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service based on reasonable costs as determined under 42 C.F.R. 405.515, adopted by reference in 7 AAC 160.900. (g) The department will express rates for long-term care facilities as a per-day rate calculated as follows:

(1) the long-term care noncapital routine portion of the prospective per-day rate is determined by adding together the long-term care noncapital routine costs from the base year adjusted Medicare cost report; the resulting total is divided by the sum of the facility’s long-term care patient days from the base year; the resulting per-day noncapital routine cost is updated to the prospective year based on adjustment factors identified in 7 AAC 150.150;

(2) the routine capital portion of the prospective per-day rate is the long-term care routine capital costs from the facility’s base year adjusted Medicare cost report divided by the facility’s total long-term care patient days from the base year; for purposes of this paragraph, the long-term care patient days are the greater of

(A) the total actual patient days; or

(B) 85 percent of licensed capacity days;

(3) the ancillary capital portion of the prospective per-day payment rate is determined by calculating the percentage of capital cost for each ancillary cost center and multiplying the percentage by the related Medicaid long-term care ancillary costs from the base year, by cost center, and totaling the calculated capital costs from all cost centers; the resulting total is divided by the sum of the Medicaid long-term care patient days from the base year;

(4) the noncapital ancillary portion of the prospective per-day rate is the Medicaid long-term care noncapital ancillary costs from the base year divided by the sum of the facility’s Medicaid long-term care patient days from the base year; the resulting per-day noncapital long-term care ancillary cost is updated to the prospective year based on adjustment factors identified in 7 AAC 150.150; the total Medicaid long-term care ancillary costs less the capital portion of the Medicaid long-term care ancillary costs as determined in (3) of this subsection equals the total noncapital Medicaid long-term care ancillary costs to be used for this portion of the rate;

(5) for purposes of this subsection, Medicaid long-term care patient days are the covered days from the MR-0-14 report;

(6) for purposes of this subsection, if the department determines that a provision in this chapter became effective after the last adjustment under 7 AAC 150.150 and the provision may change the per-day rate by a material amount, the department will apply the provision when the per-day rate is updated to the prospective year by the adjustment factors in 7 AAC 150.150;

(7) for purposes of this subsection, costs are the lower of

(A) Medicaid long-term care costs; the department will calculate those costs as the sum of