(1)Criterion: Is the financial status of the applicant adequate to support the proposed project, and will it continue to be adequate following implementation of the project?
(a)Any financial forecasts which deviate significantly from the financial statements of the five-year historical period presented in the application must be fully explained and justified;
(b)An applicant must describe how it will cover expenses incurred by the proposal in the event the proposal fails to meet budgeted revenues in any forecasted year;
(c)Applicants must discuss the results of ratio analysis required by Form CN-9 and OAR 333-580-0100 (Completion of Financial Forms)(4), explaining strengths and weaknesses. The discussion should refer to each ratio as detailed in Table 1 of OAR 333-580-0100 (Completion of Financial Forms)(4). Specifically:
(A)Applicants must describe their debt capability in terms of the required ratio analysis;
(B)The discussion of liquidity should include comments on the adequacy of cash, the collection period for patient accounts receivable, and the payment period for accounts payable;
(C)The profitability ratios required by OAR 333-580-0100 (Completion of Financial Forms)(4) and Form CN-9 must be discussed.
(d)Board designated assets: The intended uses of this fund are to be discussed in general terms. Alternative uses or contingent availability of these funds, such as to meet a cash requirement, also need to be addressed. Additionally, the proportion (percent) of depreciation that was or is to be funded is to be identified for each financial period presented;
(e)The applicant must discuss the availability of other sources of funding, including, but not limited to, donor restricted assets, assets of parent or subsidiary corporations, or a related foundation which may be acquiring assets and/or producing income that is for the purpose of, or could be used for the purpose of, capital expenditure by the applicant;
(f)Money market conditions must be discussed in terms of their impact on project financing, including interim financing, if applicable. Include the month and year in which financing is to be secured in this narrative:
(A)The estimated rate of interest must be justified by the applicant. If debt financing is secured before or during the review process, the actual rate of interest obtained should be reported within 30 days of securing financing;
(B)When a bond rating report is issued before or during the review period in conjunction with a proposed bond issue to fund a certificate of need proposal, the applicant must submit a copy of the report to the division within 30 days of its issuance;
(C)The financing term selected must be supported with evidence showing the benefits of its selection.
(g)Patient days, admissions and other units of service used in forecasting projected expenses and revenues, both for the facility as a whole and for services affected by the proposed project, must be consistent with projections used to determine area need. All assumptions must be discussed;
(h)An applicant must identify and explain all inflation assumptions and rates used in projecting future expenses and in completing the forms described in OAR 333-580-0100 (Completion of Financial Forms). It is important that the assumptions used by the applicant in preparing financial forecasts be carefully considered. All relevant factors pertaining to historical experience of the applicant, together with upcoming changes affecting the future, should be considered in forecasting the financial condition of the entity. Specifically:
(A)Projected changes in wages and salaries should be based on historical increases or known contractual obligations and planned future personnel increases. Considerations should include expected full-time equivalent staffing levels, including increases resulting from the proposal;
(B)Projected deductions from revenues should be explained and justified;
(C)Expected changes in the intensity and/or complexity of services provided must be considered in addition to the rate of inflation in arriving at an overall rate of increase in revenues or expenses;
(D)Projected gross revenue must reflect:
(i)Patient day increases/decreases;
(ii)Outpatient activity increase/decrease;
(iii)All debt service coverage requirements; and
(iv)Other significant impacts the proposal will make on revenue projections.
(i)Each applicant must submit within 30 days, a copy of the financial feasibility report if the applicant arranges for such a report and it becomes available before or during the review period.
(2)Criterion: Will the impact of the proposal on the cost of health care be acceptable?
(a)The applicant must discuss the impact of the proposal both on overall patient charges at the institution and on charges for services affected by the project:
(A)An applicant must show what the proposal’s impact will be on the gross revenues and expenses per inpatient day and per adjusted patient day;
(B)When a health service is affected by the proposal, an applicant must demonstrate what impact the proposal will have on related patient charges and operating expenses. Expenses and patient charges for individual health services will be compared to historical and forecasted rates of increase for the facility as a whole.
(b)The applicant must discuss both the proposed or actual charges for the proposed service and the profitability of the proposed service, compared to other similar services in the state (if any);
(c)The applicant must discuss the projected expenses for the proposed service, and demonstrate the reasonableness of these expense forecasts;
(d)If the proposed service is currently not being provided in the area, the applicant should identify potential travel cost savings by:
(A)Establishing what the existing travel costs are to patients;
(B)Establishing what the travel costs will be to patients after implementation of the proposal; and
(C)Showing what the difference is between the figures in paragraphs (A) and (B) of this subjection.
(e)The applicant must discuss the architectural costs of the proposal:
(A)An applicant must demonstrate that the existing structure will last long enough to derive full benefits from any new construction or remodeling;
(B)General construction costs must be within reasonable limits (within high/low range as described in the most current issue of the Dodge Research Report adjusted for location).
Rule 333-580-0060 — Economic Evaluation,