RULES AND REGULATIONS
Title 55--PUBLIC WELFARE
DEPARTMENT OF PUBLIC WELFARE
[55 PA. CODE CH. 1187]
Nursing Facility Services; Payment Methodology for Movable Property and Exceptional Payments
[32 Pa.B. 734] The Department of Public Welfare (Department) by this order adopts amendments to Chapter 1187 (relating to nursing facility services), to read as set forth in Annex A. These amendments are adopted under sections 201 and 443.1 of the Public Welfare Code (act) (62 P. S. §§ 201 and 443.1) and sections 1396a and 1396r of the Social Security Act (42 U.S.C.A. §§ 1396a and 1396r).
Omission of Proposed Rulemaking
The Department is omitting notice of proposed rulemaking in accordance with section 204(1)(iv) and (3) of the act of July 31, 1968 (P. L. 769, No. 240) (CDL) (45 P. S. § 1204(1)(iv) and (3)) and 1 Pa. Code § 7.4(1)(iv) and (3) because:
* The Department finds that publication of these amendments as proposed rulemaking is contrary to the public interest. The primary purpose of these amendments is to change the case-mix payment methodology to remove perceived disincentives for nursing facilities to purchase unusual or expensive movable property items necessary to serve their Medical Assistance (MA) residents. These amendments permit additional grant payments to those MA nursing facilities that provide nursing facility services to MA residents who require certain extraordinary and expensive medical equipment to receive care and treatment in accordance with their individual care plans. These amendments also revise the case-mix payment methodology relating to movable property in a way that is anticipated to result in overall increases in case-mix per diem rates, and therefore provide additional reimbursement to the vast majority of MA nursing facilities. Adopting these amendments by final rulemaking will enable the Department to make the additional grants and reimbursement available as quickly as possible, and thereby better ensure that MA nursing facility residents receive the necessary care and services required by law.
* These amendments relate to reimbursement for nursing facility services under the MA Program, which is a Commonwealth grant or benefit.
Purpose of Amendments
These amendments revise the Department's case-mix regulations to incorporate and expand existing exceptional payment policies to permit the Department to pay additional reimbursement to nursing facilities for nursing facility services provided to certain MA residents who require medically necessary exceptional durable medical equipment (DME). These amendments also revise the Department's case-mix regulations to change the payment methodology as it relates to the costs of movable property that is used by nursing facilities to provide services to their residents. In addition, these amendments revise the Department's case-mix regulations to clarify existing payment policies and methodology.
Background
A. Medicaid and the MA Program
In 1965, Congress authorized the Medicaid Program by adding Title XIX to the Social Security Act. See 42 U.S.C.A. §§ 1396--1396r Medicaid is a grant-in-aid program in which the Federal government provides financial assistance to participating states to aid them in furnishing various health care services to poor and needy persons. State participation in the Medicaid Program is voluntary. If a state chooses to participate in the Medicaid Program, however, it must comply with Title XIX and implementing Federal regulations.
Under Title XIX, a participating state must designate a single state agency responsible for the administration of the state's Medicaid Program. The single state agency must prepare a state plan for MA (State Plan) and submit it to the Centers for Medicare and Medicaid Services (CMS) (formerly the Health Care Financing Administration (HCFA)) of the United States Department of Health and Human Services for approval. See 42 U.S.C.A. § 1396. Among other things, a State Plan must provide coverage of certain medical services, including nursing facility services, and at the state's option may provide coverage of other services. Upon approval by CMS, the state becomes eligible for Federal financial participation in the costs of the medical care and services specified in its State Plan. See 42 U.S.C.A. § 1396(a).
The Commonwealth participates in the Title XIX Medicaid Program. The Department is the designated single State agency responsible for administration of the Commonwealth's Medicaid Program, which is known as the MA Program. The MA Program provides coverage of a wide array of medical services, including nursing facility services, to this Commonwealth's poor and needy citizens.
B. MA Nursing Facility Services
1. Conditions of Participation
To lawfully provide nursing facility services in this Commonwealth, a person or entity must first obtain a license to do so from the Department of Health (DOH). See section 806(a) of the Health Care Facilities Act (35 P. S. § 448.806(a)). The person or entity is not required to participate in the MA Program to obtain a license. See section 808 of the Health Care Facilities Act (35 P. S. § 448.808) and 28 Pa. Code Chapter 201 (relating to applicability, definitions, ownership and general operation of long-term care nursing facilities). Rather, a licensee of a nursing facility chooses to seek enrollment and to participate in the MA Program as a provider of MA nursing facility services. Thus, participation by nursing facility providers in the MA Program is voluntary.
Federal law, 42 U.S.C.A. § 1396a(a)(27), requires that a nursing facility that wishes to participate in the MA Program must sign an enrollment form called a ''Provider Agreement'' to enroll as a provider. The provider agreement does not create a contractual relationship between the Department and the provider. Rather, because the MA Program is a grant program, the obligations and duties of both the provider and the Department are derived from and governed by law and regulation. The provider agreement merely signifies the provider's voluntary enrollment in the MA Program.
A nursing facility that is not enrolled in the MA Program may not receive reimbursement from the Department for any nursing facility services that the facility may provide to MA-eligible residents. See section 443.1(3) of the act (62 P. S. § 443.1(3)) and § 1187.101(c) (relating to general payment policy).
As a condition of enrollment and continued participation in the MA Program, a nursing facility shall comply with the requirements for participation imposed by Federal and state statutes and regulations, including the Nursing Home Reform Law, 42 U.S.C.A. § 1396r, and implementing Federal regulations. See § 1187.21(3) (relating to nursing facility participation requirements). These requirements impose various duties on MA participating nursing facilities such as:
* The duty to provide services and activities that permit each resident to attain or maintain his highest practicable physical, mental and psychosocial well-being. See 42 U.S.C.A. § 1396r(b)(2) and (4)(A)(i) and (ii) and (d)(1)(A); and 42 CFR 483.25 and 483.75 (relating to quality of care; and administration).
* The duty to accommodate resident needs and preferences. See 42 U.S.C.A. § 1396r(c)(1)(v)(I); 42 CFR 483.15(e)(1) (relating to quality of life).
* The duties to promote, maintain and enhance the quality of life of each resident. See 42 U.S.C.A. § 1396r(b)(1)(A).
* The duty to properly equip the nursing facility and the rooms and otherwise provide a suitable environment. See 42 U.S.C.A. § 1396r(c)(4)(B)(ii); 42 CFR 483.15(h) and 483.70(d)(2)(iv) (relating to physical environment).
* The duty to provide equal access to quality care. See 42 U.S.C.A. § 1396r(c)(4)(B)(ii).
* The duty to ensure that residents do not experience any avoidable diminution of the ability to ambulate and transfer. See 42 CFR 483.25(a)(1)(ii).
* The duty to ensure that residents do not experience any avoidable diminution of the ability to use speech, language, or other functional communications systems. See 42 CFR 483.25(a)(1)(v).
* The duty to provide appropriate treatment and services to maintain or improve a resident's abilities in activities of daily living, including ambulation and communication. See 42 CFR 483.25(a)(2).
* The duty to prevent avoidable decreases in a resident's social interactions. See 42 CFR 483.25(f)(2).
* The duty to provide nursing facility services to a resident in accordance with that resident's written plan of care. See 42 U.S.C.A. § 1396r(b)(2) and (b)(4)(A)(i) and (ii).
* The duty to provide nursing facility services in accordance with instructions of the physician who is responsible for supervising the health care being provided to a resident. See 42 U.S.C.A. § 1396r(b)(6)(A).
A nursing facility that fails to comply with applicable program requirements, including the aforementioned duties, is subject to the imposition of various remedies by both CMS and the Department, including termination of the facility's participation in the MA Program.
2. Items and Services Covered by the MA Case-mix Per Diem Rate
Under Federal law, the Department may specify the items and services included in its MA case-mix per diem rate. See 42 U.S.C.A. § 1396r(c)(1)(B)(iii) and (4)(B)(ii). See also 42 U.S.C.A. § 1396r(f)(7). The Department has specified that the MA rate covers payment for routine services and items. See § 1187.51(c) (relating to scope). Routine services and items include, among other things: ''services required to meet certification standards, . . . the use of equipment and facilities, . . . [r]eusable items furnished to residents, such as . . . wheelchairs . . . and other durable medical equipment[,] . . . [and] special medical services of a rehabilitative, restorative or maintenance nature, designed to restore or maintain the resident's physical and social capabilities.'' See § 1187.51(c)(1), (5) and (10).
The Department has also included provisions in the Commonwealth's Title XIX State Plan that authorize the Department, under certain limited circumstances, to make exceptional payments to nursing facilities. During the period January 1, 1996, through October 31, 1999, the State Plan restricted exceptional payments to nursing facilities providing services to ''high technology dependent residents, such as ventilator dependent and head and/or spinal cord injured individuals.'' Under these State Plan provisions, the only additional costs that could be paid through the exceptional payments were costs for the rental of equipment and the supplies necessary to care for high technology-dependent residents. Before the Department would enter into an exceptional payment agreement, the Department had to be satisfied that the nursing facility's per diem rate did not cover the additional exceptional costs related to the care of the high technology-dependent resident and that the resident could not otherwise obtain appropriate care.
3. Payment in Full for Covered Services and Items
An MA nursing facility must accept payment at the MA case-mix per diem rate as payment in full for the covered services and items specified by the Department. See sections 444.1 and 1406(a) of the act (62 P. S. §§ 444.1 and 1406(a)); and § 1101.63(a) (relating to payment in full). An MA nursing facility may not seek or accept any other payment to provide a covered item or service to an MA resident, even though the cost of the particular item or service required to meet the resident's individual needs exceeds the facility's MA payment rate. In those instances in which the Department has entered into an exceptional payment agreement with an MA nursing facility, the facility must accept the MA per diem rate and any additional payments made under the exceptional payment agreement as payment in full for covered services and items provided to the resident specified in the agreement.
C. Overview of the Existing Case-Mix Rate Calculation
The MA Program pays for nursing facility services provided to eligible recipients by enrolled nursing facility providers based upon prospective per diem rates calculated in accordance with the Department's case-mix payment methodology. See §§ 1187.1(c), 1187.2 (definition of ''per diem rate''), 1187.96(e) and 1187.101. A nursing facility's prospective per diem rate is comprised of one ''capital'' rate component and three ''net operating'' rate components. See § 1187.96(e) (relating to price and rate setting computions). The capital component is based upon the nursing facility's fair rental value (FRV). The three net operating components are based upon peer group prices. See § 1187.96(a)--(e).
As specified in the Department's regulations, the Department computes ''peer group prices'' annually, using the nursing facility information system (NIS) database. See §§ 1187.2, 1187.52(a) and 1187.91 (relating to policy; definitions; and database). Generally, for any given fiscal year, the NIS database compiles costs from the three most recent audited cost reports for each MA nursing facility on file as of March 31.1 See § 1187.91. Applying a complex formula to these compiled costs, the Department calculates the peer group price for the three net operating cost centers for each of the 14 nursing facility peer groups. See §§ 1187.91 and 1187.94--1187.96. The resulting peer group prices are then used by the Department to set the net operating rate components for each nursing facility. See § 1187.96(a)--(c) (relating to price and rate setting computions).
The net operating cost components of the nursing facility's prospective payment rate are limited by or based upon the facility's peer group prices. The Department adjusts the resident care component of each nursing facility's prospective rate every quarter of the rate-setting year to reflect the resource usage of the facility's MA residents. The nursing facility's prospective rate, as adjusted each quarter, remains in effect during the rate-setting period. See §§ 1187.95 and 1187.96. When combined with the capital rate component, these net operating components comprise the nursing facility's case-mix per diem rate.
Under the case-mix regulations, the Department uses capital costs in computing the capital component of nursing facilities' per diem rates by means of an FRV methodology. Instead of recognizing depreciation and interest costs, however, the FRV methodology establishes an imputed rental cost for equipment, housing and shelter that the nursing facility uses to render services to its residents. A nursing facility's FRV is based upon the appraised depreciated replacement value of the facility's fixed and movable property as determined by the most recent appraisal of the facility conducted by the Department or its contractor.
For purposes of the case-mix system, the DME is considered movable property. See §§ 1187.2 (definitions of ''movable property'' and ''appraisal of nursing facilities'') and 1187.96(d)(1). The DME includes: bedrails, ice bags, canes, crutches, walkers, wheelchairs, traction equipment and hospital beds. See § 1187.51(c)(5). Because DME is a type of movable property, an MA nursing facility's capital rate component is computed by, among other things, including the appraised depreciated replacement value of that equipment in the total appraised value of the facility, which is then used to derive the facility's overall FRV. See § 1187.96(d)(1) and (2).
D. Purpose of the New Case-Mix Payment Policies
Nursing facilities have repeatedly objected to the Department's decision to include movable property in the FRV methodology and to the way in which the Department determines the value of that equipment in computing the overall FRV. Consumers have also expressed concerns about the way in which the Department recognizes movable property costs. Consumers have contended that the reimbursement methodology creates disincentives to nursing facilities obtaining equipment that is expensive or unusual, or both, in that the methodology does not pay, only partially pays or does not promptly pay equipment costs.
While the Department believes that its case-mix payment methodology provides fair and adequate reimbursement for nursing facility services, the Department recognizes that, in some situations, a nursing facility's obligation to provide appropriate and necessary services to an MA resident requires that the facility obtain certain DME that is unusual, expensive and otherwise extraordinary. Under current Department regulations, the DME is considered a routine service or item that is covered under the nursing facility's MA per diem rate. Therefore, the nursing facility must accept payment at the MA case-mix per diem rate as payment in full for covered services and items provided to the MA resident, including any medically necessary DME. See § 1101.63(a) (relating to payment in full).
Notwithstanding the nursing facility's obligation to accept payment at the MA per diem rate as payment in full, the Department also recognizes that, because case-mix per diem rates are based upon average costs, adjusted in part by the average acuity of MA residents, some facilities may be reluctant to obtain DME that, although medically necessary, is also unusual and expensive. The reluctance may translate into either delay in the provision of medically necessary DME or, in extreme cases, the outright failure to provide the equipment. In either situation, the likely outcomes are that the resident's needs are not being met and that the nursing facility provider is out of compliance with both State and Federal requirements. These outcomes are unacceptable.
To prevent these unacceptable outcomes and to further encourage nursing facilities to meet their legal obligations to provide necessary care and services, including equipment to improve the resident's ability to self-ambulate and otherwise maximize his independence, the Department is promulgating the amendments set forth in Annex A. The primary purpose of these amendments is to change the case-mix payment methodology to remove perceived disincentives for nursing facilities to purchase unusual or expensive movable property items necessary to serve their MA residents. These changes are part of the Department's continuing efforts to assure that MA nursing facility residents receive care and services allowing them to attain and maintain their highest practicable physical, mental and psychosocial well being in accordance with applicable law, including the Nursing Home Reform Law and Title II of the Americans with Disabilities Act (42 U.S.C.A. §§ 12131--12134).
E. Public Process
Prior to the publication of these amendments, the Department published an advance notice at 29 Pa.B. 5657 (October 30, 1999), announcing its intent to amend its State Plan and nursing facility payment policies to expand its exceptional payment provisions. The Department subsequently published a notice at 29 Pa.B. 5957 (November 20, 1999), announcing that it had drafted provisions to incorporate this policy change into its nursing facility payment methods and standards and that the proposed revisions were available for public review and comment. The Department also discussed and solicited comments on the proposed changes at meetings of the Medical Assistance Advisory Committee (MAAC) on October 27, 1999, December 9, 1999, January 27, 2000, and March 23, 2000; the Long Term Care Subcommittee meetings of the MAAC on October 13, 1999, December 15, 1999, February 9, 2000, and April 12, 2000; the Consumer Subcommittee meetings of the MAAC on October 27, 1999, and March 22, 2000; and the Fee for Service Subcommittee meeting of the MAAC on October 28, 1999. The meetings were open to the public.
The Department received a total of 94 written comments on its draft policy changes from consumers, consumer representatives, industry representatives and other interested parties. In November 2000, the Department released a second draft of its revised case-mix regulations to the members of the MAAC, and the Long Term Care and Consumer Subcommittees of the MAAC. A summary of the significant changes between the November 1999 and the November 2000 draft follows:
''Eligible facility''--In the November 1999 draft, the Department limited the availability of exceptional DME grants to ''eligible facilities.'' The definition of ''eligible facility'' excluded special rehabilitation and hospital-based nursing facilities. The Department received comments objecting to the exclusion of these types of nursing facilities from receiving exceptional payments. Upon consideration of these comments, the Department eliminated the definition of ''eligible facility'' from the draft regulatory language. The effect of the elimination of this definition is that all MA nursing facility providers may receive an exceptional DME grant, subject to the conditions and limitations set forth in §§ 1187.151--1187.158.
''Reasonableness determinations''--In the November 1999 draft, the Department specified that the issuance of an exceptional DME grant would be conditioned upon, among other things, the Department's determination that ''it [was] reasonable for the MA Program to pay for the exceptional DME.'' The Department further specified that one circumstance in which it would be unreasonable for the MA Program to pay was when the Department determined that ''[t]he expense of the Exceptional DME [was] clearly disproportionate to the therapeutic or rehabilitative benefits that are expected to be derived from the use of the equipment.'' The Department received comments objecting to the provisions requiring ''reasonableness determinations,'' and in particular, to the above-quoted provision which the commentators characterized as imposing an inappropriate ''cost/benefit'' analysis in the exceptional payment decision-making process. Upon consideration of these comments, the Department eliminated the provisions relating to ''reasonableness determinations'' from the draft regulatory revisions. The Department notes, however, that the amendments in Annex A specify that the Department must determine that the exceptional DME is medically necessary before the Department will issue an exceptional DME grant to a nursing facility. In making medical necessity determinations, the Department will continue to consider whether the resident's needs can be met with less costly, medically appropriate alternatives, or with equipment and services that are already available to the resident.
''Prior authorization''--In the November 1999 draft, the Department specified that ''[t]he facility's request must be submitted to and approved by the Department before the facility purchases or rents the DME for which the facility is requesting [an Exceptional DME] grant.'' The Department received comments objecting to this ''prior authorization'' provision. Upon consideration of these comments, the Department eliminated the requirement that the nursing facility request and receive the Department's approval before purchasing or renting the exceptional DME. The amendments set forth in Annex A allow a nursing facility to request an exceptional DME grant up to 30 days after it purchases or rents the equipment.
''Scope of the draft changes''--The November 1999 draft incorporated and expanded the Department's existing exceptional payment policies into the case-mix regulations. While the comments that the Department received were generally very supportive of the Department's proposal to make these changes, the comments also suggested that the changes did not go far enough. A number of commentators requested, for example, that the Department expand the list of exceptional DME to include standard motorized wheelchairs. Other commentators noted that the changes did not address overall concerns with the adequacy of FRV methodology. Upon consideration of these comments, the Department was not convinced that standard motorized wheelchairs should be considered exceptional DME. The Department did determine, however, that other changes could also serve to encourage nursing facilities to purchase movable property items necessary to serve their MA residents, and that the Department would revise the underlying case-mix payment methodology for movable property to further promote that objective. The Department included these additional revisions in the draft regulatory provisions. The amendments set forth in Annex A both revise the basic case-mix payment methodology for movable property and add Chapter 1187, Subchapter K (relating to exceptional payment for nursing facility services) setting forth the exceptional DME payment policies.
''Notice of rule change''--When it first announced its intent to change its exceptional payment policies, the Department also stated that it intended to make the changes by publishing a notice of rule change (NORC). See 29 Pa.B. 5957. The Department received comments objecting to the use of a NORC. After consideration of these comments, the Department announced that it would adopt the changes by promulgating final-form regulations. The Department has received no comments objecting to the publication of final-form regulations or to the omission of proposed rulemaking. For the reasons set forth in this Preamble, the Department is proceeding with the adoption of the regulations in Annex A by final-form rulemaking, notice of proposed rulemaking omitted.
Following distribution of the November 2000 draft, the Department received an additional 80 comments on the draft changes to its reimbursement methodology. The Department has considered all comments received in drafting the amendments set forth in Annex A. An overview of the changes being made by the amendments as well as a detailed explanation of each revision follows.
F. Overview of the New Case-Mix Payment Policies
1. Movable Property Payment Methodology
Currently the Department pays MA nursing facility providers on a per diem rate basis for nursing facility services provided to MA residents. These per diem rates include a capital component that is based upon the FRV of the nursing facilities' allowable fixed and movable property. The nursing facilities' FRV is subject to the capital component payment limitation contained in § 1187.113 (relating to capital component payment limitation) commonly known as ''the moratorium.''
The amendments to Chapter 1187 set forth in Annex A remove allowable movable property costs from the FRV calculation. Under the revised payment methodology, movable property is divided into two classes based on acquisition cost: minor movable property (items with an acquisition cost of less than $500) and major movable property (items with an acquisition cost of $500 or more). Allowable minor movable property costs are included in the appropriate cost center of the net operating portion of the nursing facilities' per diem rates. Allowable major movable property costs are included in a new movable property component in the capital portion of the nursing facilities' per diem rates. In addition, allowable movable property costs are no longer subject to the capital component payment limitation contained in § 1187.113. Nursing facilities' movable property capital rate components are based upon their most recent audited cost report in the NIS database for cost reporting periods beginning on or after January 1, 2001.
The amendments also include provisions that allow for a transition during the period until the new movable property payment becomes fully effective. See, §§ 1187.51(e), 1187.91(1)(iv)(D) and (2)(ii)(A) and 1187.96(d)(2). The transition period begins on January 1, 2001, and at that time the revised rules for preparing cost reports and determining allowable costs become effective. The transition period does not end on any particular date. Rather, it ends individually for each nursing facility. The end of a nursing facility's transition period for the net operating component occurs when, for purposes of setting annual peer group prices and quarterly per diem rates, the facility no longer has any audited cost reports in the NIS database for a cost reporting period beginning before January 1, 2001.
During the transition period, the Department will determine peer group prices and net operating per diem rate components using information set forth on the audited cost reports in the NIS database. Initially, this means that the peer group prices and rates will be based upon the audited costs as set forth in the audited cost reports prepared under Chapter 1181 (relating to nursing facility care), for cost reporting periods ending on or before December 31, 1995, and under Chapter 1187, for cost reporting periods that began on or after January 1, 1996, but before January 1, 2001. The Department will continue to compute the 3-year average per diem rate based upon the three most recent audited cost reports. In making this computation, the Department will use the audited costs set forth in earlier audited cost reports used without any modification or adjustment except as follows: Effective with July 1, 2001, price and rate setting, the Department will reverse audit adjustments disallowing or reclassifying minor movable property or linen costs that reduce audited allowable net operating costs in the NIS database for fiscal periods beginning prior to January 1, 2001. See § 1187.91(1)(iv)(D).
Thus, for example, if a nursing facility has one audited cost report in the NIS database for a cost reporting period beginning on January 1, 2001, and the facility's other two audited cost reports are for periods beginning on January 1, 1999 and 2000, the costs and adjustments set forth in those two audited cost reports will not be adjusted or modified so as to reflect the changes in the amendments in Annex A pertaining to the allowability or nonallowability of costs. As a result, although under the amendments ''depreciation on transportation equipment'' is no longer an allowable net operating cost, the Department will not adjust the nursing facility's audited costs for the periods in the earlier reports to eliminate the facility's audited allowable depreciation on transportation equipment. In like manner, the Department will not adjust or modify the nursing facility's audited costs for these earlier periods to include previously nonallowable costs, such as the rental cost of major movable property. To the extent that the nursing facility reported costs relating to linens and minor movable property as net operating costs on the cost reports for these earlier periods, the Department will reverse audit adjustments that disallowed or reclassified the reported costs for linens or minor movable property for these earlier periods.
During the public process, the Department received recommendations to fully implement the new movable property payment methodology in setting capital component rates effective July 1, 2001, and therefore eliminate the need for transition provisions. The Department finds this proposal impracticable, as it would require that the nursing facilities submit amended cost reports, and that the Department audit those cost reports. Therefore, pending implementation of the revised methodology, the Department will continue to include movable property costs in computing nursing facilities' fair rental. During the transition period, the Department will continue to include movable property in the FRV determination in computing a nursing facility's capital component rate until the facility has an audited cost report in the database for a fiscal period beginning on or after January 1, 2001. In determining the facility's FRV, however, the Department will no longer apply the moratorium limitation in § 1187.113 to movable property costs for rates effective on or after July 1, 2001. Once the nursing facility has an audited cost report in the database for a fiscal period beginning on or after January 1, 2001, the Department will calculate the facility's movable property component of its capital rate in accordance with § 1187.96(d)(2)(ii).
The Department also received a comment during the public process recommending that it use costs reported on the most recently ''filed'' cost reports for rate-setting purposes during the transition. The Department notes that, in its initial discussions with the associations representing the nursing facility industry, the associations recommended only that the Department reverse audit disallowances involving certain net operating costs of minor movable property in transitioning from the existing to the new payment methodology. The Department accepted this recommendation, and as described above, included provisions in the amendments in Annex A that authorize these revisions to the audited costs. In addition, the Department also determined to eliminate the application of the moratorium regulations to movable property costs, among other things. The Department believes that these measures provide for an adequate and fair transition. The issue of using audited versus reported costs was resolved by the Department as part of its promulgation of Chapter 1187.
2. Exceptional Payment Provisions
Prior to November 1, 1999, the Department's approved State Plan authorized the Department to make exceptional payments to cover the costs associated with the rental of equipment and supplies necessary to provide services to ''high technology-dependent residents.'' In promulgating these amendments to Chapter 1187, the Department is expanding these exceptional payment policies in its regulations. With the amendments set forth in Subchapter K (which take effect retroactive to November 1, 1999), the Department regulations now allow additional payments for nursing facility services that involve the provision of exceptional DME. The additional payments are not limited to cases involving MA residents who are ventilator-dependent or who have suffered head or spinal cord injuries, but are available, subject to the conditions in Subchapter K, in all cases in which exceptional DME is medically necessary. The additional payments are not limited to the cost of rent and supplies, but are based upon the reasonable and prudent costs incurred by the nursing facility to purchase or rent the exceptional DME and to obtain related services and items necessary for the effective use of that equipment, including accessories and supplies, and resident and staff training.
Although the exceptional payments authorized under these amendments are based upon the costs incurred by a nursing facility to obtain the necessary DME and related services and supplies, the Department notes that the exceptional payments constitute additional reimbursement to the MA nursing facility for nursing facility services provided to a particular resident. They are not intended as a direct payment for the DME or other related services or supplies. Because the Department considers the exceptional payments as payment for nursing facility services, the Department will only authorize the payments to enrolled nursing facility providers.
The Department also notes that the exceptional payments authorized under Subchapter K are not intended to cover situations when a nursing facility incurs a higher cost of providing services to a resident because of costs associated with something other than the use of exceptional DME. Example, exceptional payments are not available to cover situations in which an MA resident may require a higher-than-usual number of nursing hours. The risk that these costs may be necessary is a risk that a nursing facility voluntarily assumes when it elects to participate (or to continue to participate) in the MA Program. See § 1101.63. Moreover, these situations are adequately addressed by the existing case-mix regulations, including the case-mix index (CMI) computations and adjustments.
Although the amendments permit an eligible nursing facility to receive additional reimbursement, no nursing facility has an obligation to request or an automatic right to obtain the reimbursement. Rather, a nursing facility makes the choice to request an exceptional DME grant and may obtain additional grant payments only if it complies with Subchapter K. Among other things, Subchapter K requires that: (i) the facility must submit a proper written request for an exceptional DME grant; (ii) the identified resident must be MA-eligible; (iii) the DME must be exceptional; and (iv) the DME must be medically necessary.
The submission of a request for a grant does not stay or otherwise affect a nursing facility's obligation to provide proper nursing facility services, including exceptional or other DME. Indeed, the amendments expressly permit the nursing facility to immediately obtain all medically necessary DME and to request an exceptional DME grant afterwards.
3. Enforcement Activities
A nursing facility that is enrolled in the MA Program has numerous obligations under Federal law, including the obligation to provide its MA residents with any DME that is medically necessary. Failure to provide medically necessary DME is a violation of state and Federal law and constitutes a ''deficiency'' for purposes of §§ 1187.121 and 1187.122 (relating to applicability; and requirements).
By promulgating these amendments, the Department is changing the case-mix payment methodology relating to movable property costs. The Department anticipates that these changes will result in increases in the case-mix per diem rates of the vast majority of MA nursing facilities. The Department is also providing MA nursing facilities with the option to obtain additional payments when they serve MA residents who need exceptional DME. All of these changes are intended to eliminate purported disincentives to providing unusual or expensive equipment in serving MA residents. In addition, however, to ensure that nursing facilities are providing legally sufficient nursing facility services to their MA residents, the Department, in cooperation with the DOH and the Department of Aging (PDA), is increasing its focus upon instances of reported noncompliance. This increase in focus is being effectuated by various means.
First, the Department has established a hotline for use by residents and their representatives. The number of that hotline is (877) 299-2918. When the Department receives a complaint that the nursing facility services being provided to a resident do not include medically necessary DME, the Department will respond by contacting the nursing facility and requesting information, or by sending a Utilization Management Review (UMR) team or requesting the DOH to send out a survey team to determine whether the facility should be cited for a deficiency.
Second, the Department is taking proactive measures to identify persons who may require exceptional DME, to determine whether these persons are receiving services and items necessary to meet their individual needs. Initially, the Department will review services being provided to paraplegic and quadriplegic residents. Thereafter, the Department intends to focus on other subsets of the MA population.
Third, the Department has met and will continue to meet with Ombudsman and Options staff to inform them of the availability of exceptional DME grants, the Department's interest in identifying residents who may benefit from additional or different DME, including exceptional DME, and how the Options staff and Ombudsman may report to the Department or DOH when they believe that a resident's needs are not being adequately met.
When, as a result of these activities or otherwise, the Department determines that a nursing facility has failed to provide necessary standard or exceptional DME, the Department will impose remedies. These remedies may include termination of the nursing facility's participation in the MA Program, fines, and the recovery of payments.
G. Explanation of Specific Changes to Chapter 1187
§ 1187.2. Definitions
Appraisal. As originally promulgated, § 1187.2 sets forth a definition of ''appraisal of nursing facilities.'' The Department has revised that definition to use the terms ''fixed property,'' ''movable property'' and ''depreciated replacement cost.'' The requirement that an appraisal be made ''by qualified personnel of an independent appraisal firm under contract with the Department'' was moved from § 1187.57(b).
Depreciated replacement cost. The term ''depreciated replacement cost'' replaces ''replacement costs.'' As originally promulgated, Chapter 1187 included ''replacement costs'' as a defined term. Among other things, that definition specified that the amount required to replace the entire nursing facility was to be reduced by ''an allowance for accrued depreciation,'' that is, although the word ''depreciation'' did not appear in the defined term, the concept was incorporated in the definition. See § 1187.2. Thus, the new term more fully describes the underlying concept. In addition, the revised term replaces two undefined terms that were synonymous with ''replacement cost'': ''depreciated replacement cost'' and ''depreciated replacement value,'' which appeared in §§ 1187.57(b) and 1187.96(d) and were synonyms for the previous defined term. Finally, the original definition has been amended so that it now applies only to a nursing facility's fixed property, while a new, alternative definition sets forth the meaning of ''depreciated replacement cost'' in the context of ''movable property.''
DME--Durable medical equipment. The amendments add a new term to those in § 1187.2: ''durable medical equipment or DME.'' The definition of ''DME'' has four significant features:
1. Movable property. For an item to come within the definition of ''DME,'' it must meet the definition of ''movable property.'' The latter is a residual definition, it encompasses any tangible item used in the course of providing nursing facility services that does not qualify as fixed property or a supply. Thus, for example, a whirlpool bath that is affixed to the building would be an item of fixed property and, consequently, would not qualify as an item of DME.
2. Connection to the Federal definition. The definition of ''DME'' is based in part upon the first three parts of the Federal definition as set forth at 42 CFR 414.202 (relating to definitions): ''Durable medical equipment means equipment . . . that (1) [c]an withstand repeated use; (2) [i]s primarily and customarily used to serve a medical purpose; (3) [g]enerally is not useful to an individual in the absence of an illness or injury[.]'' However, because the Department's definition is applicable only for DME used in a nursing facility, the Department has not included the fourth specification of the Federal definition, that the DME must be ''appropriate for use in the home.'' To the contrary, because circumstances in a nursing facility can be very different from circumstances in a person's home, that part of the Federal definition is inapplicable.
3. Standard DME. The definition of ''DME'' recognizes two classes of DME: ''exceptional DME'' and ''standard DME.'' The latter is a residual class, that is any item of DME that does not qualify as ''exceptional DME'' must be ''standard DME.'' There is no third class.
4. Exceptional DME. All DME necessary to provide nursing facility services to residents is an item or service covered by the MA case-mix per diem rate and the allowable costs of DME are used to compute nursing facility case-mix per diem rates. The purpose of defining ''exceptional DME'' is to specify those types of DME that, when needed in the course of providing nursing facility services to an MA resident, give rise to the opportunity of the nursing facility to request an exceptional DME grant. An exceptional DME grant authorizes a nursing facility to receive payment in addition to its MA case-mix per diem rate payment. By authorizing exceptional DME grants, the Department is able to recognize the extraordinary costs associated with small subsets of the nursing facility population whose medical needs are so extensive and complex that they cannot be adequately served without highly customized or specialized DME. For an item of DME to qualify as ''exceptional DME'' it must satisfy two conditions: Its acquisition cost (determined in accordance with § 1187.61) must meet or exceed the minimum acquisition cost threshold set by the Department in its annual notice pertaining to exceptional DME, and it must be either ''specially adapted DME'' (as that term is defined in § 1187.2), or it must be a type of DME identified in the annual notice.
a. Minimum acquisition cost. The Department's per diem rates pay for nursing facility services provided to residents having various and varied needs for DME, including types of DME that are used with a fairly low frequency (such as, ventilators). However, even when these types of DME are used infrequently, their cost is reflected in the overall rate. For this reason, the Department has determined that a minimum acquisition cost is an appropriate threshold for defining what items of DME should be considered ''exceptional.'' During the public process, the Department received a comment recommending that equipment that costs more than $2,000 or $3,000 should be considered ''exceptional DME.'' In considering what an appropriate threshold would be, the Department notes that CMS recently increased its capitalization threshold to $5,000. See CMS Pub. 15-1 § 108.1. Because the Department found this threshold to be reasonable and consistent with the current inventory of movable property in nursing facilities, the current minimum acquisition cost as set forth at 31 Pa.B 1422 (March 10, 2001) is $5,000. By setting the specific amount of this threshold in the annual notice, however, the Department has retained the ability to make simple and expeditious adjustments in this amount, as DME acquisition costs fluctuate over time.
b. The annual list of exceptional DME. To put nursing facilities on notice as to what types of DME can qualify as ''exceptional DME,'' and to simplify the process of handling exceptional DME grant applications, the Department believes that a list of that DME is useful and desirable. To provide full public disclosure and information, the Department will publish an annual list of types of DME whereby, if the acquisition cost of an item on the list meets the minimum acquisition cost threshold, that item is deemed to be an item of exceptional DME. The Department intends to review recommended additions to the list on an annual basis, and intends to publish this annual list by means of a public notice set forth in July of each year in the Pennsylvania Bulletin. Persons who wish to have an item considered by the Department should submit a written request to the Department. All requests received on or before December 31 will be considered in developing the list effective the following July. Any requests received after December 31 will be considered during the next annual review cycle. To provide interested persons with clear instructions regarding the submittal of these requests, the Department has removed the words ''at least'' from the draft definition of ''exceptional DME.'' Consequently, all recommended changes to the list will be considered together, and not on an ad hoc basis. Moreover, because changes to the list will be considered through this process, the submittal of a request to add an unlisted type of DME to the annual list is intended to be an administrative remedy that must be exhausted before other relief may be sought.
During the course of the public process, the Department received comments recommending that the Department identify standard motorized wheelchairs as ''exceptional DME.'' The Department has not included the wheelchairs in either the definition of ''exceptional DME'' or in its public notice (31 Pa.B. 1422) designating the particular equipment it considers ''exceptional.'' The Department disagrees that power wheelchairs should be labeled ''exceptional.'' To the contrary, it is the Department's position that the equipment should be part of the standard array of DME routinely available in nursing facilities. To address concerns that the expense of that equipment makes its acquisition cost-prohibitive for nursing facilities, the Department notes that the amendments in addition to permitting exceptional grant payments under certain circumstances, substantially revise the case-mix payment methodology relating to movable property costs to eliminate purported disincentives for nursing facilities to provide equipment, like standard motorized wheelchairs, that may be somewhat more costly than other equipment routinely found in nursing facilities.
Fair rental value. The original definition of ''FRV'' has been amended to reflect changes in the regulations. The Department has modified the draft revised definition so that it also pertains to movable property because, in some instances, the Department will use the FRV of that movable property. See § 1187.96(d)(2)(i).
Fixed property. The Department has amended the original definition by eliminating the various examples of ''land improvements'' and ''detached buildings'' and by making other changes intended to clarify the original definition. However, no change in the scope of the definition is intended. During the public process the Department received a comment recommending that the Department retain the examples in the definition of ''fixed property.'' While the Department does not accept this recommendation, the Department notes that the examples of fixed equipment included in the original definition continue to be examples of fixed equipment under the revised regulation.
Initial appraisal. As originally promulgated, Chapter 1187 provides that each enrolled nursing facility ''will be appraised at its depreciated replacement cost.'' See § 1187.57(b). Thus, for each nursing facility, there must be a first or original (that is, initial) appraisal. By adding the term ''initial appraisal'' to § 1187.2, the Department is codifying the current colloquialism and establishing a basis for making clear reference to refer to all of the appraisals. The term stands in contrast to the terms ''updated appraisal,'' ''reappraisal'' and ''limited appraisal.''
Interest. As originally promulgated, § 1187.2 set forth a definition of ''interest--capital indebtedness'' and ''interest--administrative.'' The amendments merge both concepts under the general term ''interest'' and rename the terms, ''capital interest'' and ''other interest.'' In addition, the definition of ''capital interest'' has been changed to replace the term ''capital purposes'' with the more specific ''fixed property, major movable property or minor movable property.'' Likewise, the definition of ''other interest'' has been changed so that ''the acquisition of supplies'' is expressly included within the meaning of ''day-to-day operational activities.'' These changes do not alter the former meanings of these terms, but are intended to clarify possible ambiguities in the original version.
Limited appraisal. As originally promulgated, a limited appraisal could be conducted as a result of additions or deletions to capital, regardless of whether the capital was fixed or movable property. Under the amendments, limited appraisals are no longer necessary for additions or deletions involving movable property. The Department has committed to performing annual inventories in appraising movable property in instances where a capital rate component is computed using the FRV of movable property. Therefore, limited appraisals are used only to account for changes involving fixed property. The definition has been further modified to make clear that, for a limited appraisal to be conducted, it first must be requested by the nursing facility. If no request is made, the Department has no obligation to direct the independent appraisal firm under contract with the Department to conduct any appraisal. The Department also amended the definition to expressly set forth the function and effect of a limited appraisal, it ''results in the modification of the depreciated replacement cost set forth in an initial appraisal, a reappraisal or an updated appraisal.'' A modification is solely prospective in nature: a limited appraisal cannot serve as a basis for revising a nursing facility's capital rate component for a rate year in effect on or before the date that the limited appraisal is conducted.
Movable property. As originally promulgated, Chapter 1187 set forth a definition of ''movable property'' in § 1187.2, then used the term ''movable equipment'' in §§ 1187.2, 1187.96(d)(1) and 1187.112. Although these terms were synonymous, the amendments eliminate the latter, to eliminate possible ambiguities. In reworking the definition of movable property, the Department makes reference to tangible items. That term excludes ''intangible items'' such as annuities, stocks, shares, patents, copyrights, trade or service marks, choses in action, notes, bonds, insurance policies, goodwill, contract rights, options, legal rights, receivables and other evidences of debt, documents, and cash. No change in the scope of ''movable property'' or ''fixed property'' is intended by the inclusion of ''tangible items'' and the exclusion of ''intangible items'' from the revised definitions. In addition to these changes, the definition of ''movable property'' has been rewritten to reflect the revisions being made to the case-mix payment system. ''Movable property'' is a residual term: any tangible item that does not qualify as either fixed property or a supply is deemed to be an item of movable property.
During the public process, the Department received a comment recommending that language regarding transportation costs should be added to the movable property definition. While the Department does not accept this recommendation, the Department notes that transportation equipment used in a nursing facility in the course of providing nursing facility services to residents is ''movable property'' as defined in § 1187.2.
Major and minor movable property. The definition of ''movable property'' divides that class of tangible items into two subclasses: ''major'' and ''minor'' movable property. Taken together, these classes are exclusive. There is no third classification; any item of movable property must fall into one or the other subclass. The factor that determines this classification is the ''acquisition cost'' of the item. The rules for establishing an item's acquisition cost are set forth in § 1187.61.
Movable property appraisal. An appraisal conducted to determine the depreciated replacement cost of some or all of the movable property of a nursing facility. So long as necessary, the Department will conduct these appraisals on an annual basis. During the public process, the Department received a comment questioning the need for this definition. The definition is needed because movable property appraisals will be used during the transition period, and in some instances, for new nursing facilities.
Real estate tax cost. As originally promulgated, Chapter 1187 made repeated reference to ''real estate taxes or reasonable payment made in lieu of real estate taxes.'' See §§ 1187.51(e)(4)(ii), 1187.57(a), 1187.71(a)(4)(iii), 1187.91(2)(ii), 1187.96(d)(3) and 1187.97(1)(ii). To simplify references to this category of cost, the Department has added the definition of ''real estate tax cost'' to § 1187.2. In setting forth that definition, the Department does not intend that it result in any change in the treatment of these costs.
Reappraisal. As originally promulgated, Chapter 1187 did not require annual appraisals. Instead, it merely required that nursing facilities be ''reappraised'' every 5 years after the implementation of the case-mix payment system. See § 1187.57(b)(2). In practice, however, the Department contracted with an independent appraisal firm to provide the Department with updated appraisals on an annual basis. In addition, during 1998, the Department required that the firm inspect all enrolled nursing facilities and provide the Department with new appraisals. The latter are referred to as ''reappraisals.'' The Department has revised this term to reflect that meaning.
Related services and items. As set forth in Subchapter K, which is promulgated by these amendments, the Department will under certain conditions make payments under ''exceptional DME grants.'' Those payments are intended to pay the nursing facility for the necessary, reasonable and prudent costs incurred in acquiring and using exceptional DME when that equipment is needed by an MA resident. In various situations, the cost of using that equipment will also entail substantial additional costs. As set forth in § 1187.154(a)(1), an exceptional DME grant authorizes payment of the necessary, reasonable and prudent costs of the exceptional DME and of ''related services and items.'' The purpose of the definition of that term is to specify what is encompassed by that term.
Specially adapted DME. Generally, an item of DME qualifies as ''exceptional DME'' if its acquisition cost meets or exceeds the minimum acquisition cost threshold and if it is of a particular type set forth on the Department's annual list. However, even if DME does not fall into any of the types listed in the notice, it still can qualify as ''exceptional'' if its acquisition cost meets or exceeds the minimum acquisition cost threshold and it is ''specially adapted.'' The Department has made allowance for ''specially adapted DME'' to provide nursing facilities with the opportunity of receiving additional payments in those situations when a particular resident requires an expensive and unique item of DME and when there is no reasonable expectation that, when that resident has ceased to use the item, it might then be used by some other actual or potential resident of the facility, or would be usable by another person only if substantial modifications were made to it. An example of a device is a motorized wheelchair equipped with a palate drive device that is fabricated to meet the particular needs of a specific quadriplegic resident. The definition of ''specially adapted DME'' has three significant features, of which ''contemporaneous use'' is by far the most important:
1. Unique construction. An item of DME is ''uniquely constructed'' if it is originally fabricated or assembled to suit the particular physical or medical circumstances of the intended user. For example, if a motorized wheelchair is ordered for a particular resident, that item of DME would typically be assembled from various off-the-shelf components, and the choice of those components depends upon the physical circumstances of the intended user. Under these circumstances, the fabrication of the wheelchair might (depending on circumstances) qualify as ''unique construction.'' Even if it did, however, that circumstance would not be sufficient to cause the wheelchair to be an item of specially adapted DME.
2. Substantial adaptation or modification. An item of DME is ''substantially adapted or modified'' if, in its original or earlier configuration, it was not suitable for use by the current intended user but, as a result of subsequent modifications, has become suitable. These modifications must be substantial. For example, merely switching a joystick from the left to the right side of a chair and altering the height and depth of the seat would not, by itself, constitute ''substantial adaptation.'' On the other hand, if the joystick on an existing wheelchair were replaced with a palate drive control system that could not only drive the wheelchair but also control features such as ''tilt in space'' adjustments, the change would constitute a substantial adaptation. The mere fact that an item of DME has undergone a ''substantial adaptation'' does not, in itself, cause the item to be specially adapted DME. For instance, if the palate drive controls were removed from the wheelchair and replaced with a joystick control, this change might well cause the wheelchair to be suitable for contemporaneous use by numerous other persons, in which case it would not qualify as ''specially adapted DME.''
3. Contemporaneous use by another resident. By defining ''specially adapted DME'' to be DME that is unsuitable for contemporaneous use by another resident, the Department intends to exclude from this classification all DME that could be used by another actual or potential resident, either without any adaptation or modification or without any substantial adaptation or modification. If an item of DME is susceptible to that use, that item cannot qualify as an item of specially adapted DME, regardless of whether it was ''uniquely constructed'' or ''substantially adapted or modified'' to suit the needs of a particular resident.
The allowance for specially adapted DME is intended to address those rare situations where an expensive item of DME is so uniquely configured to the needs of a particular resident that, once that resident has ceased to use the item, it could not be used by any other resident, or could not be used by another resident unless substantial adaptations or modifications were made to it. In these situations, a nursing facility may be extremely reluctant to expend a substantial sum to obtain the item, since any further use would be impracticable. It is only in these situations that the Department intends that exceptional DME grants be given to permit additional payment to the nursing facility.
The ''contemporaneous use'' criterion is not intended to be applied to the particular residents of the nursing facility. Thus, for instance, in reviewing an application for an exceptional DME grant, the Department does not intend to review the medical or other records of the nursing facility's other residents before making a determination. Instead, the ''contemporaneous use'' criterion is intended to apply to the expected range of nursing facility residents, who come in a wide variety of sizes, shapes, conditions and capabilities. For these persons, the Department expects nursing facilities to obtain and use DME that satisfies the needs of persons within these ranges. Thus, for instance, the Department expects that nursing facilities will obtain and make available a variety of manual and motorized wheelchairs for the use of existing or potential residents, and a wheelchair does not become ''specially adapted'' merely because it is constructed to accommodate a person who is taller than average, shorter than average, heavier than average, or lighter than average, or because that person requires a differently-positioned control device.
An example of an item of DME that is not suitable for contemporaneous use is a motorized wheelchair that uses a palate drive fabricated to suit the needs of a particular quadriplegic resident. Another example of a wheelchair that is not suitable for contemporaneous use would be a wheelchair designed to the requirements of a resident with severe skeletal deformities related to a disease process, such as cerebral palsy or multiple sclerosis. An example of a wheelchair that is suitable for contemporaneous use is a wheelchair with larger-than-normal components, intended to accommodate a larger-than-average resident. Mere changes in size and strength are insufficient to cause a wheelchair to be ''specially adapted.'' Rather, the wheelchair must have some additional, medically necessary feature that prevents the foreseeable contemporaneous use by some other person without substantial adaptation or modification of the item.
During the public process, the Department received a comment recommending that the Department clarify the definition of ''specially adapted'' to provide that, in cases when a resident needs a wheelchair that must be fitted for specifications by a professional or which consists of numerous component parts, the wheelchair would be both ''exceptional'' and ''specially adapted.'' Because the Department does not believe that the definition needs to be clarified, the Department has not revised the definition as recommended in the comment. Under the definition of specially adapted equipment set forth in Annex A, a wheelchair is exceptional if it is both specially adapted and its cost equals or exceeds the minimum acquisition cost specified by the Department. The mere fact that a wheelchair is fitted to a resident under the instructions of a professional does not, in itself, cause the wheelchair to qualify as ''specially adapted DME.'' Although a wheelchair may not be exceptional or specially adapted, the Department notes that a wheelchair is standard DME that is covered by the case-mix per diem rate.
Supply. Supplies are a class of tangible item. Examples of supplies include: resident care personal hygiene items such as soap, toothpaste, toothbrushes and shampoo; resident activity items such as games and craft materials; medical supplies, including wound dressings, disposable tubing and syringes, incontinence care supplies, including catheters and disposable diapers; dietary supplies such as foodstuffs and disposable table ware and implements; laundry supplies such as detergents and bleaches; housekeeping and maintenance supplies, such as cleaners, toilet paper, paper towels, and light bulbs; and administrative supplies, such as forms, paper, pens, pencils, and ink or toner for printers and copiers. Any tangible item that is identified on the AHA Guidelines as having an original estimated useful life of 1 year or greater is not a ''supply'' even though a nursing facility intends to use, or only uses, the item for less than 12 months.
In response to a comment received during the public process, the Department deleted the terms ''relatively small in size'' and ''inexpensive,'' which were contained in the November 2000 draft, from the definition of ''supply'' in Annex A. The Department agrees that the life of an item is the key factor in determining whether an item is a supply or movable property. The Department will use American Hospital Association Uniform Chart of Accounts and Definitions for Hospitals (AHA Guidelines) to determine the item's expected useful life in deciding whether an item is a supply or movable property. Thus, for example, an item that is identified in AHA Guidelines as having as estimated useful life of 1 year or more is not a supply within the meaning of this definition.
Transportation equipment. Under the amendments, transportation equipment is a form of movable property. (Depending on its acquisition cost, an item of transportation equipment will be either major or minor movable property.) Because, under the amendments, this equipment is treated in the same manner as all other movable property, the definition of ''transportation equipment'' has been removed from Chapter 1187.
Updated appraisal. As originally promulgated, Chapter 1187 only required that nursing facilities be reappraised once every 5 years. See § 1187.57(b)(2). Nonetheless, for each year in which an ''initial appraisal'' or ''reappraisal'' was not performed, the Department contracted with its independent appraisal firm to update the previous appraisals to account for reported changes in the value of land, changes in the cost of factors affecting the replacement of the entire nursing facility, and expected depreciation. These appraisals are known as ''updated appraisals.'' The Department has included this term in § 1187.2 to formally establish it as a term of art.
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