Health & Saf. Code, § 1792.4

(a) Each provider shall include in its liquid reserve a reserve for its operating expenses in an amount that equals or exceeds 75 days’ net operating expenses. For purposes of this section:

(1) Seventy-five days net operating expenses shall be calculated by dividing the provider’s operating expenses during the immediately preceding fiscal year by 365, and multiplying that quotient by 75.

(2) “Net operating expenses” includes all expenses except the following:

(A) The interest and credit enhancement expenses factored into the provider’s calculation of its long-term debt reserve obligation described in Section 1792.3.

(B) Depreciation or amortization expenses.

(C) An amount equal to the reimbursement paid to the provider during the past 12 months for services to residents other than residents holding continuing care contracts.

(D) Extraordinary expenses that the department determines may be excluded by the provider. A provider shall apply in writing for a determination by the department and shall provide supporting documentation prepared in accordance with generally accepted accounting principles.

(b) A provider that has been in operation for less than 12 months shall calculate its net operating expenses by using its actual expenses for the months it has operated and, for the remaining months, the projected net operating expense amounts it submitted to the department as part of its application for a certificate of authority.