Maryland Department of Aging Section 11B

      (a)      In this section, "net operating expenses" means the provider's total operating expenses at each facility of the provider, less depreciation, amortization, unusual and infrequent expenses, and changes in the obligation to provide future services. Interest expenses may be excluded from calculation of net operating expenses, if the provider has funded a debt service reserve or other interest reserve under requirements imposed by a financial institution or under applicable financing documents, to the extent and in the amount the fund includes amounts to cover interest for the year in question.

      (b)      Except as otherwise provided in this section, the provider shall set aside for each facility subject to this subtitle operating reserves that equal 15% of the facility's net operating expenses for the most recent fiscal year for which a certified financial statement is available. The reserves shall be maintained in reasonably liquid form in the judgment of the provider.

      (c)      The provider shall compute operating reserves for each facility as of the end of the facility's most recent fiscal year and, simultaneously with submission of its application for a renewal certificate, shall indicate compliance by setting forth in a letter to the Department from a certified public accountant the amount actually set aside or by disclosing the amount in a certified financial statement.

      (d)      A provider may apply toward the reserve required by this section any reserves, other than debt service reserves, maintained under applicable financing document requirements if the reserves are available to the provider to meet the facility's operating expenses.

      (e)      For the purpose of calculating the provider's operating reserves, investments held to the credit of the reserves shall be calculated at their market value as of the end of the provider's most recent fiscal year for which a certified financial statement is available.

      (f)      The provider shall notify the Department in writing simultaneously withdrawing any amount from the funds available to satisfy the operating reserve that is required by subsection (b) of this section. Within 30 days of such draw, the provider shall submit to the Department a written plan for restoring the funds in the reserve to the level required by subsection (b) of this section.

      (g)      (1)      A provider shall have up to 10 full fiscal years after the later of October 1, 1996 or the date of its initial certificate to meet the requirement of subsection (b) of this section.

            (2)      A provider shall meet the requirement of subsection (b) of this section at a minimum rate of 10% per year as of the end of each fiscal year after the later of October 1, 1996 or the date of its initial certificate, up to a total of 100% as of the end of the 10th fiscal year.

            (3)      The Department may allow any such provider to modify the minimum rate or authorize an additional amount of time to meet the requirement of subsection (b) of this section, if the modification is necessary to maintain the financial viability of the facility.

      (h)      (1)      For any facility that has not been the subject of a conversion and in which some residents are not parties to continuing care agreements, the provider shall set aside as its operating reserves an amount equal to at least 15% of the pro rata proportion of the net operating expenses.

            (2)      The pro rata proportion of the net operating expenses shall equal the number of units in the facility certified by the Department divided by the total number of accommodations in the facility multiplied by the net operating expenses for the most recent fiscal year for which a certified financial statement is available.