The purpose of the proposed rule amendments is to incorporate changes in the authorizing statute, revise technical errors and update references.

 

AGENCY FOR HEALTH CARE ADMINISTRATION

Health Facility and Agency Licensing

RULE NO.:RULE TITLE:

59A-4.203Financial Requirements

PURPOSE AND EFFECT: The purpose of the proposed rule amendments is to incorporate changes in the authorizing statute, revise technical errors and update references.

SUMMARY: The Agency proposes to amend Rule 59A-4.203, F.A.C., to delete the requirement for pro forma statements, clarify definitions and revisions to allow a provider that is part of a corporate entity to submit a consolidated corporate financial statement to satisfy financial soundness and stability for Gold Seal purposes, incorporate changes in the authorizing statute, and make technical changes.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION: The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: No SERC was prepared, the Agency prepared a checklist for the rule to determine the necessity for a SERC.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 400.235 FS

LAW IMPLEMENTED: 400.235 FS

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW:

DATE AND TIME: October 26, 2016, 9:30 a.m. – 11:00 a.m.

PLACE: Agency for Health Care Administration, 2727 Mahan Drive, Building 3, Conference Room B, Tallahassee, Florida 32308

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Jacqueline Williams, Agency for Health Care Administration, 2727 Mahan Drive, Mail Stop #33, Tallahassee, FL 32308 or [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

59A-4.203 Financial Requirements.

(1) To be eligible for a Gold Seal designation, a facility must have been in operation for a minimum of 30 months prior to the date of application and must provide evidence of financial soundness and stability. This subsection provides the criteria for use of financial statements. To demonstrate 30 months of financial soundness and stability prior to the date of the application:

(a) The licensee of the facility shall submit financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) for the three consecutive fiscal years immediately preceding the date of application. If the most recent fiscal year ended within 120 days prior to the application filing deadline and the audited financial statements are not yet available, then the prior fiscal year will be considered the most recent. , including: Financial statements shall include a balance sheet, income statement and statement of cash flows and all relevant notes. The licensee concurrently shall submit a report from a certified public accountant (CPA) who has audited or reviewed these financial statements. A report of audited financial statements that contains an adverse or disclaimer of opinion will not be considered an acceptable submission for the purposes of this rule. must specify an unqualified opinion. A report on reviewed financial statements must be a standard report and must not contain any departure from GAAP. Financial statements that have been reviewed by a CPA may not be substituted for audited financial statements when the audit was conducted for the same financial accounting period. Each licensee shall also submit a one-year set of pro-forma financial statements, including balance sheet, income statement and statement of cash flows. If the audit of the licensee is not available then the following submissions would satisfy the financial statement submission requirements:

1. Consolidated Financial Statements - For a licensee whose audited or reviewed financial statements are prepared as part of a consolidated entity, the licensee can satisfy the requirements for submitting financial statements by submitting the three most recent consecutive fiscal years of CPA audited or reviewed consolidated financial statements if the statements break out the balance sheet, income statement and statement of cash flows of the individual licensee. or submit accreditation documents in accordance with Section 400.235(5)(b), F.S. In the event a continuing care retirement center has its designation as a CCRC revoked by the Department of Financial Services, the CCRC is required to submit financial statements as described in this rule.

2. Parent Financial Statements – A nursing home that is part of the same corporate entity that operates assisted living facilities and/or independent living facilities can satisfy the requirements for submitting financial statements by submitting the three most recent consecutive fiscal years of CPA audited or reviewed consolidated financial statements for the corporate entity.

3. Continuing Care Retirement Communities (CCRC) – A nursing home that is part of the same corporate entity as a CCRC licensed under Chapter 651 is considered to have met the evidence of financial soundness and stability requirement of Section 400.235(5)(b), F.S., if it meets its minimum liquid reserve as described in Section 651.035, F.S., and is accredited by a recognized accrediting organization as described in Section 651.028, F.S. In order to meet this requirement and be exempt from the ratio analysis described in paragraph (1)(b) of this rule, the applicant must provide a copy of its active certificate of authority, accreditation documentation, and documentation proving that the minimum liquid reserve is met.

(b) Each licensee must meet at least two of the three following financial soundness and stability thresholds listed below for at least two of three years of the statements, to include the most recent year submitted and the pro-forma statements. Otherwise, its facilities cannot be recommended for the Gold Seal Award except as described in subsection (2) below.

1. A positive current ratio of at least one (1). The current ratio is determined by dividing current liabilities into current assets. Current assets are items on an entity’s balance sheet that are either cash, a cash equivalent, or which can be converted into cash those held for conversion within a year or less., such as cash, temporary investments, receivables, inventory, and prepaid expenses. Board designated assets of cash or near cash instruments, where the board of directors has the option to change the authorized use of the assets and the assets are otherwise unencumbered as disclosed by the auditor, can be considered current assets for this calculation. Current liabilities are short-term obligations that are due and payable debts and unearned revenues to be paid out of current assets within a year or less.

2. A positive tangible net worth as determined by the balance sheet and/or a positive total margin. Net worth This shall be determined as equity (total assets less total liabilities). Total margin shall be considered the net profit or loss from all operations as shown on the income statement. net of intangible assets. An intangible asset is a capital asset having no physical existence, its value being dependent on the rights that possession confers upon the owner. Examples include goodwill and trademarks.

3. A cash flow to current liabilities ratio of 65 percent or greater. This shall be determined by dividing current liabilities by operating cash flow. Operating cash flow is cash flow generated by core operations and does not include cash flow generated by investing or financing activities as shown on the statement of cash flows on the financial statements. A times interest earned ratio of at least 1.15 or 115 percent. This shall be determined by dividing interest expense into net income before deducting such interest and income tax. Net income is defined as revenues (receipts or earnings) less expenses (costs). Not-for-profit providers may include non-operating income, such as public or governmental support and foundation transfers in determining net income.

(2) If the licensee can meet only one of the three financial ratios in paragraph (1)(b) above for one of the two required years, the licensee may be recommended for a Gold Seal Award only if the most recent CPA prepared financial statements provided are for a period ending within six months of the date of the application and these financial statements meet all three of the financial criteria set forth in paragraph (1)(b) above.

(3) Neither the licensee nor its parent company shall have been the subject of bankruptcy proceedings during the period beginning 30 months prior to the date of the application and ending on the date of the award of the Gold Seal.

Rulemaking Authority 400.235 FS. Law Implemented 400.235(9) FS. History‒New 8-21-01, Amended 5-19-02, 3-21-04, _________              .

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Jacqueline Williams

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Elizabeth Dudek

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: September 26, 2016

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: May 17, 2016