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UNOFFICIAL 1700.1-10 would not have resulted in the elimination of any costs due to the application of the ceiling factors in calculating the PPS rates. “CAH” or “critical access hospital” means a hospital designated and certified as a critical access hospital under the Medicare Rural Hospital Flexibility Program. “Capital component reduction factor” means a fraction with the capital cost per diem projected by a new provider to obtain its initial PPS rates as the numerator and the total projected capital, direct nursing and G&A per diem costs as the denominator. “Capital incentive adjustment” means an increase to a provider's basic PPS rate that is calculated as follows: (1) If the capital per diem cost component of the provider's basic PPS rate is in the lowest quartile of its peer group, then the incentive payment shall be thirty-five per cent of the difference between the median capital per diem cost for the peer group and the provider's capital per diem cost component; (2) If the capital per diem cost component of the provider's basic PPS rate is in the second lowest quartile of its peer group, then the incentive payment shall be twenty- five per cent of the difference between the median capital per diem cost for the peer group and the provider's capital per diem cost component; (3) Notwithstanding the foregoing, the capital incentive adjustment shall not increase a provider's capital cost component above the capital component ceiling for the applicable acuity level in the provider's peer group. “Capital related costs” means costs associated with the capital costs of the provider's facilities and equipment under Medicare principles of reimbursement. For purposes of the prospective payment methodology, capital related costs shall include depreciation, interest, property taxes, property