HAR §6-4-10. Estimate of benefits

(a) Each project party which has entered into a project agreement with the department in the form and manner prescribed in the loan application and review procedures, shall perform an estimate of the benefits to be derived from financing the project with the proceeds of a loan. The benefits shall be the amount projected to be saved by consumers of the services of the project party over the life of the bonds to be issued to fund the loan as a result of financing the project with the proceeds of a loan rather than by alternative means. Consumers shall be deemed to include third party payors and their subscribers. The following shall be elements of any estimate of benefits: (1) The interest rate to be assumed on the bonds proposed to be issued to fund a loan shall be the rate supplied to the project party by the department; (2) The interest rate to be employed in calculating the cost of alternative financing of the project shall be: (A) In the case of a proposed refinancing through a loan, the rate of interest on the existing financing; or (B) If the loan is to be the initial financing of the project, the rate of interest which would be charged to the project party by a financial institution with which the project party has a continuing relationship or the interest rate supplied by another source, in either case, as approved by the department for use in the estimate of benefits. (b) The estimate of benefits shall take into account the different classes of payers with which the project party has agreements or does business including cost-based and charge-based third party payors, and the estimated percentage of revenue derived from each during the most recent year for which the project party has cost reports which have been filed with the appropriate party, or if the cost reports are inapplicable to the project party, audited financial statements. 4-5 §6-4-10 (c) The estimate of benefits shall demonstrate a savings in interest expense which will result in a savings to consumers of the services of the project party by reducing the amount of allowable costs which would otherwise be incurred by the project party, and consequently a reduction in payments representing reimbursement by cost-based payers. In addition, the effect of decreased interest expense shall be reflected in lower charges by the project party to charge-based payors than would be the case if bonds were not issued to finance the project. The foregoing shall be demonstrated by calculating: (1) The interest expense to the project party if the project is financed at the interest rate set forth in subsection (a)(l); and (2) The interest expense to the project party if the project is financed at the interest rate set forth in subsection (a)(2). (d) The savings realized by financing the project at the interest rate set forth in subsection (a)(l) shall be related to: (1) Cost-based and charge-based payors; and (2) The basic unit of service provided by the project party, which shall be: (A) Patient days in the case of hospitals and long-term care facilities; (B) Clinic visits in the case of freestanding clinics; and (C) Any other unit of service as shall be approved by the department for other facilities. (e) The department may furnish the project party with the format to be employed in making the calculations required by subsections (c) and (d). (f) Before submitting an estimate of benefits to the department, the project party shall employ an independent feasibility consultant with experience in the area of health care, or another party approved by the department, to review the methodology, assumptions, and statistical and historical data employed in making the estimate. The consultant or other party shall determine whether the information and assumptions used constitute reasonable bases for the preparation of the estimate of benefits. A copy of the determination shall be furnished to the department with the estimate of benefits. [Eff. December 4,1981] (Auth: HRS §39A-50) (Imp: HRS §39A-50) 4-6