32.02.01.05

.05 Feasibility Study.

A. The feasibility study shall be prepared in a form satisfactory to the Department, by an authority recognized by the Department, and shall include at least the following information:

(1) A statement of the purpose for the proposed project or construction;

(2) A summary of the proposed project, which shall include the following information:

(a) A description of the proposed project;

(b) A statement regarding any affiliation of the provider with a religious, charitable, or other nonprofit organization, and the extent to which the organization will be responsible for the financial and contractual obligations of the provider;

(c) The location, address, city, county, size, and description of the site;

(d) The number of proposed independent living units, assisted living units, and comprehensive care units; and

(e) A description of any common areas and community spaces to be provided such as lobbies, dining rooms, doctor's Departments, convenience stores, craft rooms, meeting rooms, and exercise rooms;

(3) A summary of the organizational structure of the proposed provider and development team, which shall include the following information:

(a) The ownership of the provider, including whether it is for-profit;

(b) The owner of the facility if other than the provider;

(c) A description of the qualifications of the proposed manager or management company if the facility is, or will be, managed on a day-to-day basis by a person other than an individual directly employed by the provider, including the business experience the manager or management company has operating or managing similar facilities; and

(d) A description of the qualifications of any other person who is significantly involved in the development of the facility;

(4) A summary description of the location of the proposed project, which shall include the following information:

(a) A map indicating the location of the proposed community;

(b) A general description of the surrounding land use and the access to public transportation and highways; and

(c) The availability and attractiveness of proximate services such as shopping, cultural, recreational, and educational facilities, health services, churches, theaters, and libraries;

(5) A full description of the site of the proposed project which shall include the following information:

(a) The size;

(b) A general description of its boundaries;

(c) Any access roads;

(d) From whom the site was acquired and the former usage of the site;

(e) Any unique characteristics of the site such as water, ponds, or woods;

(f) Any current buildings, services, or facilities at the site and their intended use;

(g) A site development plan indicating existing features and structures, if any, and the proposed new facilities;

(h) Any planned post-application development;

(i) The availability of utilities and proximity to site;

(j) The zoning status and any required changes; and

(k) The type of site control or ownership, including such information as:

(i) The date the site was acquired,

(ii) The date it was optioned,

(iii) The terms of any rights of first refusal, or

(iv) Any other significant terms of the acquisition;

(6) A summary of any independent living component of the facility, which shall include the following:

(a) A broad description of the type and number of independent living units, such as cottages, clustered duplexes, or apartments;

(b) A description of the type of construction that may be used, such as new construction or rehabilitation of existing structures;

(c) The square footage of the independent living area that corresponds to each type of independent living unit offered;

(d) A summary of the access to the independent living units; and

(e) The schematics of each different type of independent living unit;

(7) A summary of the common and service areas of the facility, which shall include the following:

(a) A listing of the square footage of the common, service, administrative, and any other non-health-related areas and their location in relation to the independent living units; and

(b) The schematics of the common, service, administrative, and any other non-health-related areas;

(8) A summary of any plans for assisted living or comprehensive care units, which shall include the following:

(a) A general description of the square footage of each type of unit and the location of each type in relation to the independent living units and the common areas;

(b) The number of assisted living and comprehensive care units categorized as:

(i) Private,

(ii) Semiprivate, and

(iii) Suites;

(c) The total number of assisted living and comprehensive care units;

(d) A description of the types of any doctors' Departments that will be in the facility; and

(e) The schematics of any space for assisted living, comprehensive care, or doctors' Departments;

(9) A summary of the services that will be included in the monthly service fee;

(10) A summary of the ancillary services that will not be included in the monthly service fee;

(11) A statement describing any plans the provider has to require a subscriber to have long-term care insurance or supplement health insurance coverage;

(12) A statement describing any plans the provider has to become Medicare or Medicaid certified;

(13) A statement describing any plans the provider has to offer priority access to health-related services at an offsite location;

(14) A statement describing any plans to delay the refund of any entrance fees until the resale of a subscriber's unit;

(15) A study that demonstrates a market exists for the proposed project, which study shall include:

(a) A description of the primary and secondary market area as defined by the provider;

(b) A table of population information including age, sex, number, income distribution, and trends of the total population and individuals 60 years old and older within the primary and secondary market area;

(c) A calculation of the potential impact on the proposed project of existing facilities, facilities for which letters of intent have been filed with the Department, and other projects that offer similar services in the primary and secondary market area, which calculation shall include the following information for each facility in the primary and secondary markets:

(i) The number of independent living units, assisted living units, and comprehensive care units,

(ii) The opening date or proposed opening date of the facility,

(iii) The area marketed to,

(iv) The utilization experience,

(v) The amount and type of entrance fees and monthly service fees, and

(vi) The services offered;

(d) A calculation of the market penetration rate for the proposed facility for both the primary and secondary markets;

(e) A table of home values in the primary and secondary market area;

(f) A description of the minimum age, income, and net worth eligibility requirements for the anticipated subscribers of the proposed project;

(g) A description of new entrant assumptions by age, sex, and couple ratio;

(h) A description of the results of testing the potential demand and acceptance of the proposed project's location, services, and concept characteristics;

(i) If the area in which the facility is to be built has limited continuing care experience, a comparison with a demographically similar area that has experience with continuing care communities that shows the:

(i) Similarities and dissimilarities of the two markets, and

(ii) Experiences of one or more continuing care retirement communities in the comparable market, including their initial utilization experience and the penetration rates of their continuing care units into the eligible population; and

(j) A statement describing the estimated presales period, including when the provider projects it will have executed agreements and collected at least 10 percent of the entrance fee for at least 65 percent of the independent living units;

(16) A plan demonstrating the financial feasibility of the proposed project including the following:

(a) The anticipated costs of constructing or acquiring the proposed project, including all related costs such as land costs, construction costs, architectural and engineering fees, financing expenses, marketing costs, legal and administrative costs, furnishings and equipment costs, fees and permits, and other costs;

(b) The anticipated sources and uses of funds to finance the proposed project, including documentation of the financial resources of the provider;

(c) A description of the proposed financing, including anticipated terms and costs of financing the proposed project;

(d) Projected financial statements that are based on the information required in §(A)(17)(b) of this regulation and prepared in accordance with both §C of this regulation and generally accepted accounting principles;

(e) A schedule of anticipated fees for a 10-year period, including any proposed escalator or other automatic adjustment provisions;

(f) For each type of unit proposed to be offered, a schedule of the anticipated monthly move-ins until full occupancy is reached;

(g) A description of the terms of the lease, if the provider is planning to lease the facility;

(h) The estimated start and completion dates for the construction of the proposed project;

(i) The initial proposed occupancy date; and

(j) A statement indicating compliance with the requirements of Regulation .20 of this chapter;

(17) Except as provided in §B of this regulation, an actuarial study, prepared or reviewed by a qualified actuary, which includes:

(a) A cohort pricing analysis which demonstrates that for a typical cohort of new subscribers the sum of the entrance fees paid at occupancy plus the actuarial present value at occupancy of periodic fees exceeds the actuarial present value at occupancy of the costs of performing all obligations assumed by the provider, with appropriate provision for surplus;

(b) Supporting detailed documentation for the cohort pricing analysis required in §A(17)(a) of this regulation, including:

(i) A projection of future population flows and health care bed needs, for the first 20 years, using appropriate inflation factors, mortality, morbidity, withdrawal, and other demographic assumptions, and

(ii) A description of the actuarial data, assumptions, and methods used to create the projection;

(c) Cash flow projections for a 20-year period, which project positive cash balances; and

(d) The opinion of the actuary that the data and assumptions used are appropriate, the methods employed are consistent with sound actuarial principles and practices, and provision has been made for all actuarial liabilities and related statement items;

(18) A copy of the proposed deposit agreement between the provider and prospective subscribers governing the disposition of the escrowed funds and the interest earned on them;

(19) A copy of the proposed escrow agreement between the provider and the depository;

(20) Proposed payment arrangements under the agreement for both the shelter and health-related benefits;

(21) A copy of a certificate of need, or a letter or exemption from the certificate of need requirement, issued by MHCC for any proposed comprehensive care beds;

(22) The form and substance of any advertising campaign or proposed advertisement for the proposed project that is available at the time of filing; and

(23) Any further information that the Department requires.

B. Facilities which offer only domiciliary care or comprehensive care and do not offer independent living units, and facilities which offer, as the only health care, priority admission to a nursing facility, are not subject to §A(17) of this regulation, and shall submit the projection of future population flows and health care bed needs for the first 20 years, using appropriate mortality, morbidity, withdrawal, and other demographic assumptions.

C. In §A(16)(d) of this regulation, the provider shall submit projected financial statements for a minimum of the first 10 years of operation that include:

(1) Balance sheets;

(2) Income statements, including separate supplemental income statements for each of the following:

(a) Independent living,

(b) Assisted living, and

(c) Comprehensive care;

(3) Statements of cash flow; and

(4) The key assumptions used in preparing the projected financial statements, including assumptions related to utilization, turnover of units, inflation, debt service, personnel staffing and related salaries, interest rates, depreciation and amortization, amortization of entrance fees, raw food, insurance, and real estate taxes.