FAIR RENTAL VALUE (FRV) FAQ

Fair Rental Value

What is FRV?

Per the Nevada Medicaid State Plan, the FRV component of a nursing facility’s rate may be increased based on eligible remodels/renovations, or the addition of beds. The facilities initiate a rate appeal for consideration and staff reviews the information to determine eligibility. If eligibility is accepted, then a series of computations are performed using construction indices.

Authority/Policy

State Plan, Attachment 4.19-D Page 5d.1 

MSM Section 704

What documents are needed for FRV determination?

The following documents must be attached to the appeal for completing an FRV determination:

  1. Depreciation Schedule
  2. Fixed Asset Listing
  3. Invoices supporting FRV Rate Appeal
  4. Medicaid Cost Report

What is a Capital Renovation /Remodeling?

A capital renovation/remodeling project shall mean a series of activities and investments which materially

  1. Expand the capacity
  2. Reduce the operating and maintenance costs
  3. Ensure the operating efficiency and/or extend the useful economic life of a fixed asset

What are the FRV requirements for a Capital Renovation/Remodeling Project?

The FRV of each facility will be adjusted (increased) to reflect the cost of major renovation projects completed by each facility not to exceed a 24 month period.

  1. The cost of renovation projects must be documented within each facility's depreciation schedule.
  2. The cost of renovation projects must be reported to the Medicaid program by May 1st prior to the July 1st rate year when they would first be eligible for incorporation into the FRV rate setting process.
  3. The cost of renovation projects must exceed $1,000 per licensed bed in order to be considered a major renovation.

What are the allowable costs for a Capital Renovation/Remodeling Projects?

The capital renovation/remodeling project may involve new construction, reconstruction and/or renovation.

  1. The costs of land & buildings 
  2. Certain costs for repairs may be included but only when such costs are incidental to and necessitated by the project. 
  3. Moveable equipment integral component to the project:  
  • Land improvements
  • Buildings
  • Building components
  • Fixed equipment
  • Building services equipment 

Note: Costs for ordinary repairs and maintenance of an ongoing nature be included in a project.

Is purchase and installation of equipment eligible as renovation?

Generally, moveable equipment is not eligible as a renovation.

If a project cost meets the $1,000 per bed threshold, but it takes two years to complete, is it eligible for consideration in the first year of renovation/remodeling?

No. A project that spans over two years to meet the $1,000 threshold will be eligible for consideration after the two year period. It would not be eligible for consideration in the first year.

The FRV rates may be increased using the following guidelines.

  1. The request must be received by DHCFP by May 1st.
  2. The capital improvement period must not exceed 24 months.
  3. The total cost of the project should meet $1,000 per bed threshold.
  4. All cost should be clearly related to the capital project.
  5. The cost must include only fixed assets.
  6. The renovation/remodeling should meet the MSM Criteria:
  • Expands the capacity,
  • Reduces the operating and maintenance costs, or
  • Ensures the operating efficiency and/or extends the useful economic life of a Fixed Asset.