3. If the
project involves a lease, provide justification for leasing rather
additional debt (long-term or short-term) been incurred since the
fiscal period for which financial statements were submitted?
to Item 5)
yes, complete Item 4a)
a. If answer
to Item 4 is “YES,” provide the term, rate of interest,
and payoff period for each loan that was not accounted for in the
audited financial statements requested in Section 13.00.
respect to the financial
aspects of the
proposed (i.e., chosen) project, please provide the complete basis
for stating that each of the following is met:
The capital costs of the proposed project will result in the
least costly total annual operating costs [Section
22225(2)(b)(i)]. Include at least the following:
ii. Total capital costs of each
statement of assumptions for each alternative considered
iv. Explain and give complete
details and reasons as to why you believe your proposed project is
the least costly project in terms of capital costs and available
are available to meet the capital and operating needs of the
proposed project [Section 22225(2)(b)(ii)].
i. That funds are available to meet the capital needs of the
proposed project. Include at least the following:
or unaudited financial statement
Nursing home and new health facilities must provide proof of cash
reserves and availability of funding. This may be in the form of a
letter from a bank stating cash reserves are available or a letter
from a lender stating they would be interested in funding this
project if a Certificate of Need is approved.
funds are available to meet the operating needs of the proposed
project. Include at least the following:
the project will "break even" within a three-year
period. Provide all assumptions. Information provided in
response to this question must be consistent with the information
provided on the revenue and expense statement forms.
projections of revenue and expense do not show sufficient
operating revenue to cover operating expenses the applicant must
state where the funds will come from to cover operating losses.
proposed project utilizes the least costly method of financing, in
light of available alternatives [Section 22225(2)(b)(iii)].*
i. A statement of assumptions
concerning the availability of various funding sources and
projected terms of each loan for each financing alternative
(a) Financial Alternative Chosen:
(b) Financial Alternative Rejected:
cash is the funding source, the financing method cannot be amended
after a final CON decision has been issued.
cash is NOT the funding source, explain why cash is not an available
d. Explain and give complete
rationale and assumptions considered and an analysis of each
alternative, including at least the following:
(a) Financing and related debt issue costs.
on unexpended loan proceeds
outflow required for debt service
the case of a construction project, the applicant stipulates that the
applicant will competitively bid capital expenditures among qualified
contractors, or alternatively, the applicant is proposing an
alternative to competitive bidding that will achieve substantially
the same results as competitive bidding [Section 22225(2)(b)(iv)].
construction project includes projects involving both new
construction and renovation/remodeling.
the project will be competitively bid, please complete the
information below, sign, and return this form.
to Section 22225(2)(b)(v):
that the applicant will competitively bid the covered capital
expenditure, related to the proposed construction project among
qualified contractors, or alternatively, that evidence has been
presented in CON Application Number that
an alternative to competitive bidding will result in the least
costly method for implementing the project has been chosen.
of Authorized Agent
(Printed or Typed) Date
NOT Competitively Bid:
an alternative to competitive bidding has NOT been chosen, the
applicant must present evidence satisfactory to the Department that
the alternative will result in the least costly method of
implementing the project. Please explain and give complete details
means expenditure for a single project, including cost of
construction, engineering, and equipment that under generally
accepted accounting principles is not properly chargeable as an
expense of operation. Capital expenditure includes a lease or
comparable arrangement by or on behalf of a health facility to obtain
a health facility, licensed part of a health facility (i.e., a
licensed Hospital Long-Term-Care Unit or licensed Psychiatric Unit),
or equipment for a health facility, if the actual purchase of a
health facility, licensed part of a health facility, or equipment for
a health facility would have been considered a capital expenditure
under this part. Capital expenditure includes the cost of studies,
surveys, designs, plans, working drawings, specifications, and other
activities essential to the acquisition, improvement, expansion,
addition, conversion, modernization, new construction, or replacement
of physical plant and equipment.
NOTIFICATION TO APPLICANT -
lease(s) will be valid for the term of the lease(s) only (including
renewable options) and the applicant will be required to file another
certificate of need to renew a lease(s.) In the case of Capital
equipment lease(s) in which the applicant purchases the equipment,
the certificate of need is valid until the applicant replaces the
equipment. However, if the applicant does not purchase the equipment
at the end of the original lease(s) and instead renews the lease(s),
a new CON will be required.
FOR COMPLETION OF PROJECTS COSTS
each line item as shown on the form. For those items not applicable
enter 0 or N/A.
estimated costs including the effects of inflation must be based on
the projected midpoint of construction.
New Construction and Renovation & Remodeling must be broken
down into clinical and non-clinical costs and recorded under the
appropriate line on page 9 of this form. In computing the cost per
square feet in the development of project cost section on page 10,
please combine the clinical and non-clinical costs.
means equipment that is affixed to and constitutes a structural
component of a health facility, including, but not limited to,
mechanical or electrical systems, elevators, generators, pumps,
boilers, and refrigeration equipment. These costs must be included
in new construction and/or remodeling/renovation costs. Those items
determined not to be part of new construction or renovation will be
considered depreciable fixed equipment and must be identified in the
line for Fixed Equipment on Page 9 of this form.
Capital and Operating Leases must
listed as an asset and liability based on the definition of Capital
Expenditure provided under CON Law. The lease cost is calculated by
taking the annual lease payment multiplied by the number of years of
the lease including any renewal options. Use the base rental rate,
ignoring any additional rent increases.
not offset interest during construction with interest income during
construction. Net interest during construction must be included on
Page 17 of this form, the Depreciation
and Amortization Schedule.
you are unable to provide a detailed breakdown of financing and
related debt issue costs, then provide an estimate as a percentage of
total loan amount.
must equal the Total
on Page 15.
assumptions and rationale for each line item. In absence of detailed
assumptions, the analysts reviewing the project will make their own
assumptions based on data provided in this and other sections of the
data on project costs for computation errors and for conflict with
data reported on other forms. For example:
and Amortization Schedule
on Page 18 agree?
Sources of Funds
preparation of a Certificate of Need application, figures and
assumptions are sometimes revised. If you have made such revisions,
have these changes been entered on all affected forms?
For all projects involving initiation or replacement of cardiac
catheterization laboratories, CT scanners, Lithotripsy Units, MRI
scanners, MRT units, and PET scanners, attach a copy of a vendor
signed and dated vendor quotation that was issued within the past six
Whole Dollars Only)
Construction - Clinical (
Construction – Non Clinical (
and Remodeling - Clinical (
and Remodeling – Non Clinical (
Note: Submit copies
of lease agreements, purchase agreements, vendor quotes, etc.
PER SQUARE FOOT CALCULATIONS:
Construction: ($/ sq. ft. =
$ per sq. ft.)
& Remodeling: ($/ sq. ft. = $
per sq. ft.)
Please combine Clinical & Non-Clinical Costs and areas in
OF PROJECT COSTS
provide assumptions and rationale used for project cost line item(s)
as needed in developing the cost estimates.
architect estimate if available or documentation detailing the method
of estimating construction and renovation costs. The MDHHS is using
the "Means Square Foot Costs" as a guide for cost/sq. ft.
for labor and materials. The Department may
approve costs above the “Means Square Foot Costs” only if the
applicant can substantiate, with creditable documentation acceptable
to the Department, factors that increase cost such as substitution of
building materials or systems for those used in the Means Square Foot
Costs model; custom designed finishes, fixtures, and/or equipment;
special structural qualities (e.g., allowance for earthquake, future
expansion, high winds, long spans, unusual shape); special
foundations and substructures to compensate for unusual soil
conditions; an abnormal shortage of labor or materials; isolated
building site or rough terrain that would affect transportation of
personnel, material, or equipment; or unusual climatic conditions
during the construction process. Any final project costs over the
maximum will be disallowed.
OF FUNDS (Use
Whole Dollars Only)
(FHA, HUD, etc.)
Funds (i.e., grants, etc.)
Bequests, Donations, and Pledges
Income During Construction
Sources of Funds
Note: Submit copies
of financial statements, donation reports, etc.
FROM THE ABOVE STATED SOURCES OF FUNDS REQUIRE MICHIGAN DEPARTMENT OF
HEALTH & HUMAN SERVICES, HEALTH FACILITIES SECTION, APPROVAL.
the following information:
detailing progress of pledges and
detailing donation/pledge amount, on company letterhead and signed
by an authorized representative of the applicant organization.
documentation detailing the method of calculation, including
amount available for investment;
amount outstanding or anticipated drawdown schedule; and
on reserve account, if applicable.
the following documents as applicable to this application:
of proposed Purchase/Sale/Transfer Agreement,
of proposed Lease Agreement, and/or
of Valid Vendor Quotation.
Sources of Funds” must equal “Total Project Costs” (from Page
this project involve any capital or operating lease(s)?
YES (complete this
NO (skip to Page 10)
describe the property.
2. Term of the lease
3. End of term fair market value
4. Useful life
5. Annual payment
6. Capitalized value
price / beginning of term fair market value $
8. Stated or implicit interest rate
9. Please describe the property.
of the lease
price / beginning of term fair market value $
a copy of audited financial statements. If audited financial
statements are not available, provide unaudited current financial
statements including a balance sheet, income statement, statement of
cash flows and any notes to accompany the financial statements. New
entities must provide a current balance sheet, a projected income
statement for the first year of operations, a projected statement of
cash flows for the first year of operations, and any notes to
accompany the financial statements.
AND AMORTIZATION SCHEDULE
depreciation and amortization for the first full year of operation of
this project. Only those costs of the proposed project that are
capitalized using generally accepted accounting principles must be
reported. In #4 below, identify any project costs that will not be
depreciated or amortized (e.g., land purchase.)
making entries in the cost column, enter each item separately as
provided for on the form. Categories listed that have more than one
item to report must be detailed in the space provided for "other"
net interest is reported, explain how it was computed.
use the straight-line method of depreciation only.
(Use Whole Dollars
Amount of Depreciation.
Building to be Purchased
information for which additional space is required here. (Use
additional pages as needed.)
OF REVENUE DISTRIBUTION BY AMOUNT & PERCENTAGE
provide data for two (2) years actual and three (3) years projected.
Whole Dollars Only.
must total 100%.
Revenue divided by total patient days + outpatient Visits.
there is more than a 5
percent variance between years in any category, explain below.
form must reflect the revenues shown on the revenue and expense
statement for either the total facility or program/service that is
being requested in the CON application.