32.02.01.07

.07 Department Action on Feasibility Study and Application for a Preliminary Certificate of Registration.

A. The Department shall approve a feasibility study when it determines that:

(1) Either a certificate of need or an exemption from a certificate of need has been issued by MHCC for the number of comprehensive care beds proposed for the facility for which licenses are required by MDH;

(2) The number of licensed assisted living units proposed for the facility is not inconsistent with the State Health Plan;

(3) A reasonable financial plan has been submitted for developing and operating the proposed project, which:

(a) Includes in the projected financial statements all obligations and liabilities to be undertaken by the provider pursuant to the terms of the proposed continuing care agreement;

(b) Demonstrates that the anticipated sources of funds to finance the proposed project are equal to or greater than the anticipated uses of funds to construct or acquire the proposed project; and

(c) Demonstrates that the facility is financially feasible;

(4) A market for the continuing care facility appears to exist, based on reliable data, which:

(a) Is community specific;

(b) Takes into account competing shelter and health-related providers;

(c) Relates the existence of a market to the age, health, sex, marital status, number, population trends, net worth, home values, and income of the potential subscribers; and

(d) Demonstrates that the rate of penetration in the proposed market area is within acceptable industry ranges;

(5) The actuarial study as required in Regulation .05 of this chapter has been submitted and includes:

(a) A cohort pricing analysis that 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) Cash flow projections for a 20-year period, which project positive cash balances;

(c) Supporting detailed documentation for the cohort pricing analysis which includes a:

(i) Projection of future population flows for a 20-year period, which uses appropriate morbidity, mortality, withdrawal, and other demographic assumptions,

(ii) Projection of future health care bed needs for a 20-year period, which uses appropriate morbidity, mortality, withdrawal, and other demographic assumptions, and

(iii) Descriptions of the actuarial data, assumptions, and methods; and

(d) An opinion of a qualified actuary, which states that:

(i) The data and assumptions used are appropriate,

(ii) The methods employed are consistent with sound actuarial principles and practices, and

(iii) Provision has been made for all actuarial liabilities and related statement items;

(6) The projection of future population flows and health care bed needs, for the first 20 years, uses appropriate mortality, morbidity, withdrawal, and other demographic assumptions as required in Regulation .05 of this chapter;

(7) The feasibility study was prepared by an authority recognized by the Department;

(8) The approved escrow agreement and deposit agreement state that all deposits and entrance fees shall be held in escrow in Maryland in a financial institution until:

(a) The issuance of an initial certificate of registration;

(b) Completion of construction;

(c) The issuance of a certificate of occupancy or the equivalent by the appropriate local jurisdiction; and

(d) The issuance of appropriate licenses or certificates by MDH, MHCC, and the Department; and

(9) A copy of the escrow agreement, executed by the provider and the financial institution, is on file with the Department.

B. The Department shall issue a preliminary certificate of registration when it determines that the following conditions have been met:

(1) The feasibility study has been approved by the Department;

(2) The agreement between the provider and the subscriber meets the requirements of Human Services Article, §§10-444—10-449, Annotated Code of Maryland, and Regulations .27—.29 of this chapter;

(3) The required financial and organizational materials have been submitted to the Department; and

(4) The Department has determined that the form and substance of all advertising and other promotional materials filed are not deceptive, misleading, or likely to mislead.

C. Until the initial certificate of registration has been issued, the provider shall inform the Department of any changes or additions to the information provided in the feasibility study and in the application for a preliminary certificate of registration.