77 Ill. Adm. Code 1120.140
Economic Feasibility - Review Criteria
Section 1120.140 Economic
Feasibility − Review Criteria
a) The
applicant shall document the reasonableness of financing arrangements by
submitting a notarized statement signed by an authorized representative that
attests to one of the following:
1) That
the total estimated project costs and related costs will be funded in total
with cash and equivalents, including investment securities, unrestricted funds,
received pledge receipts and funded depreciation; or
2) That
the total estimated project costs and related costs will be funded in total or
in part by borrowing because:
A) A
portion or all of the cash and equivalents must be retained in the balance
sheet asset accounts in order to maintain a current ratio of at least 2.0 times
for hospitals and 1.5 times for all other facilities; or
B) Borrowing
is less costly than the liquidation of existing investments, and the existing
investments being retained may be converted to cash or used to retire debt
within a 60-day period.
b) Conditions of Debt
Financing – Review Criterion
Applicants with projects involving
debt financing shall document that the conditions of debt financing are
reasonable by submitting a notarized statement signed by an authorized
representative that attests to the following, as applicable:
1) That
the selected form of debt financing for the project will be at the lowest net
cost available;
2) That
the selected form of debt financing will not be at the lowest net cost
available, but is more advantageous due to such terms as prepayment privileges,
no required mortgage, access to additional indebtedness, term (years),
financing costs and other factors;
3) That
the project involves (in total or in part) the leasing of equipment or
facilities and that the expenses incurred with leasing a facility or equipment
are less costly than constructing a new facility or purchasing new equipment.
c) Reasonableness of
Project and Related Costs − Review Criterion
The applicant shall document that
the estimated project costs are reasonable and shall document compliance with
the following:
1) Preplanning
costs shall not exceed the standards detailed in Appendix A.
2) Total
costs for site survey, soil investigation fees and site preparation shall not
exceed the standards detailed in Appendix A unless the applicant documents site
constraints or complexities, and provides evidence that the costs are similar
to or consistent with other projects that have experienced similar constraints
or complexities.
3) Construction
and modernization costs per square foot shall not exceed the standards detailed
in Appendix A unless the applicant documents construction constraints or other
design complexities and provides evidence that the costs are similar to or
consistent with other projects that have experienced similar constraints or
complexities.
HFSRB NOTE: Construction and
modernization costs (i.e., all costs contained in construction and
modernization contracts) plus contingencies shall be evaluated for conformance
with the standards detailed in Appendix A.
4) Contingencies
(stated as a percentage of construction costs for the project's stage of
architectural development) shall not exceed the standards detailed in Appendix
A unless the applicant documents construction constraints or other design
complexities and provides evidence that the costs are similar to or consistent
with other projects that have experienced similar constraints or complexities.
HFSRB NOTE: Contingencies shall be
limited in use for construction or modernization (line item) costs only and
shall be included in construction and modernization cost per square foot
calculations and evaluated for conformance with the standards detailed in
Appendix A. If, subsequent to permit issuance, contingencies are proposed to
be used for other component (line item) costs, an alteration to the permit (as
detailed in 77 Ill. Adm. Code 1130.750) must be approved by HFSRB prior to that
use.
5) New construction
or modernization fees and architectural/engineering
fees shall not
exceed the fee schedule standards detailed in Appendix A unless the applicant
documents construction constraints or other design complexities and provides
evidence that the costs are similar to or consistent with other projects that
have experienced similar constraints or complexities.
6) The
costs of all capitalized equipment not included in construction contracts shall
not exceed the standards for equipment as detailed in Appendix A unless the
applicant documents the need for additional or specialized equipment due to the
scope or complexities of the services to be provided. As documentation, the
applicant shall provide evidence that the costs are similar to or consistent
with other projects of similar scope and complexity, and attest that the
equipment will be acquired at the lowest net cost available, or that the choice
of higher cost equipment is justified due to such factors as, but not limited
to, maintenance agreements, options to purchase, or greater diagnostic or
therapeutic capabilities.
7) Building
acquisition, net interest expense, and other estimated costs shall not exceed
the standards detailed in Appendix A. If Appendix A does not specify a
standard for the cost component, the applicant shall provide documentation that
the costs are consistent with industry norms based upon a comparison with
previously approved projects of similar scope and complexity.
d) Projected Operating Costs
The applicant shall provide the
projected direct annual operating costs (in current dollars per equivalent
patient day or unit of service) for the first full fiscal year at target
utilization but no more than two years following project completion. Direct
costs means the fully allocated costs of salaries, benefits and supplies for
the service.
e) Total Effect of the
Project on Capital Costs
The applicant shall provide the
total projected annual capital costs (in current dollars per equivalent patient
day) for the first full fiscal year at target utilization but no more than two
years following project completion.