Section 1120.APPENDIX A   Financial and Economic Review Standards

a)         Reasonableness of Project and Related Costs Standards

1)         Preplanning

Costs shall not exceed 1.8% of construction and modernization contracts plus contingencies plus equipment costs.

2)         Site Survey and Preparation

Costs shall not exceed 5.0% of construction and contingency costs.

3)         New Construction and Modernization Costs per Gross Square Foot (GSF) Hospital and long-term care (LTC) cost standards are derived from the RSMeans Building Construction Cost Data (Means) publication (RSMeans, 63 Smiths Lane, PO Box 800, Kingston MA 02364-9988, 800/334-3509; 2008, no later amendments or editions included) and will be adjusted (for inflation and location) for each project to the current year (www.rsmeans.com).  Cost standards for the other types of facilities are derived from the third quartile costs of previously approved projects and are to be adjusted to the current year based upon historic inflation rates from RSMeans.

HFSRB NOTE:  HFSRB staff will review the cost per square foot data submitted in the application, to determine compliance with the latest available cost standards of the RSMeans publication. 

HFSRB NOTE:  Modernization includes the build out of leased space and shall include the cost of all capital improvements contained in the terms of the lease.  Theses standards are based on 2008 data.

4)         Contingencies

Contingency costs for projects (or for components of projects) are based upon a percentage of new construction or modernization costs and are based upon the status of a project's architectural contract documents.

5)         New Construction or Modernization Fees & Architectural/Engineering (A&E) Fees

Current fees for services for projects or components of projects involving new construction or modernization (total amount of construction and contingencies, A&E fees for hospitals, LTC facilities and ASTCs, A&E fees for ESRDs and outpatient clinical service facilities, and total fees for site work) can be found in the Centralized Fee Negotiation Professional Services and Fees Handbook (available at www.cdb.state.il.us or by contacting the Capital Development Board, 401 South Spring Street, Springfield, Illinois 62706). HFSRB shall, for all calculations, consider the latest version of the handbook as released on the Capital Development Board website.

A)        Projects or Components of Projects Involving New Construction

B)        Projects or Components of Projects Involving Modernization

6)         Capital Equipment Not Included in Construction Contracts

Standards for capital equipment not included in construction contracts are established by type of facility and are derived from the third quartile costs of previously approved projects for which data are available.  The standards apply only to the following types of projects: establishment of new facilities, expansion of existing facilities (e.g., bed additions, station additions, or operating/treatment room additions), and modernization of existing facilities involving replacement of existing beds, relocation of existing facilities, replacement of ASTC operating or procedure room equipment, etc. The standards below are calculated for the year 2008. These will be inflated to the current year using the inflation of major medical equipment by the department. (Long Term Care standard includes ICF/DD.)

HFSRB NOTE: Modernization includes the build out of leased space and shall include the cost of capital equipment included in the terms of the lease.

7)         Inflation Factor

Costs for construction and modernization contracts and equipment are to be adjusted for projected inflation. The projected inflation rate is to be calculated to the midpoint of construction. For construction midpoint of up to 3 years, the inflation rate shall be an average of the previous 3 years annual inflation rates for construction as determined by RSMeans. For construction midpoints beyond 3 years, the inflation rate shall be the lesser of this rate or 3% for the period of time beyond 3 years.

8)         Cost Complexity Index (to be applied to hospital projects only)

The mix of service areas or departments for new construction and modernization will be adjusted by the following Cost Complexity Index:

For purposes of the Cost Complexity Index table only, the following definitions apply:

1.      "Acute Care Beds" − bed-related clinical service areas including departments/service areas such as, but not limited to, medical-surgical bed units, labor delivery recovery or labor delivery recovery postpartum units, obstetrics nursing bed units, newborn nursery units, rehabilitation bed units, pediatrics bed units, acute mental illness bed units, long-term care acute bed units, skilled nursing units and other related service areas.

2.      "ICU Beds" − intensive care bed unit clinical service areas including departments/service areas such as, but not limited to, medical intensive care, surgical intensive care, burn intensive care, pediatric intensive care, neonatal intensive care units and other related service areas.

3.      "Diagnostics and Treatment High Resource Intensive" − clinical service areas including departments/service areas such as diagnostic and imaging radiology with fixed equipment like MRI, nuclear medicine, cardiac catheterization, interventional radiology, surgery, vascular laboratory, radiation oncology, operating rooms (Class C), C-section and other related service areas.

4.      "Diagnostics and Treatment Medium Resource Intensive" − clinical service areas including departments/service areas such as, but not limited to, emergency department, Phase II recovery, clinical laboratory, surgical procedure rooms (Class B), gastro-intestinal laboratory procedures, observation rooms and other related service areas.

5.      "Diagnostics and Treatment Low Resource Intensive" − clinical service areas including departments/service areas such as, but not limited to, pharmacy, neuro-diagnostics, PT/OT/speech, respiratory therapy, cardiac rehabilitation, cardiac diagnostics, in-patient dialysis, express testing, infusion/transfusion, partial hospital program (outpatient treatment) and other examination room related service areas.

6.      "Clinical Storage, Processing and Distribution" − clinical service areas including, but not limited to, central sterile processing, pharmacy, biomedical engineering, autopsy, morgue and other related service areas.

7.      "Administrative" − non-clinical service areas or office-based departments/service areas including, but not limited to, administration/business office, medical library, medical records, human resources, marketing, meeting rooms, family services, registration, admissions, on-call rooms, patient resource coordination center, care management, emergency medical service offices, security, volunteer services, information systems, foundation office and accounting and other related service areas.

8.      "Non-Clinical Storage, Processing and Distribution" − non-clinical service areas including departments/service areas such as, but not limited to, storage, helicopter pads, employee facilities, materials management (offices and warehouses), linen holding, housekeeping, shop, ambulance garage, print shop/copy room, maintenance, kitchen/food services, transportation and other related service areas.

9.      "Public/Amenities" − non-clinical service areas including, but not limited to, lobbies, vertical circulation, reception, gift shop, community meeting rooms and other related service areas.

10.    "Building Components" − non-clinical service area components or grossing factors including, but not limited to, exterior walls, HVAC, parking garages, boiler plant and other related service areas.

b)         Financial Viability Standards

1)         Current Ratio = Current Assets/Current Liabilities

2)         Net Margin Percentage = (Net Income/Net Operating Revenues) X 100

HFSRB NOTE: Net Margin Percentage for FOR-PROFITS is before the provision for income taxes. Net income is the excess of revenues over expenses from operations, before non-recurring income or expense.

3)         Long-Term Debt to Capitalization = (Long-Term Debt/Long-Term Debt plus Net Assets) X 100

HFSRB NOTE: For long-term care facilities and for-profit facilities, the applicant shall explain the rationale of the use of debt rather than the issuance of stock (if this is the case).

4)         Projected Debt Service Coverage = Net Income plus (Depreciation plus Interest plus Amortization)/Principal Payments plus Interest Expense for the Year of Maximum Debt Service after Project Completion

HFSRB NOTE: Net Income is the excess of revenues over expenses from operations, before non-recurring income or expense.

5)         Days Cash on Hand = (Cash plus Investments plus Board Designated Funds)/(Operating Expense less Depreciation Expense)/365 days

HFSRB NOTE: Days Cash On Hand ratio can be a combination of cash and investments held by the facilities or available funds from the backup line of credit. 

6)         Cushion Ratio = (Cash plus Investments plus Board Designated Funds)/(Principal Payments plus Interest Expense) for the year of maximum debt service after project completion

HFSRB NOTE:  The applicant may also include in the numerator the amount of funds available from an existing or proposed backup line of credit.  If the applicant includes funds available from a line of credit, documentation shall be provided regarding the terms and conditions of the line.

(Source:  Amended at 34 Ill. Reg. 6143, effective April 13, 2010)