The Department of Human Services has established the following specific payment methods:

1. (1) Nursing facilities.

   1. (A) Reimbursement methodology.

      1. (i) Reimbursement rates for nursing facilities will be cost-based, facility-specific rates that will consist of four (4) major cost components and will be determined in the following way. Reimbursement rates will be determined by adding calculated per diem amounts for four (4) separate components of cost:

         1. (a) (a) Direct care;
         2. (b) (b) Indirect, administrative, and operating;
      2. (c) (c) Fair market rental; and
      3. (d) (d) The quality assurance fee.
      4. (ii) This cost data for calculating these per diems will be taken from desk reviewed cost reports submitted by providers in accordance with this part. Only full-year cost reports will be used in establishing cost ceilings and class rates. Cost reports that are submitted because of changes of ownership, whether via purchase or lease, will be used for calculating the facility’s individual rate components but will not be used in calculating the direct care ceiling or the indirect, administrative, and operating class rate.

      5. (iii) The methodology for calculating the per diem amounts for each component of cost is provided below:

         1. (a) (a) Direct care.
2. (1) (1) Direct care per diem cost shall be calculated from the facility’s actual allowable Medicaid cost as reported on the facility’s cost report. The direct care per diem cost is subject to a ceiling.
3. (2) (2) The ceiling shall be established at one hundred five percent (105%) of the allowable Medicaid direct care cost per diem incurred by the facility at the ninetieth percentile of arrayed Medicaid direct care facility cost.

4. (3) (3) The direct care component of the rate will rebase annually for the period July 1 to June 30. An inflation index (see subdivision (1)(F) of this section) will be applied to the provider’s direct care per diem cost to inflate cost from the cost reporting period to the rate period;

   1. (b) (b) Indirect, administrative, and operating. The per diem payment for this component will be set at one hundred ten percent (110%) of the median indirect, administrative, and operating per diem cost adjusted for inflation using the inflation index (see section (1)(F) of this section) and paid as a class rate to all facilities. This per diem payment will be rebased annually;

      1. (c) (c) Fair market rental.
5. (1) (1) A fair market rental system will be used to reimburse property costs. The fair market rental system reduces the wide disparity in the cost of property payments for basically the same service, therefore making this payment fairer to all participants in the program. The fair market rental system will be used in lieu of actual cost and/or lease payments on land, buildings, fixed equipment, and major movable equipment used in providing resident care. The fair market rental payment for facilities that are leased from a related party will be calculated from the costs associated with the related party in conformity with related party regulations.
6. (2) (2) The payment for provider property cost will be calculated annually by adding the return on equity, facility rental factor, and the cost of ownership, and dividing the sum of these three (3) components by the greater of the actual resident days or resident days calculated at the following occupancy levels. The minimum occupancy percentage for the SFY 2022 cost reporting period and applicable to the CY 2023 rate year shall be sixty percent (60%). Thereafter, the minimum occupancy percentage shall increase as indicated in the following table, up to a maximum of seventy-five percent (75%).

   Cost ReportPeriod	RatePeriod	% Occupancy
   SFY 2022	SFY 2023	60%
   SFY 2023	SFY 2024	65%
   SFY 2024	SFY 2025	70%
   SFY 2025	SFY 2026	70%
   SFY 2026	SFY 2027	75%
   & after	& after

   Resident days at the minimum occupancy level are calculated as: Total Licensed Beds x Number of Days in the Period x Minimum Occupancy Percentage.

7. (3) (3) Return on equity.

   1. (A) (A) The return on equity portion of the fair market rental payment will be calculated by taking the current asset value (CAV) of a facility less the ending loan balance on any loans used to finance fixed assets or major movable equipment, times the sum of the average Moody's Seasoned Baa Corporate Bond Yield for the month of June in the applicable cost reporting period plus one and a half percent (1.5%) as a risk premium. For purposes of calculating return on equity and determining allowable interest expense, allowable debt cannot exceed the facilities current asset value. The maximum rate used for calculating return on equity will be ten percent (10%).
   2. (B) (B) The CAV of a facility is calculated by multiplying the number of beds in a facility by the per bed valuation (PBV) less an aging index of one percent (1%) for each year of age, not to exceed a fifty percent (50%) reduction in PBV. A facility will be considered new the cost reporting period in which the facility is licensed. A facility will be considered one (1) year old the following cost reporting period. The CAV of a facility will be recalculated and an appropriate adjustment to the per diem will be made when additional beds are placed in operation.
   3. (C) (C) Beginning with the CY 2023 rate year and based on the base PBV for the SFY cost reporting period, the PBV methodology shall differentially apply PBV amounts according to the class of resident room where a licensed bed is located.

      Class A Resident Room
      Criteria for Class A Room	PBV Applicable to Each Licensed Bed in a Class A Room
      A private, single occupancy resident bedroom. Maximum of one licensed bed per room. Each Class A private room shall have an attached private bathroom, or an attached private bathroom shared with one adjoining private resident room. A Class A room must meet minimum space and other standards for private rooms and attached private bathrooms as set in department regulations for a licensed SNF.	Base PBV (full PBV) for the SFY 2022 cost reporting period and applicable to the CY 2023 rate year is $196,977. Updated annually as Base PBV is updated for increases in the construction index.
      Class B Resident Room
      Criteria for Class B Room	PBV Applicable to Each Licensed Bed in a Class B Room
      A semi-private, double occupancy resident bedroom. Maximum of two licensed beds per Class B room. Each Class B room shall have an attached private bathroom, or an attached private bathroom shared with one adjoining private or semi-private resident room. A Class B room must meet minimum space and other standards for semi- private rooms and attached private bathrooms as set in department regulations for a licensed SNF.	Base PBV (full PBV) for the SFY 2022 cost reporting period and applicable to the CY 2023 rate year is $140,594. Updated annually as Base PBV is updated for increases in the construction index.
      Class C Resident Room
      Criteria for Class C Room	PBV Applicable to Each Licensed Bed in a Class C Room
      A Class C room is any resident room that does not meet the criteria for a Class A room or Class B room.Maximum of two licensed beds per Class C room. For example, a Class C room includes any private or semi-private room lacking an attached private bathroom or where the occupants otherwise must rely on a communal bathroom(s)for toileting.	Fixed at the Per Bed Value in effect on June 30, 2022, with no annual update thereafter for the construction index.

   4. (D) (D) The PBV will be adjusted annually thereafter to reflect changes in construction costs as indicated per the Core Logic Marshall & Swift Valuation Service. A percentage increase will be calculated by dividing the difference between the comparative cost multipliers construction index for Little Rock, Arkansas, for the quarter ending January of the cost reporting period and January of the previous year. The annual adjustment percentage will be the lesser of the percentage as calculated above for building classes: 1) masonry bearing walls, 2) wood frame, or five percent (5%).
   5. (E) (E) Every five (5) years, the Division of Medical Services shall analyze and compare the annual updates made using the construction cost index and the actual total cost, including physical plant, fixed equipment, land acquisitions, and land improvements, of new SNF construction in Arkansas during the same period. The division shall rebase the base PBV if actual construction costs increased more than estimated by the construction index.
8. (4) (4) Facility rental factor. A facility rental factor will be paid for each facility. The rental factor is calculated by multiplying the CAV of the facility by two and a half percent (2.5%).
9. (5) (5) Cost of ownership. The cost of ownership component of the property payment will consist of interest, property taxes, and insurance premiums, including professional liability and property, as identified on the facility’s cost report. The limitation on allowable interest expense is addressed in the return on equity calculation described above. The limitation on allowable professional liability insurance is addressed in 20 CAR § 579-302(10)(I).
10. (6) (6) Minor equipment purchases. The cost of purchases of minor equipment is not covered in the fair market rental payment. Minor equipment for the purposes of reimbursement is any equipment that has a unit cost of less than two thousand five hundred dollars ($2,500). Minor equipment purchases are to be expensed in the cost area in which the equipment is normally used, i.e., direct care cost component or indirect, administrative, and operating component.

11. (7) (7) Renovations.

    1. (A) (A) The current asset value of a facility will be adjusted as a result of major renovations made to an existing facility. A major renovation is defined as renovations made to a facility where the total per bed cost of the renovation equals or exceeds ten percent (10%) of the facility’s current per bed value for the beds renovated or five percent (5%) for renovations to common areas. The actual cost of all additions or fundamental alterations to a facility that are required by state or federal laws or rules that take effect during the cost reporting period will be treated as an adjustment to the provider’s aging index regardless of the percentage of current per bed value. The cost of renovation will be treated as an adjustment to the provider’s aging index. A facility’s aging index will be reduced by one percent (1%) for each percent of the current per bed value expended for renovations on a per bed basis. For facilities that have beds that have been placed in operation at different times or when renovations include only a portion of the beds in a facility, the determination that the renovation meets the criteria of major renovation and the reduction of the aging index will relate to only those beds that were included in the renovation. For renovations to common areas, the determination that the renovation meets the criteria of major renovation and the reduction of the aging index will be applied proportionally to all beds.
    2. (B) (B) Adjustments to the aging index will be rounded to a whole percentage. Percentages greater than or equal to one-half percent (.5%) will be rounded up. Percentages less than one-half percent (.5%) will be rounded down. A facility wishing to do major renovation to their facility must submit a plan for renovation to the department for review and approval to facilitate an adjustment to the provider’s aging index. The duration of the renovation plan cannot exceed a three-year period. The plan shall include a detailed description of the renovation to be done along with the cost of the renovation. The department will determine if the proposed renovation meets the requirements for major renovation.
    3. (C) (C) The department will approve or disapprove the renovation project within thirty (30) days of receipt. The provider will then submit a detailed description of the actual work performed and a statement of the actual cost of the renovation upon completion of the project. Renovations that were not completed in compliance with the plan for renovation will not be considered. The department will notify the provider of the adjustment to the facility aging index as a result of the major renovation. Under no circumstances will the aging index be reduced to less than zero (0).

12. (8) (8) Aging index. Age of provider beds for purposes of calculating the aging index were taken from surveys provided by the Arkansas Health Care Association as prepared by providers. The provider is responsible for the accuracy of the information provided. The provider may at any time be required to provide records validating this information. The aging index is subject to adjustment based upon review or audit;

    1. (d) (d) Quality assurance fee. Acts 2001, No. 635, established the levy of a quality assurance fee on nursing facilities. The reimbursement rate paid nursing facilities will include a quality assurance fee component. The quality assurance fee component will be reimbursed at the amount established as the multiplier as defined in Acts 2001, No. 635, for the date of service billed; and

       1. (e) (e) Emergency generators.
13. (1) (1) Acts 2001, No. 1602, requires nursing facilities to own and maintain emergency generators. This establishes an add-on payment for installing emergency generators applicable only to first time emergency generators installed in order to comply with Acts 2001, No. 1602. Facilities that do not meet the requirement of existing facility as defined in Acts 2001, No. 1602, will not receive any add-on payment in addition to the facility’s fair market rental payment. Add-on payments shall be made only for the periods that depreciation or lease expense for the cost of first time generator installations is allowable.
14. (2) (2) Facilities will be required to submit copies of invoices indicating generator cost and a copy of the financing arrangement, if any, for the emergency generator installation or a copy of the generator operating lease, if any. Facilities that fail to provide this information by December 1, 2002, will not be paid the add-on for thirty (30) days past the date of submission. Should the financing arrangement on the emergency generator change during the add-on period, the facility must provide revised financing information that will be used to calculate the add-on for the following calendar year.
15. (3) (3) Facilities will be paid an add-on to their per diems for installing emergency generators. The add-on payment will begin January 1, 2003, and will be adjusted each January 1 for the period the add-on is applicable. Using cost information supplied by the facility, the add-on will be calculated by dividing the sum of projected yearly depreciation and projected yearly interest expense or projected yearly lease expense by the greater of the actual resident days from the previous cost reporting period or resident days calculated at the minimum occupancy levels identified in subdivision (1)(A)(iii)(c) of this section, fair market rental.
16. (4) (4) Depreciation will be calculated using the straight-line method assuming a useful life of ten (10) years. Interest expense will be allowable and included in the add-on for emergency generators for a maximum period of five (5) years. Interest expense and the associated debt instrument reimbursed under this provision will not be included in the fair market rental payment or any other component of the rate. Lease expense on emergency generator systems will only be allowable for a maximum period of ten (10) years.

17. (5) (5) Change of ownership does not affect add-on payments. Facilities that change ownership while receiving a generator add-on payment will continue to receive the add-on for the remainder of the allowable period identified above using the original owner’s projected expense.

    1. (B) Facility payments — Interim rates.

       1. (i) An interim rate will be established at the beginning of each state fiscal year for each facility. The interim rate will be established by applying the inflation index to the actual per diem rate from the previous rate period. For the period January 12, 2001, to June 30, 2001, an actual rate will be calculated from cost reports submitted for the period July 1, 1999, to June 30, 2000. No initial interim rate is necessary because the methodology has been implemented the second half of the rate period and therefore actual rates have been calculated. The interim rate is necessary to allow time for providers to complete cost reports and allow the department adequate time to review the cost reports and calculate rates. After the actual per diem calculations occur providers will be paid a weighted per diem rate for the portion of the rate year remaining. The weighted per diem rate will provide for an average payment approximating providers actual per diem.
       2. (ii) The following formula will be used to calculate the weighted per diem rate. {(Actual per diem rate x 12) - (Interim rate x months used)}/Months remaining.

    2. (C) Provisional rate.

       1. (i) A provisional rate will be paid to a provider who:

          1. (a) (a) Constructs a new facility; or
          2. (b) (b) Enrolls as a Medicaid provider and has not previously participated in the Medicaid program.

       2. (ii) The provisional rate will be established as follows:

          1. (a) (a) The direct care per diem rate will be established at the inflation adjusted ceiling for that rate period;
          2. (b) (b) The indirect, administrative, and operating per diem will be the class rate as established for that rate period; and
       3. (c) (c) The fair market rental payment will consist of a return on equity payment assuming no debt, a facility rental factor, and property taxes and insurance at the industry average. The industry average for property taxes and insurance will be calculated by dividing the total cost for all full year facilities as identified on facility cost reports by total resident days for the cost reporting period. The per diem payment will be calculated by dividing the sum of the components above by the required minimum occupancy. New facilities that have been constructed will use an occupancy rate of fifty percent (50%) when calculating the per diem for this component. Facilities that want to establish their provisional rate assuming a higher percentage of occupancy can do so by supplying projected occupancy figures to the department. Facilities have the option of providing documents indicating the actual cost of property taxes and insurance to be used for cost of ownership figures. Actual cost of ownership information can be supplied any time during the initial six-month period. The division will adjust the facility’s provisional rate prospectively based on the information provided.

       4. (iii) Facilities who are placed on a provisional rate as detailed above must submit a six-month cost report as required in 20 CAR § 579-106. The provisional rate will be retroactively adjusted to the per diem calculated in the following manner:

          1. (a) (a) The provider’s direct care per diem rate will be calculated from the six-month cost report using the inflation index adjusted ceiling for the applicable rate period. For cost reports that span two (2) rate periods, the applicable rate period will be considered the one that contains the majority of the days included in the six-month report;
          2. (b) (b) The indirect, administrative, and operating per diem will continue to be the class rate as established in the provisional rate; and
       5. (c) (c) The amount identified as the sum of the components used in the original calculation, as adjusted for actual cost data if applicable, for the fair market rental payment will remain as established in the provisional rate. The actual per diem amount will be adjusted to reflect the greater of actual occupancy, or the minimum required occupancy for facilities that enroll as a Medicaid provider who have not previously participated or fifty percent (50%) occupancy for new facilities. After the initial six-month reporting period the fair market rental payment will be calculated using a minimum occupancy factor as required in subdivision (1)(A)(iii)(c) of this section, for both new facilities and facilities that were not previously enrolled.
       6. (iv) If either the provisional rate or the actual rate calculated from the six-month cost report extend from one rate period to another, appropriate adjustments will be made to the vendor payment. The inflation index will be applied to the direct care per diem. The administrative and operating per diem will be changed to the class rate for the latest rate period. The fair market rental per diem will be adjusted to reflect any change in the PBV for the latest rate period.
    3. (D) Rates for facilities that change ownership. Facilities that have a change in licensure due to purchase or lease of an existing facility participating in the Medicaid program will be reimbursed the previous operator’s rate as of the date of the change of ownership. When this rate extends from one rate period to another, an inflation index will be applied to the per diem rate to establish the rate for the new rate period. The inflation factor to be used is addressed in subdivision (1)(F) of this section.
    4. (E) Terminating facilities. Facilities that withdraw from the Medicaid program either voluntarily or involuntarily will not be required to submit a final cost report. All payments made to a facility as interim or provisional will be considered as final. This provision does not apply to any fines or penalties that have been imposed on a facility.
    5. (F) Inflation index. For all inflation adjustments, unless stated otherwise in the specific area of the plan, the department will use the Skilled Nursing Facility Market Basket Index as published by the Centers for Medicare and Medicaid Services. The department will use the four quarter moving average percent change identified for the final quarter of the rate period.
    6. (G) Adjustments to provider cost reports. Adjustments to an individual provider’s per diem may be necessary as a result of amended cost reports, desk review, or audit. Should a provider’s per diem be adjusted for any reason, a retroactive adjustment will be made for all resident days paid back to the beginning of the rate period. Adjustments to a provider’s per diem resulting from any source other than an inquiry for additional information as a result of a desk review for which provided within required deadlines will only affect the per diem for that particular provider. Cost component ceilings for applicable cost components and the floor established for direct care will not be adjusted under these circumstances.

    7. (H) Cost components. For rate setting, facility allowable costs from desk-reviewed facility cost reports for an annual period ending June 30, will be identified and grouped as: direct care; indirect, administrative, and operating; property costs (identified for informational purposes, the reimbursement rate for property costs will be determined by the fair market rental method as outlined above in subdivision (1)(A)(iii)(c) of this section); and quality assurance fee.

       1. (i) Direct care expenses. The following expenses are classified as direct care:

          1. (a) (a) Salaries — Aides;
          2. (b) (b) Salaries — Medication assistants;
       2. (c) (c) Salaries — LPNs;

       3. (d) (d) Salaries — RNs;

          1. (e) (e) Salaries — Occupational therapists;
          2. (f) (f) Salaries — Physical therapists;
          3. (g) (g) Salaries — Speech therapists;
          4. (h) (h) Salaries — Other therapists;

       4. (i) (i) Salaries — Rehabilitation nurse aide;

          1. (j) (j) Salaries — Assistant Director of Nursing;
          2. (k) (k) Salaries — Director of Nursing;
       5. (l) (l) FICA — Direct care;

       6. (m) (m) Group health — Direct care;

          1. (n) (n) Pensions — Direct care;
          2. (o) (o) Unemployment taxes — Direct care;
          3. (p) (p) Uniform allowances — Direct care;
          4. (q) (q) Workers’ compensation — Direct care;
          5. (r) (r) Other fringe benefits — Direct care;
          6. (s) (s) Contract — Aides;
          7. (t) (t) Contract — Medication assistants;
          8. (u) (u) Contract — LPNs;

       7. (v) (v) Contract — RNs;

          1. (w) (w) Training — Direct care;

       8. (x) (x) Drugs, over-the-counter;

          1. (y) (y) Oxygen;
          2. (z) (z) Medical supplies — Direct care;
          3. (aa) (aa) Contract — Occupational therapists;
          4. (bb) (bb) Contract — Physical therapists;
       9. (cc) (cc) Contract — Speech therapists;

       10. (dd) (dd) Contract — Other therapists;

           1. (ee) (ee) Therapy supplies;
           2. (ff) (ff) Consultant fees — Nursing;
           3. (gg) (gg) Raw food;
           4. (hh) (hh) Food supplements; and
       11. (ii) (ii) Incontinence supplies.

       12. (ii) Indirect, administrative, and operating. The following expenses are classified as indirect, administrative, and operating:

           1. (a) (a) Salaries — Administrator;
           2. (b) (b) Salaries — Assistant administrator;
       13. (c) (c) Salaries — Dietary;

       14. (d) (d) Salaries — Housekeeping;

           1. (e) (e) Salaries — Laundry;
           2. (f) (f) Salaries — Maintenance;
           3. (g) (g) Salaries — Medical records;
           4. (h) (h) Salaries — Other administrative;

       15. (i) (i) Salaries — Owner or owner/administrator;

           1. (j) (j) Salaries — Activities;
           2. (k) (k) Salaries — Pharmacy;
       16. (l) (l) Salaries — Social services;

       17. (m) (m) FICA — Indirect, administrative, and operating;

           1. (n) (n) Group health — Indirect, administrative, and operating;
           2. (o) (o) Pensions — Indirect, administrative, and operating;
           3. (p) (p) Unemployment taxes — Indirect, administrative, and operating;
           4. (q) (q) Uniform allowance — Indirect, administrative, and operating;
           5. (r) (r) Workers’ compensation — Indirect, administrative, and operating;
           6. (s) (s) Other fringe benefits — Indirect, administrative, and operating;
           7. (t) (t) Barber and beauty expense — Allowable;
           8. (u) (u) Consultant fees — Activities;

       18. (v) (v) Consultant fees — Medical director;

           1. (w) (w) Consultant fees — Pharmacy;

       19. (x) (x) Consultant fees — Social worker;

           1. (y) (y) Consultant fees — Therapists;
           2. (z) (z) Medical transportation;
           3. (aa) (aa) Patient activities;
           4. (bb) (bb) Supplies — Care related;
       20. (cc) (cc) Other care-related costs;

       21. (dd) (dd) Contract — Dietary;

           1. (ee) (ee) Contract — Housekeeping;
           2. (ff) (ff) Contract — Laundry;
           3. (gg) (gg) Contract — Maintenance;
           4. (hh) (hh) Consultant fees — Dietician;

       22. (ii) (ii) Consultant fees — Medical records;

           1. (jj) (jj) Accounting fees;
           2. (kk) (kk) Advertising for labor/supplies;
       23. (ll) (ll) Amortization expense — Noncapital;

       24. (mm) (mm) Bank service charges;

           1. (nn) (nn) Board of directors fees;
           2. (oo) (oo) Data processing fees;
           3. (pp) (pp) Dietary supplies;
           4. (qq) (qq) Depreciation expense;
           5. (rr) (rr) Dues;
           6. (ss) (ss) Educational seminars and training;
           7. (tt) (tt) Housekeeping supplies;
           8. (uu) (uu) Interest expense — Noncapital;

       25. (vv) (vv) Laundry supplies;

           1. (ww) (ww) Legal fees;

       26. (xx) (xx) Linen and laundry alternatives;

           1. (yy) (yy) Miscellaneous;
           2. (zz) (zz) Management fees and home costs;
           3. (aaa) (aaa) Office supplies and subscriptions;
           4. (bbb) (bbb) Postage;
       27. (ccc) (ccc) Repairs and maintenance;

       28. (ddd) (ddd) Taxes – Other;

           1. (eee) (eee) Telephone and communications;
           2. (fff) (fff) Travel;
           3. (ggg) (ggg) Utilities;
           4. (hhh) (hhh) Criminal backgrounds check;

       29. (iii) (iii) Vehicle depreciation; and

           1. (jjj) (jjj) Vehicle interest.

       30. (iii) Property. The following expenses are classified as property:

           1. (a) (a) Insurance — Professional liability;
           2. (b) (b) Amortization expense — Capital;
       31. (c) (c) Depreciation;

       32. (d) (d) Interest expense — Capital;

           1. (e) (e) Property insurance;
           2. (f) (f) Property taxes;
           3. (g) (g) Rent – Building; and
           4. (h) (h) Rent – Furniture and equipment.
       33. (iv) Quality assurance fee.
    8. (I) Nonestate public nursing facility adjustment. Effective January 1, 2004, the nonstate public nursing facility adjustment is eliminated.

    9. (J) Home style facilities.

       1. (i) Fair market rental payment.

          1. (a) (a) Minimum occupancy rules (as defined in subdivision (1)(A)(iii)(c) of this section) for calculating the facility fair market rental payment will be calculated and applied separately for beds certified as home style. All other policy described in this cost manual regarding the calculation of a facility’s fair market rental payment is applicable to home style facility beds.
          2. (b) (b) All costs associated with renovating or constructing beds for initial certification as home style shall not be considered a renovation as detailed in subdivision (1)(A)(iii)(c) of this section. Thereafter, home style beds are eligible for renovation adjustment as detailed in the cost manual.
       2. (c) (c) A nursing facility participating in this program may certify less than one hundred percent (100%) of its beds as home style facility beds. A facility may have a combination of traditional style nursing facility beds and home style facility beds within a single licensed facility.

       3. (ii) Cost reporting.

          1. (a) (a) A facility or any part thereof certified by the Office of Long-Term Care as home style shall prepare and submit a financial statistical report/cost report. The cost report for home style beds will be identified as such by including the words ”home style” at the end of the facility name wherever used. The cost report must be prepared in accordance with all reimbursement rules and reporting requirements detailed in the Manual of Cost Reimbursement Rules. Combination facilities will be required to complete a separate cost report for both the traditional beds and beds certified as home style facility beds. Whenever possible, costs that can be directly identified to either the traditional or home style beds must be included on the appropriate cost report. The department recognizes that certain costs cannot be directly identified and benefit both reporting entities. These shared costs must be allocated between each of the benefiting entities. Any shared cost included in the calculation of the facility’s fair market rental payment must be allocated based on the current asset value (CAV). All other shared cost must be allocated based on resident days. The cost report for the home style portion of a combination facility will include forms 1, 2, 3, 4, 6, 7, 8, 9, 10, and 16. The cost report for the traditional beds in a combination facility must include all forms. The cost report for traditional beds in a combination facility will include aggregate information (includes both traditional and home style) on forms 5, 11, 12, 13, 14, and 15. These forms relate to the overall operation of the facility and cannot be allocated between traditional and home style.
          2. (b) (b) The cost report for home style beds will be used for the purpose of establishing a per diem rate for the facility’s home style beds.
       4. (c) (c) Full year cost reports for facilities certified entirely as home style facilities will be included when calculating the direct care ceiling and the median for the indirect, administrative, and operating component of the rate during the overall rate setting process. Full year cost reports for combination facilities will be combined into an aggregate per diem cost for both direct care and indirect, administrative, and operating, and will be included in the overall rate setting process as well.
       5. (iii) Staffing. Certified nurse assistants (CNAs) utilized in staffing home style beds are designated as universal workers within the home style concept. The universal worker performs CNA duties, and performs dietary, laundry, housekeeping, and other services to meet the needs of residents. CNA duties are considered primary to other duties performed by the CNA, therefore the cost of salaries and fringe benefits for CNAs are considered direct care costs and are appropriately reported in Section 1 of Form 6 on the facility cost report.
       6. (iv) Rate setting. With the exceptions detailed above, the per diem rate for beds certified as home style beds will be established in the same manner as traditional beds;

18. (2) Intermediate care facilities for individuals with intellectual disabilities.

    1. (A) Sixteen-bed and over — State-operated facilities.

       1. (i) Effective January 1, 1994, the method of reimbursement for intermediate care facilities for individuals with intellectual disabilities (ICF/IID) state-operated facilities certified as having more than fifteen (15) beds will be based on actual cost with provisions for retrospective adjustment semiannually to ensure reimbursement of actual allowable, reasonable costs. Each facility will have an interim per diem rate established based on the most recent semiannual cost report. This interim per diem rate will be adjusted retrospectively as a result of actual costs for that semiannual cost reporting period. Rates established for this facility type shall be changed due to adjustments to the semiannual cost reports resulting from provider corrections, desk reviews, or audits and will be retrospectively adjusted to the first day of the applicable cost report period. The reimbursement methodology for this type facility will be adjusted by submission of a state plan amendment as warranted.
       2. (ii) Provider fee. Acts 2009, No. 433, established the levy of a provider fee on intermediate care facilities for individuals with developmental disabilities. The reimbursement rate paid sixteen-bed and over state-operated facilities will include a provider fee component. The provider fee component will be reimbursed at the amount established as the multiplier for the date of service billed.

    2. (B) Sixteen-bed and over — Private facilities.

       1. (i) Reimbursement methodology. Effective with dates of service on or after January 1, 1999, ICF/IID sixteen-bed and over facilities will be paid a prospective rate based on a combination of actual allowable cost for direct care and care-related costs and a class rate up to a ceiling for administrative and operating costs. Effective the beginning of each state fiscal year, rates will be rebased or adjusted for inflation. The department will in its sole discretion determine whether to rebase the rate or apply an inflationary adjustment.

       2. (ii) Cost categories.

          1. (a) (a) For rate setting, facility allowable costs from desk-reviewed facility cost reports for an annual period determined by the department, will be identified and grouped as direct care and care-related or administrative and operating. Direct care and care-related include those expenses the facility incurs in providing care directly to the resident. Because these costs most directly affect the quality of care given a resident, the methodology includes as a component the actual allowable cost incurred for direct care and care-related costs.
          2. (b) (b) Administrative and operating constitute the remainder of facility costs. Costs associated with administrative and operating are more directly controllable by the facility. The methodology includes as a component a class rate up to a ceiling to cover the costs for administrative and operating.
       3. (c) (c) For rates effective January 1, 1999, desk-reviewed facility cost reports for the period 1/1/97 through 6/30/97 and 7/1/97 through 12/31/97 were combined to establish the base year rates. Rebasing and cost reporting period for rebasing will be at the discretion of the department. Should the department decide to rebase, the most currently available desk-reviewed cost reports will be used.
       4. (iii) Rate setting. Rates will be established in the following manner: an average per diem cost for administrative and operating will be calculated for the facility class. This will be accomplished by determining per diem cost for administrative and operating for each facility by dividing the actual allowable cost for each facility by their total resident days, adding the individual facility per diem costs and dividing by the number of facilities within the facility class. A ceiling for administrative and operating will be set at one hundred five percent (105%) of the average. A facility will be paid at the lesser of the ceiling or their actual per diem cost plus ten percent (10%) of the amount calculated as one hundred five percent (105%) of the average. A per diem cost will be calculated for each facility for direct care and care-related costs. The per diem cost will be calculated by dividing the actual allowable cost for each facility by their total resident days. A facility's per diem cost for direct care and care-related cost and administrative and operating cost will be combined to get a facility's total per diem. Once the total per diem by facility has been established, these rates will be adjusted for inflation from the base year to the rate year. In years that the rates are not rebased, existing rates will be adjusted for projected inflation. The department will use the HCFA Input Price Index (market basket) – Nursing Facilities published quarterly for determining appropriate inflation rates. Facility rates will be rebased periodically at the department’s discretion.
       5. (iv) Provider fee. Acts 2009, No. 433, established the levy of a provider fee on intermediate care facilities for individuals with developmental disabilities. The reimbursement rate paid sixteen-bed and over private facilities will include a provider fee component. The provider fee component will be reimbursed at the amount established as the multiplier for the date of service billed.

       6. (v) Enhanced care add-on.

          1. (a) (a) The department recognizes that the current rate structure limits the providers’ ability to invest additional moneys for the purpose of improving the quality of care. Additionally, the recent increase in the minimum wage (an unfunded federal mandate) will make it difficult for providers to maintain current standards much less improve the quality of care. Therefore, the department will implement an enhanced care add-on in the amount of ten dollars and fifty-four cents ($10.54) per day. This enhanced payment will provide additional funds for wage adjustments in the base salaries for new hires and incumbent salaries to address the increase of the federal minimum wage in July, 2009. This will also directly increase benefits related to these salary increases such as FICA, LTD, life insurance, retirement, etc. This add-on will also provide funding for additional initiatives to improve the quality of care.
          2. (b) (b) The following list of items identifies these additional initiatives:
19. (1) (1) Enhanced staff resources for staff development, nursing, psychological, and other professional personnel;
20. (2) (2) Enhanced maintenance cost due to the aging of the facilities;
21. (3) (3) Enhanced direct care staff and increase in number of staff to meet increased needs of children with autism and other behavior needs in order to maintain a quality standard of care and ensure the health and safety of all children being served;
22. (4) (4) Enhanced technology (computers, teleconferencing, electronic files, electronic time keeping, etc.);
23. (5) (5) Software for client programming, client data bases, billing etc.;
24. (6) (6) Security cameras/lighting; and

25. (7) (7) Other items deemed appropriate in providing enhanced care.

    1. (c) (c) The enhanced care add-on is paid in addition to the rate components identified in subdivision (2)(B)(i) and (ii) of this section.

       1. (vi) Rate justification. Modeling of this methodology produced estimates that each facility identified as efficient and economic (providers operating at or below the median of arrayed nondirect care costs) would receive payment equaling one hundred percent (100%) (plus or minus five percent (5%)) of that facility's actual allowable cost. Cost coverage in the aggregate is equal to or less than one hundred percent (100%) for ICF/IID facilities.

    2. (C) Under sixteen beds.

       1. (i) Small ICF/IID facilities certified as having fifteen (15) beds or fewer will be reimbursed on a prospective uniform class rate system. An inflationary adjustment, determined by the division to be reasonable and adequate, will be applied to the existing rates and will be implemented by state plan amendment as warranted by analysis of cost report data. Cost reports will be submitted annually for the preceding calendar year (January 1 – December 31) and will be reviewed prior to establishing new rates. The division has established the per diem rate of one hundred ninety-five dollars and forty-three cents ($195.43) for dates of service beginning July 4, 2013.

       2. (ii) Provider fee.

          1. (a) (a) Acts 2009, No. 433, established the levy of a provider fee on intermediate care facilities for individuals with developmental disabilities. The reimbursement rate paid under sixteen (16) beds facilities will include a provider fee component. The provider fee component will be reimbursed at the amount established as the multiplier for the date of service billed.
          2. (b) (b) The provider fee component is paid in addition to the rate identified in subdivision (2)(C)(i) of this section.

       3. (iii) Enhanced care add-on.

          1. (a) (a) The department recognizes that the current class rate structure limits the providers’ ability to invest additional moneys for the purpose of improving the quality of care. Additionally, the recent increase in the minimum wage (an unfunded federal mandate) will make it difficult for providers to maintain current standards much less improve the quality of care. Therefore, the department will implement an enhanced care add-on in the amount of seven dollars and two cents ($7.02) per day. This enhanced payment will provide additional funds for wage adjustments in the base salaries for new hires and incumbent salaries to address the increase of the federal minimum wage in July, 2009. This will also directly increase benefits related to these salary increases such as FICA, LTD, life insurance, retirement, etc. This add-on will also provide funding for additional initiatives to improve the quality of care.
          2. (b) (b) The following list of items identifies these additional initiatives:
26. (1) (1) Enhanced staff resources for staff development, nursing, psychological, and other professional personnel;
27. (2) (2) Enhanced therapy services to meet increasing behavior needs of the aging population being served;
28. (3) (3) Enhanced maintenance and housekeeping staff;
29. (4) (4) Enhanced direct care staff;
30. (5) (5) Generators;
31. (6) (6) Enhanced technology (computers, teleconferencing, electronic files, electronic time keeping, etc.);
32. (7) (7) Software for client programming, client data bases, billing etc.;
33. (8) (8) Security cameras/lighting; and

34. (9) (9) Other items deemed appropriate in providing enhanced care.

    1. (c) (c) The enhanced care add-on is paid in addition to the rate components identified in subdivision (2)(C)(i) and (ii) of this section.

       1. (iv) Overpayments/underpayments. Overpayments/underpayments resulting from 20 CAR § 579-112 administrative errors shall be handled through the vendor payment by recouping overpayments and reimbursing underpayments; and

35. (3) SNF and ICF — Special class — Arkansas Health Center Nursing Facility.

    1. (A) Reimbursement methodology. The Arkansas Health Center Nursing Facility will be reimbursed on an actual cost reimbursement system with provisions for retrospective adjustments to ensure reimbursement of actual allowable and reasonable costs. The facility will have an interim per diem rate established based on the most recent semiannual cost report. This interim per diem rate will be adjusted retrospectively as a result of actual costs for that semiannual cost reporting period. The per diem will be calculated by dividing actual allowable cost by resident days for the cost reporting period. The per diem rate shall be changed as a result of adjustments to the semiannual cost reports resulting from provider corrections, desk reviews, or audits, and will be retrospectively adjusted to the first day of the applicable cost report period.
    2. (B) Overpayments/underpayments. Overpayments/underpayments resulting from 20 CAR § 579-112 administrative errors shall be handled through the vendor payment by recouping overpayments and reimbursing underpayments.