Health Systems Agency
There will be no HSA recommendation for this project.
Office of Health Systems Management Approval contingent upon:
1. Submission of a check for the amount enumerated in the approval letter, payable to the New York State Department of Health. Public Health Law Section 2802.7 states that all construction
applications requiring review by the Public Health and Health Planning Council shall pay an additional fee of fifty-five hundredths of one percent of the total capital value of the project, exclusive of CON fees. [PMU]
2. Submission and programmatic approval of the final floor plans. [LTC]
3. Submission of a commitment acceptable to the Department of Health, for a permanent mortgage from a recognized lending institution at a prevailing rate of interest within 120 days of receipt from the Office of Health Systems Management, Bureau of Architectural and Engineering Facility Planning of approval of final plans and specifications, and before the start of construction. Included in the submitted permanent mortgage commitment, must be a sources and uses statement and debt amortization schedule, for both new and refinanced debt. [BFA]
4. Submission of State Hospital Code (SHC) Drawings for review and approval, as described in BAER Drawing Submission Guidelines DSG-04 (If not available on NYSDOH website at the time of submission preparation, please inquire to BAEFP for a copy of the current guidelines.). [AER]
Approval conditional upon:
1. The project must be completed within three years from the Public Health and Health Planning Council recommendation letter. Failure to complete the project within the prescribed time shall constitute an abandonment of the application by the applicant and an expiration of the approval. [PMU]
2. Per Article 28 requirements, space shall be provided to accommodate required program prescribed by Title 10 NYCRR and the 2010 Guidelines for Design and Construction of Health Care Facilities (FGI) for the exclusive use of the skilled nursing facility (vs. non-article 28 occupancies) including, but not limited to, physical therapy, occupational therapy, and designated isolation room(s). [AER]
3. The submission of Final (100%) Construction Documents, as described in BAER Drawing Submission Guidelines DSG-05, prior to the applicant’s request for, and Department’s granting approval for the start of construction (If not available on NYSDOH website at the time of submission preparation, please inquire to BAER for a copy of the current guidelines.). [AER]
4. The applicant shall start construction on or before August 25, 2014 and complete construction by October 20, 2015 upon the filing of Final Construction Documents in accordance with 10 NYCRR section 710.7. In accordance with 10 NYCRR Part 710.2(b)(5), failure to meet the construction dates may constitute abandonment of the approval. In accordance with Part 710.10(a), this approval may be deemed cancelled, withdrawn and annulled without further action by the Commissioner.
Council Action Date June 12, 2014
Program Analysis
Program Description
Existing Proposed
Facility Name Kendal at Ithaca Same
Address 2230 North Triphammer Road Ithaca, NY 14850
Same
RHCF Capacity 35 48
ADHCP Capacity N/A N/A
Type Of Operator Voluntary Same
Class Of Operator Corporation Same
Operator Kendal at Ithaca, Inc. Same
Program Review
Kendal at Ithaca (Kendal) is a continuing care retirement community consisting of 212 independent living residences, a 36 bed adult home/assisted living program, and a 35 bed skilled nursing facility. Kendal has embarked upon an expansion project with two major components: the construction of a 24 unit independent apartment building, and the replacement and expansion of the skilled nursing unit. The project will add 13 beds, resulting in a new SNF capacity of 48 beds.
Currently Kendal operates at nearly full capacity, with the demand for skilled nursing placements
increasing as the resident population ages. The additional SNF beds are required to ensure that Kendal will be able to meet the needs of the CCRC, thus avoiding the transfer of residents to outside nursing homes. The additional beds will also enable Kendal to stay within the optimal 5:1 ratio of independent to skill nursing beds.
Physical Environment
The applicant has chosen to pursue a total replacement project which creates a single-standard residential environment. The 48 bed facility will be constructed as appendages to the existing building, forming three neighborhoods of 16 beds each. Each neighborhood will contain 16 single bedrooms, each with its own bathroom and shower. Two rooms in each unit will be designed as bariatric rooms complete with ceiling mounted lifts. A kitchen with adjoining pantry area will prepare all meals for the unit, and a dining room and living room with fireplace are situated adjacent to the kitchen in each neighborhood. Each neighborhood will also include a tub for assisted bathing, affording resident choice. Outdoor space is provided via access to a courtyard which includes benches and walking paths.
Access into the nursing home will be made through a new main entrance with lobby, proceeding down a new corridor to connecting into the existing nursing home building. The former main dining room will be converted into a common area connecting the three new neighborhoods and a large multipurpose room for group activities. The remainder of the 35 bed nursing unit will be recycled for use as offices for the home health care program and medical examination rooms. The barber and beauty salon and the rehabilitation and fitness area will remain in their existing locations. A corridor through the old nursing home building will connect to the beauty salon, and the rehabilitation area will be accessed via the corridor connecting into the new entrance lobby.
Compliance
Kendal at Ithaca is currently in substantial compliance with all applicable codes, rules and regulations.
Conclusion
The expansion of Kendal will meet the need for skilled nursing placements generated by the CCRC. The replacement nursing unit will utilize contemporary nursing home design principles and result in an improved residential environment.
Project #132368-C Exhibit Page 4
Financial Analysis
Total Project Cost and Financing
Total cost to construct the proposed replacement facility, add 13 new beds and renovate existing facility is projected to be $16,866,978, broken down as follows:
New Construction $6,363,610
Renovation and Demolition 1,583,625
Site Development 1,434,379
Design Contingency 794,724
Construction Contingency 476,543
Architect/Engineering Fees 1,042,634
Construction Manager Fees 232,625
Other Fees(Consultant) 2,502,853
Movable Equipment 319,250
Financing Costs 381,817
Interim Interest Expense 1,640,668
CON Application Fee 2,000
CON Processing Fee 92,250
Total Project Cost $16,866,978
Project cost is based on a construction start date of August 25, 2014 with a fourteen month completion period. Project cost per bed, exclusive of CON fees, is $349,432, compared to a geographic per bed limitation of $229,000 with a construction midpoint of 2015.
Reimbursable project cost will be $11,086,250, as shown below:
$229,000 per bed cap x 48 beds $10,992,000
CON Application Fee 2,000
CON Processing Fee 92,250
Total Reimbursable Project Cost $11,086,250
Financing for the project is anticipated as follows:
Cash $2,748,000 Tax-Exempt Bonds (6.50% over 30 year term) $14,118,978
A letter of interest has been submitted from Ziegler as a source of permanent financing. Kendal at Ithaca will be contributing 25% equity of the allowable project cost before CON fees
($10,992,000). The Department is allowing the applicant to finance the amount over and above the bed cap since there are no Medicaid patients at the facility.
Operating Budget
The applicant has submitted an operating budget, in 2014 dollars, for the first year and third years subsequent to the facility replacement. The budget is summarized as follows:
Year One Year Three
Revenue:
Medicare $ 165,487 $165,872
Private Pay 1,446,959 1,646,534
Expenses:
Operating $6,384,358 $6,776,078
Capital 513,253 516,014
Total $6,897,611 $7,292,092
Net Income (Loss) $(5,285,165) $(5,479,686)
Utilization (patient days) 13,306 14,028
Occupancy 75.95% 80.07%
The following is noted with respect to the operating budget:
Medicare and private pay assume current rates of payment.
Occupancy is projected at 75.95% and 80.07% for the first and third years, respectively. Utilization by payor source is projected as follows:
Medicare 4.23% Private Pay 95.77%
The historical occupancy for the 35 RHCF beds is 94% in 2012, which only allows the applicant to take on two more residents. With Kendall adding 24 more independent living units, the board has voted for the expansion of RHCF beds to anticipate future needs. Kendal at Ithaca currently has no capacity for outside admissions, and the additional beds will allow outside admissions, including Medicaid patients.
Capability and Feasibility
The facility will provide equity of $2,748,000 from accumulated funds. BFA Attachment A is the Financial Summary of Kendal at Ithaca. The remaining project cost of $14,118,978 will be satisfied from a bank mortgage at stated terms. A bank letter of interest has been submitted by the applicant.
Working capital requirements should be minimal, as operations transfer to the new facility and revenue streams will not be negatively impacted. Costs associated with relocation of residents are not budgeted, since these expenses will be absorbed as normal staff job functions.
The submitted budget indicates that a loss in revenues of $5,285,165 and $5,479,686 would be experienced in the first and third years following replacement, respectively. The CFO has submitted a letter attesting to Kendal at Ithaca, Inc. to incur all operational losses of the RHCF, which will be achieved through the ongoing CCRC monthly fees and the upfront entrance fee. The budget appears reasonable. As shown on BFA Attachment A, the facility has maintained positive working capital and net asset balances and generated an average excess balance of $848,842 over the 2011-2012 periods. Therefore, based on the preceding, and subject to the noted contingency, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and approval is
recommended.
Recommendation
From a financial perspective, contingent approval is recommended.
Attachments
BFA Attachment A Financial Summary, Kendal at Ithaca, 2011 and 2012 certifieds BFA Attachment B Financial Summary, Kendal at Ithaca 2013 internals
Project #132124-B Exhibit Page 1