STATE OF ILLINOIS HEALTH FACILITIES AND SERVICES REVIEW BOARD

Transcription

1 STATE OF ILLINOIS HEALTH FACILITIES AND SERVICES REVIEW BOARD WEST JEFFERSON ST. SPRINGFIELD, ILLINOIS (217) FAX: (217) DOCKET NO: BOARD MEETING: PROJECT NO: PROJECT COST: H-1 February 5, 213 FACILITY NAME: Rehabilitation Institute of Chicago CITY: Chicago TYPE OF PROJECT: Substantive HSA: VI Original: $522,744,866 Current: PROJECT DESCRIPTION: The applicant is proposing the construction of a 27-level building to house a 242-bed hospital approximately three blocks south of their existing rehabilitation hospital, in Chicago. The existing 182 bed hospital will be discontinued upon project completion. The cost of this project is $522,744,866. The anticipated project completion date of this project is March 31, 217. The State Board Staff Notes the following: A Master Design Project was approved for the Rehabilitation Institute of Chicago ( RIC ) for planning and design costs for the proposed establishment of a new hospital by the Illinois Health Facilities and Services Review Board ( IHFSRB ) on April 17, 212 as Permit #12-2 at a cost of $26,34,873. The Master Design project was for planning and design costs only and did not contain any construction elements. Findings on the need for beds and services and financial viability and economic feasibility that were made during the review of Permit #12-2 were only applicable for the Master Design project (12-2). Although the State Board approved the Master Design application, it is not now obligated to approve or determine positive findings on this (or any other) application that would implement the design. As part of the applicant s planning and design process the number of beds was reduced from 272 to 242 beds. There have been no changes to any of the clinical services to be provided, the facility's location, the population to be served, or the general conceptual design of the hospital.

2 EXECUTIVE SUMMARY PROJECT DESCRIPTION: The applicant, Rehabilitation Institute of Chicago is proposing to construct a 27-level building to house a 242-bed hospital located at 63 McClurg Court, Chicago, Illinois. The existing 182 bed hospital, located at 345 East Superior Street, Chicago will be discontinued upon the completion of the new hospital. The cost of this project is $522,744,866. The anticipated project completion date of this project is March 31, 217. WHY THE PROJECT IS BEFORE THE STATE BOARD: The project is before the State Board because the project is proposing the discontinuation and the establishment of a health care facility as defined by the Act. PURPOSE OF THE PROJECT: According to the applicants The purpose of the project is to increase the hospital s capacity to admit/treat inpatients, and increase the number of private rooms. The applicant plans to provide expanded patient service areas co-located with research/therapy services, resulting in an increased overall patient experience. BACKGROUND: Rehabilitation Institute of Chicago is a 182-bed acute care rehabilitation hospital, located at 345 East Superior Street, Chicago, on the campus of Northwestern University. In April of 212, the State Board approved Permit #12-2, a Master Design Project to design a new hospital. COMPLIANCE ISSUES: The State Agency notes the applicants are compliant with all reporting requirements for past projects and clinical data. PUBLIC HEARING/COMMENT An opportunity for a public hearing was offered on this project; however, no hearing was requested. No letters of support or opposition were received by the State Board Staff. IMPACT LETTERS: Request for impact letters were sent to 2 facilities within 45 minutes of the proposed new location. Two responses were received. Mark Frey President Alexian Brothers Health System stated Thank you for notifying us regarding your planned construction of a replacement hospital. We understand further that you will be "discontinuing" your current facility upon the opening of the replacement hospital. As a result of these changes, Alexian Brothers does not anticipate that the discontinuation" of your existing hospital will have any impact on the operations or utilization of Alexian Brothers Medical Center in Elk Grove. 2

3 Mark Newton CEO Swedish Covenant Hospital stated This letter is in response to your letter dated October 4, 212 requesting Swedish Covenant Hospital (SCB) to comment on effect of the discontinuation process for the existing Rehabilitation Institute of Chicago (RIC) facility upon completion of the RIC replacement hospital. Swedish Covenant Hospital is currently licensed for 25 Acute Rehabilitation Beds and would have capacity to accommodate a portion of adult rehabilitation patients from RIC that reside within our overlapping service area. In calendar year 211, SCH had an average daily census of 12.2 acute adult rehabilitation patients or 48.8% of CON occupancy capacity. Therefore at 1% capacity, SCH could have accommodated an additional census of 12.8 adult patients per day. Swedish Covenant Hospital does not currently provide acute rehabilitation services for pediatric patients. NEED FOR THE PROJECT: Applicants proposing to discontinue and establish a new hospital must: Document that the proposed discontinuation is warranted, Document that there is a calculated need for the services being provided, Document that the project will serve the residents of the service area, Document that there is demand for the service, Document that the proposed hospital will improve access, Document that the proposed hospital will not result in a duplication or maldistribution of service, The discontinuation of the current hospital appears warranted given the age of the current structure (38 years) and the changes in the standard of care for rehabilitative services. However the discontinuation will create a need for 86 rehabilitation beds in this planning area. The long-term use of the existing building and the equipment located in that building has not been finalized as of the date of this application. It is not anticipated that the building will continue to be used by the applicants following the opening of the new hospital. There appears to be sufficient demand for the rehabilitative services and it appears that the proposed facility will provide service to area residents. During the 12-month period ending August 31, 212 Northwestern Memorial Hospital referred 54% of the patients admitted to the existing hospital, and 5.4% were referred from Ann and Robert H. Lurie Children's Hospital of Chicago ("Lurie"). Approximately 3% of the admissions to the existing hospital came from other Chicago land hospitals, and 1% came from outside the metropolitan Chicago area. The existing hospital has been at or above the State Board s target occupancy of 85% for the past two years. The applicant has provided documentation that approximately 42.8% of the hospitals inpatients are Chicago residents, 46.9% are Illinois residents, living outside of Chicago, and approximately 1.3% come from outside of Illinois. There are existing facilities in the planning area and within 3 minutes that are currently operating at less than the target occupancy of 85%. There are a total of 466 rehabilitation beds within 3 minutes currently operating at 49.53%. It does appear a duplication of service may result with the establishment of the new facility. In addition the applicant s current utilization will justify 171 rehabilitation beds at the target occupancy of 85% and not the 242 rehabilitation beds being requested. The applicant projected the 242 beds by 3

4 relying upon a proprietary bed methodology. This methodology projected the number of beds for CY218 and CY219, the first two years after project completion. The applicant stated the bed need methodology begins with Chicagoland population projections from state data (Dept of Commerce and Economic Opportunity DCEO ) for age cohorts of under- and over-age 65. The model then incorporates all Chicagoland acute care hospital discharges, by diagnosis (e.g., stroke, brain injury, spinal cord injury, neurological conditions, etc.), by age cohort (e.g., under- and over-age 65) and by discharge destination (e.g., inpatient rehabilitation, skilled nursing facility). For each of these sub-categories, RIC projects the percentage of patients that will transfer to RIC based on historical data and estimates for growth or decline due to technology advances, marketing efforts and other market and environmental factors. Because of RIC s wide catchment, it does similar calculations for patients from outside of Chicagoland, also by age cohort and diagnosis. Facilities within 3 minutes of proposed project Name City Minutes # of Rehab Beds Utilization 211 State Standard Met Standard? St. Mary of Nazareth Hospital Chicago % 85% No Rush University Medical Center Chicago % 85% No St. Joseph Health Ctr. & Hospital Chicago % 85% No Advocate Illinois Masonic Medical Chicago % 85% No Ctr. Louis A. Weiss Memorial Hospital Chicago % 85% No Mercy Hospital & Medical Ctr. Chicago % 85% No University of Illinois Hospital Chicago % 85% No Schwab Rehabilitation Hospital Chicago % 85% No Rush Oak Park Hospital Oak Park % 85% No Swedish Covenant Hospital Chicago % 85% No Resurrection Medical Ctr. Chicago % 85% No Loyola University/Foster McGaw Maywood % 85% Yes VHS Westlake Hospital Melrose Park % 85% No % FINANCIAL AND ECONOMIC FEASIBILITY: The project is to be funded with cash and securities of $61,444,866, bond issues totaling $147,5,, gifts and bequests totaling $3,,, and leases with a fair market value of $13,8,. Audited financial statements compiled by Deloitte & Touche, LLP, were provided by the applicants (application, p. 122), and it appears that sufficient funds are available to fund the cash portion of the project. According to the applicants due to the magnitude of the project cost, the entire cost cannot be addressed through the use of cash and liquid assets. The proposed financing plan, will, however, allow the applicant to maintain a current ratio in excess of 1.5. As of the filing of this Certificate of Need application, $141M has been pledged and/or received. Should the entire $3M not be realized, the applicant 4

5 has access to cash and debt not included in the identified Sources of Funds to address any shortfall in the realization of anticipated Gifts and Bequests. The applicant provided the following: As financial advisor to the Rehabilitation Institute of Chicago ("RIC), Hammond Hanlon Camp LLC (H2C) has been asked to provide information regarding the funding of a portion of the proposed Research Hospital with the proceeds of tax-exempt debt. While the plan of finance has not been finalized, the following describes the preliminary plan that RIC is in the process of implementing, which will remain subject to change depending upon market conditions and other factors. In addition to operations and philanthropy, it is RIC's intent to issue approximately $25 million of incremental debt to support the construction of the new Research Hospital. The incremental debt will be used to manage the new Research Hospital cash flow requirements and will provide a permanent increase in debt of approximately $15 million. RIC has begun the financing process and expects to issue tax exempt bonds in 213. The financing team will include H2C, RIC's financial advisor, as well as J.P. Morgan Securities and Goldman Sachs as underwriters for the bonds. The plan of finance anticipates that RIC's existing $11 million par amount of variable rate debt will be restructured in order to achieve the most favorable borrowing terms overall. Therefore, maximum debt outstanding during the construction of the Research Hospital will be approximately $35 million, with approximately $1 million issued at fixed interest rates and $25 million in variable rate obligations, and will be issued through a combination of a negotiated public sale and bank direct placement. Internal cash and philanthropic support will be used to redeem the debt during the construction period. Based upon current interest rate levels, bond market characteristics and RIC's objectives, the finance team has recommended that the bonds be structured with 3-35 year final maturities. The fixed rate bonds are expected to be sold at a true interest cost below 6.%. The variable rate bonds will be structured either as LOC-backed demand bonds or will be purchased directly by J.P. Morgan, Northern Trust (both provide Letter of Credit support on RIC's current outstanding bonds) and other leading financial institutions. The variable rate bonds are expected to have received favorable indications from its initial meetings with the three major rating agencies; based on these indications and the analysis completed by the finance team, our bonds should be assigned a rating in the "A" category. The bonds will have covenants consistent with other A-rated bonds, with security limited to a debt service reserve fund, if necessary. Provided there is no significant change in the level of interest rates or demand for municipal bonds over the next several months, it is the opinion of H2C and RIC's underwriters that the financing transactions can be completed within the general parameters described above. CONCLUSIONS: The applicant addressed a total of 2 criteria and has not met the following: State Board Standards Not Met Criteria Reasons for Non-Compliance (a) Size of the Project The rehabilitation patient care units exceed the State Board standard by 11 GSF per room. The applicant acknowledges these spatial configurations surpass ADA requirements, and states the overages are necessary to accommodate the installation of specially designed bathrooms in each private room (b)- Project Services Utilization The applicant proposes to establish 4 general 5

6 State Board Standards Not Met Criteria Reasons for Non-Compliance radiology rooms, but supplied utilization data to justify the establishment of two rooms. The applicants stated two general radiology/fluoroscopy rooms that will be located in the main department and two radiographic units located on the floor of the medical office building to be leased by the hospital is being provided for the convenience of outpatients (b)(1) Planning Area Need There is an excess of 96 rehabilitation beds in HSA-6, and 11 of the 12 hospitals in the service area are below the 85% occupancy target. The applicant notes that the other 11 Chicago hospitals approved to provide comprehensive physical rehabilitation are not programmatically similar to their facility, attributing to utilization at or above the 6% level. The applicant notes that based on these factors, the patient base at their hospital will continue to rise, and the need for additional rehabilitation beds at RIC will continue, regardless of the bed excess in HSA (c)(1)(2)(3) Unnecessary Duplication 11 of the 12 area hospitals with Rehabilitation of Service/Maldistribution beds are not operating at the 85% State Clinical Service Areas Other than Categories of Service occupancy target. The applicant did not supply sufficient utilization data to justify the establishment of 4 general radiology rooms/units. The applicants stated two general radiology/fluoroscopy rooms that will be located in the main department and two radiographic units located on the floor of the medical office building to be leased by the hospital is being provided for the convenience of outpatients Financial Viability The applicant net margin percentages for 21, 211, and 219 did not meet the State Board Standard of 3.5% (c) Economic Feasibility New Construction and Contingencies exceed the State standard by $17.4 per GSF. The applicant attributes the overage to the 27 story heights of the building. 6

7 STATE BOARD STAFF REPORT Rehabilitation Institute of Chicago, Chicago Project #12-92 APPLICATION SUMMARY Applicant Rehabilitation Institute of Chicago Facility Name Rehabilitation Institute of Chicago Location Chicago, Illinois Application Received November 14, 212 Application Deemed Complete November 14, 212 Can Applicant Request Another Deferral? No I. The Proposed Project The applicant is proposing to discontinue a 165-bed rehabilitation hospital, and establish a 242-bed replacement hospital approximately three blocks away, in a newly constructed 27-level building on the campus of Northwestern Medical Center in Chicago. The cost of this project is $522,744,866. The anticipated project completion date of this project is March 31, 217. II. Summary of Findings A. The State Agency finds the proposed project does not appear to be in conformance with the provisions of Part 111. B. The State Agency finds the proposed project does not appear to be in conformance with the provisions of Part 112. III. General Information The applicant is Rehabilitation Institute of Chicago. The existing facility is located at 345 East Superior Street, Chicago, and new facility will be located at 63 North McClurg Court, Chicago in the HSA-6 comprehensive physical rehabilitation planning area. HSA-6 comprehensive planning area consists of the City of Chicago. The operating entity and the owner of the site is Rehabilitation Institute of Chicago. There is an additional 11 hospitals in this planning area offering comprehensive physical rehabilitation services. There is a calculated excess of 96 comprehensive rehabilitation beds in this planning area. The State Board s target utilization for rehabilitation beds is 85%. Project obligation will occur after permit issuance. This is a substantive project, and is 7

8 subject to both a Part 111 and Part 112 review. The anticipated project completion date is March 31, 217. At the conclusion of this report is the 211 Annual Hospital Profile for Rehabilitation Institute of Chicago, (RIC). TABLE ONE Rehabilitation Institute of Chicago Bed Utilization Category of Service Authorized Beds Proposed Beds Adm. 211 Patient Days ALOS ADC 211 CON Occupancy State Standard Met Standard? Rehabilitation ,66 52, % 85.% Yes 1. Patient Days includes inpatient and observation days. Summary of Support and Opposition Comments An opportunity for a public hearing was offered on this project; however, no hearing was requested. No letters of support or opposition were received by the State Agency. IV. The Proposed Project - Details The applicant is proposing to construct a 27-level building to house a 242-bed rehabilitation hospital. The Research Hospital will be located approximately three blocks south of the existing 182-bed Flagship Hospital, at 63 North McClurg Court, and replace the Flagship Hospital, which will be discontinued after project completion. The Research Hospital will be housed in seventeen levels of the proposed building, three floors will be developed as medical office space by a independent third-party developer, and the lower seven levels will be utilized for parking. Space at the ground level will be dedicated for use as a standby Emergency Department (ED). The building will consist of all new construction, and the research Hospital will be housed in 859,61 GSF of space. V. Project Costs and Sources of Funds The project is being funded with cash and securities totaling $61,444,866, Gifts and bequests amounting to $3,,, Bond Issues for $147,5,, and Fair Market Value of Leases totaling $13,8,. Table Two displays the project s cost information. The funding for the proposed project includes $3M in Gifts and Bequests. As of the filing of this Certificate of Need application, $141M has been pledged and/or received. Should the entire $3M not be realized, the applicant 8

9 has access to cash and debt not included in the identified Sources of Funds to address any shortfall in the realization of anticipated Gifts and Bequests. TABLE TWO Project Costs and Sources of Funds #12-92 Rehabilitation Institute of Chicago Clinical Non- Total Clinical Preplanning $918,39 $751,41 $1,669,8 Site Survey and Soil Investigation $21,167 $17,318 $38,485 Site Preparation $8,511,243 $6,963,745 $15,474,988 Off Site Work $222,853 $182,334 $45,187 New Construction Contracts $174,147,279 $144,332,68 $318,479,967 8 Contingencies $5,79,42 $7,176,495 $12,885,915 Architectural and Engineering Fees $9,416,288 $7,74,236 $17,12,524 Consulting and Other Fees $25,591,5 $2,938,5 $46,53, Movable Equipment $66,96, $7,344, $73,44, Bond Issuance Expense $1,677,5 $1,372,5 $3,5, Net Interest Expense During Construction $1,917,5 $8,932,5 $19,85, FMV Leased Space/Equipment $12,42, $1,38, $13,8, Total $315,649,14 $27,95,72 $522,744,866 6 Sources of Funds Cash and Securities $37,12,266 $24,342,6 $61,444,866 Gifts & Bequests $181,148,62 $118,85,93 $3,, 8 Bond Issues $89,64,955 $58,435,45 $147,5, FMV Leases $8,332,857 $5,467,143 $13,8, VI. Cost/Space Requirements Table Three displays the project s space requirements for the clinical and nonclinical portions of the project. The definition of non-clinical as defined in the Planning Act [2 ILCS 396/3] states, non-clinical service area means an area for the benefit of the patients, visitors, staff or employees of a health care facility and not directly related to the diagnosis, treatment, or rehabilitation of persons receiving 9

10 treatment at the health care facility. No decision has been made on the use of vacated or shell space at the facility. TABLE THREE Cost Space Requirements Department/Area Cost Existing Proposed New Construction Remodeled As Is Vacant Clinical Rehabilitation Units $16,349, ,26 184,26 Imaging-Main $18,938,948 13,116 13,116 Imaging-MOB $1,262, Therapy/Research-Main $11,477, , ,863 Therapy/Research-MOB $18,938,948 27,753 27,753 Pharmacy $2,84,842 3,683 3,683 Acute Dialysis $946,947 1,46 1,46 Laboratory $1,893,895 1,356 1,356 Total Clinical $315,649,14 38,628 38,628 Non-Clinical Admin./Education $72,483,54 137,81 137,81 Retail $2,7,957 2,478 2,478 Physician s Offices $1,768,978 14,8 14,8 Research Support $9,94,595 7,35 7,35 Facilities $8,283,829 28,473 28,473 Lobby $4,141,915 7,743 7,743 Dietary $16,567,658 17,663 17,663 Core, Mechanical, Bldg. Gross $82,838,29 263, ,682 Total Non Clinical $27,95, , ,433 Total $522,744, ,61 859,61 VII. Safety Impact Statement/ Charity Care The applicants provided a safety net statement at page 171 of the application for permit. The applicants stated in part Rehabilitation Institute of Chicago is not a member of a multi-hospital health care system, and as a result, there are not other hospitals that have an opportunity or the ability to cross-subsidize safety net services provided by RIC. While RIC is not an acute care provider, and the scope of safety net services it can provide is somewhat limited, it does provide considerable safety net services in the form of charity care. With the opening of the new Research Hospital, the Flagship Hospital will be discontinued, and will not have any impact on any other hospital s ability to provide safety net services. 1

11 Charity Care TABLE FOUR Rehabilitation Institute of Chicago Safety Net Impact Inpatient Outpatient 457 1,83 1,36 Total 662 1,294 1,626 Charity Care Inpatient $294,131 $296,559 $246,56 Outpatient $24,752 $34,418 $76,544 Total $534,883 $6,977 $1,6,599 Medicaid Inpatient Outpatient 2,793 2,817 2,54 Total 3,185 3,91 2,772 Medicaid Inpatient $9,649, $8,849,35 $12,198,853 Outpatient $6,68, $4,789,667 $4,29,934 Total $16,329, $13,638,972 $16,47,934 TABLE FIVE Rehabilitation Institute of Chicago Net Patient Revenue $141,36, $144,475, $155,378, Amount of Charity Care $1,165,324 $1,387,937 $2,513,983 Cost of Charity Care $523,395 $568,31 $1,41,161 Charity Care % of Net Patient Revenue.4%.4%.6% VIII. Discontinuation A) Criterion Discontinuation The applicant shall document that the discontinuation is justified. The applicant shall document that the discontinuation of each service or of the entire facility will not have an adverse impact upon access to care for residents of the facility's market area. The applicant shall provide copies of impact statements received from other resources or health care facilities 11

12 located within 45 minutes travel time that indicate the extent to which the applicant's workload will be absorbed without conditions, limitations or discrimination. The applicants shall identify the categories of service and the number of beds, if any, that are to be discontinued, the anticipated date of discontinuation for each identified service or for the entire facility, the anticipated use of the physical plant and equipment after discontinuation occurs; the anticipated disposition and location of all medical records pertaining to the services being discontinued and the length of time the records will be retained. The applicant states that in 1974, twenty years after its' founding, RIC built the world's first freestanding rehabilitation hospital. The hospital was the first of its kind, in that it brought together the continuum of physical rehabilitation care under one roof, dedicated singularly to the treatment of disabled patients. That building continues today, and many changes and enhancements to the original design over the past 38 years have helped maintain an adequate infrastructure for patient care and, to a lesser extent, research. However, the facility no longer meets RIC's needs for current patient care or research space and is significantly lacking in meeting RIC's future space needs. Most critical among the facility's shortcomings is the fact that it is not designed to facilitate the integral interactions between clinicians and researchers, which ultimately drive innovations and care processes. Further, there is little space for incorporating best practice clinical care standards such as private medication rooms and universal access in all bathrooms that have evolved since the original design. The applicants are proposing to discontinue an existing 182-bed rehabilitation hospital (The Flagship Hospital), located at 345 East Superior Street, Chicago, and establish a 242-bed replacement hospital (The Research Hospital), approximately 3 blocks away, at 63 North McClurg Court, Chicago. The applicant notes the proximity of the two facilities, combined with the proposed increase in inpatient/outpatient capacities will not result in diminished accessibility. There is an excess of 96 comprehensive rehabilitation beds in this planning area and the discontinuation of 182 comprehensive rehabilitation beds will create a need for 86 comprehensive care beds in this planning area. All medical records will be transferred to the replacement facility, and the applicant supplied certification that all questionnaire/ capital expenditure surveys will be provided through the date of discontinuation. The applicant sent impact letters to 2 health care facilities within a 45-minute radius, and received two responses indicating no negative impact would occur as a result 12

13 of the proposed project. The applicant is currently finalizing a long-term plan for use of the Flagship Hospital after discontinuation. While the proposed discontinuation will create a need for comprehensive rehabilitation beds in this planning area; the age of the existing structure and the changes in the standard of care for rehabilitative services appears to justify the discontinuation. A positive finding can be made for this criterion. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE DISCONTINUATION CRITERION (77 IAC ) VIII. Section Background Project Purpose and Alternatives The information requirements contained in this Section are applicable to all projects except projects that are solely for discontinuation. An applicant shall document the qualifications, background, character and financial resources to adequately provide a proper service for the community and also demonstrate that the project promotes the orderly and economic development of health care facilities in the State of Illinois that avoids unnecessary duplication of facilities or service. [2 ILCS 396/2] a) Background of Applicant 1) An applicant must demonstrate that it is fit, willing and able, and has the qualifications, background and character, to adequately provide a proper standard of health care service for the community. [2 ILCS 396/6] In evaluating the qualifications, background and character of the applicant, HFPB shall consider whether adverse action has been taken against the applicant, or against any health care facility owned or operated by the applicant, directly or indirectly, within three years preceding the filing of the application. A health care facility is considered "owned or operated" by every person or entity that owns, directly or indirectly, an ownership interest. If any person or entity owns any option to acquire stock, the stock shall be considered to be owned by such person or entity (refer to 77 Ill. Adm. Code 11 and 113 for definitions of terms such as "adverse action", "ownership interest" and "principal shareholder"). The applicant is Rehabilitation Institute of Chicago, and has provided the necessary documentation as required by the State Board rules. The applicant 13

14 provided attestation that no adverse actions have been taken against their facility during the three years prior to the filing of the application, and authorization permitting IHFSRB and Illinois Department of Public Health (IDPH) access to any documents necessary to verify the information submitted. b) Purpose of the Project The applicant shall document that the project will provide health services that improve the health care or well-being of the market area population to be served. The applicant shall define the planning area or market area, or other, per the applicant's definition. 1) The applicant shall address the purpose of the project, i.e., identify the issues or problems that the project is proposing to address or solve. Information to be provided shall include, but is not limited to, identification of existing problems or issues that need to be addressed, as applicable and appropriate for the project. Examples of such information include: A) The area's demographics or characteristics (e.g., rapid area growth rate, increased aging population, higher or lower fertility rates) that may affect the need for services in the future; B) The population's morbidity or mortality rates; C) The incidence of various diseases in the area; D) The population's financial ability to access health care (e.g., financial hardship, increased number of charity care patients, changes in the area population's insurance or managed care status); E) The physical accessibility to necessary health care (e.g., new highways, other changes in roadways, changes in bus/train routes or changes in housing developments). 2) The applicant shall cite the source of the information (e.g., local health department Illinois Project for Local Assessment of Need (IPLAN) documents, Public Health Futures, local mental health plans, or other health assessment studies from governmental or academic and/or other independent sources). 14

15 3) The applicant shall detail how the project will address or improve the previously referenced issues, as well as the population's health status and well-being. Further, the applicant shall provide goals with quantified and measurable objectives with specific time frames that relate to achieving the stated goals. 4) For projects involving modernization, the applicant shall describe the conditions being upgraded. For facility projects, the applicant shall include statements of age and condition and any regulatory citations. For equipment being replaced, the applicant shall also include repair and maintenance records. This project is part of Master Design Project #12-2, Rehabilitation Institute of Chicago, and the modernization of its medical campus. The proposed project calls for the replacement of its current hospital (Flagship Hospital), with a modern, 27-story, Research Hospital, approximately three blocks south of the existing facility. Rehabilitation Institute of Chicago (RIC), has been recognized as the nation s leading Physical Medicine and Rehabilitation Hospital for 22 consecutive years, and has fostered/maintained positions of leadership in both innovative patient care and the education of physical medicine. The purpose of this project is to address a shortage of patient care/research space, and integrate the clinical and research functions in an effort to provide better patient care. The proposed project calls for the establishment of a replacement facility in close proximity to the existing hospital, which will: Increase the hospital s capacity to admit and treat inpatients more efficiently. Increase the number of private patient rooms and increase the spatial configurations of these rooms, in accordance with modern health care standards. Combine research and therapy areas in accordance with RIC s highly-successful patient treatment model. Space for outpatient programs that have been forced to move out of the hospital due to a lack of suitable space will be provided, improving continuity of care; Space will be provided for selected research programs that have been forced to fit into constrained and often inaccessible space due to a lack of adequate space, or have been relocated to space outside of the flagship facility; 15

16 Space designed for specific equipment, never envisioned when the hospital was originally designed, will be provided; and Appropriate space will be provided to facilitate family participation in the rehabilitation process. The applicant noted its patient origin is essentially from throughout the world, with the majority originating in Chicago, and the State of Illinois. The applicant reports having served 82 patients from 68 countries in 212, which represents a 23% growth in international patients served at RIC. Table Six identifies its patient origin by percentage. TABLE SIX Patient Origin for Rehabilitation Institute of Chicago Origin Percentage Chicago Residents 42.8% Illinois Residents Outside of Chicago 46.9% Outside Illinois 1.3% c) Alternatives to the Proposed Project Information Requirements The applicant shall document that the proposed project is the most effective or least costly alternative for meeting the health care needs of the population to be served by the project. 1) Alternative options shall be addressed. Examples of alternative options include: A) Proposing a project of greater or lesser scope and cost; B) Pursuing a joint venture or similar arrangement with one or more providers or entities to meet all or a portion of the project's intended purposes; developing alternative settings to meet all or a portion of the project's intended purposes; C) Utilizing other health care resources that are available to serve all or a portion of the population proposed to be served by the project; and D) Other considerations. 16

17 2) Documentation shall consist of a comparison of the project to alternative options. The comparison shall address issues of cost, patient access, quality and financial benefits in both the short term (within one to three years after project completion) and long term. This may vary by project or situation. 3) The applicant shall provide empirical evidence, including quantified outcome data; that verifies improved quality of care, as available. The applicant considered four alternatives in regard to the proposed project: 1. Renovate the Current Structure and Construct a New Bed Tower Separate from the Existing Facility 2. Construct a New Facility Remote from the Northwestern Memorial Hospital Medical Campus 3. Make Improvements to the Facility s Existing Infrastructure and Utilize Other Healthcare Resources to Serve All or a Portion of the Patient Population 4. Construct a New Hospital Proximate to the McGaw Medical Campus (Project as Proposed) The first three alternatives were rejected, based on the inefficiencies of maintaining operations in the existing building, an inability to incorporate its innovative rehabilitation care model in the existing building footprint, and an inability to generate sufficient space to accommodate additional private rooms and incorporate conjoined clinical service and research spaces. While each option possessed its merits, ultimately the fourth option prevailed, based on its compliance with RIC s clinical, operational, and financial strategies. IX. Section Project Scope and Size, Utilization and Unfinished/Shell Space A) Criterion (a) - Size of Project 1) The applicant shall document that the physical space proposed for the project is necessary and appropriate. The proposed square footage (SF) cannot deviate from the SF range indicated in Appendix B, or exceed the SF standard in Appendix B if the standard is a single number, unless SF can be justified by documenting, as described in subsection (a) (2). 17

18 2) If the project SF is outside the standards in Appendix B, the applicant shall submit architectural floor plans (see HFSRB NOTE) of the project identifying all clinical service areas and those clinical service areas or components of those areas that do not conform to the standards. The applicant shall submit documentation of one or more of the following: A) The proposed space is appropriate and neither excessive nor deficient in relation to the scope of services provided, as justified by clinical or operational needs; supported by published data or studies, as available; and certified by the facility's Medical Director; or B) The existing facility's physical configuration has constraints that require an architectural design that exceeds the standards of Appendix B, as documented by architectural drawings delineating the constraints or impediments, in accordance with this subsection (a); or C) Additional space is mandated by governmental or certification agency requirements that were not in existence when the Appendix B standards were adopted. HFSRB NOTE: Architectural floor plans submitted shall identify clinical service areas or components and shall designate the areas in square footage. Architectural floor plans must be of sufficient accuracy and format to allow measurement. Format may be either a digital drawing format (.dwg file or equivalent) or a measurable paper copy 1/16 th scale or larger. Department/Area TABLE SEVEN Gross Square Feet by Department Proposed GSF Number of Beds Stations Rooms State Standard Difference Met Standard Per Unit Total Rehabilitation 184, ,72 24,36 over No Imaging 13,91 see below n/a 15,7 1,799 under Yes 18

19 The project proposes to establish the following Imaging services at two different sites in the Research Hospital. They are: One MRI Room One CT Room Two General Radiology Rooms Three Procedure Rooms containing C-Arms One Dexascan Room One Ultrasound Room Eight Pre-Procedure/Phase II Recovery Stations The applicant has met the size requirements for Imaging services. However, it appears the rooms in the patient unit exceed the State standard by 11 GSF per patient bed. The applicant acknowledges these spatial configurations surpass ADA requirements, and states the overages are necessary to accommodate the installation of specially designed bathrooms in each private room. A negative finding has been made for this criterion. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT DOES NOT APPEAR TO BE IN CONFORMANCE WITH THE SIZE OF THE PROJECT CRITERION (77 IAC (a)) B) Criterion Project Services Utilization The applicant shall document that, by the end of the second year of operation, the annual utilization of the clinical service areas or equipment shall meet or exceed the utilization standards specified in Appendix B. The number of years projected shall not exceed the number of historical years documented. If the applicant does not meet the utilization standards in Appendix B, or if service areas do not have utilization standards in 77 Ill. Adm. Code 11, the applicant shall justify its own utilization standard by providing published data or studies, as applicable and available from a recognized source, that minimally include the following: 1) Clinical encounter times for anticipated procedures in key rooms (for example, procedure room, examination room, imaging room); 2) Preparation and clean-up times, as appropriate; 3) Operational availability (days/year and hours/day, for example 25 days/year and 8 hours/day); and 4) Other operational factors. 19

20 The applicant has documented by the second year after project completion that services being proposed will be at the State Board s target occupancy except for General Radiology. The applicant proposes to establish 4 radiology/dexascan rooms, but can only justify the establishment of two. Based on these data, a positive finding cannot be made for this criterion. TABLE EIGHT Utilization by Second Year after Project Completion Number of Beds Stations Rooms State Standard Projected Utilization ADC Second Year After Complete Met Standard Department/Area Rehabilitation % 91% 219 Yes General 4 rooms 24, hrs 1,924 hrs 219 No Radiology/Dexascan Ultrasound 1 3,1 visits 1,116 visits 219 Yes CT 1 7, visits Yes MRI 1 2,5 procedures 1,778 procedures 219 Yes C-Arm 3 n/a 1,444 procedures 219 n/a THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT DOES NOT APPEAR TO BE IN CONFORMANCE WITH THE PROJECT SERVICE UTILIZATION CRITERION (77 IAC (b)) C) Criterion (c) Relationship to Previously Approved Master Design Project Review Criterion 1) The applicant must document that any construction or modification project submitted pursuant to an approved master design project is consistent with the approved design permit. When such construction or modification represents a single phase of a multiple phase master plan, the applicant must document that the proposed phase is consistent with the approved master plan, and that any elements which will be utilized to support additional phases are justified under the approved master design permit. Documentation shall consist of: A) schematic architectural plans for all construction or modification approved in the master design permit; 2

21 B) the estimated project cost for the proposed project and also for the total construction/modification project approved in the master design permit; C) an item by item comparison of the construction elements (i.e., site, number of buildings, number of floors, etc.) in the proposed project to the approved master design permit; and D) a comparison of proposed beds and services to those approved under the master design permit. The applicant notes the proposed project is programmatically unchanged from the original Master Design Project #12-2, approved by the State Board on April 17, 212. The spatial configuration and project budget were refined, resulting in a reduction of proposed beds, from 272 to 242. The conceptual design, project location, and population served remain unchanged. The applicant has included all space to be leased by the hospital in the application, including a single floor in the medical office building portion, which RIC has committed to lease from an outside developer. Architectural schematics are included with the application for permit (pgs 93-18a). THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE RELATIONSHIP TO PREVIOUSLY APPROVED MASTER DESIGN PROJECTS CRITERION (77 IAC (c)) X. Section Comprehensive Physical Rehabilitation A. Criterion (b)(1) Planning Area Need Review Criterion The applicant shall document that the number of beds to be established or added is necessary to serve the planning area's population, based on the following: 1) 77 Ill. Adm. Code 11 (formula calculation) A) The number of beds to be established for each category of service is in conformance with the projected bed deficit specified in 77 Ill. Adm. Code 11, as reflected in the latest updates to the Inventory. 21

22 B) The number of beds proposed shall not exceed the number of the projected deficit, to meet the health care needs of the population served, in compliance with the occupancy standard specified in 77 Ill. Adm. Code 11. The applicants note there is a current excess of 96 rehabilitation beds in HSA-6, and Board Staff concurs with these findings. The applicant also notes the historical utilization of its rehabilitation hospital to be in excess of the occupational targets for 211 (87.7%), and the first nine months of 212 (89.8%). The applicants attribute the excess occupancy to the diverse patient base originating from throughout Illinois, the United States, and the World. The applicant notes that the other 12 Chicago hospitals approved to provide comprehensive physical rehabilitation are not programmatically similar to their facility, attributing to lower utilization. The applicant notes that based on these factors, the patient base at their hospital will continue to rise, and the need for additional rehabilitation beds at RIC will continue, regardless of the bed excess in HSA-6. Due to the calculated excess of beds in HSA-6, a positive finding cannot be made for this criterion. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT DOES NOT APPEAR TO BE IN CONFORMANCE WITH THE PLANNING AREA NEED CRITERION (77 IAC (b)(1). B. Criterion (b)(2) - Service to Planning Area Residents Review Criteria A) Applicants proposing to establish or add beds shall document that the primary purpose of the project will be to provide necessary health care to the residents of the area in which the proposed project will be physically located (i.e., the planning or geographical service area, as applicable), for each category of service included in the project. B) Applicants proposing to add beds to an existing CPR service shall provide patient origin information for all admissions for the last 12-month period, verifying that at least 5% of admissions were residents of the area. For all other projects, applicants shall document that at least 5% of the projected patient volume will be from residents of the area. 22

23 C) Applicants proposing to expand an existing CPR service shall submit patient origin information by zip code, based upon the patient's legal residence (other than a health care facility). Throughout the application, the applicant has noted its advanced approach to comprehensive rehabilitation care, and the fact that its geographical service area exceeds the Chicago area. Table 6 indicates that while the majority of its patient base originates from Chicago, patients from throughout the State, combined with a growing international patient base have contributed to excessive operational capacities in 211 and 212. The applicant has supplied information to support the need for the proposed project, but could not furnish data documenting that 5% of the patient base will originate from HSA-6. During CY % were residents of HSA-VI, the city of Chicago. Based on these findings, a positive finding cannot be made. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT DOES NOT APPEAR TO BE IN CONFORMANCE WITH THE SERVICE TO PLANNING AREA RESIDENTS CRITERION (77 IAC (b)(2). C. Criterion (b)(3) Planning Area Need- Establishment of Category of Service Review Criteria Service Demand Establishment of Comprehensive Physical Rehabilitation The number of beds proposed to establish CPR service is necessary to accommodate the service demand experienced annually by the existing applicant facility over the latest two-year period, as evidenced by historical and projected referrals, or, if the applicant proposes to establish a new hospital, the applicant shall submit projected referrals. The applicant shall document subsection (b)(3)(a) and either subsection (b)(3)(b) or (C). A) Historical Referrals If the applicant is an existing facility, the applicant shall document the number of referrals to other facilities, for each proposed category of hospital bed service, for each of the latest two years. Documentation of the referrals shall include: patient origin by zip code; name and specialty of referring physician; name and location of the recipient hospital. 23

24 B) Projected Referrals An applicant proposing to establish CPR or to establish a new hospital shall submit the following: i) Physician referral letters that attest to the physician's total number of patients (by zip code of residence) who have received care at existing facilities located in the area during the 12-month period prior to submission of the application; ii) iii) iv) An estimated number of patients whom the physician will refer annually to the applicant's facility within a 24-month period after project completion. The anticipated number of referrals cannot exceed the physician's documented historical caseload; The physician's notarized signature, the typed or printed name of the physician, the physician's office address and the physician's specialty; and Verification by the physician that the patient referrals have not been used to support another pending or approved CON application for the subject services. i) An average annual occupancy rate that has equaled or exceeded occupancy standards for the category of service, as specified in 77 Ill. Adm. Code 11, for each of the latest two years; C) Projected Service Demand Based on Rapid Population Growth: If a projected demand for service is based upon rapid population growth in the applicant facility's existing market area (as experienced annually within the latest 24- month period), the projected service demand shall be provided. Documentation on projection methodology, data sources, assumptions and special adjustments shall be submitted to HFPB. 24

25 The applicant notes that RIC receives a vast majority of its inpatients as direct transfers from acute care hospitals in the State and Chicago area, to include hospitals with rehabilitation units. The applicant met with Board Staff in an effort to discuss the method of securing referrals for this unique project. It was agreed upon by both parties that projected referral data from referral sources, instead of area physicians would suffice for this project. The applicant supplied projected referral letters from Ann & Robert H. Lurie Children s Hospital of Chicago (application, p.117), projecting to refer 175 pediatric patients in the 219, the second full year after project completion. The application also contains a letter from Northwestern Memorial Healthcare Chicago, (application, p.118), documenting the referral of 1,379 patients to RIC for rehabilitative care in the recent past. Based on the agreed referral data, the applicant has met the requirements of this criterion. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE SERVICE DEMAND- ESTABLISHMENT OF CATEGORY OF SERVICE CRITERION (77 IAC (b)(3). D. Criterion (b)(5) Planning Area Need-Service Accessibility Review Criteria The number of beds being established or added for each category of service is necessary to improve access for planning area residents. The applicant shall document the following: A) Service Restrictions The applicant shall document that at least one of the following factors exists in the planning area: i) The absence of the proposed service within the planning area; ii) iii) Access limitations due to payor status of patients, including, but not limited to, individuals with health care coverage through Medicare, Medicaid, managed care or charity care; Restrictive admission policies of existing providers; 25

26 iv) The area population and existing care system exhibit indicators of medical care problems, such as an average family income level below the State average poverty level, high infant mortality, or designation by the Secretary of Health and Human Services as a Health Professional Shortage Area, a Medically Underserved Area, or a Medically Underserved Population; v) For purposes of this subsection (b)(5) only, all services within the 45-minute normal travel time meet or exceed the utilization standard specified in 77 Ill. Adm. Code 11. B) Supporting Documentation The applicant shall provide the following documentation, as applicable, concerning existing restrictions to service access: i) The location and utilization of other planning area service providers; ii) iii) iv) Patient location information by zip code; Independent time-travel studies; A certification of waiting times; v) Scheduling or admission restrictions that exist in area providers; vi) An assessment of area population characteristics that document that access problems exist; and vii) Most recently published IDPH Hospital Questionnaire. The applicant notes the number of rehabilitation beds being established in this project is necessary to improve access for planning area residents, and referral patients from outside this defined area as well. The applicant notes the uniqueness of the services provided as the exception to the excess of rehabilitation beds (96), in HSA-6. The applicant notes the 26

27 combination of patient care, research, and clinical training is the impetus behind high utilization rates, waiting lists/delayed admissions, and referrals from other hospital-based rehabilitation units. The applicant notes the bed increase from 182 beds to 242 beds is not excessive, and is in response to proven bed-need methodology specific to RIC. Based on these findings, it appears the applicants have met the requirements of this criterion, and a positive finding can be made. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE PLANNING AREA NEED-SERVICE ACCESSIBILITY CRITERION (77 IAC (b)(5). E. Criterion (c)(1)(2) Unnecessary Duplication of Service/Maldistribution Review Criteria 1) The applicant shall document that the project will not result in an unnecessary duplication. The applicant shall provide the following information: A) A list of all zip code areas that are located, in total or in part, within 3 minutes normal travel time of the project's site; B) The total population of the identified zip code areas (based upon the most recent population numbers available for the State of Illinois population); and C) The names and locations of all existing or approved health care facilities located within 3 minutes normal travel time from the project site that provide the categories of bed service that are proposed by the project. 2) The applicant shall document that the project will not result in maldistribution of services. Maldistribution exists when the identified area (within the planning area) has an excess supply of facilities, beds and services characterized by such factors as, but not limited to: A) A ratio of beds to population that exceeds one and onehalf times the State average; 27

28 B) Historical utilization (for the latest 12-month period prior to submission of the application) for existing facilities and services that is below the occupancy standard established pursuant to 77 Ill. Adm. Code 11; or C) Insufficient population to provide the volume or caseload necessary to utilize the services proposed by the project at or above occupancy standards. 3) The applicant shall document that, within 24 months after project completion, the proposed project: A) Will not lower the utilization of other area providers below the occupancy standards specified in 77 Ill. Adm. Code 11; and B) Will not lower, to a further extent, the utilization of other area hospitals that are currently (during the latest 12- month period) operating below the occupancy standards. The applicant notes the proposed project will not result in unnecessary duplication, based on the scope of services provided at RIC, and the fact that RIC attracts patients from around the world. The applicant notes the proven bed need methodology as proof of need, and state that upon completion of the 242-bed research hospital, the 165-bed flagship hospital will be discontinued. The applicant identified a 3-minute drive range, containing 11 zip codes. The 212 population of this service area is 3,171,176 residents. The applicant identified 13 facilities offering comprehensive inpatient rehabilitation services in this perimeter. These are listed in Table 9 below. TABLE NINE Facilities within 3 minutes of proposed project Name City Minutes # of Rehab Beds St. Mary of Nazareth Hospital Rush University Medical Center St. Joseph Health Ctr. & Hospital Advocate Illinois Masonic Medical Ctr. Louis A. Weiss Memorial Hospital 28 Utilization 211 State Standard Met Standard? Chicago % 85% No Chicago % 85% No Chicago % 85% No Chicago % 85% No Chicago % 85% No

29 TABLE NINE Facilities within 3 minutes of proposed project Name City Minutes # of Rehab Beds Mercy Hospital & Medical Ctr. University of Illinois Hospital Schwab Rehabilitation Hospital Rush Oak Park Hospital Swedish Covenant Hospital Resurrection Medical Ctr. Loyola University/Foster McGaw VHS Westlake Hospital Utilization 211 State Standard Met Standard? Chicago % 85% No Chicago % 85% No Chicago % 85% No Oak Park % 85% No Chicago % 85% No Chicago % 85% No Maywood % 85 Yes Melrose Park % 85% No Of the 13 facilities identified in Table Nine, 12 (92.3%), are performing beneath the State Occupancy Target for Rehabilitation beds. The applicant attests that the atypical geographic service area, combined with the scope of services offered at RIC, eliminate the possibility of duplication of services/maldistribution, and the establishment of the 242-bed rehabilitation hospital would not have a negative impact on the already-underperforming facilities in the area. However, these data suggest the proposed project may result in unnecessary duplication of service/maldistribution in the service area. A positive finding cannot be made for this criterion. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT DOES NOT APPEAR TO BE IN CONFORMANCE WITH THE UNNECESSARY DUPLICATION OF SERVICES/MALDISTRIBUTION CRITERIA (77 IAC (c)(1)(2)). C) Criterion (e) - Staffing Availability The applicant shall document that relevant clinical and professional staffing needs for the proposed project were considered and that licensure and JCAHO staffing requirements can be met. In addition, the applicant shall document that necessary staffing is available by providing letters of interest from prospective staff members, completed applications for 29

30 employment, or a narrative explanation of how the proposed staffing will be achieved. The applicants provided sufficient information that licensure and JCAHO staffing requirements can be met and the necessary staffing will be available. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE STAFFING AVAILABILITY REQUIREMENTS CRITERION (77 IAC (e)) D) Criterion (f) - Performance Requirements Bed Capacity Minimum 1) Rehabilitation The minimum freestanding facility size for comprehensive physical rehabilitation is a minimum facility capacity of 1 beds. The applicant proposes to establish a 242-bed freestanding Rehabilitation hospital, and has met the performance requirements as required by this standard. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE PERFORMANCE REQUIREMENTS CRITERION (77 IAC (f)) E) Criterion (g) - Assurances The applicant representative who signs the CON application shall submit a signed and dated statement attesting to the applicant's understanding that, by the second year of operation after the project completion, the applicant will achieve and maintain the occupancy standards specified in 77 Ill. Adm. Code 11 for each category of service involved in the proposal. The applicants have submitted a signed and dated statement attesting to the applicants understanding that by the second year after project completion the applicants will achieve and maintain the occupancy standards. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE ASSURANCES REQUIREMENTS CRITERION (77 IAC (g)) 3

31 XI. Section Clinical Service Areas Other Than Categories of Service Review Criteria b) Need Determination Establishment The applicant shall describe how the need for the proposed establishment was determined by documenting the following: 1) Service to the Planning Area Residents A) Either: i) The primary purpose of the proposed project is to provide care to the residents of the planning area in which the proposed service will be physically located; or ii) If the applicant service area includes a primary and secondary service area that expands beyond the planning area boundaries, the applicant shall document that the primary purpose of the project is to provide care to residents of the service area; and B) Documentation shall consist of strategic plans or market studies conducted, indicating the historical and projected incidence of disease or health conditions, or use rates of the population. The number of years projected shall not exceed the number of historical years documented. Any projections and/or trend analyses shall not exceed 1 years. 2) Service Demand To demonstrate need for the proposed CSA services, the applicant shall document one or more of the indicators presented in subsections (b)(2)(a) through (D). For any projections, the number of years projected shall not exceed the number of historical years documented. Any projections and/or trend analyses shall not exceed 1 years. A) Referrals from Inpatient Base For CSAs that will serve as a support or adjunct service to existing inpatient services, the applicant shall document a minimum two-year historical and two-year projected number of inpatients requiring the subject CSA. 31

32 B) Physician Referrals For CSAs that require physician referrals to create and maintain a patient base volume, the applicant shall document patient origin information for the referrals. The applicant shall submit original signed and notarized referral letters, containing certification by the physicians that the representations contained in the letters are true and correct. C) Historical Referrals to Other Providers If, during the latest 12-month period, patients have been sent to other area providers for the proposed CSA services, due to the absence of those services at the applicant facility, the applicant shall submit verification of those referrals, specifying: the service needed; patient origin by zip code; recipient facility; date of referral; and physician certification that the representations contained in the verifications are true and correct. D) Population Incidence The applicant shall submit documentation of incidence of service based upon IDPH statistics or category of service statistics. 3) Impact of the Proposed Project on Other Area Providers The applicant shall document that, within 24 months after project completion, the proposed project will not: A) Lower the utilization of other area providers below the utilization standards specified in Appendix B. B) Lower, to a further extent, the utilization of other area providers that are currently (during the latest 12-month period) operating below the utilization standards. 4) Utilization Projects involving the establishment of CSAs shall meet or exceed the utilization standards for the services, as specified in Appendix B. If no utilization standards exist in Appendix B, the applicant shall document its anticipated utilization in terms of incidence of disease or conditions, or historical population use rates. 32

33 The applicant has identified 4 clinical services applicable to this criterion. They are: General Radiology/Fluoroscopy (4 Units) MRI (1 Unit) CT(1 Unit) Ultrasound (1 Unit) The applicant notes that neither CT or MRI are currently provided at the Flagship hospital, and in the past have been provided through Northwestern Memorial Hospital, and that two of the four radiology/fluoroscopy units will be located in the main imaging department at the Research Hospital. The other two will be located in the MOB portion of the building leased by RIC, and is being provided for the convenience of outpatients. The applicant identified sufficient projected utilization data for all four services, with the exception of general radiology, where the historical utilization data suggests the establishment of only two general radiology rooms. Based on these findings, a negative finding has been made for this criterion. THE STATE BOARD STAFF FINDS THE PROPOSED PROJECT DOES NOT APPEAR TO BE IN CONFORMANCE WITH THE CLINICAL SERVICE AREAS OTHER THAN CATEGORIES OF SERVICE REQUIREMENTS CRITERION (77 IAC )) XIII Availability of Funds The applicant shall document that financial resources shall be available and be equal to or exceed the estimated total project cost plus any related project costs by providing evidence of sufficient financial resources. The total estimated project cost is $522,744,866. The applicants will fund the project through cash and securities totaling $61,444,866, bond issues totaling $147,5,, gifts and bequests totaling $3,,, and fair market value of leases totaling $13,8,. The applicants also furnished audited financial statements from Deloitte & Touche, LLP (application, p. 131), indicating sufficient financial resources exist to complete the project. The applicants have met the requirements of this criterion. THE STATE AGENCY FINDS THE PROPOSED PROJECT APPEARS TO MEET THE REQUIREMENTS OF THE AVAILABILITY OF FUNDS CRITERION (77 IAC ) XIV Financial Viability 33

34 a) Financial Viability Waiver The applicant is NOT required to submit financial viability ratios if: 1) all project capital expenditures, including capital expended through a lease, are completely funded through internal resources (cash, securities or received pledges); or HFSRB NOTE: Documentation of internal resources availability shall be available as of the date the application is deemed complete. 2) the applicant's current debt financing or projected debt financing is insured or anticipated to be insured by Municipal Bond Insurance Association Inc. (MBIA), or its equivalent; or HFSRB NOTE: MBIA Inc is a holding company whose subsidiaries provide financial guarantee insurance for municipal bonds and structured financial projects. MBIA coverage is used to promote credit enhancement as MBIA would pay the debt (both principal and interest) in case of the bond issuer's default. 3) the applicant provides a third-party surety bond or performance bond letter of credit from an A rated guarantor (insurance company, bank or investing firm) guaranteeing project completion within the approved financial and project criteria. The total estimated project cost is $522,744,866 and the applicants will fund the project through cash and securities totaling $61,444,866, bond issues totaling $147,5,, gifts and bequests totaling $3,,, and fair market value of leases totaling $13,8,. The applicants also supplied audited financial statements from Deloitte & Touche, LLP (application, p. 131), indicating sufficient financial resources exist to complete the project. The applicant provided financial viability ratios (Table Ten), and it appears that insufficient Net Margin Percentage data for years 21, 211, and 219 exist, resulting in a negative finding for this criterion. TABLE TEN Rehabilitation Institute of Chicago Ratio State Historical Projected Standard Current Ratio >= Net Margin Percentage >=3.5% 2.8% 3.2% 4.1%.9% Percent Debt to Total Capitalization <=8% 56.3% 48.5% 47.7% 27.4% 34

35 TABLE TEN Rehabilitation Institute of Chicago Ratio State Historical Projected Standard Projected Debt Service Coverage >= Days Cash on Hand >= Cushion Ratio >= THE STATE AGENCY FINDS THE PROPOSED PROJECT DOES NOT APPEAR TO MEET THE REQUIREMENTS OF THE FINANCIAL VIABILITY CRITERION (77 IAC ) XV Economic Feasibility Criterion (a) Reasonableness of Financing Requirements The applicant shall document the reasonableness of financing arrangements by submitting a notarized statement signed by an authorized representative that attests to one of the following: 1) That the total estimated project costs and related costs will be funded in total with cash and equivalents, including investment securities, unrestricted funds, received pledge receipts and funded depreciation; or 2) That the total estimated project costs and related costs will be funded in total or in part by borrowing because: A) A portion or all of the cash and equivalents must be retained in the balance sheet asset accounts in order to maintain a current ratio of at least 2. times for hospitals and 1.5 times for all other facilities; or B) Borrowing is less costly than the liquidation of existing investments, and the existing investments being retained may be converted to cash or used to retire debt within a 6- day period. The total estimated project cost is $522,744,866 and the applicants will fund the project through cash and securities totaling $61,444,866, bond issues totaling $147,5,, gifts and bequests totaling $3,,, and fair market value of leases totaling $13,8,. The applicants also supplied 35

36 audited financial statements from Deloitte & Touche, LLP (application, p. 131), indicating sufficient financial resources exist to complete the project. THE STATE AGENCY FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE REASONABLENESS OF FINANCING ARRANGEMENTS CRITERION (77 IAC (a)). B) Criterion (b) - Conditions of Debt Financing This criterion is applicable only to projects that involve debt financing. The applicant shall document that the conditions of debt financing are reasonable by submitting a notarized statement signed by an authorized representative that attests to the following, as applicable: 1) That the selected form of debt financing for the project will be at the lowest net cost available; 2) That the selected form of debt financing will not be at the lowest net cost available, but is more advantageous due to such terms as prepayment privileges, no required mortgage, access to additional indebtedness, term (years), financing costs and other factors; 3) That the project involves (in total or in part) the leasing of equipment or facilities and that the expenses incurred with leasing a facility or equipment are less costly than constructing a new facility or purchasing new equipment. The total estimated project cost is $522,744,866 and the applicants will fund the project through cash and securities totaling $61,444,866, bond issues totaling $147,5,, gifts and bequests totaling $3,,, and fair market value of leases totaling $13,8,. The applicants also supplied audited financial statements from Deloitte & Touche, LLP (application, p. 131), indicating sufficient financial resources exist to complete the project. The application contains a notarized statement from the applicant, attesting that the selected form of financing is at the lowest net cost available. This attestation is located on page 168 of the application for permit, meeting the requirements of this criterion. THE STATE AGENCY FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE TERMS OF DEBT FINANCING CRITERION (77 IAC (b)). 36

37 C) Criterion (c) - Reasonableness of Project and Related Costs The applicant shall document that the estimated project costs are reasonable and shall document compliance with the following: 1) Preplanning costs shall not exceed the standards detailed in Appendix A of this Part. 2) Total costs for site survey, soil investigation fees and site preparation shall not exceed the standards detailed in Appendix A unless the applicant documents site constraints or complexities and provides evidence that the costs are similar to or consistent with other projects that have experienced similar constraints or complexities. 3) Construction and modernization costs per square foot shall not exceed the standards detailed in Appendix A unless the applicant documents construction constraints or other design complexities and provides evidence that the costs are similar to or consistent with other projects that have experienced similar constraints or complexities. HFSRB NOTE: Construction and modernization costs (i.e., all costs contained in construction and modernization contracts) plus contingencies shall be evaluated for conformance with the standards detailed in Appendix A. 4) Contingencies (stated as a percentage of construction costs for the project's stage of architectural development) shall not exceed the standards detailed in Appendix A unless the applicant documents construction constraints or other design complexities and provides evidence that the costs are similar to or consistent with other projects that have experienced similar constraints or complexities. HFSRB NOTE: Contingencies shall be limited in use for construction or modernization (line item) costs only and shall be included in construction and modernization cost per square foot calculations and evaluated for conformance with the standards detailed in Appendix A. If, subsequent to permit issuance, contingencies are proposed to be used for other component (line item) costs, an alteration to the permit (as detailed in 77 Ill. Adm. Code ) must be approved by HFSRB prior to that use. 37

38 5) New construction or modernization fees and architectural/engineering fees shall not exceed the fee schedule standards detailed in Appendix A unless the applicant documents construction constraints or other design complexities and provides evidence that the costs are similar to or consistent with other projects that have experienced similar constraints or complexities. 6) The costs of all capitalized equipment not included in construction contracts shall not exceed the standards for equipment as detailed in Appendix A unless the applicant documents the need for additional or specialized equipment due to the scope or complexities of the services to be provided. As documentation, the applicant must provide evidence that the costs are similar to or consistent with other projects of similar scope and complexity, and attest that the equipment will be acquired at the lowest net cost available, or that the choice of higher cost equipment is justified due to such factors as, but not limited to, maintenance agreements, options to purchase, or greater diagnostic or therapeutic capabilities. 7) Building acquisition, net interest expense, and other estimated costs shall not exceed the standards detailed in Appendix A. If Appendix A does not specify a standard for the cost component, the applicant shall provide documentation that the costs are consistent with industry norms based upon a comparison with previously approved projects of similar scope and complexity. 8) Cost Complexity Index (to be applied to hospitals only) The mix of service areas for new construction and modernization will be adjusted by the table of cost complexity index detailed in Appendix A. The State Agency notes the costs identified below are for clinical expenses only, and the appropriate complexity ratio was applied to the Means cost standard and inflated by 3% annually. Preplanning Costs These costs total $918,39 or.37% of construction, contingency, and equipment costs. This appears reasonable compared to the State standard of 1.8%. Site Survey/Site Preparation Costs These costs total $8,532,41 or 4.7% of new construction and contingency costs. This appears to be reasonable 38

39 compared to the State Standard of 5%. Off-Site Work These costs total $222,853. The State Board does not have a standard for these costs. New Construction and Contingencies This cost is $179,856,699 or $ per GSF. This appears high when compared to the adjusted State Board standard of $ per GSF. Contingencies This cost is $5,79,42 or 3.2% of new construction costs. This appears reasonable when compared to the State Board standard of 1% for new construction. Architectural and Engineering Fees This cost is $9,416,288 or 5.2%of construction and contingency costs. This appears reasonable when compared to the State Board standard of 3.59% %. Consulting and Other Fees These costs total $25,591,5. The State Board does not have a standard for this cost. Moveable Equipment - These costs total $66,96,. The State Board does not have an applicable standard for this criterion in relation to hospitals. Bond Issuance Expense These costs total $1,677,5. The State Board does not have a standard for this cost. Net Interest Expense During Construction These costs total $1,917,5. The State Board does not have a standard for this cost. Other Costs to be Capitalized These costs total $12,42,. The State Board does not have a standard for this cost. THE STATE AGENCY FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE REASONABLENESS OF PROJECT COSTS CRITERION (77 IAC (c)). D) Criterion (d) - Projected Operating Costs The applicant shall provide the projected direct annual operating costs (in current dollars per equivalent patient day or unit of service) for the first full fiscal year at target utilization but no more than two years following project completion. Direct cost means the fully allocated costs of salaries, 39

40 benefits and supplies for the service. The applicant projects $4,37.29 as the projected operating cost per equivalent patient day. The State Board does not have a standard for this cost. THE STATE AGENCY FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE PROJECT DIRECT OPERATING COSTS CRITERION (77 IAC (d)). E) Criterion (e) - Total Effect of the Project on Capital Costs The applicant shall provide the total projected annual capital costs (in current dollars per equivalent patient day) for the first full fiscal year at target utilization but no more than two years following project completion. The applicant projects $ as the capital cost per patient day. The State Board does not have a standard for this cost. THE STATE AGENCY FINDS THE PROPOSED PROJECT APPEARS TO BE IN CONFORMANCE WITH THE TOTAL EFFECT OF THE PROJECT ON CAPITAL COSTS CRITERION (77 IAC (e)). 4

41 12-92 Rehabilitation Institute of Chicago - Chicago mi Copyright and (P) Microsoft Corporation and/or its suppliers. All rights reserved. Portions InstallShield Software Corporation. All rights reserved. Certain mapping and direction data 25 NAVTEQ. All rights reserved. The Data for areas of Canada includes information taken with permission from Canadian authorities, including: Her Majesty the Queen in Right of Canada, Queen's Printer for Ontario. NAVTEQ and NAVTEQ ON BOARD are trademarks of NAVTEQ. 25 Tele Atlas North America, Inc. All rights reserved. Tele Atlas and Tele Atlas North America are trademarks of Tele Atlas, Inc.

42 Hospital Profile - CY 211 Rehabilitation Institute of Chicago Chicago 1 Ownership, Management and General Information Patients by Race Patients by Ethnicity ADMINISTRATOR NAME: Peggy Kirk White # 6.8% Hispanic or Latino: 7.3% ADMINSTRATOR PHONE: Black # 23.6% Not Hispanic or Latino: 78.9% OWNERSHIP: Rehabilitation Institute of Chicago American Indian #.1% Unknown: 13.8% OPERATOR: Rehabilitation Institute of Chicago Asian # 1.7% IDPH Number: 1958 MANAGEMENT: Not for Profit Corporation (Not Church-R Hawaiian/ Pacific #.% CERTIFICATION: HPA A-1 # Unknown: 13.8% FACILITY DESIGNATION: Rehabilitation Hospital HSA 6 ADDRESS 345 East Superior Street CITY: Chicago COUNTY: Suburban Cook (Chicago) Clinical Service Medical/Surgical -14 Years Years Years Years 75 Years + Pediatric Intensive Care Direct Admission Transfers Authorized CON Beds 12/31/211 Peak Beds Setup and Staffed Admissions Inpatient Days Observation Days Obstetric/Gynecology Maternity Clean Gynecology Neonatal Long Term Care Swing Beds Acute Mental Illness Facility Utilization Data by Category of Service Peak Census Staff Bed Occupancy Rate % Rehabilitation ,66 52, Long-Term Acute Care.... Dedcated Observation Facility Utilization 165 2,66 52, Inpatients Outpatients (Includes ICU Direct Admissions Only) Inpatients and Outpatients Served by Payor Source Medicare Medicaid Other Public Private Insurance Private Pay Charity Care 45.6% 8.9%.% 35.2%.1% 1.2% Totals 27.9% 11.6%.% 53.4%.9% 6.2% ,917 Financial Year Reported: 9/1/21 to 8/31/211 Inpatient and Outpatient Net Revenue by Payor Source Total Charity Charity Care Expense Medicare Medicaid Other Public Private Insurance Private Pay Totals Care 1,6,599 Inpatient Expense 32.% 21.7%.% 46.3%.% 1.% Revenue ( $) Outpatient Revenue ( $) Average Length of Stay Average Daily Census CON Occupancy 12/31/ ,78,48 2,94,599 44,595,53 96,28,51 246, % 4.5%.% 75.9%.% 1.% 11,94,948 2,727,839 46,287,723 6,956,51 76,544.6% 2,66 Total Charity Care as % of Net Revenue Birthing Data Number of Total Births: Number of Live Births: Birthing Rooms: Labor Rooms: Delivery Rooms: Labor-Delivery-Recovery Rooms: Labor-Delivery-Recovery-Postpartum Rooms: C-Section Rooms: CSections Performed: Newborn Nursery Utilization Level 1 Patient Days Level 2 Patient Days Level 2+ Patient Days Total Nursery Patientdays Laboratory Studies Inpatient Studies 94,321 Outpatient Studies 5,81 Studies Performed Under Contract 5,811 Organ Transplantation Kidney: Heart: Lung: Heart/Lung: Pancreas: Liver: Total:

43 Hospital Profile - CY 211 Rehabilitation Institute of Chicago Chicago Surgery and Operating Room Utilization Surgical Specialty Operating Rooms Surgical Cases Surgical Hours Inpatient Outpatient Combined Total Inpatient Outpatient Inpatient Outpatient Total Hours Cardiovascular Dermatology General Gastroenterology Neurology OB/Gynecology Oral/Maxillofacial Ophthalmology Orthopedic Otolaryngology Plastic Surgery Podiatry Thoracic Urology Totals SURGICAL RECOVERY STATIONS Stage 1 Recovery Stations Stage 2 Recovery Stations 2 Hours per Case Inpatient Outpatient Procedure Type Gastrointestinal Laser Eye Procedures Pain Management Dedicated and Non-Dedicated Procedure Room Utilzation Procedure Rooms Surgical Cases Surgical Hours Inpatient Outpatient Combined Total Inpatient Outpatient Inpatient Outpatient Total Hours Cystoscopy Hours per Case Inpatient Outpatient Cardiac Catheterization Labs Cardiac Catheterization Utilization Total Cath Labs (Dedicated+Nondedicated labs): Total Cardiac Cath Procedures: Cath Labs used for Angiography procedures Diagnostic Catheterizations (-14) Dedicated Diagnostic Catheterization Labs Diagnostic Catheterizations (15+) Dedicated Interventional Catheterization Labs Interventional Catheterizations (-14): Dedicated EP Catheterization Labs Interventional Catheterization (15+) Emergency/Trauma Care EP Catheterizations (15+) Certified Trauma Center No Level of Trauma Service Level 1 Level 2 (Not Answered) Not Answered Operating Rooms Dedicated for Trauma Care Number of Trauma Visits: Patients Admitted from Trauma Emergency Service Type: Basic Number of Emergency Room Stations Persons Treated by Emergency Services: Patients Admitted from Emergency: Total ED Visits (Emergency+Trauma): Multipurpose Non-Dedicated Rooms Cardiac Surgery Data Total Cardiac Surgery Cases: Pediatric ( - 14 Years): Adult (15 Years and Older): Coronary Artery Bypass Grafts (CABGs) performed of total Cardiac Cases : Outpatient Service Data Total Outpatient Visits 189,87 Outpatient Visits at the Hospital/ Campus: 62,345 Outpatient Visits Offsite/off campus 127,525 Diagnostic/Interventional Equipment Examinations Owned Contract Inpatient Outpt Contract General Radiography/Fluoroscopy 7 1,81 6,358 Nuclear Medicine Mammography Ultrasound Angiography Diagnostic Angiography Interventional Angiography Positron Emission Tomography (PET) Computerized Axial Tomography (CAT) Magnetic Resonance Imaging Treatment Equipment Owned Contract Therapies/ Treatments Lithotripsy Linear Accelerator Image Guided Rad Therapy Intensity Modulated Rad Thrpy High Dose Brachytherapy Proton Beam Therapy Gamma Knife Cyber knife Source: 211 Annual Hospital Questionnaire, Illinois Department of Public Health, Health Systems Development.