Oregon Administrative Rules › Chapter 333 - OREGON HEALTH AUTHORITY, PUBLIC HEALTH DIVISION › Division 580 - CERTIFICATE OF NEED APPLICATION INSTRUCTIONS AND FORMS › Section 333-580-0060 - Economic Evaluation

Current through Register Vol. 63, No. 7, July 1, 2024
Applicants must provide a narrative discussion of each of the
				items below. The entity actually proposing to implement a certificate of need
				must submit the required financial data. Additional financial data may be
				required to be presented by the applicant or a related entity to isolate the
				financial activities of the proposal:
(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(4),
			 explaining strengths and weaknesses. The discussion should refer to each ratio
			 as detailed in
Table 1
of OAR
			 333-580-0100(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(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.
			 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.