Title 7 . Health and Social Services

Chapter 7 . Assistance for Community Health Facilities

Section 10. Expenditures to be included when determining whether a certificate of need is required

7 AAC 07.010. Expenditures to be included when determining whether a certificate of need is required

(a) In determining the amount of an expenditure for an activity under AS 18.07.031 (a), a person shall include the cost for one, or a combination of two or more, of the following components, as applicable:

(1) site excavation;

(2) construction, demolition, or remodeling of a building;

(3) other site or facility development;

(4) purchase of equipment, a building, or other property;

(5) purchase of land that is to be used for the health care facility; the value of land purchased for future development of the facility will be considered at the time the future development is to occur, if the

(A) future development requires a certificate of need; and

(B) value of the land was not included in a previous certificate of need issued under this chapter for the facility;

(6) the value of land that is owned by the applicant and that is to be used for the health care facility, based on the value of the land at acquisition or the current appraised value of the land after deducting the cost of the appraisal, whichever value is less; the provisions of this paragraph do not apply

(A) to an expenditure that involves only remodeling of an existing facility unless the remodeling includes an expansion of the facility; or

(B) if the value of the land was included in a previous certificate of need issued under this chapter for the facility;

(7) the value of space that is owned by the applicant and that is to be used for the health care facility, based on the value of the square footage of the space if it were leased, using the average current market rate for similar space leased in the proposed service area or comparable space in a comparable service area; the provisions of this paragraph do not apply to an expenditure that involves only remodeling of an existing facility unless the remodeling includes an expansion of the facility;

(8) leasing of equipment or space occupied by the facility, based on

(A) the net present value of the lease; for purposes of this subparagraph, "net present value" means the total lease payments over the useful life of the asset as set out in the 2004 version of Estimated Useful Lives of Depreciable Hospital Assets, published by the American Hospital Association and adopted by reference;

(B) the total cost of any leasehold improvements; and

(C) the total cost of any furnishings, fixtures, or equipment purchased or leased without regard to depreciation;

(9) undertakings essential to a component listed in this subsection; those items include

(A) studies, surveys, designs, plans, working drawings, site acquisitions and preparation, financing costs, research, training, and consultant costs; and

(B) for purchase of equipment, the cost of shipping and installation in addition to undertakings listed in (A) of this paragraph;

(10) donations in kind or transfers to a health care facility, including land, buildings, equipment, furnishings, and fixtures, which if acquired directly by the facility would be included as an expenditure, valued at the fair market value of the asset at the time of its donation or transfer.

(b) For an expansion of an existing facility, only the value of the land that will be used for the expansion will be considered an expenditure.

(c) For purposes of determining whether AS 18.07.031 (a) and this section apply to a specific activity, the expenditure of more than one person for the same activity will be considered the expenditure of the person conducting the activity.

(d) In this section,

(1) "excavation" means the digging out or removal of materials;

(2) "fixture" means an article that is permanently resting on, permanently affixed to, or permanently attached by cement, plaster, nails, bolts, screws, or other means to a building; "fixture" includes cabinets, counters, sprinkler systems, air conditioning units, furnaces, boilers, heating units, lighting fixtures, burglar alarms, fire alarms, plumbing fittings, awnings, Venetian blinds, lockers, walk-in refrigeration units, signs, vault doors and equipment, and elevators;

(3) "furnishings" means furniture, wall coverings, or floor coverings;

(4) "remodeling" means altering the structure or furnishings of a building; "remodeling" does not include routine maintenance or routine replacement of equipment;

(5) "used for the health care facility" means land occupied by the building where the health care facility is located, and land or space used in support of the facility, including outbuildings related to maintenance and other facility operations, recreational areas, and parking areas.

History: Eff. 10/26/77, Register 64; am 8/13/80, Register 75; am 8/8/90, Register 115; am 12/5/90, Register 116; am 5/19/91, Register 118; am 8/14/2005, Register 175

Authority: AS 18.07.031

AS 18.07.101

Editor's note: A copy of the Estimated Useful Lives of Depreciable Hospital Assets, adopted by reference in 7 AAC 07.010, may be examined at the department's certificate of need program at 350 Main Street, Juneau, Alaska, or may be purchased from the American Hospital Association, One North Franklin, 27th Floor, Chicago, Illinois 60606; telephone (800) 242-2626; Internet address: http: //www.ahaonlinestore.com/.