhichreimbursementissoughtshallbefiledwiththeCommissionandbe subjecttoperiodicreviewtoassurethattheplanmaybereasonablyexpectedtoprovidebenefitstoboth professionalandnon-professionalemployees, tostabilizetheemployees'turnoverrateinfacilities,andtomakemoreattractiveemploymentinsaidfacilities;andthatitscostsare reasonableandconsistentwithother suchplans.

2.6: continued

(26)PensionPlans--ApprovalbyInternalRevenueServices.Tobereimbursable,apensionplanmusthavemet thecurrentrequirementsofandreceivedtheapprovaloftheInternalRevenueService.AllapplicableInternalRevenueServiceFormsdocumentingInternalRevenueapprovalmustaccompanytheRSC-1 reportorbemadeavailabletoon-siteauditors.

(27)PensionPlans--RequiredbyStateStatute.Long-termcare providersthatarerequiredbyenablingstatutetomakepayments toamunicipalpensionfundshallbereimbursedforthesumofa)theaggregatecompensationoftheemployeescovered bythePlan, orforanyindividualsocovered,includinganyindividualwhoisdesignatedasperformingtheAdministrationandPolicyPlanningfunction andforwhoseservicestheschedulecontainedin114.2CMR2.07,AdministrationandPolicyPlanning Allowance,constitutestheupperlimitandb)theimputedvalueoftheemployer'scostofparticipatingintheFederalSocialSecurityprogram.

(28)AppealExpenses.Allfees andexpensesincluding,butnotlimitedto,legalandaccountingfeesandexpenses,directlyapplicabletothepreparationofanactualparticipationinappealsbeforethe DivisionofAdministrativeLawAppealsorlitigationbeforethecourts,orotherproceedingsarisingundertheprovisionsofM.G.L.c.6A,§36,shallbeincludedasreasonableoperatingcostssubjecttothefollowingconditionsandlimitations:

(a)ThefeesandexpensesexcludingfilingfeesofahearingbeforetheDivisionofAdministrativeLawAppealsshallbeincludedasareasonableoperatingcostuptotheamountof$1,000provided theappellantprevailson atleastoneclaimsetforthinthebillofcomplaint.Innoeventshalltheappealexpenseexceedthevalueofthesuccessfulclaim.

(b)Thefeesandexpensesofjudicialreview oftheDivision'sfinaldecisionintheSuperiorCourtfortheCountyofSuffolkpursuanttoM.G.L.c.6A,§36shallbeincludedasareasonableoperatingcostuptotheamountof$1,000providedtheappellantprevailsonatleastoneclaimsetforthinthebillofcomplaint.

(c)ThesumoffeesandexpensesforanyoneappealinitiatedunderM.G.L.c.6A, § 36 shallbeincludedasareasonableoperatingcostprovidedsuchfeesandexpensesdo notexceed atotalof

$2,000,andfurtherprovidedthattheappellantprevailsonaleast oneclaimraisedinthebillofcomplaint.

(d)Anyfees required bytheDivisionofAdministrativeLawAppealsasaprerequisitetofilinganappealshallnot beincludedasareasonableoperatingcost.

2.7: AdministrationandPolicyPlanningAllowance

(1)AdministrationandPolicyPlanningAllowance.Anallowanceequaltoamountsdeterminedundertheappropriatescheduleattheendof114.2CMR2.07foradministrationandpolicyplanningfunctions shallbemadeinlieuofanycompensationincludingpayrolltaxes,fringebenefitsincludingthe costofcontinuingeducationrequirements,andanyotherincrementsrelatedtosuchcompensationpaidtoanowner,officer,administrator,assistantadministrator,officemanager,businessmanager,controller,ortoanypersonwhoperformsprimarilyadministrationandpolicyplanningfunctionsandinlieuofanyfees formanagementcompanies,managementorfinancialconsultants.Theallowancessetforthin114.2CMR2.07(2)areinlieuofcompensationforanyotherservicessuchasnursing,maintenance,bookkeeping,accounting,etc.,performedbythequalifiedlicensedadministratorofthefacilityaslistedwiththeDepartment. Whereafull-timeadministratorisrequiredtobeonthepremises duringtheworkingdaybytheDepartment'sapplicableregulations,theallowancesetforthin

114.2 CMR2.07(2)shallbesubstitutedforthesalary,fringebenefitsandanyother incrementsofapersonperformingtheadministrationfunctionduringtheworkingday,whetherornotthatpersonisthelicensedadministratordesignatedbytheprovider.Thesalaryandrelatedbenefitsofthepositions,StaffDevelopmentCoordinatorandQualityAssuranceNurse,shallbereimbursedasvariablecostsandnotincludedintheAdministrationandPolicyPlanningAllowance. ForthefinalrateeffectiveJanuary1,1989 andtheinterimrateeffectiveOctober1, 1989, thesalaryandrelatedbenefitsoftheposition,

2.7: continued

QualityAssuranceNurse,shallbeclaimedasanincentive-basedvariable cost,andoftheposition,StaffDevelopmentCoordinator,shallbeclaimedasanon-incentive-basedvariablecost.

(2)ScheduleofAdministrationandPolicyPlanningAllowance.Approximatelythefollowingscheduleofannualallowancesshallbeimputedintotheinterimandfinalratesbydividingtheannualallowancebythelicensedbedcapacity.ThisscheduleshallbeusedintheinterimrateeffectiveOctober1,1990andinthefinalrateeffectiveJanuary1, 1990.

Forfacilities10 orless to 30 beds / $22,663
plus$652 foreachbedinexcessof10.
Forfacilities31 to 50 beds / $35,003
plus$442 foreachbedinexcessof31.
Forfacilities51 to 70 beds / $43,778
plus$291 foreachbedinexcessof51.
Forfacilities71 to 119 beds / $49,648
plus$221 foreachbedinexcessof71.
Forfacilities120 bedsorover / $66,454
plus$177 foreachbedinexcessof120.

TheAPPA schedulemaybeupdatedwiththemost currentavailableinflationfactorpriorto October1, 1990.

2.8: NursingCosts

(1)LimitationonAllowableNursing Costs.Unlessspecificallypermittedundertheexceptionforexcessnursingcostswithin114.2CMR2.04orundertherecognitionofadditionalnursingcostswithin

114.2CMR2.08,thereshallbeexcludedallnursingcostsincludingcompensationforregisterednurses,licensedpracticalnurses,rehabilitationnursingassistants,nurses'aides,includingthepayrolltaxesandfringebenefitsrelatedtosuchcompensation,andpurchasedservicenursing,inexcessofone standarddeviationabovethemeannursingcostsforarepresentativesampling,asdetermined bythecommission,ofprovidersinthe samegroup. Whereagroup includeslessthan15 providers,nursing costsinexcessofthe84thpercentileshallbeexcluded.Theselimitationswillbedeterminedwheneversufficientdataisavailabletothecommissionandatthesametimeasthecomputationofefficiencygroupsestablishedpursuantto114.2CMR2.16(7)(b)2.,AcceptableComplianceIncentive.BeginningwiththeinterimrateeffectiveOctober1, 1987 andthefinalrateeffectiveJanuary1, 1987,thesalaryandrelatedbenefitsofthepositionofDirectorofNursesinnursingfacilitiesshallbeexcludedfromthecalculationsofallowablenursingcostsandshallbereimbursedseparately.

(2)GroupingsforRepresentativeSampling. Forpurposes ofcomputingthelimitationonallowablenursingcosts, providersshallbegroupedasfollows:

(a)HeavyCase-MixIntensityFacilities;

(b)LightCase-MixIntensityFacilities;

(c)ModerateCase-MixIntensityFacilities;

(d)Facilitiesorunitsthereofprovidingexclusivelypediatriccare;

(e)Certifiedlongtermcarenursingunitsofacuteandchroniccarehospitals; and

(f)PublicMedicalInstitutions.

Provided,however,thattheHealthCareFinancingAdministrationallowscontinueduseofthepreviouslyapprovedlimitationsforatransitionperiodnot toextendbeyondDecember 31, 1990, thelimitationsdescribedaboveshallnot beusedincomputingthelimitationonreasonablenursingcostsuntilJanuary1,1991.FortheperiodofOctober1throughDecember31,1990, facilitiesshallbereimbursedaccordingtothegroupingineffectonSeptember30, 1990.

2.8: continued

(3)RecognitionofAdditionalNursing Costs.Where costs inexcessofthelimitationare theresultofrequirementsoftheDepartment andsuchrequirementsforthatprovideraresupportedbywrittencertificationbytheDepartmentaccordingtoits appropriate regulations,theCommissionmaypermitrecognitionintherateoftheassociateadditionalnursingcosts.

2.9: RateAdjustmentforAverageEquityCapital.

(1)RateAdjustmentforAverageEquityCapital.Theper diemrateofaproprietaryproviderwhichhasa positive equitypositionshallbeincreased byanannually-determined percentage oftheaverage equitycapitaldividedbyadivisorasdescribedin114.2 CMR2.04(2),2.04(3),2.05(3)and2.05(4)fortheinterimrate.Forthefinalrate,theannually-determinedpercentageshallbecalculatedbytotaling12 monthlyrates forthereportingyear,eachofwhichrepresentsapercentageequalto112%oftheaveragemonthlyratesofinterestonspecialissuesofpublicdebtobligationsissuedtotheFederalHospitalInsuranceTrustFund.Thissumshallbethendividedby12toobtaintheannualpercentage.Forthepurposesofestablishing an interimrate,thepercentageshallbe112%ofthemostrecentavailableinterestonthespecialissuesofpublicdebtobligationsissuedtotheFederalHospitalInsuranceTrustFund.ForthepurposesoftheinterimrateeffectiveOctober1,1990,thepercentagewillbeapproximately9.80%andwillbeupdatedwiththemostcurrentdataavailablepriortoOctober1, 1990.

(2)BasisforComputationofAverageEquityCapital.Averageequitycapitalshallbebased ontheamountsreflectedintheaccountsasdescribedin114.2 CMR2.02(4)and reported onastraight-line basisinaccordancewith114.2CMR2.11(2).Providerswhohaveusedotherthanstraight-linemethodsinthedeterminationofdepreciationinprioryearsandsuchmethodhasnotbeenreimbursedmustsubmitareconciliationofendingnetworthasreported onDecember 31 oftheprioryearwithnetworthasreportedonJanuary1ofthecurrentyear.AnyextraordinaryfluctuationsinaverageequitycapitalduringtheyearshallbereportedbytheproviderandshallbeweightedinthecomputationofaverageequitycapitalastheCommissiondeemsappropriate.Thecomputationofaverageequitycapitalshallnotbediminishedbylong-termdebtforwhichinteresthasbeen excludedundertherefinancingprovisionof114.2CMR2.10(l)(b)orlong-termloansfrom owners,officersorrelatedpartiesunder114.2CMR2.10(3).ForfinalrateseffectiveJanuary1,1983andinterimrateseffectiveFebruary1,1984,averageequitycapitalshallbeincreasedtoreflectanequitysupplementasdefinedin114.2 CMR2.02.Theequitysupplementshallnotbeincludedinfinalorinterimrates forproviderswhoacquirelong-termcare facilitiesonorafterJanuary1, 1983. Forfinalrates effectiveJanuary1,1983andthereafter,averageequitycapitalshallnotbereduced bybuildingdepreciationoccurringonandafterJanuary1, 1983.

2.10: Interest Expense

(1)MaximumAllowableInterestExpense.Reasonableandnecessaryinterestexpenseshallbeincludedintherateasfollows:

(a)InterestonWorkingCapital.Interestonshort-termorworkingcapitalborrowingsshallbeexcludedfromreasonableoperatingcosts.Inlieuofthesecosts,an allowanceforfinancingofcurrentoperationsshallbeimputedintorates.Suchallowanceshallbe based onthemonthlynetaverageMedicaidaccountsreceivablereportedinthereportingyearmultipliedbyapercentdefinedasfollows.Forthefinalrate,thepercentshallbetheweightedmonthlyaveragefortheyear oftheprimelendingrateoftheBankofBoston.Fortheinterimrate,thepercentshallbethemostrecentavailableprimelendingrateoftheBankofBoston.Theper diemallowanceshallbedeterminedbydividingthetotalallowancebythepublicly-aidedpatientdays. Forpurposesof

114.2CMR2.10,thefinalrateshallincludeasaccountsreceivablethenet Medicaidreceivablesforcurrent andprioryearsoutstandingbasedonthedifferencebetweentheinterimandfinalratesuptothedateofcertificationbytheCommission.Forfacilitiesconvertingtotheprospectivepaymentsystem,andwherethisfinalratewillbethelastfinalrateforthefacility,the

2.10: continued

Commissionshallalsoinclude asaccountsreceivablethenetMedicaidreceivablesforsubsequentyearsinwhichthelastfinalratewasoutstanding.ForthepurposesoftheinterimrateeffectiveOctober1, 1988, theprimerateshallbeapproximately 9%.Thisratewillbeupdatedwiththemost currentdata availableprior toOctober1, 1988.

Example:Whenthe1988 finalrateiscertified onJune15, 1990,thedifferencebetweenthe1988interimrates andthe1988 finalratetimesthe1988 publicly-aidedpatientdayswillbeconsideredasaccountsreceivablefromJanuary1,1990toJuly14,1990.TheamountofaccountsreceivableforthisperiodshallbeimputedintothecalculationoftheworkingcapitalallowancebytheCommission.

TheComputationofthedifference betweentheinterimratesofpaymentforthecalendaryearandthefinalrateofpaymentshallnot consideranypatient-specificinterimorfinalrates.

(b)Interest onLong-TermDebt.

1.Reasonableandnecessaryinterestonallowablelong-termdebt,supportedbyafixedassetwhichissubjecttothelimitationssetforthin114.2CMR2.12,LimitationofBasisforDepreciation,InterestandEquity,shallbeincludedintheinterimandfinalperdiemrates.Suchinterestshallbelimitedtoanannually-determinedpercentageofsimpleintereston all outstandinglong-termloansweightedbythedollaramountofthefundsborrowed.Forinterimandfinalratespromulgatedpursuanttothisregulation,theannually-determinedpercentageshall be,forallowablelong-termdebtssecuredpriortoJanuary1, 1983, therateas statedinthedebtinstrumentat thetimeofborrowing;and,forallowablelong-termdebtssecuredonandafterJanuary1,1983,theloweroftherateasstatedinthedebtinstrumentatthetimeofborrowing,orapercentageequaltothemonthlyrateofinterestonspecialissuesofpublicdebt obligationsissuedtotheFederalHospitalInsuranceTrustFundforthethirdmonthpriortothemonthinwhichthefinancingoccurredplus3%.InnoeventshalltherateofinterestwhichtheCommissionallows exceed 15%perannum.

2.Interestpaymentsmadepursuanttorefinancingshallbeallowedwhentheaccumulatedprincipalpaymentsonmortgages securedbyallowablefixedassets exceedstheaccumulateddepreciationallowedbytheCommissionpursuantto114.2 CMR2.11,Depreciation.Themaximumrateofinterestallowedpursuanttosuchrefinancingshallbetheloweroftherateasstatedinthedebtinstrumentatthetimeofborrowing,orapercentageequaltothemonthlyrate ofinterestonspecialissuesofpublicdebtobligationsissuedtotheFederalHospitalInsuranceTrustFundforthethirdmonthpriortothemonthinwhichthefinancingoccurredplus3%.InnoeventshalltherateofinterestwhichtheCommissionallows exceed 15%perannum.

3.Incaseswheretheprovider'sallowablelong-termfinancingbecomespayableupondemand,refinancingoftheoutstandingbalancewhichexceedsthedifferencebetweentheallowablecostofthefixed assetsand the allowabledepreciationaccumulatedthereonshallbe allowedataratenottoexceed11%perannum,or13%perannuminthecaseofanewly-constructedfacilitylicensed onorafterJanuary1, 1979. Theinterestallowedontheremainingbalanceshallbetheloweroftherateas statedinthedebtinstrumentatthetimeofborrowing,orapercentageequaltothemonthlyrateofinterestonspecialissuesofpublicdebt obligationsissuedtotheFederalHospitalInsuranceTrustFundforthethirdmonthpriortothemonthinwhichthefinancingoccurredplus3%.InnoeventshalltherateofinterestwhichtheCommissionallows exceed 15%perannum.Incaseswheretheinvoluntaryfinancingisforamountsinexcessoftheamountneededtocontinuetheexistingloanandtheadditionalproceedsareusedforpurposesotherthanexpansion,improvementortheadditionofequipmentsubjectto114.2 CMR2.12, interestexpenseontheexcessmortgagewillnotbereimbursed.

(4. Reserved)

5.Exceptasprovidedforin114.2CMR2.10(1)(b)2.,incaseswheretheprovidervoluntarilyrefinancesforpurposesotherthanexpansion,improvementortheadditionofequipmentsubjectto114.2CMR2.12,thereimbursementoflongterminterestwillbecalculatedasthoughtherefinancingdidnotoccur.

2.10: continued

6.ForfacilitiespurchasedorconstructedonorafterJanuary1,1983,reasonableandnecessaryinterestwillbereimbursedtotheextentthattheallowablelong-termdebtissupported byallowabledepreciableassets asdefinedin114.2 CMR2.12.

7.Facilitiesthathave beengrantedadvisoryrulingspriortoJanuary1,1983whichallowedinterestreimbursementinexcessof15%willnotbesubjecttothe15%limitationin114.2 CMR2.10(1)(b)1., 2., or3.

(2)MaximumAllowableInterestonIndividualLoans.Innocase shalltherateincluderecognitionofinterestinexcessof18%onanyindividualloanorobligation.

(3)LoansfromOwner,OfficerorRelatedParty.Interestexpenseshallnot includeinterestonloanstothefacilityfromanowner,officer, orrelatedparty.

(4)InterestIncome.Interestincomeshallnot berecoveredagainstinterestexpense.2.11: Depreciation

(1)DepreciationAllowed.Depreciationofbuildingsandequipmentshallbeallowedbasedonacceptedaccountingprinciplesusingasabasistheloweroftheoriginalacquisitioncostofthefacility,anamountbased onacostperbedfortheyear ofconstructionofthefacilitywhichissetforthinthelong-termcarefacilityregulationgoverningtherateyearoftheoriginalacquisition,ortheprinciplessetforthin114.2 CMR2.12(2)(e)ifachangeofownershipoccursonandafterJanuary1, 1983.

(2)Depreciation--Methodology.Incalculatingtheallowancesfordepreciation,thestraight-line methodshallbeused.Fullydepreciatedassets(assets whosedepreciablelifehasexpired)shallbeseparatelyidentifiedon RSC-1,2 and3costreportingforms.Costsoffullydepreciated assetsand relatedaccumulateddepreciationshallbereportedasprovidedforonallcostreportsunlesssuchcostsandaccumulateddepreciationhavebeenremovedfromtheprovider'sbooksandrecords.Upontheretirementofequipment, ascheduleshallbeattachedtothecost reportingformindicatingthecostoftheretiredequipment,accumulateddepreciationandtheaccountingentriesonthebooksandrecordsofthefacilitytorecordtheretirementoftheasset(s).Upontheexpirationoftheusefullifeofabuilding,anallowanceshallbemadeinlieuofbuildingdepreciation,whichshallbeequaltothebuildingdepreciationpreviouslyallowedbytheCommissioninthelastfullyearofthefacility'susefullife.

(3)UsefulLives.Theusefullifeofassetsfor depreciationpurposesshallbeasfollows:

AssetLifeYearlyRate

(a) Building.
ClassIorIIasclassified bytheDept. ofPublicSafety. / 40 yrs. / 2.5%
Class IIIorIVasclassified bytheDept. ofPublicSafety. / 33 yrs. / 3.33%
Abuildingownedandoperated byapoliticalsubdivision / 20 yrs. / 5.0%
oftheCommonwealthoranauthoritythereof,construction
ofwhichwasfinancedthroughmunicipalbonds.
(b)BuildingImprovements. / Various / upto5%
Buildingorleaseholdimprovements madesubsequenttothe
beginningofthefinalrateyearmustbe proratedover
thelifeoftheleaseorthebalanceoftheestimated
lifeofthebuildingasdeterminedabove,butinnocase
toexceedtheyearlyrateof5%.
(c) Equipment,FurnitureandFixtures. / 10 yrs. / 10%
(d) MotorVehicleEquipment. / 4 yrs. / 25%

2.11: continued

(4)PrincipalandInterestPaymentsRecognized.Inlieuoftheamountsallowedfordepreciationpursuantto 114.2 CMR2.11 andinterest pursuantto 114.2 CMR2.12 andinordertofacilitateuseofM.G.L.c.44,§7,asameansoffinancinglong-termcarefacilityrenovationsorexpansion,theCommissionmayrecognizepaymentsofprincipalandinterestmadeonbehalfofalong-termcarefacilityifallofthefollowingconditionsare satisfied:

(a)Thefacilityrequestingrecognitionofprincipalandinterest inlieuofdepreciationandinterestisownedandoperated byamunicipalityorbyadulyconstitutedmunicipalauthority;

(b)Theprincipalandinterestpaymentsarerelatedtothefinancing,governed bytheprovisionsofM.G.L.c. 44, § 7, ofrenovationstoorexpansionofanexistingfacility;

(c)Theamountofprincipalandinterestrecognizeddoesnotexceedtheamountofdepreciationandinterestthatwouldhavebeen recognizedhadtheprovisionsof114.2 CMR2.10 and2.11beenapplied;

(d)TheCommissionis satisfied thatno reasonable alternativemethod offinancingisavailableto thefacilitytogeneratethefundsneededtomaketheinitialprincipalandinterestpaymentrequiredunderM.G.L.c. 44, § 19. Noadjustmenttoaninterimrateorcalculationofafinalrateshallbemadeundertheprovisionsof114.2CMR2.11until themunicipalbondsusedtogeneratethefinancingfortherenovationsorexpansionhavebeendulyissuedundertheprovisionsofM.G.L.

c. 44,§7.WhentheCommissionhaspermittedrecognitionofprincipalandinterestinlieuofdepreciationandinterestinaccordancewith114.2 CMR2.11andtheproposedrenovationsorexpansionare not completed, ortheprincipalandinterestpaymentsrequiredbyM.G.L.c. 44,

§19are not made,theCommissionmayadjusttherateforthefacilitytoeliminatesuchallowanceandrequirerepaymentofamountspreviouslyallowedunder114.2CMR2.11(4).

In additiontotheaboveprincipalpaymentsinlieuof depreciationmayalsoberecognizedforfacilitiesthatareownedandoperated bycountiesandwhichhaveoperatedashospitalsbuthavebeenrelicensedaslong-termcarefacilities.Innoeventshallthebondprincipalpayments,togetherwithanydepreciationallowed,ifany,exceedtheamountswhichwouldhavebeenpaidovertheusefullifeoftheassets whichare financed bythebond.

2.12: LimitationofBasisforDepreciation,Interest andEquity

(1)Applicationof114.2CMR2.12.Thebasisforassetsestablishedunder114.2CMR2.12shallbeuniformlyappliedtothecalculationofallowabledepreciation,interestandequity.Innocaseshallallowablecostsfordepreciation,interestandequitybecalculatedonabasiswhichexceedsthelimitationsof114.2 CMR2.12.

(2)AllowableBasisforFixedAssets.

(a)Wheretherehasbeen no changeofownership,theallowablebasisoffixedassetsshallbethe reasonableconstructioncosts.

(b)WheretherehasbeenachangeofownershipbeforeJuly1,1976,theallowablebasisoffixedassetsshallbegoverned bytheapplicableregulationandshallbethelowerofacquisitioncostortheallowabledollaramountperbedforbuildingandequipmentfortheyearofconstructionwhichissetforthinthelong-termcareregulationgoverningtherateyearofthechangeofownershipandbeginninginrateyear1974reducedbytheamountofactualdepreciationallowedtotheimmediatepriorownerofthefacilityincalculatingratesofpaymentforpublicly-aidedpatientsfortheyears1968 tothepresent.

(c)1.WheretherehasbeenachangeofownershipbetweenJuly1, 1976 andDecember31,1978, theallowablebasisoffixedassetsshallbetheloweroftheacquisitioncostorthebasisallowedtheimmediatepriorowner,reduced bytheamountofactualdepreciationallowedtothepriorownerofthefacilityincalculatingratesofpaymentforpublicly-aided patientsfor the years1968tothedateofthechangeofownership.Wheretheamountofactualdepreciationallowedforthefacilityinaprior year isnot known,thenewowner shallhavetheburdenofdemonstratingtheamount,ortheamountwillbereconstructed bytheCommissionusingthebestavailableinformation.

2.12: continued

2.WheretherehasbeenachangeofownershipbetweenJuly1, 1976 andDecember31,1978,theallowablebasisoffixedassetspreviouslytransferredsubsequenttoJanuary1,1968 shallbedepreciatedovertheremainingusefullife.WheretherehasbeenachangeofownershipbetweenJuly1,1976andDecember31,1978,theallowablebasisoffixedassetspreviouslytransferredpriortoJanuary1,1968shallbedepreciatedovertheirremaininguseful lifeplusthenumberofyearstheassetswereinthepossessionofthetransferor prior to 1968.Foranychangeofownershipbetween July1,1976andDecember31,1978,theannualamountofdepreciationontheassets thathave beentransferredshallnot exceedthatallowedtothepreviousowner.

(d)1. WheretherehasbeenachangeofownershipbetweenJanuary1,1979andDec­ember 31,1982,theallowablebasisoffixedassets shallbe:

-Forland,theloweroftheacquisitioncostorthebasisallowedtheimmediatepriorowner;

-Forequipment,theloweroftheacquisitioncostorthebasisallowedtheimmediatepriorowner,reducedbytheamountofactualdepreciationallowedtothepriorownerofthefacilityincalculatingratesofpayment forpublicly-aidedpatients;

-Forbuildingandbuildingimprovements,theloweroftheacquisitioncostorthebasisallowed theimmediatepriorowner,reduced bytheamountofactualdepreciationallowedtothepriorownerofthefacilityincalculatingratesofpaymenttopublicly-aidedpatientsfortheyears1968 tothe date ofthechangeofownership.

Inall transferswheretheamountofactualdepreciationallowedforthefacilityinaprioryear isnot known,thenewowner shallhavetheburdenofdemonstratingtheamount,ortheamountwillbereconstructed bytheCommissionusingthebestavailableinformation.

2.WheretherehasbeenachangeofownershipbetweenJanuary1,1979andDecember31, 1982,theallowablebasisoffixedassetspreviouslytransferredsubsequenttoJanuary1,1968 shallbedepreciatedovertheirremainingusefullife.WheretherehasbeenachangeofownershipbetweenJanuary1,1979andDecember31,1982,theallowablebasisofbuildingandbuildingimprovements(butnotequipment)previouslytransferredpriortoJanuary1,1968 shallbedepreciatedovertheirremainingusefullifeplusthenumberofyearsthe assetswereinthepossessionofthetransferorpriorto1968.ForanychangeofownershipbetweenJanuary1,1979andDecember31,1982,theannualamountofdepreciationontheassetsthathavebeentransferredshallnot exceedthatallowedtothepreviousowner.

(e)1.Wheretherehasbeenachangeofownership onorafterJanuary1, 1983, theallowablebasisoffixedassets shallbe:

-Forland,theloweroftheacquisitioncostorthebasisallowedtheimmediatepriorowner;

-Forequipmentandbuildingimprovements,theloweroftheacquisition costorthebasisallowedtheimmediateprior owner,reduced bytheamountofactualdepreciationallowedtotheprior owner ofthefacilityincalculatingratesofpayment forpublicly-aidedpatients.

-Forbuilding,wherethechangeofownershipoccursin1983,the allowablebasis shallbethe loweroftheacquisitioncostorthebasisallowedtheimmediateprior owner,reduced bytheamountofactualdepreciationallowedtotheprior owner ofthefacilityincalculatingrates ofpaymenttopublicly-aidedpatientsfortheyears1968 through1980.

Wherethechangeofownershipoccursin1984, theallowablebasisforbuildingshallbetheloweroftheacquisitioncostorthebasisallowedtheimmediateprior owner,reduced bytheamountofactualdepreciationallowedtothepriorownerofthefacilityincalculatingratesofpaymenttopublicly-aidedpatientsfortheyears1968 through1978. Wherethechangeof ownershipoccursonorafterJanuary1,1985,theallowablebasisforbuildingshallbetheloweroftheacquisitioncostorthebasisallowedtheimmediateprior owner,reduced bytheamountofactualdepreciationallowedtotheprior owner ofthefacilityincalculatingratesofpaymenttopublicly-aidedpatientsfortheyears1968 throughJune30, 1976.

2.12: continued

Inalltransferswheretheamountofactualdepreciationallowedforthefacilityinaprioryearisnot known,thenewowner shallhavetheburdenofdemonstratingtheamount,ortheamountwillbereconstructed bytheCommissionusingthebestavailableinformation.

2. WheretherehasbeenachangeofownershiponorafterJanuary1, 1983, theallowablebasisofbuildingandbuildingimprovements shallbe depreciated over theremaining usefullife plusthenumberof yearsthatbuildingdepreciationwasnotrecapturedindeterminingtheallowablebasisofthenewowner. ForanychangeofownershiponorafterJanuary1,1983, theannualamountofdepreciationontheassetsthathavebeentransferredshallnotexceedthatallowedtothepreviousowner.

(3)ForgivenessofDebt.Where,subsequent to achangeofownership,thetransferorforgivesorreducesthe debtofthetransferee,suchforgivenessorreductionofdebtshallberetroactivelyappliedtoreducetheacquisitioncosttothetransferee.

(4)ChangeofOwnership.Achangeofownershipwillberecognizedwhenthefollowingcriteriahavebeenmet:

(a)Thechangeofownershipdidnotoccurbetweenrelatedparties;

(b)Thechangeofownershipwas madefor reasonableconsideration;

(c)The changeofownershipwasabona-fidetransferofallthepowersandindiciaofownership;

(d)Thechangeofownershipmanifestedanintenttosell theassetsofthefacilityratherthanimplementamethod offinancing;and

(e)Inthe case ofafinancingagreementbetweenthetransferorandthetransferee,theagreementisconstructedtoeffectacompletechangeofownershipandthereiscompliancewiththetermsofsuchagreement.TheCommissionreservestherighttoevaluatetherelationshipbetweenthetransferorandthetransfereeandmonitorcompliancewiththeagreementtoassureacompletechangeofownership.

(5)ReasonableConstructionCost.

(a)InthecaseofanewlyconstructedfacilityopeningforpatientcareonorafterJanuary1, 1977butpriortoJanuary1,1979,thebasisofsuchassetsshallbelimitedtoreasonable,auditedconstructionandequipmentcostsbasedupontheminimumstandardsoftheMassachusettsDepartmentofPublicHealthandtheMassachusettsDepartment ofPublicSafety.Inaddition,reasonablenessshallbedeterminedbyacomparisonofconstructionandequipmentcostsonaperbedbasisoffacilitiesnewlylicensedwithinthesameyear.Landcostwhichexceedsaratioof20tooneshallbeexcludedfromthebasis.

(b)Inthecaseofanewly-constructedfacilityopeningforpatientcareonorafterJanuary1,1979orafacilitywhoseexistingDeterminationofNeedisamendedafterJanuary1,1979,theallowablebasisshallnotexceedthecostofconstructionandequipmentapprovedinaccordancewithM.G.L.

c. 111, § 25CortheminimumstandardsandrequirementsoftheMassachusettsDepartment ofPublicHealthandtheMassachusettsDepartmentofPublicSafetywhicheverislower.IntheeventthattheMassachusettsPublicHealthCouncil,inconnectionwithaDeterminationofNeedpursuant toM.G.L.c.111,§25C,imposesaconditionontheDeterminationofNeed,theCommissionshall reflectsuchconditionsinthecalculationofrateswhereapplicable.

(6)ReasonableCapitalExpendituresforFacilitiesConstructedinUrbanUnderbeddedAreas.EffectiveMay11,1989,thisprovisionshallgovernthedeterminationofMaximumCapitalExpenditure (MCE)fornewconstructionbyfacilitiesexempt fromtheDepartment ofPublicHealthDeterminationofNeed(DON)pursuanttoM.G.L.c.111,§25C1/2.TheMCEshallbe thebasisofreimbursementofcapitalexpenditureandrelatedexpensesasdefinedin114.2 CMR2.00.

(a)Tobeeligiblefortreatmentunder114.2 CMR2.12 (6),anapplicantmustmeetthefollowing requirements:

2.12: continued

1.Thefacilitymustbelocatedinan"urbanunderbeddedarea"asdefinedinDepartmentguidelinesentitled,"GuidelinesForDeterminationofNeed ExemptionsforLong-TermCareBedsConstructedInUrbanUnderbeddedAreas".

2.InlieuofanapprovedDeterminationofNeedapplication,theapplicantmustsubmitanapprovedapplicationforexemptionfrom theDepartmentofPublicHealthpursuanttotheDepartment'sGuidelines.

3.Theapplicantmustcontributeat least 10%oftheMCE.

(b)IndeterminingtheMCE,theCommissionwillconsiderthecostsofthefollowing:

1.reasonableconstruction,

2.landacquisitionanddevelopment,

3.planninganddevelopment,

4.financing,and

5.majormovableequipment.

Inevaluatingthereasonablenessofcosts,theCommissionwillutilizethesameevaluationmethodologyappliedbytheDepartment'sDONprogram,asineffect180daysafterfinalconstructionplanswereapprovedbytheDepartment(per105CMR150.017)orthedateonwhichtheconstructioncontractwas signed,whicheverisearlier.ThisprovisionensuresstatewideconsistencyintheevaluationofMCEforthepurposeofsettingrates,andinvolvescomparisonofprojectcosts tothoseofpreviouslyapprovedprojects.

(c)Reasonableconstructioncosts.TheCommissionwillconsiderthesizeandcostofthefacilityasfollows:

1.Size.TheCommissionshallutilizethe"GeneralStandardsofConstructionofLong-TermCareFacilities"(105CMR151.000),issuedbytheDivisionofHealth CareQuality,asineffect180daysafterfinalconstructionplanswereapprovedbytheDepartment(per105 CMR150.017)orthedateonwhichtheconstructioncontractwassigned,whicheverisearlier,todeterminethereasonablenessofsize.Thesestandardsrepresentminimumrequirements,whichmaybeadjustedconsistentwiththestandardsappliedbytheDepartment'sDONprogramasineffect180daysafterfinalconstructionplanswereapproved bytheDepartment(per105CMR150.017)orthedateonwhichtheconstructioncontractwassigned,whichever isearlier.Forthepurposeofestablishingreasonableconstructioncosts, theCommissionwillutilizereasonablegrosssquarefootage(gsf)initscostpergsfformula,and willdisallowcosts associatedwithgsfwhichexceedtheguidelinesfor reasonableness.

2.Costs.Thefollowingfourcosts willbeincludedinevaluatingcosts pergsf:thesitesurvey,

theconstructioncontract,

Architecturalandengineering,and

fixedequipment not intheconstructioncontract.

3.Evaluationmethodology. TheCommissionwillutilizethereasonablegsfdefinedin

114.2CMR2.12(6)(c)1.asthedivisorforthetotalcostsdefinedin114.2CMR2.12(6)(c)2.toarriveatthefacility'srequestedgsfcosts.ThiswillbecomparedtotheDepartment'sDONstandardforreasonablegsfcostsasineffect180daysafterfinalconstructionplanswereapproved bytheDepartment (per105 CMR105.017)orthedateonwhichtheconstructioncontractwassigned,whicheverisearlier.Costswhichexceedthisstandardwillbedisallowedasfollows:

Example:Ifthereasonablegsfdefinedin114.2CMR2.12(6)(c)1.were40,000,andthetotalcostdefinedin114.2CMR2.12(6)(c)2.were$5 million, thenthefacility'srequestedcost/gsfis$125. Ifthereasonablecost/gsfis$90, then$1,400,000 ofthetotalcostwillbedisallowed.Thereasonableconstructioncostwhichthefacility'sratewillbebasedonis$3,600,000.

(d)LandAcquisitionandDevelopmentCosts. Allowablecostswillbeestablishedper114.2CMR2.12(5).

2.12: continued

(e)AllowablePlanningandDevelopmentCosts.Theseincludethecostsofpreparingtheapplicationforexemption,thefinancialanalysis,legal feesrelatedtoarticlesoforganizationandpurchaseandsaleandarchitecturallinedrawings.ThetotalwillbelimitedtothestandarddefinedbytheDONprogramasineffect180daysafterfinalconstructionplanswereapproved bytheDepartment(per105CMR150.017)orthe date onwhichtheconstructioncontractwassigned,whichever isearlier.Extenuatingcircumstanceswillbetreatedconsistentlywiththepoliciesapplied bythe DONprogram.

(f)Allowablefinancingcosts.Thebaseonwhichnet interestexpensewillbeallowedisnomorethan½ofthetotalreasonablecostsofconstruction,asdefinedin114.2CMR2.12(c),(d),(e)and