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Title: Section 86-2.28 - Return on investment

Effective Date


86-2.28 Return on investment.

(a) For rate year 1993, in computing the allowable cost of a proprietary residential health care facility, there will be included, after subtracting for current and noncurrent time deposits and equivalents, investments and construction in progress, a reasonable return on average equity capital invested for necessary and proper operation for patient care activities of a residential health care facility and related organizations, as defined in section 86-2.26(a) of this Subpart. For purposes of this section, average equity capital shall mean the difference between total assets less total liabilities averaged over the applicable cost report period, including assets and liabilities attributable to land, plant, fixed equipment and capital improvements thereto. It shall also include the average equity capital of related organizations proportionate with the percentage of a related organization's business with the residential health care facility, as calculated in the annual report forms filed in accordance with section 86-2.2 of this Subpart.

(b) The allowable average equity capital shall be further adjusted by subtracting the equity, as that term is defined in section 86-2.21(a)(4) of this Subpart, upon which a return is calculated pursuant to section 86-2.21(e)(6) of this Subpart. The return on investment for rate year January 1, 1993 shall be computed on the basis of allowable fiscal and statistical data submitted by the facility for the fiscal year ended December 31, 1991, or other applicable cost report period used to determine the capital component of the 1993 rate, in accordance with section 86-2.21 of this Subpart. The return on investment for subsequent rate years shall be based upon the annual cost report used by the department to determine the capital component of the rate in accordance with section 86-2.21 of this Subpart. The percentage to be used in computing the return on investment shall be equal to the twenty-six week United States Treasury Bill rate in effect on the second Wednesday of September of the year prior to the rate year.


VOLUME A-2 (Title 10)