STATE OF NEW YORK PUBLIC HEALTH AND HEALTH PLANNING COUNCIL COMMITTEE DAY AGENDA May 22, 2014 10:00 a.m.   New York State Department of Health Offices at 90 Church Street, 4th Floor, Rooms 4A & 4B, NYC New York State Department of Health Offices, Triangle Building, 335 East Main Street, 2nd Floor Rochester, NY 14604 I. COMMITTEE ON ESTABLISHMENT AND PROJECT REVIEW Jeffrey Kraut, Chair A. Applications for Construction of Health Care Facilities Cardiac Services - Construction Exhibit # 1 Number Applicant/Facility 1. 141033 C New York Presbyterian Hospital – Columbia Presbyterian Center (Westchester County) 2. 141034 C Lawrence Hospital Center (Westchester County) Residential Health Care Facilities – Construction Number Applicant/Facility 1. 131158 C Richmond Center for Rehabilitation and Specialty Healthcare (Richmond County) 2. 132368 C Kendal at Ithaca (Tomkins County) Exhibit # 2 B. Applications for Establishment and Construction of Health Care Facilities/Agencies Ambulatory Surgery Centers - Establish/Construct Exhibit # 3 Number Applicant/Facility 1. 132124 B Union Square Surgery Center, LLC (New York County) 2. 132346 B Northway SPC, LLC d/b/a the Northway Surgery and Pain Center (Saratoga County) 3. 141004 E Garden City Surgi Center (Nassau County) 4. 141069 E Greater New York Endoscopy Surgical Center (Kings County) 5. 141080 E Upstate Orthopedics Ambulatory Surgery Center (Onondaga County) Diagnostic and Treatment Centers - Establish/Construct 1. Number Applicant/Facility 141013 E Ralph Lauren Center for Cancer Care and Prevention (New York County) Dialysis Services- Establish/Construct 2. Exhibit # 4 Exhibit # 5 Number Applicant/Facility 132352 E Lincoln Dialysis, LLC (Queens County) Residential Health Care Facilities - Establish/Construct Number Applicant/Facility 1. 131160 B Highland View Care Center Operating Co. LLC d/b/a Highland View Care Center (Bronx County) 2. 132306 E Northwoods Rehabilitation and Extended Care Facility at Moravia (Cayuga County) 3. 132349 E Lincoln Center for Rehabilitation and Healthcare, LLC (Queens County) 2 Exhibit # 6 4. 132355 E Flushing Center for Rehabilitation and Healthcare, LLC (Queens County) 5. 132357 E URNC Operating, LLC d/b/a Utica Rehabilitation & Nursing Center (Oneida County) 6. 132360 E NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation (Kings County) 7. 141029 E Ontario Operations Associates LLC d/b/a Ontario Center for Rehabilitation and Healthcare (Ontario County) 8. 141091 E Atlantis Operating LLC d/b/a The Phoenix Rehab and Healing Center (Kings County) Certified Home Health Agencies – Establish/Construct 1. Number Applicant/Facility 141051 E Oswego Health Home Care, Inc. (Oswego County) Exhibit # 7 C. Certificates Certificate of Dissolution Exhibit # 8 Applicant The Foundation for Planned Parenthood of Western New York, Inc. Restated Certificate of Incorporation Exhibit # 9 Applicant AC Center, Inc. Application for Authority Exhibit # 10 Applicant HCWNY Foundation, Inc. 3 D. Home Health Agency Licensures Home Health Agency Licensures II. Exhibit # 11 Number Applicant/Facility 2131 L Cambridge Home Care, LLC (Bronx, Kings, New York, Queens, Richmond and Westchester Counties) 2135 L InterMed Health Care Services, Inc. (Bronx, Kings, Nassau, New York and Queens Counties) 2132 L LK Healthcare, Inc. d/b/a Accessible Home Health Care of Staten Island (Richmond County) 2365 L Refuah Home Health, Inc. (Kings, Orange, Rockland and Sullivan Counties) 1818 L Sofia’s Home Care, Inc. (Bronx, Kings, New York, Queens and Richmond Counties) 2110 L Ultimate Home Care, Inc. (Bronx, Kings, New York, Queens and Richmond Counties) 2209 L Magic Home Care, LLC (Kings, Queens and Richmond Counties) COMMITTEE ON CODES, REGULATIONS AND LEGISLATION John Palmer, Ph.D., Vice Chair Exhibit #12 For Adoption 13-03 Addition of Section 400.25 to Title 10 NYCRR (Disclosure of Quality and Surveillance Related Information) 13-12 Amendment of Section 1.31 of Title 10 NYCRR (Disclosure of Confidential Cancer Information) III. COMMITTEE ON HEALTH PLANNING Dr. John Rugge, Chair 4 Public Health and Health Planning Council Project # 141033-C New York Presbyterian Hospital - Columbia Presbyterian Center County: Westchester Purpose: Construction Program: Hospital Acknowledged: January 24, 2014 Executive Summary Description New York Presbyterian Hospital-Columbia Presbyterian Center, part of a 2,478-bed, not-for-profit hospital health care system located in New York and Westchester counties, is seeking to jointly construct and operate a cardiac catheterization laboratory located at Lawrence Hospital Center (Westchester County). New York Presbyterian Hospital is requesting to amend its operating certificate, requesting a joint certification with Lawrence Hospital Center to operate a cardiac catheterization laboratory located at Lawrence Hospital Center. Concurrently, Lawrence Hospital Center is seeking to amend its operating certificate requesting a joint certification, via CON 141034, with New York Presbyterian Hospital to operate the new cardiac catheterization laboratory located at Lawrence Hospital Center. The application results from both Lawrence Hospital Center and New York Presbyterian Hospital joining services in order to provide cardiac catheterization and enhance quality of cardiac services at Lawrence Hospital Center through the shared resources and improved access of patients. As part of this project, NYP-Columbia will also concurrently reduce one of its existing cardiac catheterization laboratories, resulting in no net increase in cardiac catheterization laboratories in New York State. transferred to New York Presbyterian HospitalColumbia Presbyterian Center. DOH Recommendation Contingent Approval Need Summary NYP-Columbia will reduce its cardiac catheterization laboratories from 8 to 7 and transfer one lab from New York County to Lawrence Hospital in Westchester County. New York Presbyterian Center is currently treating 752 patients from Westchester County, which is enough to support two PCI laboratories in Westchester County. The transfer of one lab will allow Westchester residents to receive treatment closer to home. The new lab will meet all the Department’s minimum qualifications. The transfer of the single lab will not result in a change in the number of laboratories within the New York Presbyterian Health System. Program Summary Based on the results of this review, a favorable recommendation can be made regarding the facility’s current compliance pursuant to 2802-(3)(e) of the New York State Public Health Law. New York Presbyterian Hospital will provide clinical leadership and quality oversight for the outpatient procedures for the cardiac catheterization laboratory located at Lawrence Hospital Center. Lawrence Hospital Center will provide quality oversight for the inpatient procedures. Patients needing surgery will be Project #141033-C Exhibit Page 1 Financial Summary There are no project costs associated with this project. Budget: Revenues Expenses Excess of Revenues over Expenses $9,604,370 9,023,846 $ 580,524 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Project #141033-C Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. Submission of an executed Comprehensive Cardiac Center Affiliation Operating Agreement that is acceptable to the Department of Health. [BFA] 2. Submission of an executed Employee Leasing Agreement, acceptable to the Department. [BFA] 3. Submission of an executed Occupancy License Agreement, acceptable to the Department. [BFA] 4. Submission of a executed Comprehensive Cardiac Center Affiliation Operating Agreement with a NYS Cardiac Surgery Center, acceptable to the Department, in accordance with the standards at Section 405.29(c)(8)(i). [HSP] 5. Submission of written documentation of governing body approval of the co-operator contract. [HSP] 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] Council Action Date June 12, 2014 Project #141033-C Exhibit Page 3 Need Analysis Project Description New York Presbyterian Center-Columbia (NYP-Columbia) requests approval for joint certification with Lawrence Hospital Center (Lawrence) of a PCI capable cardiac catheterization Lab at Lawrence Hospital. This project will be a transfer of one lab from NYP-Columbia (New York County) to Lawrence (Westchester County). Background New York Presbyterian Center-Columbia has the following certified beds and services: Table 1: NYP-Columbia: Certified Beds. Source: HFIS, 2014. Bed Category AIDS Bone Marrow Transplant Chemical Dependence Detox Coronary Care Intensive Care Maternity Medical / Surgical Neonatal Continuing Care Neonatal Intensive Care Neonatal Intermediate Care Pediatric Pediatric ICU Physical Medicine and Rehabilitation Psychiatric Total Certified Capacity 14 12 3 18 99 58 551 11 14 33 100 41 16 25 995 Table 2: NYP-Columbia: Certified Services. Source: HFIS, 2014. AIDS Neonatal Continuing Care AIDS Center Neonatal Intensive Care Ambulatory Surgery – Multi Speciality Neonatal Intermediate Care Audiology O/P Nuclear Medicine – Diagnostic Cardiac Catheterization – Adult Diagnostic Nuclear Medicine – Therapeutic Cardiac Catheterization – Electrophysiology (EP) Pediatric Cardiac Catheterization – Pediatric Diagnostic Pediatric Intensive Care Cardiac Catheterization – Pediatric Intervention Elective Pediatric O/P Cardiac Catheterization – Percutaneous Coronary Intervention (PCI) Pharmaceutical Service Cardiac Surgery – Adult Physical Medical Rehabilitation O/P Cardiac Surgery – Pediatric Prenatal O/P Certified Mental Health Services O/P Primary Medical Care O/P Chemical Dependence – Detoxification Psychiatric Clinical Laboratory Service Radiology – Diagnostic Comprehensive Psychiatric Emergency Program Radiology-Theapeutic Coronary Care Renal Dialysis – Acute Project #141033-C Exhibit Page 4 Dental O/P Renal Dialysis – Chronic Emergency Department Respiratory Care Epilepsy Comprehensive Services Therapy – Occupational O/P Family Planning O/P Therapy – Physical O/P Health Fairs O/P Therapy – Speech Language Pathology Intensive Care Transplant – Bone Marrow Linear Accelerator Transplant – Heart – Adult Lithotripsy Transplant – Heart – Pediatric Magnetic Resonance Imaging Transplant – Kidney Maternity Transplant – Liver Medical Social Services Medical/Surgical State designations:  AIDS Center;  Regional Perinatal Center;  Regional Pediatric Trauma Center;  SAFE Center; and  Stroke Center Analysis New York Presbyterian Center-Columbia seeks approval for joint certification with Lawrence Hospital Center of a PCI capable cardiac catheterization laboratory at NYP-Columbia. Lawrence Hospital Center will add the following certified services to its operating certificate:  Cardiac catheterization – adult diagnostic;  Cardiac catheterization – adult intervention;  Cardiac catheterization – percutaneous coronary intervention; Through this application, NYP-Columbia, located in New York County will reduce one of its existing cardiac catheterization labs and transfer it to a network facility Lawrence in Westchester County. The hospital network will not see a change in the number of cardiac catheterization labs. Currently NYP-Columbia is treating over 500 patients from Westchester County, but this number sometimes surges to over 700 (NYP-Columbia treated 752 Westchester residents in 2012). The transfer of the lab to Lawrence in Westchester will allow the patients to be treated closer to home.  Volume Requirements: o 709.14(d)(ii)(c): All PCI capable cardiac catheterization laboratory centers must yield 36 emergency PCI procedures per year within the first year of operation and at least 200 total PCI cases per year within two years of start-up.  The standard will be met:  It is projected there will be 60 emergency PCI procedures performed in the first year of the Lab’s operations and 77 emergency PCI procedures performed in the third year of operation. Both the number of emergency PCls and total PCI cases will exceed the above referenced minimums.  lf provided locally, the services would greatly ameliorate the inconvenience and cost to patients and families of travelling to New York County. o Section 709.14(d)(1)(ii)(k): Where public need is established herein, priority consideration shall be given to applicants that can demonstrate projected volume in excess of 300 PCI cases per year.  This standard will be met:  Based on the above projections of the 304 PCI anticipated cases that will be done in year 1. Project #141033-C Exhibit Page 5 o Section 405.29(3)(iii): Minimum Workload Standards. Any institution seeking to maintain approval shall present evidence that the annual minimum workload standards have been achieved and maintained. Diagnostic Cardiac Catheterization Services shall achieve and maintain an annual minimum volume of 200 angiographic diagnostic cardiac catheterization procedures within two years of initial approval.  This standard will be met. o Section 405.29(2)(iv): Minimum Workload Standards. Each PCI Capable Cardiac Catheterization Laboratory Center must maintain a minimum volume of 150 percutaneous coronary intervention cases per year including at least 36 emergency percutaneous coronary intervention cases per year. Hospitals with volumes below 400 percutaneous coronary intervention cases per year must comply with NYSDOH reviews as outlined in regulations. Section 405.29(2)(iv)(a): PCI Capable Cardiac Catheterization Laboratory Centers with an annual volume between 300 and 400 percutaneous coronary intervention cases shall undergo a review of cases and outcome trends conducted by the Department to evaluate the appropriateness and quality of care provided by the center.  This standard will be met.  As previously noted, it is projected that there will be 304 PCI procedures performed in the first year of operations. Since more than 300 PCl’s are anticipated per year, the program will not be subject to reviews required for programs with lesser volume. o In 2008, the PCI volume for residents of Westchester County was 1,709 procedures; by 2012, these procedures declined by 19.4 percent to 1,376. It should be noted that there are large swings in data and in 2011 the visits were only down 5.6 percent to 1,612. The overall numbers are still showing a decline in the number of Westchester County residents requiring PCI treatment. (Table 3). Table 3: Westchester County Residents: PCI Utilization Statistics by Place of Procedure. Source: Cardiac Services Program, 2008 – 2012. County/Hospital 2008 2009 2010 2011 2012 Bronx County 277 258 163 123 114 Kings County 3 3 6 2 1 1425 1300 1207 1484 1254 4 1 8 3 7 1,70 9 1,562 1,384 1,612 1,376 New York County Richmond County Subtotal Hudson Valley Region Hospitals Good Samaritan Hospital (Suffern) 3 3 3 1 4 Orange Regional Medical 0 0 0 1 2 St. Francis Hospital 10 5 10 8 8 Vassar Brothers Medical Center 11 3 5 2 8 719 684 683 485 352 Westchester Medical Center White Plains Hospital Total 0 0 122 240 274 743 695 823 737 648 All existing PCI capable cardiac catheterization laboratories are expected to maintain a volume of 300 PCI procedures per year. Currently, there are 7 hospitals in the Hudson Valley region with PCI Labs, of these; only one (1) is not meeting the PCI volume standard of 300 procedures per year (Table 5). The one facility not meeting the 300 visits is still seeing 291 for the last year reported, showing that the Hudson Valley region is at capacity. As shown in Table 4, NYP-Columbia treated 580 patients for PCI in 2012 and NYP-Weill treated 172 patients. These 752 patients are all from Westchester County and could potentially be treated in Westchester after the PCI lab has been transferred to Lawrence Hospital. Project #141033-C Exhibit Page 6 Table 4: NYP-Columbia: PCI Utilization Statistics for NYP-Columbia. Source: Cardiac Services Reporting System, 2012. Hospital 2008 2009 2010 2011 2012 NYP-Columbia 569 532 477 729 580 NYP-Weill 247 233 225 197 172 Total 816 765 702 926 752 Table 5: Hudson Region Hospitals: PCI Utilization Statistics. Source: Cardiac Services Program 2008- 2012. Hospital Good Sam Suffern Hospital Orange Regional Medical St. Francis Hospital Vassar Brothers Medical Center Westchester Medical Center White Plains Hospital St. Lukes Cornwall Total 2008 2009 2010 2011 2012 888 792 661 645 531 87 109 534 554 592 3,196 3,292 3,092 2,718 2,388 739 659 679 696 703 1277 1218 1043 694 488 0 0 133 256 291 0 39 364 348 324 6187 6109 6506 5911 5317 Based on 709.14(d)(2), PCI capable cardiac catheterization labs are required to maintain a minimum PCI volume of 300 procedures per year, and this volume level will be maintained following the approval. Conclusion As stated in 10 NYCRR 709.14(d)(1), the factors and methodology for determining the public need for PCI Capable Cardiac Laboratory Centers shall include, but not be limited to, the following:  The planning area for PCI capable catheterization laboratories is one hour average surface travel time.  Evidence that existing PCI capable catheterization laboratories within the planning area cannot adequately meet the needs of patients in need of emergency PCIs due to conditions such as capacity, geography, and/or EMS limitations.  Documentation by the applicant must demonstrate the hospital’s ability to provide high quality care that would yield a minimum of 36 emergency PCI procedures per year within the first year of operation and would yield a minimum of 200 total PCI cases per year within two years of start-up.  Existing referral patterns indicate that approval of an additional service will not jeopardize the minimum volume required at other existing PCI capable cardiac catheterization laboratories. Over the last five (5) years, PCI procedures for the residents of Westchester County have declined. The declining utilization pattern for the residents of Westchester County is consistent with the statewide pattern. However, the Westchester residents being treated at New York Presbyterian Center exceed the number needed to support a PCI lab in Westchester. If fewer than half the Westchester patients currently being treated at the New York Presbyterian facilities return to Westchester, their number will be enough to support the PCI lab. Because the NYP-Columbia PCI laboratory at Lawrence Hospital would serve Westchester County patients currently traveling to Manhattan, its operation would not adversely affect the ability of existing PCI programs at Hospitals in Westchester County and the Hudson Valley to maintain current PCI volumes. Recommendation From a need perspective, approval is recommended. Project #141033-C Exhibit Page 7 Program Analysis Project Proposal New York Presbyterian Hospital - Columbia Presbyterian Center (NYP-Columbia), a 2,478-bed, not-forprofit hospital health care system that is a full services cardiac surgery provider with eight (8) cardiac catheterization laboratories (CCLs), seeks approval for the relocation of one of its existing percutaneous coronary intervention (PCI) capable cardiac catheterization labs from NYP-Columbia to Lawrence Hospital Center (LHC) in Westchester County. Under this arrangement, there will be no net increase or loss of cardiac catheterization laboratories in New York State. The aim of the jointly operated program is to provide residents of Westchester County local access to higher-level cardiac catheterization services. Clinical leadership and quality oversight for outpatient procedures will be provided by NYP-Columbia for the cardiac catheterization laboratory located at the LHC site. Additionally, the policies and procedures currently in place at NYP-Columbia for its cardiac catheterization laboratory services will be incorporated into the operation of the joint cardiac catheterization lab, and patients who require surgery will be transferred to NYP-Columbia. Currently, among other services, NYP-Columbia is certified for: Cardiac Catheterization – Adult Diagnostic Cardiac Catheterization – Electrophysiology Cardiac Catheterization – Pediatric Diagnostic Cardiac Catheterization – Intervention Elective Cardiac Catheterization – Percutaneous Coronary Intervention (PCI) Cardiac Surgery – Adult Cardiac Surgery – Pediatric The Operating Certificate of NYP-Columbia will change to indicate that there will be an off-site location at Lawrence Hospital Center, with the inpatient component of the above-noted services to be provided by Lawrence under contract through NYP-Columbia, and the outpatient component of the above-noted services to be provided by NYP-Columbia. A concurrent CON (#141034) has been submitted by Lawrence Hospital Center. Upon approval, LHC will have the services below added to their operating certificate. In addition, the LHC operating certificate will change to indicate that the inpatient component of those services will be provided by Lawrence under contract through NYP-Columbia and the outpatient component of those services will be provided by NYPColumbia. Cardiac Catheterization – Adult Diagnostic Cardiac Catheterization – Intervention Elective Cardiac Catheterization – Percutaneous Coronary Intervention (PCI) The Applicant has submitted a written plan that demonstrates their ability to comply with all of the standards for PCI Capable Cardiac Catheterization Laboratories and they have assured the Department that their program will meet all of the requirements of 409.29(e)(1) and 409.29(e)(2). Compliance with Applicable Codes, Rules and Regulations This facility has no outstanding Article 28 surveillance or enforcement actions and, based on the most recent surveillance information, is deemed to be currently operating in substantial compliance with all applicable State and Federal codes, rules and regulations. This determination was made based on a review of the files of the Department of Health, including all pertinent records and reports regarding the facility’s enforcement history and the results of routine Article 28 surveys as well as investigations of reported incidents and complaints. Recommendation From a programmatic perspective, contingent approval is recommended. Project #141033-C Exhibit Page 8 Financial Analysis Comprehensive Cardiac Center Affiliation Operating Agreement The applicant has submitted a draft comprehensive cardiac center affiliation agreement and operating agreement, which is summarized below: Parties: Purpose: Duties of NYP: Duties of LHC: Term: Compensation: New York Presbyterian Hospital (NYPH) and Lawrence Hospital Center (LHC) The parties have applied for two separate certificate of need applications to jointly operate an Article 28 diagnostic cardiac catheterization and PCI capable cardiac catheterization program. NYP will provide all non-physician personnel (including allied health and technical staffing) for the Cath Lab; will arrange for the provision of diagnostic cardiac catheterizations and percutaneous coronary intervention services to outpatients of the Cath Lab and to Lawrence inpatients; shall serve as the Comprehensive Cardiac Surgery Center Affiliate for the Cath Lab; shall make arrangements to staff the Cath Lab with a sufficient number of licensed and/or certified, appropriately trained and credentialed non-physician clinicians, and NYP shall bill patients, or, as applicable, responsible third party payors for the technical component of the Outpatient Services rendered in the Cath Lab. LHC shall arrange that the Cath Lab is staffed by a sufficient number of licensed, Board certified, appropriately trained and credentialed physicians to provide services to outpatients and inpatients seeking services at the Cath Lab during all hours of the Cath Lab’s operations and only Lawrence shall have the right to submit bills for and collect fees and charges to third party payors and patients for the clinical services provided to Inpatients. The term of the agreement shall be for three years. Following the end of the Initial Term, the term shall automatically be extended for successive one year periods. Lawrence Hospital shall pay NYP a fee for each cardiac catheterization procedure performed on an Inpatient basis. The estimated fee paid to NYP during the first and third year is $3,988,610 and $4,640,364, respectively. Employee Leasing Agreement The applicant has submitted a draft employee leasing agreement, which is summarized below: Parties: Purpose: Leased Employees: Lease Employee Status: Responsibilities and Lawrence Hospital Center and New York Presbyterian Hospital Lawrence has agreed to lease to NYPH certain of its respective employees to provide services in connection with the operation of the Cath Lab. Lawrence shall lease to NYPH certain non-physician Lawrence employees to provide services in the Cath Lab on either a full time or part time basis. During the term of this Agreement, each Leased Employee shall be and shall remain an employee of Lawrence and while performing Services as the Cath Lab will be managed and receive direction from NYPH managers and supervisors whose duty it is to oversee the operation of the Cath Lab. Each Leased Employee shall remain an employee of Lawrence not NYPH. At such time as a leased Employee is providing Services at the Cath Lab pursuant to this Agreement, NYPH managers and supervisors shall have authority and responsibility for supervisors and directing such Leased Employee, determining the means and methods by which such Leased Employee provide Services hereunder and confirming that Leased Employee performs Services to appropriate professional standards and in conformance with Law. NYPH shall have and exercise all authority and power to direct the Project #141033-C Exhibit Page 9 Authority of NYPH: Responsibilities and Authority of Lawrence: Term: Compensation: activities and duties of the Leased Employees; NYPH will cooperate with Lawrence so that Lawrence is able to comply with the collective bargaining agreements applicable to the Leased Employees and labor laws and laws regarding equal opportunities, whether federal, state of local; NYPH shall provide all equipment and materials reasonably necessary for the Leased Employees to provide Services pursuant to this Agreement and NYPH may at its sole option, require Lawrence to immediately remove from the Cath Lab and leased employee. Lawrence shall have the sole and exclusive responsibility for determining, paying and providing the wages, salaries and fringe benefits and other compensation of all the Leased Employees and Lawrence will comply with all applicable collective bargaining agreements applicable to the Leased Employees and labor laws and laws regarding equal employment opportunities, whether federal, State of local. This agreement will terminate upon the termination, expiration or nonrenewal of the Operating Agreement. NYPH agrees to pay Lawrence a fee for the Leasing of the Employees. The estimated fee paid to Lawrence during the first and third year is estimated at $6,520,532 and $7,534,396, respectively. Occupancy License Agreement The applicant has submitted a draft occupancy license agreement for the space that NYPH will lease from Lawrence, which is summarized below: Premises: Lessor: Lessee: Term: Rental:l Provisions: 3,500 square feet located on the 3rd floor, 3 West, in the building located at 55 Palmer Avenue, Bronxville, New York. Lawrence Hospital Center New York Presbyterian Hospital Five years unless sooner terminated in accordance with the provisions of this Agreement. The annual rent shall be $156,000 ($44.57 per sq.ft.) The lessee shall be responsible for maintenance and utilities. Operating Budget The applicant has submitted an incremental operating budget, in 2014 dollars, for New York Presbyterian Hospital, for the first and third years, summarized below: Year One Year Three Revenues: Outpatient Annual Fee from Lawrence Hospital Total Revenues $4,029,700 3,988,610 $8,018,310 $4,964,006 4,640,364 $9,604,370 Expenses: Operating Capital Total Expenses $7,172,474 899,610 $8,072,084 $8,186,338 837,508 $9,023,846 ($53,774) $580,524 496 $16,274.36 611 $14,768.98 Excess of Revenues over Expenses Outpatient: (Visits) Cost Per Visit Project #141033-C Exhibit Page 10 Incremental utilization, broken down by payor source, for the first and third years of New York Presbyterian Hospital outpatient services is as follows: Medicaid Managed Care Medicare Fee For Service Commercial Fee For Service Other Year One 9.07% 47.78% 39.71% 3.44% Year Three 9.16% 47.79% 39.77% 3.28% Expense assumptions are based on the standard NYPH cardiac catheterization staffing model and were jointly determined by NYPH and Lawrence Hospital Center. Utilization assumptions are based on actual NYPH cardiac catheterization laboratory volume of residents of Westchester County who travel to NYP/Columbia for PCI procedures. Capability and Feasibility There is no total project cost associated with this application. The submitted incremental budget for New York Presbyterian Hospital projects an excess of revenues over expenses of ($53,774) and $580,524 for the first and third year of operation, respectively. Revenues are based on current reimbursement rates of New York Presbyterian Hospital’s outpatient cardiac catheterization services. As shown on Attachment A, New York Presbyterian Hospital has maintained an average positive working capital position and average positive net asset position. Also, New York Presbyterian Hospital has achieved an average excess of revenues over expenses of $247,326,000 in 2011 and 2012, respectively. BFA Attachment B is the November 30, 2013 internal financial statements of New York Presbyterian Hospital. As shown, the facility had a positive working capital position and a positive net asset position through November 30, 2013. Also, the facility achieved an operating income of $149,287,000 through November 30, 2013. Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A BFA Attachment B Financial Summary- 2011 and 2012 certified financial statements of New York Presbyterian Hospital November 30, 2013 internal financial statements of New York Presbyterian Hospital. Project #141033-C Exhibit Page 11 Public Health and Health Planning Council Project # 141034-C Lawrence Hospital Center County: Westchester Purpose: Construction Program: Hospital Acknowledged: January 24, 2014 Executive Summary Description Lawrence Hospital Center, a 291-bed not-for-profit hospital located in Westchester County, is seeking to jointly construct and operate a cardiac catheterization laboratory located at Lawrence Hospital Center. Lawrence Hospital Center is requesting to amend its operating certificate, requesting a joint certification with New York Presbyterian Hospital- Columbia Presbyterian Center (NYP-Columbia) to operate a cardiac catheterization laboratory located at Lawrence Hospital Center. New York Presbyterian Hospital- Columbia Presbyterian Center (NYP-Columbia) is also seeking to amend its operating certificate, requesting a joint certification, via CON 141033, with Lawrence Hospital Center to operate the new cardiac catheterization laboratory located at Lawrence Hospital Center. The application results from both Lawrence Hospital Center and New York Presbyterian Hospital joining services in order to provide cardiac catheterizations and enhance quality of cardiac services at Lawrence Hospital Center through the shared resources and improved access to patients. As part of this project, NYP-Columbia will also concurrently reduce one of its existing cardiac catheterization laboratories, resulting in no net increase in cardiac catheterizations laboratories in New York State. New York Presbyterian Hospital will provide clinical leadership and quality oversight for the outpatient procedures for the cardiac catheterization laboratory located at Lawrence Hospital Center. Lawrence Hospital Center will provide quality oversight for the inpatient procedures. Patients needing surgery will be transferred to New York Presbyterian Hospital/Columbia Presbyterian Center. DOH Recommendation Contingent Approval Need Summary NYP-Columbia will reduce its cardiac catheterization laboratories from 8 to 7 and transferring one lab from New York County to Lawrence Hospital in Westchester County. New York Presbyterian Center is currently treating 752 patients from Westchester County which is enough to support two PCI laboratories in Westchester County; the transfer of the one lab will allow Westchester residents to receive treatment closer to home. The new lab will meet all the Department’s minimum qualifications. The transfer of the single lab will not result in a change in the number of laboratories within the New York Presbyterian Health System. Program Summary Based on the results of this review, a favorable recommendation can be made regarding the facility’s current compliance pursuant to 2802-(3)(e) of the New York State Public Health Law. Financial Summary The total project cost of $8,598,237 will be financed as follows: Equity of $5,765,895 from New York Presbyterian Hospital and a bank loan of $2,832,342 at an interest rate of 5% for a six year term. Budget: Revenues Expenses Excess of Revenues over Expenses $15,370,396 15,323,101 $ 47,295 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Project #141034-C Exhibit Page 1 Recommendations 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 of a executed Comprehensive Cardiac Center Affiliation Operating Agreement with a NYS Cardiac Surgery Center, acceptable to the Department, in accordance with the standards at Section 405.29(c)(8)(i). [HSP] 3. Submission of written documentation of governing body approval of the co-operator contract. [HSP] 4. Submission of an executed Employee Leasing Agreement, acceptable to the Department. [HSP] 5. Submission of an executed Comprehensive Cardiac Center Affiliation Operating Agreement, acceptable to the Department. [BFA] 6. Submission of an executed Employee Leasing Agreement, acceptable to the Department. [BFA] 7. Submission of State Hospital Code (SHC) Drawings, acceptable to the Department, as described in BAEFP Drawing Submission Guidelines DSG-02 Hospitals. [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. The submission of Final Construction Documents, signed and sealed by the project architect, as described in BAEFP Drawing Submission Guidelines DSG-05, prior to the applicant’s start of construction. [AER] 3. The applicant shall complete construction by June 15, 2015. In accordance with 10 NYCRR Part 710.2(b)(5) and 710.10(a), if construction is not completed on or before that date, this may constitute abandonment of the approval and this approval shall be deemed cancelled, withdrawn and annulled without further action by the Commissioner. [AER] Council Action Date June 12, 2014 Project #141034-C Exhibit Page 2 Need Analysis Background Lawrence has the following certified beds and services:    Table 1: Lawrence: Certified Beds. Source: HFIS, 2014. Bed Category Certified Capacity Coronary Care 10 Intensive Care 8 Maternity 23 Medical / Surgical 228 Neonatal Intermediate Care 7 Pediatric 12 Total 288     Table 2: Lawrence: Certified Services. Source: HFIS, 2014. Ambulatory Surgery – Multi Speciality Medical/Surgical Audiology O/P Neonatal Intermediate Care Clinical Laboratory Service Nuclear Medicine - Diagnostic Coronary Care Nuclear Medicine - Therapeutic CT Scanner Pediatric Dental O/P Pharmaceutical Service Emergency Department Physical Medicine and Rehabilitation O/P Family Planning O/P Primary Medical Care O/P Intensive Care Radiology - Diagnostic Lithotripsy Renal Dialysis - Acute Magnetic Resonance Imaging Therapy - Speech Language Pathology Maternity Therapy - Speech Language Pathology O/P Medical Social Services   State designations:   Level 2 Perinatal;   Stroke Center;    Analysis Lawrence Hospital Center seeks approval for joint certification with New York Presbyterian CenterColumbia of a PCI capable cardiac catheterization laboratory at NYP-Columbia. Lawrence Hospital Center will add the following certified services to its operating certificate:  Cardiac catheterization – adult diagnostic;  Cardiac catheterization – adult intervention;  Cardiac catheterization – percutaneous coronary intervention; Through this application NYP-Columbia located in New York County will reduce one of its existing cardiac catheterization labs and transferring it to a network facility Lawrence in Westchester County. The hospital network will not see a change in the number of cardiac catheterization labs. Project #141034-C Exhibit Page 3 Currently NYP-Columbia is treating over 500 patients from Westchester County but this number sometimes surges to over 700 (NYP-Columbia treated 752 Westchester residents in 2012). The transfer of the lab to Lawrence in Westchester will allow the patients to be treated closer to home.  Volume Requirements: o Section 709. 14(d)(ii)(c): All PCI capable cardiac catheterization laboratory centers must yield 36 emergency PCI procedures per year within the first year of operation and at least 200 total PCI cases per year within two years of start-up.  The standard will be met:  It is projected there will be 60 emergency PCI procedures performed in the first year of the Lab’s operations and 77 PCI procedures performed in the third year of operation. Both the number of emergency PCls and total PCI cases will exceed the above referenced minimums.  lf provided locally, the services would greatly ameliorate the inconvenience and cost to patients and families of travelling to New York County. o Section 709. 14(d)(1)(ii)(k): Where public need is established herein, priority consideration shall be given to applicants that can demonstrate projected volume in excess of 300 PCI cases per year.  This standard will be met:  Based on the above projections of the 304 PCI anticipated cases that will be done in year 1. o Section 405.29 (3)(iii): Minimum Workload Standards. Any institution seeking to maintain approval shall present evidence that the annual minimum workload standards have been achieved and maintained. Diagnostic Cardiac Catheterization Services shall achieve and maintain an annual minimum volume of 200 angiographic diagnostic cardiac catheterization procedures within two years of initial approval.  This standard will be met. o Section 405.29(2)(iv): Minimum Workload Standards. Each PCI Capable Cardiac Catheterization Laboratory Center must maintain a minimum volume of 150 percutaneous coronary intervention cases per year including at least 36 emergency percutaneous coronary intervention cases per year. Hospitals with volumes below 400 percutaneous coronary intervention cases per year must comply with NYSDOH reviews as outlined in regulations. o Section 405.29(2)(iv)(a): PCI Capable Cardiac Catheterization Laboratory Centers with an annual volume between 300 and 400 percutaneous coronary intervention cases shall undergo a review of cases and outcome trends conducted by the Department to evaluate the appropriateness and quality of care provided by the center.  This standard will be met.  As previously noted, it is projected that there will be 304 PCI procedures performed in the first year of operations. Since more than 300 PCl’s are anticipated per year, the program will not be subject to reviews required for programs with lesser volume. In 2008, the PCI volume for residents of Westchester County was 1,709 procedures; by 2012, these procedures declined by 19.4 percent to 1,376. It should be noted that there are large swings in data and in 2011 the visits were only down 5.6 percent to 1,612. The overall numbers are still showing a decline in number of Westchester County residents requiring PCI treatment. (Table 3). Table 3: Westchester County Residents: PCI Utilization Statistics by Place of Procedure. Source: Cardiac Services Program, 2008 – 2012. County/Hospital 2008 2009 2010 2011 2012 Bronx County 277 258 163 123 114 Kings County 3 3 6 2 1 New York County 1425 1300 1207 1484 1254 Richmond County 4 1 8 3 7 1,709 1,562 1,384 1,612 1,376 Subtotal Project #141034-C Exhibit Page 4 Table 3: Westchester County Residents: PCI Utilization Statistics by Place of Procedure. Source: Cardiac Services Program, 2008 – 2012. County/Hospital 2008 2009 2010 Hudson Valley Region Hospitals Good Samaritan Hospital (Suffern) Orange Regional Medical 3 3 2011 2012 3 1 4 0 0 0 1 2 St. Francis Hospital 10 5 10 8 8 Vassar Brothers Medical Center 11 3 5 2 8 719 684 683 485 352 0 0 122 240 274 743 695 823 737 648 Westchester Medical Center White Plains Hospital Total All existing PCI capable cardiac catheterization laboratories are expected to maintain a volume of 300 PCI procedures per year. Currently, there are 7 hospitals in the Hudson Valley region with PCI Labs, of these; only one (1) is not meeting the PCI volume standard of 300 procedures per year (Table 5). The one facility not meeting the 300 visits is still seeing 291 for the last year reported, showing that the Hudson Valley region is at capacity. As shown in Table 4, NYP-Columbia treated 580 patients for PCI in 2012 and NYP-Weill treated 172. The 752 patients are all from Westchester County and could potentially be treated in Westchester after the PCI lab has been transferred to Lawrence Hospital. Table 4: NYP-Columbia: PCI Utilization Statistics for NYP-Columbia. Source: Cardiac Services Reporting System, 2012. Hospital NYP-Columbia 2008 2009 2010 2011 2012 569 532 477 729 580 NYP-Weill 247 233 225 197 172 Total 816 765 702 926 752 Table 5: Hudson Region Hospitals: PCI Utilization Statistics. Source: Cardiac Services Program 2008- 2012. Hospital Good Samaritan Hospital (Suffern) Orange Regional Medical St. Francis Hospital Vassar Brothers Medical Center Westchester Medical Center 2008 2009 2010 2011 2012 888 792 661 645 531 87 109 534 554 592 3,196 3,292 3,092 2,718 2,388 739 659 679 696 703 1277 1218 1043 694 488 White Plains Hospital 0 0 133 256 291 St. Lukes Cornwall 0 39 364 348 324 6187 6109 6506 5911 5317 Total Based on 709.14(d)(2), PCI capable cardiac catheterization labs are required to maintain a minimum PCI volume of 300 procedures per year and this volume level will be maintained following the approval. Project #141034-C Exhibit Page 5 Conclusion As stated in 10 NYCRR 709.14(d)(1), the factors and methodology for determining the public need for PCI Capable Cardiac Laboratory Centers shall include, but not be limited to, the following:  The planning area for PCI capable catheterization laboratories is one hour average surface travel time.  Evidence that existing PCI capable catheterization laboratories within the planning area cannot adequately meet the needs of patients in need of emergency PCIs due to conditions such as capacity, geography, and/or EMS limitations.  Documentation by the applicant must demonstrate the hospital’s ability to provide high quality care that would yield a minimum of 36 emergency PCI procedures per year within the first year of operation and would yield a minimum of 200 total PCI cases per year within two years of start-up.  Existing referral patterns indicate that approval of an additional service will not jeopardize the minimum volume required at other existing PCI capable cardiac catheterization laboratories. Over the last five (5) years, PCI procedures for the residents of Westchester County have declined. The declining utilization pattern for the residents of Westchester County is consistent with the statewide pattern. However, the Westchester residents being treated at New York Presbyterian Center exceed the number needed to support a PCI lab in Westchester. If fewer than half the Westchester patients currently being treated at the New York Presbyterian facilities return to Westchester, their number will be enough to support the PCI lab. Because the NYP-Columbia PCI laboratory at Lawrence Hospital would serve Westchester County patients currently traveling to Manhattan, its operation would not adversely affect the ability of existing PCI programs at Hospitals in Westchester County and the Hudson Valley to maintain current PCI volumes. Recommendation From a need perspective, approval is recommended. Program Analysis Project Proposal Lawrence Hospital Center (LHC), a 291-bed not-for-profit hospital located in Westchester County, requests approval to accommodate the relocation an existing cardiac catheterization laboratory from New York Presbyterian Hospital – Columbia Presbyterian Center (NYP–Columbia). As part of this proposal, NYP-Columbia, a full services cardiac surgery provider with eight (8) cardiac catheterization laboratories (CCLs) on its campus, seeks to amend its operating certificate by decertifying and transferring one (1) of its CCLs to Lawrence Hospital (under companion CON 141033). Upon approval, the relocated cardiac catheterization lab from NYP-Columbia will become jointly operated by NYP-Columbia and Lawrence Hospital at the LHC site and Lawrence Hospital will be licensed to provide diagnostic cardiac catheterizations and percutaneous coronary intervention (PCI) procedures. The applicant states the rationale behind the jointly operated program is to provide residents of Westchester County local access to higher-level cardiac catheterization services that are also under the oversight of NYP-Columbia. Staffing at LHC is expected to increase by 20.0 FTEs by the end of the first year and is projected to remain at that level into the third year of operation. The Applicant has submitted a written plan that demonstrates the hospital’s ability to comply with the standards for PCI Capable Cardiac Catheterization Laboratories and has assured the Department that their program will meet all of the requirements of 409.29(e)(1) and 409.29(e)(2). Project #141034-C Exhibit Page 6 Compliance with Applicable Codes, Rules and Regulations This facility has no outstanding Article 28 surveillance or enforcement actions and, based on the most recent surveillance information, is deemed to be currently operating in substantial compliance with all applicable State and Federal codes, rules and regulations. This determination was made based on a review of the files of the Department of Health, including all pertinent records and reports regarding the facility’s enforcement history and the results of routine Article 28 surveys as well as investigations of reported incidents and complaints. Recommendation From a programmatic perspective, contingent approval is recommended. Financial Analysis Comprehensive Cardiac Center Affiliation Operating Agreement The applicant has submitted a draft comprehensive cardiac center affiliation agreement and operating agreement; which is summarized below: Parties Purpose Duties of NYP Duties of LHC Term Compensation New York Presbyterian Hospital (NYPH) and Lawrence Hospital Center (LHC) The parties have applied for two separate Certificate of Need applications to jointly operate an Article 28 diagnostic cardiac catheterization and PCI capable cardiac catheterization program. NYP will provide all non-physician personnel (including allied health and technical staffing) for the Cath Lab; will arrange for the provision of diagnostic cardiac catheterizations and percutaneous coronary intervention services to outpatients of the Cath Lab and to Lawrence inpatients; shall serve as the Comprehensive Cardiac Surgery Center Affiliate for the Cath Lab; shall make arrangements to staff the Cath Lab with a sufficient number of licensed and/or certified, appropriately trained and credentialed non-physician clinicians, and NYP shall bill patients, or, as applicable, responsible third party payors for the technical component of the Outpatient Services rendered in the Cath Lab. LHC shall arrange that the Cath Lab is staffed by a sufficient number of licensed, Board certified of Board eligible, appropriately trained and credentialed physicians to provide services to outpatients and inpatients seeking services at the Cath Lab during all hours of the Cath Lab’s operations and only Lawrence shall have the right to submit bills for and collect fees and charges to third party payors and patients for the clinical services provided to Inpatients. The term of the agreement shall be for three years. Following the end of the Initial Term, the term shall automatically be extended for successive one year periods. Lawrence Hospital shall pay NYP a fee for each cardiac catheterization procedure performed on an Inpatient. The estimated fee paid to NYP during the first and third year is $3,988,610 and $4,640,364, respectively. Project #141034-C Exhibit Page 7 Employee Leasing Agreement The applicant has submitted a draft employee leasing agreement, which is summarized below: Parties Purpose Leased Employees Lease Employee Status Responsibilities and Authority of NYPH Responsibilities and Authority of Lawrence Term Compensation Lawrence Hospital Center and New York Presbyterian Hospital Lawrence has agreed to lease to NYPH certain of its respective employees to provide services in connection with the operation of the Cath Lab. Lawrence shall lease to NYPH certain non-physician Lawrence employees to provide services in the Cath Lab on either a full time or part time basis. During the term of this Agreement, each Leased Employee shall be and shall remain an employee of Lawrence and while performing Services as the Cath Lab will be managed and receive direction from NYPH managers and supervisors whose duty it is to oversee the operation of the Cath Lab. Each Leased Employee shall remain an employee of Lawrence not NYPH. At such time as a leased Employee is providing Services at the Cath Lab pursuant to this Agreement, NYPH managers and supervisors shall have authority and responsibility for supervisors and directing such Leased Employee, determining the means and methods by which such Leased Employee provide Services hereunder and confirming that Leased Employee performs Services to appropriate professional standards and in conformance with Law. NYPH shall have and exercise all authority and power to direct the activities and duties of the Leased Employees; NYPH will cooperate with Lawrence so that Lawrence is able to comply with the collective bargaining agreements applicable to the Leased Employees and labor laws and laws regarding equal opportunities, whether federal, state of local; NYPH shall provide all equipment and materials reasonably necessary for the Leased Employees to provide Services pursuant to this Agreement and NYPH may at its sole option, require Lawrence to immediately remove from the Cath Lab and leased employee. Lawrence shall have the sole and exclusive responsibility for determining, paying and providing the wages, salaries and fringe benefits and other compensation of all the Leased Employees and Lawrence will comply with all applicable collective bargaining agreements applicable to the Leased Employees and labor laws and laws regarding equal employment opportunities, whether federal, State of local. This agreement will terminate upon the termination, expiration or nonrenewal of the Operating Agreement. NYPH agrees to pay Lawrence a fee for the Leasing of the Employees. The estimated fee paid to Lawrence during the first and third year is estimated at $6,520,532 and $7,534,396, respectively. Project #141034-C Exhibit Page 8 Total Project Cost and Financing Total project cost, which is for renovations and the acquisition of moveable equipment is estimated at $8,598,237, further broken down as follows: Renovation Asbestos Abatement or Removal Design Contingency Construction Contingency Planning Consultant Fees Architect Engineering Fees Construction Manager Fees Other Fees (Consultant) Moveable Equipment Telecommunications CON Fee Additional Processing Fee Total Project Cost $3,515,800 $58,300 $320,000 $320,000 $75,000 $372,000 $220,000 $323,000 $3,281,516 $63,600 $2000 $47,021 $8,598,237 Project costs are based on a June 15, 2014 construction start date and a six month construction period. The applicant’s financial plan appears as follows: Equity (New York Presbyterian Hospital) Bank Loan (5% interest rate for a six year term) $5,765,895 $2,832,342 Operating Budget The applicant has submitted an incremental operating budget, in 2014 dollars for Lawrence Hospital Center for the first and third years, summarized below: Lawrence Hospital Center (Inpatient) Year One Year Three Revenues: Inpatient Annual Fee from NYP-Columbia Space Lease Revenue Total Revenues $6,015,200 6,520,532 156,000 $12,691,732 $7,680,000 7,534,396 156,000 $15,370,396 Expenses: Operating Capital Total Expenses $12,977,019 0 $12,977,019 $15,323,101 0 $15,323,101 Excess of Revenues over Expenses ($285,287) $47,295 Total Discharges Cost Per Discharge 304 $42,687.56 389 $39,391.01 Incremental utilization, broken down by payor source, for the first and third years of Lawrence Hospital Center inpatient services is as follows: Year One Year Three Medicaid Managed Care 5.98% 6.16% Medicare Fee For Service 47.03% 46.78% Medicare Managed Care 13.15% 13.11% Commercial Fee For Service 1.97% 2.05% Commercial Managed Care 31.87% 31.90% Project #141034-C Exhibit Page 9 Expense assumptions are based on the standard Lawrence Hospital Center cardiac catheterization staffing model, and were jointly determined by NYPH and Lawrence Hospital Center. Utilization assumptions are based on actual NYPH cardiac catheterization laboratory volume of residents of Westchester County who travel to NYP/Columbia for PCI procedures. Capability and Feasibility The total project cost of $8,598,237 will be met as follows: bank loan of $2,832,342 at an interest rate of 5% for a six year term and equity of $5,765,895 from New York Presbyterian Hospital. Presented as BFA Attachment C are the 2011 and 2012 certified financial statements of New York Presbyterian Hospital, which indicates the availability of sufficient funds for the equity contribution. The incremental submitted budget for Lawrence Hospital Center projects an excess of revenues over expenses of ($285,287) and $47,295 for the first and third year of operation, respectively. The first year loss will be offset from operations. Revenues are based on current reimbursement rates of Lawrence Hospital Center inpatient cardiac catheterization services. The budget appears reasonable. As indicated in BFA Attachment A, Lawrence Hospital Center has maintained an average positive working capital position and an average positive net asset position from 2011 through 2012. Also, Lawrence Hospital Center has achieved an operating income from operations of $12,049,773 and $11,508,571 in 2011 and 2012, respectively. BFA Attachment B are the October 31, 2013 internal financial statements of Lawrence Hospital Center. As shown, the facility had a positive working capital position and a positive net asset position through October 31, 2013. Also, the facility achieved an operating income of $720,404 through October 31, 2013. Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A BFA Attachment B BFA Attachment C Financial Summary- 2011 and 2012 certified financial statements of Lawrence Hospital Center Financial Summary- October 31, 2013 internal financial statements of Lawrence Hospital Center 2011 and 2012 certified financial statements of New York Presbyterian Hospital Project #141034-C Exhibit Page 10 Public Health and Health Planning Council Project # 131158 C Richmond Center for Rehabilitation and Specialty Healthcare County: Richmond County Purpose: Construction Program: Residential Health Care Facility Acknowledged: April 1, 2013 Executive Summary Description Program Summary SV Operating Three, LLC, doing business as Richmond Center for Rehabilitation and Specialty Healthcare (Richmond Center), requests approval to add 72 new neuro-behavioral beds to its operating certificate, and construct a 72 neuro-behavioral unit on the 3rd floor of the former Bayley Seton Hospital, located at 75 Vanderbilt Avenue, Staten Island. These additional 72 neuro-behavioral beds will bring the facility’s total bed capacity from 300 to 372 beds. The facility’s neuro-behavioral capacity would increase from 72 neuro-behavioral beds to 144 neurobehavioral beds. The renovation to the 3rd floor will be constructed by the Landlord, SV Land I, LLC, who will lease the additional space to Richmond Center. The addition of 72 beds at Richmond Center will address the need for additional behavioral intervention beds. The design of the new third floor unit will provide a modern, code conforming residential environment for this difficult-to-manage population. DOH Recommendation Financial Summary Total project cost of $6,548,582 will be met as follows: Equity of $1,637,582 (via landlord) and a bank loan of $4,911,000 at an interest rate of 6.00% for a 10 year term. Incremental Budget: Revenues Expenses Net Income $11,518,398 7,142,667 $ 4,375,731 Contingent Approval. Need Summary Richmond Center for Rehabilitation and Specialty Healthcare is hoping to repatriate patients needing neurobehavioral care to New York. Currently there are over 308 New York residents receiving this type of care in Massachusetts. With only 72 beds of this type in the entire NYC planning area, Richmond Center for Rehabilitation and Specialty Healthcare has been forced to turn away an additional 50 patient referrals in the last 12 months, which demonstrates the need for the additional 72 neurobehavioral beds. Richmond Center for Rehabilitation and Specialty Healthcare’ s catchment area would allow for many NY residents to return from out of state and be closer to family members. Subject to the noted contingency, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended Project # 131158 C Exhibit Page 1 Recommendations Health Systems Agency There will be no HSA recommendation of this application. 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 the CON fees. [PMU] 2. The submission of a commitment signed by the applicant who indicates that, upon completion of construction the facilities repatriation plan will be initiated. Additionally the applicant will provide a signed affidavit stating that repatriating patients back to NY from out of state will take precedence over all other facility initiatives. [RNR] 3. Submission of a detailed plan to repatriate out of state patients back to New York. At a minimum, the plan should include, but not necessarily limited to, ways in which the facility will:  Reach out to out of state nursing home discharge planners to facilitate the repatriation to Richmond Center;  Communicate with local hospital discharge planners to make sure residents are not being referred to out of state facilities;  A schedule outlining visit dates and times and an exact timeline of events for repatriation  Submit an annual report to DOH, which demonstrates substantial progress with the implementation of the plan. The report should include but not be limited to: o Information on activities relating to a, b, and c above; Documentation pertaining to the number of referrals and the number of patients repatriated back to NYS o Other factors as determined by the applicant to be pertinent. [RNR] 4. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 5. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily limited to, ways in which the facility will:  Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program;  Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility;  Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and  Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; and o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. [RNR] The DOH reserves the right to require continued reporting beyond the two year period. 6. Submission and programmatic review and approval of the final floor plans. [LTC] 7. Submission and programmatic review and approval of the room layouts showing placement of all appropriately sized furniture. [LTC] 8. Submission of a bank loan commitment, acceptable to the Department. [BFA] Project # 131158 C Exhibit Page 2 9. The submission of State Hospital Code (SHC) Drawings, acceptable to the Department, as described in BAEFP Drawing Submission Guidelines DSG-01. [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. Approval of limited review CON #141200 and completion of the project which will ensure the existing second floor neurobehavioral unit meets the CMS mandated sprinkler regulation. [LTC] 3. The submission of Final Construction Documents, signed and sealed by the project architect, as described in BAEFP Drawing Submission Guidelines DSG-01, prior to the applicant’s start of construction. [AER] 4. The applicant shall complete construction by January 30, 2015 in accordance with 10 NYCRR Part 710.2(b)(5) and 710.10(a), if construction is not completed on or before that date, this may constitute abandonment of the approval and this approval shall be deemed cancelled, withdrawn and annulled without further action by the Commissioner. [AER] Council Action Date June 12, 2014 Project # 131158 C Exhibit Page 3 Need Analysis Background Richmond Center for Rehabilitation and Specialty Healthcare, a 300 bed Residential Health Care Facility located at 91 Tompkins Avenue, Staten Island, New York 10304, Richmond County, is seeking approval to add an additional 72 neurobehavioral beds to be located at the newly renovated 3rd floor of the former Bayley Seton Hospital Campus at 75 Vanderbilt Avenue, for a total of 144 neurobehavioral beds and 372 overall beds. Analysis Richmond Center for Rehabilitation and Specialty Healthcare utilization was higher than that of Richmond County for 2009 and 2011, but was slightly lower in 2010, as shown in Table 1 below: Table 1: RHCF Richmond Center for Rehabilitation and Specialty Healthcare/Richmond County % Occupancy % Occupancy % Occupancy Facility/County/Region 2010 2011 2012 Richmond Center RHCF Beds 94.3% 92.2% 94.8% Richmond Center Neurobehavioral Beds 99.9% 99.4% 98.0% Richmond County 95.2% 93.6% 95.2% NYC 95.4% 94.8% 94.8% NYC region has an 8,862 bed need number. This project will not affect the bed need complement. Table 2: RHCF Need – NYC Region 2016 Projected Need 51,071 Current Beds 41,895 Beds Under Construction 314 Total Resources 42,209 Unmet Need 8,862 NYC’s overall utilization rate is below that of the 97 percent planning optimum. This leaves a rebuttable presumption that there is no need for additional beds in the area, according to the Title 10 Section 709.3 regulation. The following factors documented by the applicant suffice to rebut the presumption of no need:  Currently RCRSH has the only (72) neurobehavioral beds in the NYC planning area.  The current 72 neurobehavioral beds are operating at 99% occupancy.  According to a 2013 survey, there were 308 New York residents receiving treatment in neurobehavioral beds located in Massachusetts.  The survey identified 87 out-of-state patients that would qualify for RCRSH admission criteria.  In the last 12 months RCRSH has turned away more than 50 referrals from area hospitals.  Patients with cognitive capacity at RCRSH are prepared for a smooth transition back to their community. Richmond Center has a plan in place for the repatriation of patients to NYC from New Jersey and the Massachusetts. They have a list of facilities with Neurobehavioral Beds in each state and are planning site visits for each. The facility has included a list that outlines 52 current patients that are residing out of state who can immediately be repatriated and 20 patients that will be displaced out of state if additional resources are not added. Project # 131158 C Exhibit Page 4 Below is the facility’s plan for safe and effective treatment of the new patients:  A plan of care will be developed, reviewed, and altered to meet the needs of each patient being clinically accepted.  Residents will be evaluated and moved to the appropriate wing to meet their needs.  After DOH final approval, each subunit will be opened in succession, but the next will not open until the previous is filled, allowing staff to fully clinically assess and orient each patient.  An experienced Neurobehavioral IDT team will review and oversee all procedures. Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patient’s admissions is at least 75% of the planning area percentage or the Health Systems Agency percentage, whichever is applicable. Richmond Center for Rehabilitation and Specialty Healthcare was above the 75 percent planning average for both 2010 and 2011. The facility reported Medicaid admissions of 50.8 percent in 2010 and 56.0 in 2011. The 75 percent planning averages for Richmond County for 2010 and 2011 were 26.7 percent (2010) and 29.5 percent (2011). Conclusion Approval of this application will facilitate the repatriation of patients who have been forced to leave New York State to receive neurobehavioral care. Recommendation From a need perspective, contingent approval is recommended. Programmatic Analysis Program Description Facility Name Address RHCF Capacity ADHCP Capacity Type Of Operator Class Of Operator Operator Existing Richmond Center for Rehabilitation and Specialty Healthcare 91 Thompkins Avenue Staten Island, NY 10304 300 (Includes 72 behavioral intervention beds) N/A Proprietary LLC SV Operating Three, LLC Project # 131158 C Exhibit Page 5 Proposed Same Same 372 (includes 144 behavioral intervention beds) N/A Same Same Same Program Review Richmond Center for Rehabilitation and Specialty Healthcare (Richmond Center) is a 300 bed nursing home with 72 behavioral intervention beds located in Richmond County. Neurobehavioral is a specialty bed unit for the care of individuals who require nursing home placement and exhibit cognitive deficits which often manifest as aggressive and anti-social behaviors. The original neurobehavioral unit was opened by St. Elizabeth Ann’s Health Care Center on the second floor of the former Bayley Seton Hospital building, which is adjacent to the St. Elizabeth Ann’s. The nursing home changed ownership on April 1, 2012 with SV Operating Three, LLC assuming operational ownership from St. Elizabeth Ann’s. The St. Elizabeth Ann’s neurobehavioral program was approved in 1997, with the first phase of 28 beds commencing operation in September, 1999. The unit does not comply with the current regulation, 10 NYCRR 713-4.7, and did not comply with 10 NYCRR 713-3.7, effective when the unit opened. St. Elizabeth Ann’s was granted a series of waivers prior to the second and third phases which created the 72 bed unit. The waivers included:  Unit size in excess of 20 beds;  Unit does not have 100% single occupancy bedrooms,  Toilet rooms are not handicapped accessible;  Bedrooms cannot accommodate a wheelchair turnaround;  No outdoor activity space accessible from the unit;  Low ceiling height in corridor;  Wardrobe units insufficiently sized;  Dead-end corridor per NFPA 12-2.5.6;  Shower stalls only 3’ X 3’ and not handicapped accessible. In addition, the second floor does not meet the August, 2013 CMS sprinkler mandate. The existing neurobehavioral unit functions without a step-down unit to transition the resident from a secure to a less restrictive environment, such as a conventional nursing unit or community based setting. The discharge process instead employs an interdisciplinary team, led by activities and neurobehavioral education teachers, to tailor the program to the individual resident. Those residents who can learn using contemporary instructional strategies, including role play, multi-modal learning, and problem solving through the internet, can be successfully discharged from the unit without the use of a step down unit. The resident centered approach, coupled with the inherent inefficiencies of the physical plant, requires an extremely rich staffing model. Richmond Center has devoted the additional resources needed to maintain coverage and oversee the challenging residential environment, and the redesign of this unit will offer potential savings in operating costs. The subject application seeks to build on the experience of the operator in serving the neurobehavioral population to meet the continued need for these beds, particularly the repatriation of New York State residents in Massachusetts and other out-of state locations. Richmond Center proposes the construction of a new code conforming 72 bed unit of the third floor. Subsequently the existing second floor unit will be renovated to meet all current Codes, including 10 NYCRR 713-4.7 and FGI 2010. Physical Environment The existing Bayley Seton building is a multi-use seven story structure with nursing home space located on floors two and three. Offices for Richmond University Medical Center (RUMC) and related organizations are situated on the first and sixth floors, with the remaining floors largely vacant. RUMC offices on the third floor are being relocated, with the entire floor undergoing a gut renovation to provide 41,630 feet of total altered area for the neurobehavioral expansion. The new behavioral intervention program will consist of three behavior intervention units of 20, 19 and 17 beds respectively, and a 16 bed behavior intervention step-down unit. Access will be controlled into each unit, with secured doors adjacent to the elevators. The behavioral intervention units will be configured with all single occupancy rooms, and provide adequate and family support and staff conference space. The step-down unit will be configured with seven double and two single bedrooms, and include the required quiet room area, which will also serve as a family counseling area. Neurobehavioral program offices will also be located within the step-down unit. Resident rooms will be Project # 131158 C Exhibit Page 6 arrayed in a linear fashion, with the nursing control station generally located in the center of the unit. Some units include wings that jut out to accommodate dining, activity, and exercise/rehab space, and storage. Each unit will be serviced by at least one elevator with access controlled to ensure appropriate egress. An additional stair tower will be constructed at the end of the step-down unit, which will also serve the second floor thereby eliminating the dead end corridor condition. Each unit will include a rehabilitation/exercise area, and on-unit dining. While the submitted drawings clearly show sufficient dining space, final plans should show sufficient capacity on each unit, in light of the security issues which are germane to the neurobehavioral program. Each unit will provide showers or bathtubs with a minimum of three fixtures per unit, and a toilet and shower will be proximate to the exercise room. Plans show only a single tub for the entire unit; a minimum of two tubs serving the floor would better serve the needs of the residents. Walls will employ surfaces that are be constructed to avoid hazards to residents and staff, and all electrical outlets will be recessed and tamper proof. Monolithic ceilings and walls will be designed to be resistant to damage. Outdoor space will be created on the existing roof, flanking the step-down unit corridor. Compliance Richmond Center for Rehabilitation and Specialty Healthcare is currently in substantial compliance with all applicable codes, rules and regulations. Richmond Center is not in compliance with the CMS mandated sprinkler regulation, with the second floor neurobehavioral unit lacking the required system. A limited review application has been submitted to the Department for a project which will, when completed, result in the second floor meeting the CMS mandated sprinkler regulation. Conclusion The addition of 72 beds at Richmond Center will address the need for additional behavioral intervention beds. The design of the new third floor unit will provide a modern, code conforming residential environment for this difficult to manage population. Richmond Center will also accrue operational savings by constructing a unit which will enable staffing at a reduced level compared to the pattern implemented on the existing unit. In order to avoid unfavorable comparisons between the new and old neurobehavioral units the applicant will be required to renovate the non-code conforming second floor. However the absence of an operational sprinkler system on the second floor creates urgency since the continued certification of the nursing home is at risk. The applicant has supplied assurances that the installation of the sprinkler system will be undertaken immediately, and a limited review application has been submitted to the Department for review. The limited review application includes the construction of a new 20 bed transition area in which residents will be relocated, avoiding disruptions to their routine and the associated security issues. Existing residents will then return to newly renovated single bedded rooms, as the sprinkler installation proceeds throughout the floor. Many of the code deficiencies cited earlier will be alleviated by the sprinkler project. A subsequent project, to be completed no more than 18 months following the completion of the third floor, will address the remaining deficiencies, transforming the second floor into an equivalent resident environment. The applicant is encouraged to continue reconstruction of the second floor as the sprinkler installation finishes in order to enjoy savings to the overall construction budget, and the benefit of full operation of the two neurobehavioral floors in code conforming space. Recommendation From a programmatic perspective, contingent approval is recommended. Project # 131158 C Exhibit Page 7 Financial Analysis Total Project Cost and Financing Total project cost, which is for renovations and the acquisition of moveable equipment, is estimated at $6,548,582, further broken down as follows: Renovation and Demolition Design Contingency Construction Contingency Architect/Engineering Fees Other Fees (Consultant) Moveable Equipment Financing Costs Interim Interest Expense CON Fee Additional Processing Fee Total Project Cost $4,331,600 433,160 433,160 346,528 36,400 561,600 220,995 147,330 2,000 35,809 $6,548,582 Project costs are based on an August 1, 2014 construction start date and a twelve month construction period. The applicant’s financing plan appears as follows: Equity (via landlord) Bank Loan (interest rate of 6.00% for a ten year term) $1,637,582 4,911,000 Operating Budget The applicant has submitted an incremental operating budget, in 2013 dollars, for the first and third years, summarized below: Year One Year Three $11,520,748 $11,518,398 Expenses: Operating Capital Total Expenses $6,253,517 902,225 $7,155,742 $6,253,517 889,150 $7,142,667 Net Income Utilization: (patient days) Occupancy $4,365,006 26,120 99.39% $4,375,731 26,120 99.39% Revenues: Medicaid Managed Care Utilization will be 100% Medicaid Managed Care. Expense assumptions are based on the historical experience of the facility. Utilization assumptions are based on the historical experience of the existing neuro-behavioral beds. Project # 131158 C Exhibit Page 8 The applicant’s neurobehavioral beds are currently operating at 99% occupancy. Due to the additional admissions of neurobehavioral admissions from providers in Richmond County, admission from providers in New York City outside of Richmond County, admissions from outside of New York City but within New York State, and the need to repatriate of New York residents who have been forced into outof-state facilities due to the lack of care options within New York State, the applicant feels there is a demand for these additional beds. Capability and Feasibility Total project cost of $6,548,582 will be met as follows: Equity of $1,637,582 (via landlord) and a bank loan of $4,911,000 at an interest rate of 6.00% for a ten year term. BFA Attachment C is the personal net worth statement of the sole member SV Land I, LLC, Daryl Hagler, which indicates the availability of sufficient funds for the equity contribution. Working capital requirements are estimated at $1,190,444, which is equivalent to two months of third year expenses. The applicant has indicated that the working capital will be met via equity from the operations of Richmond Center for Rehabilitation and Specialty Healthcare. BFA Attachment A is the 2012 certified financial statement of Richmond Center for Rehabilitation and Specialty Healthcare, which indicates the availability of sufficient funds for the equity contribution. The submitted budget indicates an incremental net income of $4,365,006 and $4,375,731 during the first and third years, respectively. Revenues are based on current reimbursement rates for the neurobehavioral beds. As shown on Attachment A, the facility had a positive working capital position and a positive net asset position through 2012. Also, the facility achieved a net income of $956,269 through 2012. The current operator, SV Operating Three, LLC took over the operations of Richmond Center for Rehabilitation and Specialty Healthcare on April 1, 2012. BFA Attachment B is the September 30, 2013 internal financial statements of Richmond Center for Rehabilitation and Specialty Healthcare. As shown on Attachment B, the facility had a negative working capital position and a positive net asset position through September 30, 2013. The applicant has indicated that the negative working capital position is the result of the members taking cash out of the business that they used for their other facilities. Also, the facility achieved a net income of $1,083,684 through September 30, 2013. Subject to the noted contingency, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A BFA Attachment B BFA Attachment C 2012 certified financial statements of Richmond Center for Rehabilitation and Specialty Healthcare September 30, 2013 internal financial statements of Richmond Center For Rehabilitation and Specialty Healthcare Personal Net Worth Statement Project # 131158 C Exhibit Page 9 Public Health and Health Planning Council Project # 132368-C Kendal at Ithaca County: Tompkins Purpose: Construction Program: Residential Health Care Facility Acknowledged: January 7, 2014 Executive Summary Description Kendal at Ithaca is a voluntary not-for-profit corporation and a Continuing Care Retirement Community (CCRC) consisting of 212 independent living residences, 36 adult home/assisted living units, and a 35-bed residential health care facility (RHCF). Kendal is seeking approval to construct a replacement RHCF facility within the CCRC located at 2230 North Triphammer Road in Ithaca, and to add thirteen new RHCF beds to better serve the residents and to respond to more current occupancy levels. The original facility was opened in December of 1995, and is associated with Kendal New York and Religious Society of Friends. The new facility will consist of three households with sixteen private rooms each, totaling 48 certified RHCF beds. DOH Recommendation Contingent Approval Need Summary Because RHCF beds in CCRCs are not subject to the RHCF bed need methodology set forth in 10 NYCRR Section 709.3, there will be no Need review of this project. Program Summary 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. Financial Summary The total cost of the project is $16,866,978. Project costs will be met with $2,748,000 in cash and a $14,118,978 mortgage over 30 years at 6.5%. Total reimbursable cost is limited to $11,086,250. Budget: Revenues: Expenses: Loss: $1,812,406 $7,292,092 $(5,479,686) Subject to the noted contingency, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #132368-C Exhibit Page 1 Recommendations 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 Project #132368-C Exhibit Page 2 Program Analysis Program Description Facility Name Address RHCF Capacity ADHCP Capacity Type Of Operator Class Of Operator Operator Existing Kendal at Ithaca 2230 North Triphammer Road Ithaca, NY 14850 35 N/A Voluntary Corporation Kendal at Ithaca, Inc. Proposed Same Same 48 N/A Same Same 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. Recommendation From a programmatic perspective, contingent approval is recommended. Project #132368-C Exhibit Page 3 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 Renovation and Demolition Site Development Design Contingency Construction Contingency Architect/Engineering Fees Construction Manager Fees Other Fees(Consultant) Movable Equipment Financing Costs Interim Interest Expense CON Application Fee CON Processing Fee Total Project Cost $6,363,610 1,583,625 1,434,379 794,724 476,543 1,042,634 232,625 2,502,853 319,250 381,817 1,640,668 2,000 92,250 $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 CON Application Fee CON Processing Fee Total Reimbursable Project Cost $10,992,000 2,000 92,250 $11,086,250 Financing for the project is anticipated as follows: Cash Tax-Exempt Bonds (6.50% over 30 year term) $2,748,000 $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: Revenue: Medicare Private Pay Total Year One Year Three $ 165,487 1,446,959 $1,612,446 $165,872 1,646,534 $1,812,406 Project #132368-C Exhibit Page 4 Expenses: Operating Capital Total Net Income (Loss) Utilization (patient days) Occupancy $6,384,358 513,253 $6,897,611 $6,776,078 516,014 $7,292,092 $(5,285,165) $(5,479,686) 13,306 75.95% 14,028 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 BFA Attachment B BFA Attachment C Financial Summary, Kendal at Ithaca, 2011 and 2012 certifieds Financial Summary, Kendal at Ithaca 2013 internals Historical Utilization, 2011-2013 Project #132368-C Exhibit Page 5 Public Health and Health Planning Council Project # 132124-B Union Square Surgery Center, LLC County: New York Purpose: Establishment and Construction Program: Diagnostic and Treatment Center Acknowledged: September 9, 2013 Executive Summary Description Union Square Surgery Center, LLC, a to-be-formed limited liability company, requests approval for the establishment and construction of a single-specialty freestanding Ambulatory Surgical Center (ASC) to provide ophthalmology. The center will be located in approximately 3,300 square feet on the first floor of an existing building located at 20 West 13th Street, New York. The center will consist of one operating room, one pre-op bay, two recovery bays, clean and soiled workrooms, patient and staff toilets, staff lockers and appropriate support space. The center will be staffed with one board certified ophthalmologist. The sole proposed member of Union Square Surgery Center, LLC is John Khadem, M.D. DOH Recommendation Contingent Approval with an expiration of the operating certificate five (5) years from the date of its issuance. Need Summary The proposed project will serve the Chelsea and Clinton neighborhoods and surrounding communities. The number of projected surgical procedures to be performed is 4,564 in the first year of operation and 5,522 procedures in the third year. Program Summary Based on the information reviewed, staff found nothing that would reflect adversely upon the applicant’s character and competence or standing in the community. A transfer and affiliation agreement is expected to be provided by Manhattan Eye, Ear and Throat. Financial Summary Total project costs of $1,925,040 will be met with a $1,540,032 bank loan and $385,008 in member’s equity. Budget: Revenues: Expenses: Net Income: $1,651,434 1,423,208 $228,226 Subject to noted contingencies, the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #132124-B Exhibit Page 1 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval with an expiration of the operating certificate five (5) years from the date of its issuance is recommended, 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 of an executed working capital loan commitment, acceptable to the Department. [BFA] 3. Submission of an executed construction loan commitment, acceptable to the Department. [BFA] 4. Submission of an executed transfer and affiliation agreement, acceptable to the Department with a local acute care hospital. [HSP] 5. The submission of State Hospital Code (SHC) Drawings, acceptable to the Department, as described in BAEFP Drawing Submission Guidelines DSG-03. [AER] 6. Submission of a signed agreement with an outside independent entity satisfactory to the Department to provide annual reports to the DOH beginning in the second year of operation. Said reports should include:  Data showing actual utilization including procedures;  Data showing breakdown of visits by payor source;  Data showing number of patients who need follow-up care in a hospital within seven days after ambulatory surgery;  Data showing number of emergency transfers to a hospital;  Data showing percentage of charity care provided, and  Number of nosocomial infections recorded during the year in question. [RNR] 7. Submission of a statement, acceptable to the Department, that the applicant will consider creating or entering into an integrated system of care that will reduce the fragmentation of the delivery system, provide coordinated care for patients, and reduce inappropriate utilization of services. The applicant will agree to submit a report to the Department beginning in the second year of operation and each year thereafter detailing these efforts and the results. [RNR] 8. Submission by the governing body of the ambulatory surgery center of an Organizational Mission Statement which identifies, at a minimum, the populations and communities to be served by the center, including underserved populations (such as racial and ethnic minorities, women and handicapped persons) and the center’s commitment to meet the health care needs of the community, including the provision of services to those in need regardless of ability to pay. The statement shall also include commitment to the development of policies and procedures to assure that charity care is available to those who cannot afford to pay. [RNR] 9. Submission of evidence of site control, acceptable to the Department. [CSL] 10. Submission of a photocopy of applicant’s Articles of Organization, as filed with the Department of State, acceptable to the Department. [CSL] 11. Submission of a photocopy of the executed Certificate of Amendment to the Articles of Organization of USSC, LLC, acceptable to the Department. [CSL] 12. Submission of a photocopy of the applicant’s executed Operating Agreement, acceptable to the Department. [CSL] 13. Submission of a signed statement from the applicant, acceptable to the Department, that the proposed transaction has been assessed in light of anti-kickback and self-referral laws, with the consultation of legal counsel, and it is concluded that proceeding with the proposal is appropriate. [CSL] Project #132124-B Exhibit Page 2 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. The staff of the facility must be separate and distinct from staff of other entities. [HSP] 3. The signage must clearly denote the facility is separate and distinct from other adjacent entities. [HSP] 4. The entrance to the facility must not disrupt any other entity's clinical program space. [HSP] 5. The clinical space must be used exclusively for the approved purpose [HSP] 6. The installation and certification of an automatic sprinkler system for the entire high-rise building, in compliance with 2000 NFPA 101 and NFPA 13, will be required prior to DOH approval of any article 28 space and issuance of an operating certificate. [AER] 7. The submission of Final Construction Documents, signed and sealed by the project architect, as described in BAEFP Drawing Submission Guidelines DSG-03s, prior to the applicant’s start of construction. [AER] 8. The applicant shall complete construction by March 31, 2015 in accordance with 10 NYCRR Part 710.2(b)(5) and 710.10(a), if construction (including installation of the building-wide sprinkler system per above condition), is not completed on or before that date, this may constitute abandonment of the approval and this approval shall be deemed cancelled, withdrawn and annulled without further action by the Commissioner. [AER] Council Action Date June 12, 2014 Project #132124-B Exhibit Page 3 Need Analysis Project Description Union Square Surgery Center is seeking approval to establish and construct an Article 28 diagnostic and treatment center to provide single specialty ambulatory surgery services at 20 West 13th Street, New York, 10011, in New York County. The proposed specialty is ophthalmology. Analysis The service area is zip codes 10011, 10001, 10018, 10019, 10020, and 10036 in Manhattan. The number of projected surgical procedures is 4,564 in year 1 and 5,522 procedures in year 3. These projections are based on the current practices of the participating surgeon. The proposed ASC will have one operating room. Based on the current practice, approximately 16 percent of these procedures are done in the local hospitals and the remaining 84 percent are done in the private practice. The latter will now be moved to the proposed ASC and performed in a procedure room. Thus, based on the projected volume to be performed in an operating room, only one operating room is required, with the other procedures being performed in a procedure / examination room. New York County has a total of seven freestanding multi-specialty ASCs and eight freestanding single-specialty ASCs. Existing Ambulatory Surgery Centers: New York County (Source: SPARCS 2012) Name Total Patients ASC Type  2012 7,357 Gastroenterology  Carnegie Hill Endo, LLC Center for Specialty Care 4,585 Multi‐Specialty  East Side Endoscopy 8,811 Gastroenterology  Fifth Avenue Surgery Center 2,051 Multi‐Specialty  Gramercy Park Digestive Disease 8,577 Multi‐Specialty  Gramercy Surgery Center, Inc 2,136 Multi‐Specialty  Kips Bay Endoscopy Center LLC 9,401 Endoscopy  9,857 Gastroenterology  Manhattan Endoscopy Ctr, LLC Mid Manhattan Surgi-Center 3,888 Ophthalmology  Midtown Surgery Center, LLC 2,860 Multi‐Specialty  Retinal Ambulatory Surgery Ctr 1,718 Ophthalmology  Surgicare of Manhattan,LLC 3,993 Multi‐Specialty  3,652 Gastroenterology  West Side GI Roosevelt SC (Opened April 1, 2013) N/A Multi‐Specialty  N/A Gastroenterology  Yorkville Endoscopy Center (Opened February 22, 2013) 68,886 Total  In addition there are two freestanding ASCs, one single-specialty ASC and one multi-specialty ASC, which have been approved, but are not yet operational. The applicant is committed to serving all persons without regard to their ability to pay or the source of payment. Conclusion Approval of the proposed ASC would bring under Article 28 regulation an additional provider of ambulatory surgery to serve the communities of New York County. Recommendation From a need perspective, contingent approval is recommended for a limited life of five years. Project #132124-B Exhibit Page 4 Program Analysis Project Proposal Union Square Surgery Center, LLC is seeking approval to establish and construct an Article 28 single-specialty ambulatory surgery center. Proposed Operator Site Address Surgical Specialties Operating Rooms Procedure Rooms Hours of Operation Staffing (1st Year / 3rd Year) Medical Director(s) Emergency, In-Patient and Backup Support Services Agreement and Distance On-call service Union Square Surgery Center, LLC 20 West 13th Street, New York, NY Single Specialty: Ophthalmology 1 (Class B) 0 Monday through Friday from 8:00 am to 6:00 pm (Extended as necessary to accommodate patient needs). 6.5 FTEs / 6.5 FTEs John J. Khadem, MD Expected to be provided by Manhattan Eye, Ear and Throat Hospital 2.4 miles/8 minutes The surgeon’s, as well as the Center’s and back-up hospital’s contact information and an after-hours contact number will all be provided to patients as part of discharge instructions. Character and Competence The sole member of the LLC is: Name John J. Khadem, MD 100% Dr. Khadem is a board-certified practicing ophthalmologist. Staff from the Division of Certification & Surveillance reviewed the disclosure information submitted regarding licenses held, formal education, training in pertinent health and/or related areas, employment history, a record of legal actions, and a disclosure of the applicant’s ownership interest in other health care facilities. Licensed individuals were checked against the Office of Medicaid Management, the Office of Professional Medical Conduct, and the Education Department databases as well as the US Department of Health and Human Services Office of the Inspector General Medicare exclusion database. Integration with Community Resources The facility will ensure that patients have access to primary care services through expansion of the Transfer and Affiliation Agreement with Manhattan Eye, Ear and Throat Hospital (MEETH), a division of Lenox Hill Hospital (LHH), to include primary and other specialty services, as needed. Outreach to the underserved will include participation in community health events and religious institutions to ensure the local community is aware of the facility’s services and its relationship with MEETH/LHH. The applicant intends to use an Electronic Medical Record but has not yet identified the specific system it will be using. The facility has indicated interest in becoming a part of an Accountable Care Organization (ACO) and has made inquiries to MEETH/LHH in an effort to establish a mutual network relationship, as well as express its desire to integrate into a Regional Health Information Organization (RHIO)/Health Information Exchange (HIE). Recommendation From a programmatic perspective, contingent approval is recommended. Project #132124-B Exhibit Page 5 Financial Analysis Lease Rental Agreement The applicant will lease approximately 3,300 square feet on the first floor of an existing building located at 20 West 13th Street, New York under the terms of the executed lease agreement summarized below: Date: Landlord: Lessee: Term: Rental: Provisions: August 28, 2013 John Khadem M.D. Union Square Surgery Center, LLC 10 years with the option to renew for an additional 10 years. $168,000/year ($51 per sq. ft.) increasing 3% yearly The lessee will be responsible for insurance, utilities and maintenance. The applicant has indicated that the lease will be a non-arm’s length agreement and letters of opinion from Licensed Commercial Real Estate Brokers have been submitted indicating rent reasonableness. Other nonrelated parties occupy the remainder of the building. Total Cost and Financing Total project costs for renovations and movable equipment are estimated at $1,925,040, itemized as follows: Renovation & Demolition Design Contingency Construction Contingency Architect/Engineering Fees Consultant Fees Movable Equipment Telecommunications Financing Costs Interim Interest Expense Application Fee Additional Processing Fee Total Project Cost $1,034,158 103,416 103,416 81,511 125,000 400,000 15,000 28,583 21,437 2,000 10,519 $1,925,040 Project cost is based on a July 1, 2014 construction start date and a four month construction period. The applicant’s financing plan appears as follows: Bank Loan (10yrs, 7%) Member’s equity $1,540,032 $ 385,008 A letter of interest from Capital One Bank has been submitted by the applicant. Operating Budget The applicant has submitted an operating budget in 2014 dollars, for the first and third years of operation, summarized below: Year One Year Three Revenues: $1,338,139 $1,651,434 Expenses: Operating Capital Total Expenses: 920,281 387,220 $1,307,501 1,025,757 397,451 $1,423,208 Net Income: $30,638 $228,226 Utilization: (procedures) Cost per procedure 4,564 $286.48 5,522 $257.73 Project #132124-B Exhibit Page 6 Utilization by payor source for the first and third years is as follows: Commercial Fee for Service Commercial Managed Care Medicare Fee for Service Medicaid Managed Care Private Pay Charity Care Year One and Year Three 23% 20% 40% 12% 3% 2% Expenses and utilization assumptions are based on the historical experience of the physician’s private practice. Upon CON approval, Dr. Khadem will continue to operate his private practice. Capability and Feasibility Total project costs of $1,925,040 will be met through a loan from Capital One Bank for $1,540,000 at stated terms, with the remaining $385,040 from proposed member’s equity. BFA Attachment A is the net worth statement of the proposed member, which indicates the availability of sufficient funds. Working capital needs are estimated at $237,201 based on two months of third year expenses. The applicant will finance $118,601 of working capital at an interest rate of 6% over 3 years for which a letter of interest has been provided by Capital One Bank. The remaining $118,600 will be provided as equity by the proposed member. BFA Attachment B is the pro-forma balance sheet of Union Square Surgery Center, LLC as of the first day of operation, which indicates positive member’s equity of $503,609. The submitted budget indicates a net income of $30,638 and $228,226 during the first and third years of operation, respectively. Revenues are based on current reimbursement methodologies for ambulatory surgery centers. The budget appears reasonable. Based on the preceding, and subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A BFA Attachment B BHFP Net Worth Statement Pro-forma Balance Sheet Map Project #132124-B Exhibit Page 7 Supplemental Information Outreach Below are presented summaries of responses by hospitals to letters from the Department asking for information on the impact of the proposed ambulatory surgery center (ASC) in their service areas. There follows a summary of the applicant’s response to DOH’s request for information on the proposed facility’s volume of surgical cases, the sources of those cases, and on how staff will be recruited and retained by the ASC. Facility: NYU Langone Medical Center -- No Response 550 First Avenue New York, NY 10016 Facility: Bellevue Hospital Center -- No Response First Avenue at 27th Street New York, NY 10016 Facility: Beth Israel Medical Center/ -- No Response Petrie Division First Avenue at 16th Street New York, NY 10003 Facility: New York Eye and Ear Infirmary Mount Sinai 310 East 14th Street New York, NY 10003 Current OR Use (% of capacity) Surgery Cases Ambulatory Reserved OR Time for Applicant Physicians 183 Yes Inpatient 95% 31,954 Amb. Surg. Cases by Applicant Physicians 554 The New York Eye and Ear Infirmary Mount Sinai (NYEEIMS) opposes the application, stating that it will lose $450,000-$600,000 in surgical revenues annually from the three physicians associated with the application who currently perform surgeries at NYEEIMS. The hospital states that this loss of revenues would have adverse effects on its community-oriented services, including its emergency department and trauma services, its services to the uninsured and underinsured, its outpatient clinics, and its extensive community education activities. The hospital does not describe these effects in specific terms. In 2012, NYEEIMS had expenses of $142.3 million on revenue of $159.5 million. In 2011, NYEEIMS had expenses of $129.3 million on revenue of $141.8 million. The hospital’s current assets in 2012 were $73.5 million and current liabilities were $25.7 million, for a working capital ratio of 2.9 to1.0. In 2011, current assets were $63.0 million, and current liabilities $27.6 million, for a working capital ratio of 2.3 to 1.0. In 2012, NYEEIMS incurred bad debt expenditures of $3.8 million and provided charity care of $1.9 million. In 2011, NYEEIMS incurred bad debt expenditures of $4.3 million and provided charity care in the amount of $1.7 million. Supplemental Information from Applicant Need and Sources of Cases: The applicant states that the projected volume of the proposed ASC is based on the actual experience of the proposed operator and his associates in his practice. The applicant also expects that ongoing and projected growth in ambulatory surgery in general will be a source of cases for the proposed facility, as will convenience in scheduling and the location of the ASC in an out-of-hospital setting, in close proximity to the proposed operator’s PC practice. Project #132124-B Exhibit Page 8 Staff Recruitment and Retention: The applicant plans to recruit necessary staff through a hiring program. To the extent that additional staff may be needed, the proposed operators are committed not to seek to attract staff from local hospitals. The applicant will retain staff through competitive salary benefits and continuing education opportunities, elective work schedules within regular work hours and occasional long weekends or additional days off as rewards for hard work and efficiency. Office-Based Cases: The applicant states that approximately 94 percent of the procedures projected for the proposed ASC are currently performed in the office-based setting; the remainder are performed in the hospital setting. DOH Comment The presumed loss of 183 case to the ASC by the single hospital commenting on this application would constitute only 0.6% of that facility’s annual ambulatory surgical volume of more than 31,000 cases, carried out in operating rooms functioning at 95 percent of capacity. The Department finds that such minimal projected impact, and the fact that none of the three other hospitals in the area chose to comment on this application, provide no basis for reversal or modification of the recommendation for limited life approval of the proposed ASC based on public need, financial feasibility and operator character and competence. Project #132124-B Exhibit Page 9 Public Health and Health Planning Council Project # 132346-B Northway SPC, LLC d/b/a The Northway Surgery and Pain Center County: Saratoga Purpose: Establishment and Construction Program: Ambulatory Surgery Center Acknowledged: December 31, 2013 Executive Summary Description Northway SPC, LLC, proposes to develop a single specialty ambulatory surgery center to provide pain management services. The Center will be located at 1596 Route 9, Clifton Park, New York 12065. The ownership of Northway SPC, LLC will be 95% NSPC Holdings, LLC and 5% Heritage Ambulatory Surgery Center, LLC. The members of NSPC Holdings, LLC which will have 95% membership in Northway SPC, LLC is as follows: Edward A Apicella, M.D. 35% Martin Ferrillo, D.O. 35% Charles Gordon, M.D. 15% Quentin Phung, M.D. 15% The Membership of Heritage Ambulatory Surgery Center, LLC which will have 5% membership in Northway SPC, LLC is as follows: Robert Tiso, M.D. 37.50% Joseph Catania 37.50% Eric Tallarico, M.D. 5.00% Nameer Haider, M.D. 20.00% The proposed ambulatory surgery center is located in Clifton Park, where the four physicians will perform procedures and improve efficiencies that allow for more complex procedures to address their patient needs. Currently Edward A Apicella, M.D. and Martin Ferrilli, D.O. operate a private practice with offices in Albany and Saratoga Springs. Charles Gordon, M.D. and Quentin Phung, M.D. operate a private practice which provides office based surgery services in two procedure rooms in Clifton Park. Heritage Ambulatory Surgery Center Alliance, LLC will provide consulting services and provide administrative services to the ambulatory surgery center. DOH Recommendation Approval with an expiration of the operating certificate five (5) years from the date of its issuance is recommended. Need Summary The proposed project is a conversion of an officebased ambulatory surgery practice into an Article 28 diagnostic and treatment center to provide singlespecialty ambulatory surgery services specializing in pain management. The number of projected procedures is 8,232 in the first year. Program Summary Based on the information reviewed, staff found nothing that would reflect adversely upon the applicant’s character and competence or standing in the community. A transfer and affiliation agreement is expected to be provided by Saratoga or Ellis Hospital. Financial Summary The total project costs for establishment of this facility and moveable equipment is $979,655. The members will provide equity of $99,655 based on their percentage of membership. The residual $880,000 will be provided via bank loan to North SPC, LLC for a seven year term at 4.5% interest rate. Project #132346-B Exhibit Page 1 Budget: Revenues: $7,619,876 Expenses: 3,564,058 Gain/ (Loss) $4,055,818 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #132346-B Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval with an expiration of the operating certificate five (5) years from the date of its issuance, 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 of a signed agreement with an outside independent entity satisfactory to the Department to provide annual reports to the DOH beginning in the second year of operation. Said reports should include:  Data showing actual utilization including procedures;  Data showing breakdown of visits by payor source;  Data showing number of patients who need follow-up care in a hospital within seven days after ambulatory surgery;  Data showing number of emergency transfers to a hospital;  Data showing percentage of charity care provided, and  Number of nosocomial infections recorded during the year in question. [RNR] 3. Submission of a statement, acceptable to the Department, that the applicant will consider creating or entering into an integrated system of care that will reduce the fragmentation of the delivery system, provide coordinated care for patients, and reduce inappropriate utilization of services. The applicant will agree to submit a report to the Department beginning in the second year of operation and each year thereafter detailing these efforts and the results. [RNR] 4. Submission by the governing body of the ambulatory surgery center of an Organizational Mission Statement which identifies, at a minimum, the populations and communities to be served by the center, including underserved populations (such as racial and ethnic minorities, women and handicapped persons) and the center’s commitment to meet the health care needs of the community, including the provision of services to those in need regardless of ability to pay. The statement shall also include commitment to the development of policies and procedures to assure that charity care is available to those who cannot afford to pay. [RNR] 5. Submission of an executed transfer and affiliation agreement with a local acute care hospital, acceptable to the Department. [HSP] 6. Submission of an executed Administrative Services Agreement, acceptable to the Department. [HSP] 7. Submission of an executed operating agreement, acceptable to the Department. [BFA] 8. Submission of an executed building lease, acceptable to the Department. [BFA] 9. Submission of executed equipment bank loan commitment, acceptable to the Department. [BFA] 10. Submission of an executed working capital loan commitment, acceptable to the Department. [BFA] 11. Submission of an executed lease agreement, acceptable to the Department. [CSL] 12. Submission of revised Articles of Incorporation of Northway SPC, LCC, stating the location of the principal office of the LLC by specific address, acceptable to the Department. [CSL] 13. Submission of the executed Operating Agreement of Northway SPC, LCC, acceptable to the Department. [CSL] 14. Submission of a revised Schedule 3B(I)(H), confirming the applicant intends to enter into an Administrative Services Agreement, acceptable to the Department. [CSL] 15. Submission of an executed Administrative Services Agreement, acceptable to the Department. [CSL] Project #132346-B Exhibit Page 3 16. Submission of an amended and executed Operating Agreement of NSPC Holdings, LLC such that in Section 1.27 the term “person” shall mean only natural persons, acceptable to the Department. [CSL] 17. Submission of the list of members of Heritage Ambulatory Surgery Center Alliance, LLC that indicates indirect ownership percentage. [CSL] 18. Submission of the list of all managers of Heritage Ambulatory Surgery Center Alliance, LLC. [CSL] 19. Submission of the executed and dated Operating Agreement of Heritage Ambulatory Surgery Center Alliance, LLC, acceptable to the Department. [CSL] 20. The submission of State Hospital Code (SHC) Drawings, acceptable to the Department, as described in BAEFP Drawing Submission Guidelines DSG-03 Outpatient Facilities. [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. The staff of the facility must be separate and distinct from staff of other entities. [HSP] 3. The signage must clearly denote that the facility is separate and distinct from other adjacent entities. [HSP] 4. The entrance to the facility must not disrupt any other entity's clinical program space. [HSP] 5. The clinical space must be used exclusively for the approved purpose. [HSP] 6. The submission of Final Construction Documents, signed and sealed by the project architect, as described in BAEFP Drawing Submission Guidelines DSG-05, prior to the applicant’s start of construction. If not available on the DOH website at the time you are ready to prepare these documents, please request that these guidelines be sent to you. [AER] 7. The applicant shall start construction on or before July 1, 2014 and complete construction by December 31, 2014 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), if construction is not started on or before the start date, this shall constitute abandonment of the approval. In accordance with Part 710.10(a), this approval shall be deemed cancelled, withdrawn and annulled without further action by the Commissioner. [AER] Council Action Date June 12, 2014 Project #132346-B Exhibit Page 4 Need Analysis Project Description Northway SPC, LLC d/b/a The Northway Surgery and Pain Center is requesting approval to establish and construct an Article 28 diagnostic and treatment center to provide single-specialty ambulatory surgery services specializing in pain management. The proposed location is 1759 Route 9, Clifton Park, 12065, in Saratoga County. Analysis The service area includes Albany, Rensselaer, Saratoga, Schenectady, Warren, and Washington Counties; it will also serve the neighboring communities in Fulton and Montgomery Counties. In 2012, four of the sponsoring physicians performed a total of 9,700 procedures. The number of projected procedures is 8,232 in year 1 and 9,961 in year 3. Saratoga County currently has a freestanding endoscopy center that served 1,707 patients in 2013; a freestanding single specialty ambulatory surgery center specializing in ophthalmology services opened in the county in July 2013. The applicant is committed to serving all persons without regard to their ability to pay or the source of payment. Conclusion The proposed project will bring procedures that are currently being performed in private physicians’ offices under a regulated Article 28 entity. Recommendation From a need perspective, contingent approval is recommended with the expiration of the operating certificate five years from the date of issuance. Program Analysis Project Proposal Northway SPC, LLC (NSPC) is seeking approval to establish and construct an Article 28 single-specialty ambulatory surgery center in Clifton Park. Upon approval, the center will be known as The Northway Surgery and Pain Center. Proposed Operator Doing Business As Site Address Surgical Specialties Operating Rooms Procedure Rooms Hours of Operation Staffing (1st Year / 3rd Year) Medical Director(s) Emergency, In-Patient and Backup Support Services Agreement and Distance On-call service Northway SPC, LLC The Northway Surgery and Pain Center 1596 Route 9, Clifton Park (Saratoga County) Single Specialty: Pain Management 4 (3 Class B and 1 Class C) 0 Monday through Friday from 7:00 am to 3:00 pm 22.20 FTEs / 23.20 FTEs Edward Apicella, MD Expected to be provided by either Saratoga or Ellis Hospital 15 mi./19 min. & 11 mi./20 min., respectively An after-hours contact number will all be provided to patients as part of discharge instructions and all calls will be responded to by the appropriate on-call physician. Project #132346-B Exhibit Page 5 Character and Competence The members of the LLC are: Name NSPC Holdings, LLC Edward Apicella, MD (35%) Martin Ferrillo, DO (35%) Charles F. Gordon III, MD (15%) Quentin Phung, MD (15%) Heritage Ambulatory Surgery Center Alliance, LLC Robert L. Tiso, MD (37.50%) Eric A. Tallarico, MD (37.50%) Joseph A. Catania, MD (5%) Nameer Haider, MD (20%) Percentage 95% 5% The majority member Northway SPC, LLC (95%) is comprised of four (4) physicians from two practices. Heritage Ambulatory Surgery Center Alliance, LLC, a 5% member of the proposed Center, is comprised of four (4) physicians who will provide administration and consulting services to the center. Staff from the Division of Certification & Surveillance reviewed the disclosure information submitted regarding licenses held, formal education, training in pertinent health and/or related areas, employment history, a record of legal actions, and a disclosure of the applicant’s ownership interest in other health care facilities. Licensed individuals were checked against the Office of Medicaid Management, the Office of Professional Medical Conduct, and the Education Department databases as well as the US Department of Health and Human Services Office of the Inspector General Medicare exclusion database. Dr. Tiso disclosed two (2) closed malpractice cases (one closed by settlement) and one (1) open malpractice case. Dr. Catania disclosed two (2) closed malpractice cases (both by settlement) and four (4) open malpractice cases. Integration with Community Resources The proposed ASC will specialize in Pain Management services and anticipates that the majority of patients will come from primary care physicians’ referrals. For those patients who have a need for primary care follow-up and do not have a primary care physician, the center will provide a list of physicians located near the facility who are accepting new patients. The ASC staff will ensure that the list is maintained up-to-date by contacting the primary care offices several times per year. The center aims to provide quality pain management services to all who are referred to the physicians credentialed by the ASC without regard to their ability to pay. In addition to participating in both the Medicare and Medicaid programs, the center will welcome referrals from hospital emergency departments and hospital-based clinics which provide services for the indigent and underserved. The applicant intends on utilizing an Electronic Medical Record (EMR) but has not yet identified the specific system it will use. The ASC’s goal is to integrate into a Regional Health Information Organization (RHIO) and it is receptive to becoming a part of an Accountable Care Organization (ACO) or Medical Home based on regulatory and market demands. Recommendation From a programmatic perspective, contingent approval is recommended. Project #132346-B Exhibit Page 6 Financial Analysis Total Project Cost and Financing Total project cost for moveable equipment is estimated at $979,655 broken down as follows: Moveable Equipment Applicant Fee Additional Processing Fee Total Project Costs $972,308 2,000 5,348 $979,655 Lease Rental Agreement The applicant has submitted an executed lease rental agreement for the site to be occupied. The terms of which are summarized below. Premises: Lessor: Lessee: Rental: Term: Provisions: 9,420 square feet located at 1759 Route 9 Associates, Saratoga County The Northway SPC, LLC 1596 Route 9 Associates, LLC $396,060 annually ($42 per sq. ft.) Also, the annual increase in rent will be 2% over the ten year term. 15 years with (15) year renewal options. Tenant shall pay real estate taxes, insurance for liability costs, maintenance for its premises and any improvements that the tenant makes shall be paid for out of the tenant’s obligations. The applicant has provided two letters indicating the rent reasonableness. The applicant has indicated that the lease agreement will be an arms-length lease agreement. Operating Agreement The applicant has provided a draft operating agreement, the terms of which are summarized below. Effective Date: Term: Conditions: Mandatory Redemption: Dissolution of the Company: Upon execution of agreement by both parties, Northway SPC, LLC and Heritage Ambulatory Surgery Center, LLC. 10 years from date of execution. Both parties have agreed to the stated terms: Northway SPC, LLC in cooperation with Heritage Ambulatory Surgery Center Alliance, LLC to 5% membership. Management shall be maintained to any beneficial owner of 10% or more member. It is agreed that Heritage Ambulatory Surgery Center Alliance, LLC would be limited in scope in the organization to consulting and administrative services only. At any time on or after the 10th anniversary date, Northway SPC, LLC may exercise its option to buy back its membership from Heritage Ambulatory Surgery Center Alliance, LLC. The dissolution and termination of the company may be dissolved by a vote of the majority of Interest of Members at any time. Project #132346-B Exhibit Page 7 Administrative Service Agreement The applicant has provide a draft administrative service agreement, the terms of which are summarized below. Provider: Facility Operator: Services provided: Heritage Ambulatory Surgery Center Alliance, LLC Northway SPC, LLC Billing and collections; data and coding services; claims collections; tracking accounts receivable; training of center staff and monthly and annual reports for claims; collections and receivables; manage billing software and vendor relationships; attend meetings to monitor compliance with Medicare and provide payroll, purchasing, accounts payable data entry services. $270,000 annually which will be paid monthly. 10 years Compensation: Term: The Northway SPC, LLC will enter into a consulting and administrative service agreement with Heritage Ambulatory Surgery Center Alliance, LLC. It should be noted that Northway SPC, LLC will operate and maintain governance of the facility and will be responsible for all of its day-to-day operations and strategic decisions through the operating agreement and scope of the Administrative Service Agreement. Operating Budget The applicant has submitted an operating budget, in 2014 dollars, for the first of operation after the change in ownership, summarized below: Revenues: $6,297,418 $7,619,876 Operating Capital Total Expenses $ 2,525,970 584,953 $3,110,923 $ 2,976,865 587,193 $3,564,058 Net Income: $3,186,495 $4,055,818 Utilization: Visits Cost Per Visit: 8,232 377.90 9,961 357.80 Expenses: Utilization by payor source for the first and third year is as follows: Commercial Fee-for-Service Commercial Managed Care Medicaid Managed Care Charity Care Other Private Pay Year One & Three 60.2% 15.8% 3.3% 0.3% 20.0% 0.4% Expense and utilization assumptions are based on the historical experience of similar facilities that these Members have operating in the Saratoga County Region. Project #132346-B Exhibit Page 8 Capability and Feasibility The total project costs for establishment of this facility and moveable equipment is $979,655. The members will provide equity of $99,655 based on their percentage of membership. The residual $880,000 will be provided via bank loan to North SPC, LLC for a seven year term at 4.5% interest rate. A letter of interest has been submitted indicating interest. BFA Attachment A is the personal net worth statements for the proposed members. Edward Apicella, M.D. and Martin Ferrillo, D.O. will each contribute $33,136 from their personal assets. Charles Gordon, M.D. and Quentin Phung, M.D. will each contribute $14,201from their personal assets. Heritage Ambulatory Surgery Center, LLC is a new establishment and has no financial statements to date. The members of Heritage Ambulatory Surgery Center, LLC have submitted their net worth statements on BFA Attachment B indicating they have sufficient equity resources to provide for their 5% ownership totaling $4,983. This will be distributed equally among Robert Tiso, M.D., Joseph Catania, Eric Tallarico, M.D., and Nameer Haider, M.D. Working capital requirements, estimated at $594,010, appear reasonable based on two months’ of first year expenses. The proposed working capital requirement will be met via personal assets from the members of $325,000 and a bank loan of $269,010 at a rate of 4.5% for a term of seven years. A letter of interest has been submitted for the loan. Edward Apicella, M.D. and Martin Ferrillo, D.O. will each contribute $108,063 from their personal assets. Charles Gordon, M.D. and Quentin Phung, M.D. will each contribute $46,313 from their personal assets. As indicated on BFA Attachment A, the members have the ability to fund the working capital position. As shown on BFA Attachment B, Heritage Ambulatory Surgery Center Alliance, LLC is a new establishment with no financial statements. The members will use their personal equity to contribute a total of $16,250 allocated to each member $4,062.50 each. BFA Attachment B indicates sufficient resources to fund working capital. BFA Attachment C is the pro forma balance sheet of Northway SPC, LLC, which indicates a positive shareholders’ equity position of $417,308 as of the first day of operation. The submitted budget projects a net income of $3,186,495 and $4,055,818 during the first and third year of operation, respectively. Revenues are based on current reimbursement methodologies for ambulatory surgery services. Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A BFA Attachment B BFA Attachment C BHFP Personal Net Worth Statement- Northway SPC, LLC Personal Net Worth Statement- Heritage Ambulatory Surgery Center Alliance, LLC Pro-forma Balance Sheet- Northway SPC, LLC Map Project #132346-B Exhibit Page 9 Supplemental Information Outreach Below are presented summaries of responses by hospitals to letters from the Department asking for information on the impact of the proposed ambulatory surgery center (ASC) in their service areas. There follows a summary of the applicant’s response to DOH’s request for information on the proposed facility’s volume of surgical cases, the sources of those cases, and on how staff will be recruited and retained by the ASC. Facility: Saratoga Hospital -- No Response 211 Church Street Saratoga Springs, NY 12866 Facility: Ellis Hospital -- No Response 1101 Nott Street Schenectady, NY 12308 Facility: St. Peter’s Hospital 315 So. Manning Blvd. Albany, NY 12208 Although the hospital states that none of the applicant physicians for the proposed ASC practice at St. Peter’s, the hospital projects a loss of $988,000 per year based on referrals that these physicians currently make to St. Peter’s for surgery for spinal cord stimulator placements and kyphoplasty. With the establishment of the ASC, the hospital would lose these referrals and the associated surgeries (and an indeterminate number of percutaneous discectomies). However, the Department found that none of the CPT codes for the spinal cord stimulatory placement, and kyphoplasty procedures referred to in the hospital’s letter (by CPT code) match any of the descriptions or CPT codes for any of the procedures the applicants list in their CON application as those to be performed in the proposed ASC; nor does the applicant propose to perform percutaneous discectomies. St. Peter’s had a current ratio of 2.1 in 2011 and 1.6 in 2012. In 2011, the hospital’s operating margin was 1.7%, which rose to 4.1% in 2012. In 2011, the hospital experienced $20.4 million in bad debt and $10.9 million in charity care. In 2012, bad debt was $19.2 million, and charity care $10.3 million. Facility: Albany Medical Center Hospital -- No Response 43 New Scotland Avenue Albany, NY 12208 Supplemental Information from Applicant Need and Source of Cases: Cases will be drawn from those currently being performed in the office setting of the applicant physicians. The applicant also states that the ASC will meet an unmet need in the community by having the ability to perform more complex procedures than are currently available at the applicant physicians’ practice site. Based on National Center for Health Statistics estimates of chronic pain prevalence in the adult population, the applicant calculates that there are an estimated 182,000 persons in the six-county service area of the proposed ASC who could benefit from pain management intervention. Staff Recruitment and Retention: The applicant states that employees will be recruited from accredited schools and training programs, as well as through advertisements in local newspapers and professional publications. Employees will also move from the applicant physicians’ practices to work in the ASC as permanent employees of the ASC. To retain good employees, the ASC will offer competitive wages and above-average benefits, as well as incentives for good performance. Project #132346-B Exhibit Page 10 Office-Based Cases: The applicant projects that approximately 90 percent of the procedures in the first year of operation would transfer from the practice’s office-based surgery setting. By the third year of operation, it is projected that an additional 1,700 procedures not currently performed in an office-based setting would be performed in the proposed ASC. DOH Comment The information from the single hospital commenting on the application is based on the potential for referrals lost to the ASC for certain procedures currently performed in the hospital (St. Peter’s). Since none of the applicant physicians currently perform surgeries at the hospital, any projected loss of revenues by the hospital to the proposed ASC must be considered speculative. This is especially true in view of the fact that none of the potential lost referrals described in the hospital’s comments would involve procedures proposed to be performed in the new ASC. Therefore, the Department sees little prospect of financial loss to the hospital with the approval of this application. In view of this conclusion and in the absence of comments from the other hospitals invited to opine on the application, the Department finds no basis for reversal or modification of the recommendation for limited life approval of the proposed ASC based on public need, financial feasibility and operator character and competence. Project #132346-B Exhibit Page 11 Public Health and Health Planning Council Project # 141004-E Garden City Surgi Center County: Nassau Purpose: Establishment Program: Diagnostic & Treatment Center Acknowledged: January 7, 2014 Executive Summary Description Endo Group, LLC, d/b/a Garden City Surgi Center (the Center), an existing multi-specialty free standing ambulatory surgical center (ASC) that is also certified to provide Outpatient Radiology Diagnostic and Clinical Laboratory services, is requesting approval to add North Shore-LIJ Ventures GCSC, LLC as a 70% member of the Center. The sole member of North Shore-LIJ Ventures, LLC is North Shore University Hospital, a voluntary not-for-profit 804 bed tertiary care hospital located in Manhasset. The current and proposed membership interest of the Center is as follows: Current Member Phaco Group, LLC Odyssey Venture Group, LLC Jordan Garelick, M.D. Proposed Member Phaco Group,LLC North Shore-LIJ Ventures GCSC,LLC Interest 78.3112% 19.5778% 2.1110% Interest 30.0% 70.0% North Shore-LIJ Ventures GCSC, LLC has entered into a Membership Interest Purchase Agreement to acquire 70% membership interest in the Center for $7,076,300. BFA Attachment D is the financial summary for North Shore-Long Island Jewish Health System, which will fund this transaction for North Shore-LIJ Ventures GCSC, LLC, and shows sufficient funds for the purchase. The Center performed 5,850 and 6,363 procedures in 2012 and 2013, respectively. The change in ownership will not result in any change in the services being provided or the capacity. DOH Recommendation Contingent Approval Need Summary There will be no Need recommendation of this project. Program Summary Based on the information reviewed, staff found nothing that would reflect adversely upon the applicant’s character and competence or standing in the community. Financial Summary There are no project costs associated with this application. The purchase price of $7,076,300 will be met with accumulated funds from North Shore-Long Island Jewish Health System. It appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #141004-E Exhibit Page 1 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. Submission of an executed Administrative Services Agreement, acceptable to the Department. [CSL] 2. Submission of an executed Articles of Organization of Endo Group, LLC and must specifically provide that managers must be members of Endo Group’s LLC members, acceptable to the Department. [CSL] 3. Submission of an executed Operating Agreement of Endo Group, LLC, acceptable to the Department, revised such that a. Section 3.1 such that the powers and purposes of the LLC are limited to the ownership and operation of the Article 28 facility, specified by name and address. As drafted, section 3.1 is overbroad. b. The agreement specifically provides that managers must also be members of Endo Group’s LLC members. [CSL] 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] Council Action Date June 12, 2014 Project #141004-E Exhibit Page 2 Program Analysis Program Description Endo Group, LLC, d/b/a Garden City Surgi Center (GCSC, the Center), an existing multi-specialty free standing ambulatory surgical center that is also certified to provide Outpatient Radiology Diagnostic and Clinical Laboratory services, is requesting approval to add North Shore-LIJ Ventures GCSC, LLC as a 70% member of the Center. The sole member of North Shore-LIJ Ventures GCSC, LLC is North Shore University Hospital a voluntary, not-for-profit 804-bed tertiary care hospital located in Manhasset. North Shore University Hospital is a member of the North Shore-Long Island Jewish Health System. The Board of Trustees for North ShoreLong Island Jewish Health System is comprised of 160 members, of which 120 were subject to Character and Competence review. Additionally, the Department also reviewed the individuals who will be the managers of Garden City Surgi Center. Phaco Group, LLC will acquire the existing interests in the Center held by Odyssey venture Group, LLC and Mr. Jordan Garelick. Mr. Garelick will become a member of Phaco Group, LLC and Odyssey Venture Group, LLC will no longer be an owner of Endo Group, LLC. Upon approval, the proposed membership interest of the Center will be: Proposed Members Interest North Shore-LIJ Ventures GCSC, LLC 70.0% Phaco Group,LLC* 30.0% *Phaco Group members were not subject to review under this CON The managing members of the Center are: Name Dennis Dowling Mark Jarrett, MD John McGovern Joseph Moscola Laurence Kraemer **Marc Werner, MD **Robert Rothman, MD **Michael Sable, MD **existing members/managers of GCSC and not subject to review under this CON Staff from the Division of Certification & Surveillance reviewed the disclosure information submitted regarding licenses held, formal education, training in pertinent health and/or related areas, employment history, a record of legal actions, and a disclosure of the applicant’s ownership interest in other health care facilities. Licensed individuals were checked against the Office of Medicaid Management, the Office of Professional Medical Conduct, and the Education Department databases as well as the US Department of Health and Human Services Office of the Inspector General Medicare exclusion database. Mr. Michael Ashner disclosed two pending civil legal matters involving allegations of breach of fiduciary duty, abuse of control, mismanagement, and waste of corporate assets. Mr. Alan Chopp disclosed affiliation with several long-term care health facilities. The Department cited Avalon Gardens Rehabilitation in a Stipulation and Order dated April 21, 2009 and July 16, 2009 for issues related to Quality of Care. On March 7, 2014, a complaint investigation resulted in Immediate Jeopardy which caused the facility to again be out of compliance. The Department cited Bayview Nursing & Rehabilitation Center in a Stipulation and Order dated September 29, 2005, June 13, 2007, and December 16, 2011 for issues related to Comprehensive Care Plans, Quality of Life and Quality of Care (Pressure Ulcers and Accidents). Civil money penalties of $74,658.64 were assessed and a Denial of Project #141004-E Exhibit Page 3 Payment for New Admissions was imposed from November 24, 2004 through January 10, 2005. The Hamptons Center for Rehabilitation and Nursing was cited several times by the Department in a Stipulation and Order (dated June 12, 2007, June 1, 2009, December 6, 2010, and May 24, 2011) for issues related to Quality of Care (i.e., Treatment, Hydration, and Accidents) and for Administration and Facility Practices. Mr. Richard Goldstein disclosed that he had been a director and shareholder of corporation which filed for bankruptcy in 2009 then subsequently sold their assets. Mr. Charles Merinoff disclosed that he had been named in an employment action involving a company that he was affiliated with in 2009. The matter was settled at arbitration in July 2012. Mr. Seth Horowitz disclosed that, in June 2012, a company he is affiliated with entered into a settlement with the Securities and Exchange Commission (SEC) and agreed to a Consent Judgment (CJ) to settle the civil action filed by the SEC. Mr. Lewis S. Ranieri disclosed that he was Chairman and director of a bank holding company whilch filed for Chapter 7 bankruptcy protection in November 2008. He also disclosed that, in March 2013, a company he was affiliated with entered into a settlement agreement with the SEC for failure to adequately oversee a third party’s activities related to marketing a particular fund. Ms. Lois Schlissel disclosed two pending civil legal matters dated January and July 2013 relating to unpaid legal fees. Mr. Sean Simon disclosed that, in 2009, he (and more than 20 other officers/directors) had been named as defendants in several civil lawsuits alleging losses caused by certain funds’ investments with Bernard Madoff. None of the suits alleged that Mr. Simon personally engaged in specific wrongdoing. He and the other defendants moved for dismissal and, to date, one of the suits has been dismissed and the others remain pending. Mr. Michael Slade disclosed pending legal action. In 2004, six separate shareholder class-actions were filed against a company with which he was affiliated (as well as certain officers and directors of that company). The Court consolidated the suits and the matter is now in discovery. In addition, in April 2005, a second state court derivative action was filed alleging breaches of fiduciary duties by individual directors and officers. The company was named as a nominal defendant and has filed a motion to dismiss. Additionally, the staff from the Division of Certification & Surveillance reviewed the ten-year surveillance history of all associated facilities. Sources of information included the files, records, and reports found in the Department of Health. Included in the review were the results of any incident and/or complaint investigations, independent professional reviews, and/or comprehensive/focused inspections. The review found that any citations were properly corrected with appropriate remedial action. In September 2008, Staten Island University Hospital (SIUH) entered into a settlement with the U.S. Attorney’s Office, the Office of the Inspector General of the Department of Health and Human Services, and the Attorney General’s Office of the State of New York and agreed to pay a monetary settlement of $76.4M to the federal government and $12.4M to the state and enter into a 5-year Corporate Integrity Agreement. The settlement covered payments related to stereotactic radiosurgery treatments; provision of detoxification services above licensed capacity; SIUH’s graduate medical education program; and the provision of inpatient psychiatric services above licensed capacity. In September 2010, North Shore-Long Island Jewish Health System settled claims without a finding or admission of fraud, liability or other wrongdoing relative to a qui tam lawsuit filed under the civil False Claims Act by a private whistleblower and investigated by the U.S. Attorney’s Office. The $2.95M settlement covered a 10-year period and primarily related to isolated errors in various cost reports rather than the allegations. Project #141004-E Exhibit Page 4 Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Membership Interest Purchase Agreement North Shore-LIJ Ventures GCSC, LLC has entered into a Membership Interest Purchase Agreement with Endo Group, LLC. The applicant has submitted an executed agreement, which is summarized below: Purchaser: Seller: Purchase Price: North Shore-LIJ Ventures GCSC, LLC Phaco Group,LLC, Odyssey Venture Group, LLC, and Jordan Garelick,M.D. $7,076,300 for 70% membership interest with $50,000 to be held in escrow with the remaining balance due at closing. Capability and Feasibility There are no project costs associated with this application. The purchase price of $7,076,300 will be met with accumulated funds from North Shore-Long Island Jewish Health System. BFA Attachment D is the financial summary for North Shore-Long Island Jewish Health System which will fund this transaction for North Shore-LIJ Ventures GCSC, LLC, and shows sufficient funds for the purchase. BFA Attachments C is the 2012 and as of December 31, 2013, financial summaries for the Center currently in operation, which shows the facility has experienced negative working capital in 2012, and maintained positive working capital in 2013, positive members’ equity in both years, and a net income from operations of $1,762,194 and $2,070,929, respectively. The reasons for the 2012 negative working capital was due to the Center paying off all of its outstanding long term debt of $116,328 as a condition of the sale with North Shore-LIJ ventures GCSC, LLC, and reclassifying as current and the overpayments of $133,000 repaid to insurance companies. BFA Attachments D is the 2012 and as of September 30, 2013 financial summaries for North Shore-Long Island Jewish Health System, Inc., which shows the system has maintained positive working capital, net assets and a net income from operations of $97,867,000 and $69,129,000, respectively. 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, approval is recommended. Attachments BFA Attachment A BFA Attachment B BFA Attachment C BFA Attachment D Proposed Organizational Chart of Garden City Surgi Center Organizational Chart of North Shore-LIJ Health System, Inc. Financial Summary of Garden City Surgi Center, LLC- certified 2012 and internal 2013 Financial Summary of North Shore-Long Island Jewish Health System, Inc.- certified 2012 and internals as of September 30, 2013 Project #141004-E Exhibit Page 5 Public Health and Health Planning Council Project # 141069-E Greater New York Endoscopy Surgical Center County: Kings Purpose: Establishment Program: Diagnostic and Treatment Center Acknowledged: February 20, 2014 Executive Summary Description Brooklyn Endoscopy SC, LLC d/b/a Greater New York Endoscopy Surgical Center, an existing proprietary Article 28 diagnostic and treatment center is requesting approval for permanent life. The original application, CON 062405, was approved by the Public Health Council with a conditional, limited life of five (5) years from April 3, 2009, the date the operating certificate was issued. The facility, which is located at 2211 Emmons Avenue, Brooklyn, continues to operate under the original lease, which was executed in 2010 for a term of (11) eleven years and is included on the original application submission, #062405. There has been no change to the membership of this facility since the original approval. DOH Recommendation Contingent Approval exceeded these projections considerably, with Medicaid visits at 23 percent in 2010 and 25 percent in 2012, and charity care at nine percent. Program Summary Based on the information reviewed, staff found nothing that would reflect adversely upon the applicant’s character and competence or standing in the community. Financial Summary There are no project costs associated with this application. Total Budget Revenues:  Expenses:  Net Income:  $5,744,420 2,580,838 $3,163,852 It appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Need Summary Based on CON 062405, the applicant projected to perform 4,800 procedures in year 1 and 5,292 procedures in year 3, and the percent of Medicaid patients projected was 10 percent and that of charity care was four percent. For 2010-12, the applicant Project #141069-E Exhibit Page 1 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. Submission of an affidavit attesting that there have been no changes to the legal documentation as originally approved by the Department. [CSL] Approval conditional upon: 1. The project must be completed within one year 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] Council Action Date June 12, 2014 Project #141069-E Exhibit Page 2 Need Analysis Background Brooklyn Endoscopy SC, LLC d/b/a Greater New York Endoscopy Surgical Center, an existing Article 28 diagnostic and treatment center certified as a single-specialty ambulatory surgery center specializing in gastroenterology procedures, is requesting permission to convert to permanent life following a five (5) year limited life approval of CON 062405. Brooklyn Endoscopy SC is located at 2211 Emmons Avenue, Brooklyn, 11235, Kings County. Analysis The primary service area of the proposed project includes 11235, 11223, 11224, and 11239 in Kings County. Based on CON 062405, the applicant projected to perform 4,800 procedures in year 1 and 5,292 procedures in year 3, and the percent of Medicaid patients projected was 10 percent and that of charity care was four percent. Based on the annual reports submitted by the applicant for 2010-12, the Greater NY Endoscopy SC exceeded these projections. The number of procedures was 5,883 in year 1 (2010) and 7,441 in year 3 (2012) with Medicaid visits at 23 percent in 2010 and 25 percent in 2012 and charity care at nine percent. Upon approval of this project, the applicant projects to have 9,267 procedures in years 1 and 3, with 25 percent Medicaid visits and eight percent charity care visits. The proposed project will serve all persons regardless of their ability to pay or the source of payment. Conclusion The proposed project will result in the continued operation of the facility as a source of access to ambulatory surgery services in Brooklyn, including access for Medicaid clients and the uninsured. Recommendation From a need perspective, approval is recommended. Program Analysis Program Description Brooklyn Endoscopy SC, LLC d/b/a Greater New York Endoscopy Surgical Center, an existing Article 28 diagnostic and treatment center certified as a single-specialty ambulatory surgery center specializing in gastroenterology procedures, is requesting permission to convert to permanent life following a five (5) year limited life approval. There will be no changes in services and staffing is expected to remain at 20.0 FTEs. Compliance with Applicable Codes, Rules and Regulations The medical staff will continue to ensure that procedures performed at the facility conform to generally accepted standards of practice and that privileges granted are within the physician's scope of practice and/or expertise. The facility’s admissions policy will include anti-discrimination regarding age, race, creed, color, national origin, marital status, sex, sexual orientation, religion, disability, or source of payment. All procedures will be performed in accordance with all applicable federal and state codes, rules and regulations, including standards for credentialing, anesthesiology services, nursing, patient admission and discharge, a medical records system, emergency care, quality assurance and data requirements. Project #141069-E Exhibit Page 3 This center has no outstanding Article 28 surveillance or enforcement actions and, based on the most recent surveillance information, is deemed to be currently operating in substantial compliance with all applicable State and Federal codes, rules and regulations. This determination was made based on a review of the files of the Department of Health, including all pertinent records and reports regarding the facility’s enforcement history and the results of routine Article 28 surveys as well as investigations of reported incidents and complaints. Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Operating Budget The applicant has submitted an operating budget, in 2013 dollars, for the current year and years one and three of operation subsequent to receiving a permanent life, which is summarized below:   Revenues:  Expenses:  Operating  Capital  Total Expenses:    Net Income:    Utilization (procedures)  Cost per procedure  Current Year (2013) $5,744,420 Year One  $5,744,420    $2,294,231  286,607  $2,580,838    $3,163,852    9,267  $278.49  $2,164,359 310,392 $2,474,750 $3,269,670 9,267 $267.04 Year Three $5,744,420 $2,294,231 286,607 $2,580,838 $3,163,852 9,267 $278.49 Below is the projected year one and three utilization from the original limited life application #062405, along with actual results. Utilization (procedures)  Projected  Actual  Year One (2010) 4,800 5,883 Year Three (2012)  5,292 7,441 Utilization by payer source during year one and three (2010 and 2012) for project 062405 subsequent to receiving permanent life certification is as follows: Current Year (2013) Year Three (2015)   Commercial Fee for Service  41.0% 41.0%  Medicare Fee for Service  18.4% 18.4%  Medicaid Fee for Service  1.0% 1.0%  Medicaid Managed Care  24.0% 24.0% Charity Care  8.0% 8.0% Other  7.6% 7.6% Expense and utilization is based on the historical experience of Greater New York Endoscopy Surgical Center, based upon reported SPARCS data. Project #141069-E Exhibit Page 4 Below are the projected year one and year three utilization by payer source from the original limited life application #062405.   Commercial Fee for Service  Medicare Fee for Service  Medicaid Managed Care Medicaid Fee for Service  Charity Care  Private  Year One (2010) 45.0% 34.5% 7.0% 3.0% 4.0% 6.5% Year Three (2012) 46.0% 34.5% 8.0% 2.0% 4.0% 5.5% Capability and Feasibility There are no project costs associated with this application. The submitted budget indicates a net income of $3,163,852 during the first and third year of operation subsequent to receiving permanent life. Revenues and expenses are based on current reimbursement methodologies for endoscopy surgery centers and historical experience of the operating facility. The budget appears reasonable. BFA Attachment A, a financial summary of Greater Endoscopy Surgical Center, indicates the facility has maintained positive working capital and member’s equity position. Also, the facility generated an average net income of $2,962,614 during 2012 and 2013. Based on the preceding, 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, approval is recommended. Attachments BFA Attachment A  Financial Summary 2012-2013, Brooklyn Endoscopy Center Surgery Center Project #141069-E Exhibit Page 5 Public Health and Health Planning Council Project # 141080-E Upstate Orthopedics Ambulatory Surgery Center County: Onondaga Purpose: Establishment Program: Diagnostic and Treatment Center Acknowledged: March 6, 2014 Executive Summary Description Upstate Orthopedics Ambulatory Surgery Center, LLC, a free-standing Article 28 proprietary ambulatory surgery center, is requesting approval for permanent life. The original application, CON 072151, was approved by the Public Health Council with a conditional, limited life of five (5) years from December 7, 2009, the date the operating certificate was issued. Also, this application proposes that two new members be added to the current membership. The facility, located at 6620 Fly Road, Suite 300, East Syracuse, continues to operate under the original 11 year lease. The members are as follows before and after the approval of the proposed application: Current Membership Stephen A. Albanese, MD John P. Cannizzaro, MD Timothy Damron, MD Lisa Darin Brian Harley, MD Danielle Katz, MD William F. Lavelle, MD Jon B. Loftus, MD Kathryn E. Palomino, MD Matthew G. Scuderi, MD Kevin J. Setter, MD Mike H. Sun, MD Richard A. Tallarico, MD Ian Madom, MD Joshua Pletka, MD 7.6982% 7.6982% 7.6982% 7.6213% 7.6982% 7.6982% 7.6982% 7.6982% 7.6982% 7.6982% 7.6982% 7.6982% 7.6982% 0% 0% Proposed Membership 6.6711% 6.6711% 6.6711% 6.6045% 6.6711% 6.6711% 6.6711% 6.6711% 6.6711% 6.6711% 6.6711% 6.6711% 6.6711% 6.6711% 6.6711% The proposed new members will purchase their respective membership into the practice by providing equity upon closing of their agreements. Ian Madom, MD, will purchase her membership for $125,000, using a bank loan, which a letter of interest has been submitted. Joshua Pletka, MD, will purchase his membership in the amount of $200,000 via personal assets. DOH Recommendation Contingent approval with a one-year extension to the operating certificate, from the date of the Public Health and Health Planning Council approval. Need Summary Based on CON 072151, UOASC projected 3,060 procedures in year 1 and 3,206 procedures in year 3. Based on the Annual Report 2010-13 submitted by the applicant, the number of total procedures was 2,010 in year 1 (2010) and 4,304 in year 3 (2012). The percent of Medicaid patients grew from 10.6 percent in 2010 to 12.7 percent in 2012. UOASC commits to serving all patients regardless of their ability to pay. In the past four years, UOASC has provided charity care to 84 patients totaling $59,000 in patient balances waived. Upon approval of this project, UOASC projects 4,975 procedures in year 1. There will be no changes in services. Project #141080-E Exhibit Page 1 Program Summary Based on the information reviewed, staff found nothing that would reflect adversely upon the applicant’s character and competence or standing in the community. Financial Summary There are no project costs associated with this application. Budget Revenues: Expenses: Net Income: $8,114,000 6,463,500 $1,650,500 Subject to the noted contingency, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #141080-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval with a one-year extension to the operating certificate from the date of Public Health and Health Planning Council approval, contingent upon: 1. Submission of a plan to separate the number of visits for charity care from other payor categories. [RNR] 2. Submission of a plan, satisfactory to the Department, to improve Medicaid and charity care visits at or above the rate projected in CON 072151. [RNR] 3. Submission of a signed agreement with an outside independent entity satisfactory to the Department to provide annual reports to the DOH beginning in the second year of operation. Said reports should include:  Data showing actual utilization including procedures;  Data showing breakdown of visits by payor source;  Data showing number of patients who need follow-up care in a hospital within seven days after ambulatory surgery;  Data showing number of emergency transfers to a hospital;  Data showing percentage of charity care provided, and  Number of nosocomial infections recorded during the year in question. [RNR] 4. Submission of an executed loan commitment for membership interest, acceptable to the Department. [BFA] 5. Submission of photocopies of any amendments to or restatements of the applicant’s Articles of Organization, acceptable to the Department. [CSL] 6. Submission of a photocopy of an executed amendment to the Amended and Restated Operating Agreement of Upstate Orthopedics Ambulatory Surgery Center, LLC, acceptable to the Department. [CSL] Approval conditional upon: 1. The project must be completed within one year 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] Council Action Date June 12, 2014 Project #141080-E Exhibit Page 3 Need Analysis Background Upstate Orthopedics Ambulatory Surgery Center (UOASC), an Article 28 diagnostic and treatment center, is requesting permission to convert to permanent life following a five (5) year limited life. The facility is located at 6620 Fly Road, East Syracuse, 13057, in Onondaga County. It is also seeking approval to transfer 13.3422 percent ownership (6.6711% each) to two additional members. Analysis Upstate Orthopedics Ambulatory Surgery Center serves a total of 14 counties in the Central New York Region. More than 70 percent of the patients come from Onondaga County (43%), Oneida County (11%), Oswego County (10%), and Jefferson County (9%); patients also come from Madison, Cayuga, Cortland, Broome, Tompkins, St. Lawrence, Lewis, Herkimer, Chenango, Tioga, and Other Counties in the area. The table below provides information on projections for years 1 and 3 based on CON 072151. Projections Year 1 Year 3 Total Visits 3,060 3,206 The following table depicts projected percentages by payor for Years 1 and 3 along with actual utilization figures for 2010 – 2013 based on CON 072151. Projections Projections Payor Comm.-FFS Comm.MC Workers Comp. Medicaid-FFS Medicaid-MC Medicare-FFS Medicare-MC No Fault Private Charity All Other Total Actual Actual Actual Actual % % % % Actual Actual Actual Actual 2010 2011 2012 2013 52.8% 48.8% 49.1% 46.8% Year 1 19.00% 24.00% Year 3 19.00% 24.00% 2010 1061 2011 1,962 2012 2,115 2013 2,187 10.00% 10.00% 293 607 593 659 14.6% 15.1% 13.8% 14.1% 8% 10.00% 7.00% 5.00% 8.00% 5.00% 4.00% 0.00% 100.00% 8% 10.00% 7.00% 5.00% 8.00% 5.00% 4.00% 0.00% 100.00% 45 168 227 57 53 7 67 393 534 117 97 13 73 472 562 153 98 15 62 603 649 167 131 15 2.2% 8.4% 11.3% 2.8% 2.6% 0.3% 1.7% 9.8% 13.3% 2.9% 2.4% 0.3% 1.7% 11.0% 13.1% 3.6% 2.3% 0.3% 1.3% 12.9% 13.9% 3.6% 2.8% 0.3% 232 223 4,022 4,304 196 4,669 99 2,010 4.9% 5.8% 5.2% 4.2% 100.0% 100.0% 100.0% 100.0% The applicant has submitted annual reports for 2010 to 2013. The number of total and Medicaid visits continued to grow during this period. The number of total visits more than doubled from 2,010 total visits in 2010 to 4,669 total visits in 2013. Although the applicant did not meet the projected number of Medicaid visits at 18 percent, the number of Medicaid visits more than tripled from 213 visits in 2010 to 665 visits in 2013 or 14.2% of total visits. The applicant reports that the percent of Medicaid patients served is slightly lower than initially projected because the overall number of cases served is significantly higher than was projected; the applicant also reports that they have captured a larger market share of privately insured and Medicare patients than anticipated. Per CON 072151, the projections for charity care were four (4) percent. The applicant reports that charity care patient write offs are reflected in one of the payor categories, often in ‘Self Pay’ or the ‘Commercial’ category. In the past four years, UOASC has provided charity care to 84 patients equating to over $59,000 in patient balances waived. However, this constitutes only 0.6% of visits for the period 2010 through 2013. According to the applicant, UOASC provides charity care to every uninsured or underinsured patient that is referred. The lack of uninsured patients is reflective of extensive efforts by local organizations and providers including UOASC to assist the uninsured in obtaining coverage through Medicaid and managed care organizations. Project #141080-E Exhibit Page 4 Upon approval of this project, UOASC projects 4,975 procedures in year 1 and 5,200 procedures in year 3 with 14.9 percent Medicaid visits (Medicaid FFS 1.4%, Medicaid MC 13.5%) and 0.5 percent charity care. Conclusion With some 14 percent of its service volume devoted to Medicaid clients, the UOASC has made a credible effort to reach the underserved in its service area. Nevertheless, this proportion falls short of the 18 percent Medicaid volume projected in UOASC’s original CON application. In addition, UOASC’s charity care volume of less than one percent does not even approach the originally projected four percent for that category of payment. While UOASC is to be commended for its efforts to assist the uninsured in obtaining Medicaid or other coverage, it seems doubtful that any such expanded coverage has left less than one percent of the population in UOASC’s service area uninsured. UOASC should be preserved as a source of ambulatory surgery services in the Central New York region, but one that serves a larger portion of Medicaid clients and the uninsured. Therefore, before permanent certification can be considered, a one-year extension of UOASC’s limited life certification is recommended, to enable the facility to expand its services to these populations. Recommendation From a need perspective, contingent approval for a one year extension is recommended. Program Analysis Project Proposal The Upstate Orthopedics Ambulatory Surgery Center is requesting permission to convert to permanent life following a five (5) year limited life approval. Additionally, the Center seeks approval to transfer 13.3422% of membership interest to two (2) new members. There will be no changes in services and staffing is expected to remain at 28.8 FTEs. Character and Competence: Upon approval, the LLC will consist of 14 physicians and one (1) non-physician as noted below: Percentage Current Members Ownership Stephen A. Albanese, MD 6.6711% John P. Cannizzaro, MD 6.6711% Timothy Damron, MD 6.6711% Lisa Darin 6.6044% Brian Harley, MD 6.6711% Danielle Katz, MD 6.6711% William F. Lavelle, MD 6.6711% Jon B. Loftus, MD 6.6711% Kathryn E. Palomino, MD 6.6711% Matthew G. Scuderi, MD 6.6711% Kevin J. Setter, MD 6.6711% Mike H. Sun, MD 6.6711% Richard A. Tallarico, MD 6.6711% Proposed New Members (Subject to review) Ian A. Madom, MD Joshua D. Pletka, MD Total 6.6711% 6.6711% 100% Staff from the Division of Certification & Surveillance reviewed the disclosure information submitted regarding licenses held, formal education, training in pertinent health and/or related areas, employment Project #141080-E Exhibit Page 5 history, a record of legal actions, and a disclosure of the applicant’s ownership interest in other healthcare facilities. Licensed individuals were checked against the Office of Medicaid Management, the Office of Professional Medical Conduct, and the Education Department databases as well as the US Department of Health and Human Services Office of the Inspector General Medicare exclusion database. Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Operating Budget The applicant has submitted an operating budget, in 2014 dollars, for the current year, and years one and three of operation subsequent to receiving a permanent life, which is summarized below:   Revenues:  Expenses:  Operating  Capital  Total Expenses:    Net Income:    Utilization (procedures)  Cost per procedure  Current Year (2013) $7,650,000 Year One $7,960,000 Year Three $8,114,000 $4,938,000 1,214,000 $6,152,000 $5,134,750 1,205,000 $6,339,750 $5,274,500 1,189,000 $6,463,500 $1,498,000 $1,620,250 $1,650,500 4,669 $1,317.62 4,975 $1,274.32 5,200 $1,242.98 Below is the actual year one and three utilization from the original limited life application #072151. Utilization (procedures)  Year One (2010) Year Three (2012)  Actual  2,010 4,304 Utilization by payer source during year one and three for project subsequent to receiving a permanent life is as follows:   Commercial Fee for Service Commercial Managed Care  Medicare Fee for Service Medicare Managed Care  Medicaid Fee for Service  Medicaid Managed Care  Charity Care  Private Pay Workers Compensation No Fault  Year One & Third Year 19% 24% 7% 5% 8% 10% 4% 5% 10% 8%               Expense and utilization is based on the historical experience of Upstate Orthopedic Ambulatory Surgery Center, LLC. Below is the projected year one and year three utilization by payer source from the original limited life application #072151. Project #141080-E Exhibit Page 6   Commercial Fee-for-Service  Other: Workers Comp./No Fault  Medicare Fee for Service Medicare Managed Care Medicaid Fee for Service Medicaid Managed Care Charity Care Private Year One & Year Three 45.6% 20.7% 13.7% 4.1% 1.4% 13.5% 0.5% 0.5% Capability and Feasibility There are no project costs associated with this application. The submitted budget indicates a net income of $1,620,250 and $1,650,500 during the first and third year of operation subsequent to receiving permanent life. Revenues are based on current reimbursement methodologies for orthopedics ambulatory surgery centers and historical experience of the operating facility. The budget appears reasonable. BFA Attachment A are the certified financial statements for Upstate Ambulatory Surgery Center, LLC, which indicates the facility has maintained a positive working capital position and a member’s deficit equity position. The deficit equity position was due to startup costs of the new facility due to property, plant and equipment being purchased. The facility is growing the practice revenues and paying off the debt to have a positive member’s equity position. Also, the facility generated an average net income of $662,681 during 2011 and 2012. BFA Attachment B is the un-audited 2013 year-end financial summary for Upstate Orthopedics Ambulatory Surgery Center, LLC. The summary indicates a positive working capital position and a positive member’s equity position. Also, the facility had a net income of $ 1,388,355. Subject to the noted contingency, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A   Financial Summary 2011-2012, Upstate Orthopedics Ambulatory Surgery Center, LLC. BFA Attachment B Un-audited Financial Summary – 2013, Upstate Orthopedics Ambulatory Surgery Center, LLC BFA Attachment C Proposed Member (Net-Worth Statement) Project #141080-E Exhibit Page 7 Public Health and Health Planning Council Project # 141013-E Ralph Lauren Center for Cancer Care and Prevention County: New York Purpose: Establishment Program: Diagnostic and Treatment Center Acknowledged: January 22, 2014 Executive Summary Description Ralph Lauren Center for Cancer Care and Prevention (RLCCCP), is a not-for-profit diagnostic and treatment center located at 1919 Madison Avenue, New York, NY (New York County) that was approved for limited life under CON number 062286. The applicant received an extension to their limited life under project 082140 as they attempted to attain financial viability. During this time period, the facility received additional grant monies totaling $2.8 million per year from Memorial Sloan Kettering and Polo/Ralph Lauren Foundations in order to help cover any shortfalls in the facility’s overall operations. At this time the applicant is requesting approval for indefinite life. Upon review of the applicants 2011 and 2012 certified financial statements and the proposed budget, it appears there is still uncertainty with respect to financial feasibility. Therefore, the Department recommends an extension of three years to the current operating certificate. DOH Recommendation Contingent approval for a three-year extension of the operating certificate, from the date of the Public Health and Health Planning Council approval. Need Summary Based on CON 082140, in year 1 (2011), RLCCCP projected 14,216 total visits with 43.5 percent Medicaid visits. RLCCCP had a total of 11,872 actual visits and 28.8 percent Medicaid visits in 2011; in 2012, RLCCCP had a total of 11,217 visits and 56.6 percent Medicaid visits. The percent of charity care projected was 7.7 percent vs. 6.7 percent actual in 2011 and 7.5 percent in 2012. There will be no changes in services. Upon approval of this project, the RLCCCP projects 13,448 visits in year 1 and 14,826 visits in year 3; Medicaid visits will be 48.8 percent in years 1 and 3 and charity care will be 5.8 percent in year 1 and 4.8 percent in year 3. Program Summary Based on the results of this review, a favorable recommendation can be made regarding the facility’s current compliance pursuant to 2802-(3)(e) of the New York State Public Health Law. Financial Summary There are no project costs associated with this proposal. Budget Revenues: Expenses: Gain/Loss Prior to Other Operating Revenue Adjustment: Other Revenue Adjustment Adjusted Gain/Loss: $4,433,274 $8,040,450 ($3,607,176) $3,568,617 $(38,559) The applicant has not demonstrated the capability to proceed in a financially feasible manner, without support from an outside source to cover the projected losses. The facility is, however, in the process of receiving an additional letter of support from Memorial Sloan Kettering to cover the projected losses for Years 2 and 3. With this support the facility will have demonstrated the capability to proceed in a financially feasible manner for the next 3 years. Project #141013-E Exhibit Page 1 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval for a three-year extension of the operating certificate, from the date of the Public Health and Health Planning Council approval, contingent upon: 1. Submission of a signed agreement with an outside independent entity satisfactory to the Department to provide annual reports to the DOH beginning in the second year of operation. Said reports should include:  Data showing actual utilization including procedures;  Data showing breakdown of visits by payor source;  Data showing number of patients who need follow-up care in a hospital within seven days after ambulatory surgery;  Data showing number of emergency transfers to a hospital;  Data showing percentage of charity care provided, and  Number of nosocomial infections recorded during the year in question. [RNR] 2. Submission of an executed letter of additional support for the projected Year 2 and Year 3 losses from Memorial Sloan Kettering, acceptable to the Department. [BFA] 3. Submission of an executed amendment to the Certificate of Incorporation, acceptable to the Department. [CSL] 4. Submission of an organizational chart reflecting the applicant’s legal structure, acceptable to the Department. [CSL] 5. Submission of a photocopy of the executed lease agreement between Maple Plaza Housing Development Fund Corporation and the applicant, acceptable to the Department. [CSL] 6. Submission of a photocopy of an executed Certificate of Incorporation of member Memorial Sloan Kettering Cancer Center, acceptable to the department. [CSL] 7. Submission of a photocopy of the adopted Bylaws of member Memorial Sloan Kettering Cancer Center, acceptable to the Department. [CSL] Approval conditional upon: 1. The project must be completed within ninety (90) days 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] Council Action Date June 12, 2014 Project #141013-E Exhibit Page 2 Need Analysis Background The Ralph Lauren Center for Cancer Care and Prevention (RLCCCP), an Article 28 diagnostic and treatment center, is requesting permission to convert to permanent life following a three (3) year limited life extension. The facility is located at 1919 Madison Avenue, New York, 10035, in New York County. RLCCCP was initially approved for limited life under CON 062286 and received an extension under CON 082140. Analysis The service area includes all five boroughs of New York City. The table below provides data on actual utilization for 2011 and 2012. RLCCCP Total Medicaid-FFS Medicaid-MC Medicare-FFS Medicare-MC Commercial Self Pay/Other Charity Total 2011 11,872 6.8% 22.0% 15.0% 2.6% 26.4% 20.5% 6.7% 100.0% 2012 11,217 7.6% 49.0% 1.8% 8.0% 18.1% 8.0% 7.5% 100.0% The table below provides data on projections upon approval of the proposed project. Year 1 Year 2 Year 3 (2014) (2015) (2016) 2014 2015 2016 Projections Visits Visits Visits % Visits % Visits % Visits Medicaid-FFS 1,054 1,137 1,159 7.80% 7.90% 7.80% Medicaid-MC 5,498 5,842 6,048 40.90% 40.60% 40.80% Medicare-FFS 706 806 777 5.30% 5.60% 5.20% Medicare-MC 2,133 2,302 2,346 15.90% 16.00% 15.80% Commercial-FFS 2,473 2,734 2,720 18.40% 19.00% 18.40% Self Pay/Other 800 863 1070 5.90% 6.00% 7.20% Charity 784 705 706 5.80% 4.90% 4.80% Total 13,448 14,389 14,826 100.00% 100.00% 100.00% RLCCCP commits to serving all patients regardless of their ability to pay, and the source of payment. Conclusion The proposed project will continue the provision of needed services to the communities of New York County. Recommendation From a need perspective, contingent approval is recommended. Project #141013-E Exhibit Page 3 Program Analysis Program Description The Ralph Lauren Center for Cancer Care and Prevention is requesting permission to convert to permanent life following a three (3) year limited life extension. There will be no changes in services, and staffing is expected to remain at 35.3 FTEs. Compliance with Applicable Codes, Rules and Regulations The medical staff will continue to ensure that procedures performed at the facility conform to generally accepted standards of practice and that privileges granted are within the physician's scope of practice and/or expertise. The facility’s admissions policy will include anti-discrimination regarding age, race, creed, color, national origin, marital status, sex, sexual orientation, religion, disability, or source of payment. All procedures will be performed in accordance with all applicable federal and state codes, rules and regulations, including standards for credentialing, anesthesiology services, nursing, patient admission and discharge, a medical records system, emergency care, quality assurance and data requirements. This facility has no outstanding Article 28 surveillance or enforcement actions and, based on the most recent surveillance information, is deemed to be currently operating in substantial compliance with all applicable State and Federal codes, rules and regulations. This determination was made based on a review of the files of the Department of Health, including all pertinent records and reports regarding the facility’s enforcement history and the results of routine Article 28 surveys as well as investigations of reported incidents and complaints. Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Operating Budget The Statement of Operations, actual 2012 vs. projected for year one (2014) and Year Three (2016) are as follows: Year One Year Two Year Three Current Year (2012) Revenues: $2,586,234 $4,004,233 $4,390,644 $4,433,274 Total Expenses: Excess (Deficiency) of Revenue over Expenses prior to Other Operating Revenue Adjustment Other Revenue Adjusted Net Income/(Loss) Visits: Cost Per visit:  $7,591,568 ($5,005,334) $7,935,232 ($3,930,999) $7,944,911 ($3,554,267) $4,139,971 $4,390,000 $3,501,725 ($865,363) 11,217 $676.79 459,001 13,448 $590.07 ($52,542) 14,389 $552.15 $8,040,450 ($3,607,176) $3,568,617 ($38,559) 14,826 $542.32 Note: 2012 used as it’s the latest certified financial statement provided Upon review of the applicant’s financial statements, it appears that they have been able to reduce their overall losses, but still have not been able to bring the facility to a positive operating or break-even financial position. A significant part of the reduction in losses comes from the applicant’s receipt of the Project #141013-E Exhibit Page 4 $2.8 million dollars in grant funding from Memorial Sloan Kettering and Polo Ralph Lauren Foundation. If the facility was not to receive these monies, they would be financially distressed. With the operating performance improvements that the facility has achieved in the last few years, along with the applicants’ significant level of service to underserved populations, the Department recommends an extension to the expiration of the operating certificate. Utilization by payor source for the historical 2011 and 2012, and Year 1 and Year 3 projections are as follows: 2011 2012 2014 Year 1 2015 Year 2 2016 Year 3 Medicaid Fee-For-Service 6.8% 7.6% 7.8% 7.9% 7.8% Medicaid Managed Care 22.0% 49.0% 40.9% 40.6% 40.8% Medicare Fee-For-Service 15.0% 1.8% 5.3% 5.6% 5.2% Medicare Managed Care 2.6% 8.0% 15.9% 16.0% 15.8% Commercial Insurance 26.4% 18.1% 18.4% 19.0% 18.4% Self-Pay/Other 20.5% 8.0% 5.9% 6.0% 7.2% Charity Care 6.7% 7.5% 5.8% 4.9% 4.8% Capability and Feasibility There are no issues of capability, as the facility is operating. The issue of feasibility is centered on the applicant’s ability to offset expenses with revenues and maintain a viable operating entity. As shown above, Year 1 has a positive net income, while Year 2 and 3 show a small net loss for both years. To support the loss, the facility is in the process of receiving a document of additional support from Memorial Sloan Kettering stating they will support the projected losses shown for Years 2 and 3. BFA Attachment A are the 2011-2012 certified financial summaries of Ralph Lauren Center for Cancer Care and Prevention. As shown on Attachment A, the facility had an average operational loss of $5,156,600 during the period shown, before grants and contributions, although it had an average positive working capital and net asset position during the period. With the grants during this same time period, the facility had an average net loss of $1,450,831. The facility, however, has had a net asset balance to cover these losses. Currently, the net asset balance as of 12/31/2012 is approximately $1,476,153. The issue of feasibility is centered on the applicant’s ability to offset expenses with revenues. The submitted budget indicates a net income of $459,001 in year 1 and a net loss of $52,542 in Year 2 and a net loss of $38,559 in Year 3, and assumes receipt of stated grant funds and other non-operating revenue, all of which are combined as other revenue. Revenues are based on current reimbursement methodologies for diagnostic and treatment services. The budget appears reasonable. Memorial Sloan Kettering is in the process of providing a document of additional support, to offset the projected losses shown for both Years 2 and 3. The applicant has complied and is current with cost report requirements. There are currently no known outstanding Medicaid audit liabilities. The applicant has demonstrated the capability to proceed in a financially feasible manner based on their ability to finance operating losses, their positive net asset position and the proposed grants they will be receiving from both Memorial Sloan Kettering of $1,000,000 per year for the next three years, and Polo/Ralph Lauren Foundation for $1,800,000 per year for the next three years, as well as the $1,000,000 Year 1 pledge from Mr. Ian Cooke. Conclusion From a financial perspective, with the proposed grants and the additional support for the years 2 and 3 losses, an extension of the current limited life for an additional three years is recommended. Recommendation From a financial perspective, contingent approval is recommended. Project #141013-E Exhibit Page 5 Attachments BFA Attachment A Financial summary, Ralph Lauren Center for Cancer Care and Prevention Project #141013-E Exhibit Page 6 Public Health and Health Planning Council Project # 132352-E Lincoln Dialysis, LLC County: Queens Purpose: Establishment Program: Diagnostic and Treatment Center Acknowledged: December 30, 2013 Executive Summary Description Lincoln Dialysis, LLC requests approval to become the new operator of Flushing Manor Dialysis Center, LLC, a 6-station chronic renal dialysis center expanding to 12 stations in accordance with approved CON 102019, located at 36-17 Parsons Boulevard in Flushing. Following is a summary of ownership of the facility before and after the proposed change: Current Ownership Flushing Manor Dialysis Center, LLC Ester S. Benenson 20% Michael J. Benenson 20% Sharon Benenson 20% Amy L. Benenson 20% Blanche S. Benenson 20% Proposed Ownership Lincoln Dialysis Center, LLC Bernard Fuchs Deana Hersh Richard Platschek DOH Recommendation Contingent Approval Need Summary Queens County currently has a population of 2,272,771 with 3,609 residents needing dialysis treatment. Currently there are 622 total stations approved to be operational in Queens County but can only treat 2,799 patients according to the Department of Health’s methodology. Thus, retaining the services of this facility are necessary to area residents needing ESRD treatment. Program Summary Based on the information reviewed, staff found nothing that would reflect adversely upon the applicant’s character and competence or standing in the community. Financial Summary There are no project costs associated with this application. 50% 25% 25% Concurrently, CON 132356, CON 132349, and CON 132352 will be reviewed due to the Omnibus Sale Agreement, which also includes the sale and acquisition of the Queens-Long Island Certified Home Health Agency (CHHA). The CHHA will go before the Public Health and Health Planning Council at a later date. Budget: Revenues: Expenses: Gain: $2,548,375 $2,420,388 $ 127,987 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #132352-E Exhibit Page 1 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. Submission of an executed transfer and affiliation agreement, acceptable to the Department, with a local acute care hospital. [HSP] 2. Submission of an executed building lease, acceptable to the Department. [BFA] 3. Submission of a commitment for a permanent mortgage for the project to be provided from a recognized lending institution at a prevailing rate of interest that is determined to be acceptable by the Department. Included with 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 executed Articles of Organization, acceptable to the Department. The Article of Organization must specify that the Manager must be a member. The Articles of Organization must also the address of the entity’s principal office, which must be the same as that of the facility. [CSL] 5. Submission of an executed Operating Agreement, acceptable to the Department. [CSL] 6. Submission of evidence of site control, acceptable to the Department. [CSL] 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. The staff of the facility must be separate and distinct from other adjacent entities. [HSP] 3. The signage must clearly denote the facility is separate and distinct from other adjacent entities. [HSP] 4. The entrance to the facility must not disrupt any other entity’s clinical program space. [HSP] 5. The clinical space must be used exclusively for the approved purpose. [HSP] Council Action Date June 12, 2014 Project #132352-E Exhibit Page 2 Need Analysis Background Lincoln Dialysis, LLC is submitting an application seeking approval to be established as the new operator of Flushing Manor Dialysis Center LLC, a 6 station chronic dialysis center which has been approved to be expanded to a 12 station facility through project 102019. The facility is located at 36-17 Parsons Boulevard, Flushing New York 11354, Queens County. Analysis The primary service area for Flushing Manor Dialysis Center LLC is Queens County, which had a population estimate of 2,272,771 in 2012. The percentage of the population aged 65 and over was 13.2%. The non-white population percentage was 72.89%. These are the two population groups that are most in need of end stage renal dialysis service. Comparisons between Queens County and New York State are listed below. Ages 65 and Over: Nonwhite: Queens County 13.2% 72.8% State Average 14.1% 42.4% *Source: U.S. Census 2013 Capacity The Department’s methodology to estimate capacity for chronic dialysis stations is specified in Part 709.4 of Title 10 and is as follows:  One free standing station represents 702 treatments per year. This is based on the expectation that the center will operate 2.5 patient shifts per day at 6 days per week, which can accommodate 15 patients per week (2.5 x 6 x 15 x 52 weeks). This projected 702 treatments per year is based on a potential 780 treatments x 52 weeks x 90% utilization rate = 702. The estimated average number of dialysis procedures each patient receives per year is 156.  One hospital based station is calculated at 499 treatments per year per station. This is the result of 2.0 shifts per day x 6 days per week x 52 weeks x 80% utilization rate. One hospital based station can treat 3 patients per year.  Per Department policy, hospital-based stations can treat fewer patients per year. Statewide, the majority of stations are free standing, as are the majority of applications for new stations. As such, when calculating the need for additional stations, the Department bases the projected need on establishing additional free standing stations.  There are currently 556 free standing chronic dialysis stations operating in Queens County and 66 in the pipeline for a total of 622. This project will not add any net new chronic dialysis stations. The total stations (622) will be able to treat 2,799 patients. Projected Need 2012 Total Patients Treated 2017 Total Residents Treated 3350 Free Standing Stations Needed 744 Existing Stations 556 Pipeline Stations 66 w/Approval of This CON 622 Unmet Need With Approval 122 *Based upon an estimate of a three percent annual increase 3609 802 556 66 622 180 Project #132352-E Exhibit Page 3 *Projected Total Patients Treated *Projected 3884 863 556 66 622 241 4184 930 556 66 622 308 Residents Treated The data in the first row, "Free Standing Stations Needed," comes from the DOH methodology of each station being able to treat 4.5 patients, and each hospital station being able to treat 3 patients annually. The data in the next row, "Existing Stations," comes from the Department’s Health Facilities Information System (HFIS). "Unmet Need" comes from subtracting needed stations from existing stations. "Total Patients Treated" is from IPRO data from 2011. Conclusion The facility currently accommodates a population in need of access to dialysis stations in the service area. The 556 stations in Queens County currently serve a population of 2,272,771 residents. This facility is a community asset that provides needed services to residents. Recommendation From a need perspective, approval is recommended. Program Analysis Program Description Lincoln Dialysis, LLC seeks approval to become the new operator of Flushing Manor Dialysis Center, an existing six (6) station chronic renal dialysis center (expanding to 12 stations in accordance with approved CON 102019). There are no significant programmatic changes anticipated as a result of this proposal. Character and Competence The members of Lincoln Dialysis, LLC are: Name Bernard Fuchs Richard Platschek (Manager) Deena Hersh Percentage 50% 25% 25% Mr. Fuchs is the CEO and Chief Investment Officer of an investment company and has prior work experience as an electronics importer. Since 2007, Mr. Platschek’s work experience includes sales of portable x-ray equipment. Prior to that, he worked as a purchasing agent for a nursing home. Ms. Hersh disclosed that she has no work history or healthcare experience and no ownership interest in health facilities. Mr. Fuchs disclosed that he has 50% ownership interest in a nursing home in the Bronx and serves on the board at two nursing homes in Brooklyn. Additionally, Mr. Platschek has a 4.5% ownership interest in each of three (3) nursing homes in the Buffalo area. Disclosure information was similarly submitted and reviewed for the Medical Director. Dr. Raichoudhury is board-certified in internal medicine and nephrology. He has spent nearly eight years in private practice in the Bronx and has also served as the Medical Director for Flushing Manor Dialysis. Staff from the Division of Certification & Surveillance reviewed the disclosure information submitted regarding licenses held, formal education, training in pertinent health and/or related areas, employment history, a record of legal actions, and a disclosure of the applicant’s ownership interest in other health care facilities. Licensed individuals were checked against the Office of Medicaid Management, the Office of Professional Medical Conduct, and the Education Department databases as well as the US Department of Health and Human Services Office of the Inspector General Medicare exclusion database. Additionally, the staff from the Division of Certification & Surveillance reviewed the ten-year surveillance history of all associated facilities. Sources of information included the files, records, and reports found in the Department of Health. Included in the review were the results of any incident and/or complaint Project #132352-E Exhibit Page 4 investigations, independent professional reviews, and/or comprehensive/focused inspections. The review found that any citations were properly corrected with appropriate remedial action. Mr. Fuchs disclosed an affiliation with Hopkins Center for Rehabilitation and Healthcare commencing in March 2011. In a Stipulation and Order dated 8/24/12, the Department fined Hopkins Center $4,000 for issues related to Quality of Care (Accidents) and Administration. Recommendation From a programmatic perspective, contingent approval is recommended. Financial Analysis Asset Purchase Agreement The change in operational ownership will be effectuated in accordance with an executed purchase agreement, the terms of which are summarized below: Date: Seller: Purchaser : Purchased Assets: Excluded Assets: Assumed Liabilities: Purchase Price: Payment of Purchase Price: August 21, 2013 Flushing Manor Dialysis Center, LLC Kennedy Pavilion RH II, LLC All assets used in operation of the facility. Facilities; equipment; supplies and inventory; prepaid expenses; documents and records; assignable leases, contracts, licenses and permits; telephone numbers, fax numbers and all logos; resident trust funds; deposits; accounts and notes receivable; cash, deposits and cash equivalents; Any security, vendor, utility or other deposits with any Governmental Entity; any refunds, debtor claims, third-party retroactive adjustments and related documents prior to closing. Those associated with purchased assets $4,000,000 for the operating interest. $341,880 has been paid in cash and put into escrow with the balance of $3,658,120 to be paid at closing. Kennedy Pavilion RH II, LLC will be renamed Lincoln Dialysis, LLC. The proposed members have submitted an original affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring interest, without releasing the transferor of its liability and responsibility. Omnibus Sale Agreement An Omnibus Sale Agreement has been executed between the sellers; Flushing Manor Geriatric Center, Inc. d/b/a William O. Benenson Rehabilitation Center, Flushing Manor Dialysis Center, LLC, FMNH, LLC d/b/a Flushing Manor Nursing and Rehabilitation Center, Flushing Manor Care Center, Inc. and QueensLong Island Certified Home Health Agency, LLC and the buyers; Kennedy Pavilion RH I, LLC, Kennedy Pavilion RH II, LLC, Kennedy Pavilion RH III, LLC, Kennedy Pavilion RH IV, LLC and Kennedy CHHA, LLC, whereas each Operating Asset Purchase Agreement and Real Estate Purchase Agreement shall simultaneously close upon receipt of the Buyer of all necessary regulatory approvals and other closing conditions. The aggregate purchase price is $117,000,000 with the operational assets totaling $28,457,400. Project #132352-E Exhibit Page 5 Lease Agreement Facility occupancy is subject to a draft lease agreement, the terms of which are summarized as follows: Premises: Landlord: Tenant: Terms: Rental: Provisions: 6-station to be expanded to 12-station chronic renal dialysis center located at 3617 Parsons Boulevard, Flushing 3617 BH Parsons Realty, LLC Kennedy Pavilion RH III, LLC 26 years commencing on the execution of the lease with a ten year option to renew. Annual rent is equal to the Landlord’s annual HUD debt service payment, HUD mortgage insurance premiums, real property taxes and property and liability insurance. Tenant is responsible for general liability insurance, utilities and maintenance The lease arrangement is a non-arm’s length agreement. The applicant has submitted an affidavit attesting to the relationship between the landlord and operating entity. Operating Budget The applicant has submitted first year estimated operating budgets, in 2014 dollars, as summarized: Revenues First Year $2,548,375 Expense: Operating Depreciation and Interest Total Expenses $2,163,422 256,966 $2,420,388 Excess Income over Expenses $127,987 Utilization (Visits) 8,640 Cost per Visit $280.14 Utilization by payor source for first and third years is as follows: Medicaid Medicare Private Pay Year One 11.0% 75.0% 14.0% Expense and utilization assumptions are based on the historical experience of the existing dialysis center. Capability and Feasibility There are no project costs associated with this application. The working capital requirement is estimated at $403,398 based on two months of first year expenses, and will be satisfied from the facility’s existing cash and receivables, and additional members’ equity. Net cash and receivables (minus accounts payable) were $235,104 at December 31, 2013. An affidavit from proposed applicant member, Bernard Fuchs, states that he is willing to contribute resources disproportionate to his ownership percentage. BFA Attachment C is the pro-forma balance sheet of Lincoln Dialysis Center, LLC as of the first day of operations. As shown, the facility will initiate operation with $1,272,073 members’ equity. It is noted that assets include $4,000,000 in goodwill, which is not an available liquid resource, nor is it recognized for Medicaid reimbursement purposes. Thus members’ equity would be negative $2,727,927. Project #132352-E Exhibit Page 6 The submitted budget projects a net income of $127,987 during the first year. Revenues are based on prevailing reimbursement methodologies and contracted rates for dialysis services. The budget appears reasonable. As shown on BFA Attachments D and E, Financial Summary of Flushing Manor Dialysis Center for 2012 and 2013, respectively, the facility had a positive working capital position and a negative equity, and experienced $503,078 and $522,379 net loss from operations, respectively. The net operating loss is expected to become a break-even by the end of 2014, with the anticipated additional net revenues of $600,000 from the added 6 dialysis stations. Based on the preceding, and subject to the noted contingencies, 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 BFA Attachment B BFA Attachment C BFA Attachment D BFA Attachment E Organizational Chart Net Worth of Proposed Members Pro-forma Balance Sheet Financial Summary of Flushing Manor Dialysis Center, LLC, Certified 2012 Financial Summary of Flushing Manor Dialysis Center, LLC, Internal 2013 Project #132352-E Exhibit Page 7 Public Health and Health Planning Council Project # 131160-B Highland View Care Center Operating Co. LLC d/b/a Highland View Care Center County: Bronx Purpose: Establishment and Construction Program: Residential Health Care Facility Acknowledged: April 10, 2013 Executive Summary Description Highland View Care Center Operating Co., LLC, d/b/a Highland View Care Center requests approval for the establishment and construction of a 385-bed nursing facility to be located in lease space at the former site of Kingsbridge Heights Rehabilitation and Care Center located at 3400 Cannon Place, Brooklyn. Currently, Kingsbridge Heights Rehabilitation and Care Center is a 400-bed nursing home. Also, as part of this transaction, there will be a real estate purchase agreement. DOH Recommendation Contingent approval with an expiration of the operating certificate five (5) years from the date of its issuance, to ensure timely completion of approved construction. The facility is currently operated by Kingsbridge Heights Receiver, LLC, a 2009 Court appointed receiver, whose sole member is William Pascocello. With the submission of this application, the proposed operator will be seeking approval from the Court to be appointed by the Court as Receiver of the existing nursing facility while the project is proceeding to completion. There is no established operator in the existing facility and to date, the Court has not chosen to extend the current receivership. The current receivership was approved for only eighteen months and has continued for over three years. Program Summary The proposed applicant will provide stability for Kingsbridge Heights Rehabilitation and Care Center which has been running under a Bronx County Supreme Court appointed receiver for a number of years. The proposed applicant plans to invest resources to improve services, enhance code compliance, and achieve operational efficiencies. The current facility contains resident rooms that do meet ADA accessibility standards. Refurbishments made to the existing plant will increase the ADA accessibility of resident rooms, bathing areas, and resident dining and recreation areas. The proposed members of Highland View Care Center Operating Co., LLC with ownership percentages is as follows: Leo Friedman Esther Farkowitz Gabrielle Philipson Bent Philipson 50% 25% 20% 5% Need Summary Currently, Kingsbridge has 378 residents with occupancy of 94.4 percent. Retaining the current residents and decertifying 15 RHCF beds will bring the occupancy up to 98.2 percent. No negative information has been received concerning the character and competence of the proposed applicants identified as new members. Project #131160-B Exhibit Page 1 Financial Summary The total project cost of $27,379,068 will be met as follows: Equity of $2,000,000, a personal loan from est rate of 6.00% for a twenty year term. The purchase Bent Philipson of $4,082,697 at 6% for a seven year term, and a bank loan of $21,296,371 at an interest rate of 6.00% for a twenty year term. The purchase price for the real estate is $30,000,000 and will be met as follows: $5,000,000 forgiveness for assuming Medicaid, New York State Department of Health and union liabilities of the prior operator of the Nursing Home; personal loan of $3,000,000 at an interest rate of 6% for a seven year term taken out by Bent Philipson, and a bank loan of $22,000,000 at an interest rate of 6% for a thirty year term. Year Three Budget: Revenues Expenses Net Income $43,096,815 41,520,100 $ 1,576,716 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Project #131160-B Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval with an expiration of the operating certificate five (5) years from its issuance, 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. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 3. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily limited to, ways in which the facility will:  Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program;  Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility;  Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and  Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two-year period. [RNR] 4. Submission of, and programmatic approval of final floor plans. Such plans will clearly identify resident rooms for which Condition 2 of this recommendation will apply. [LTC] 5. Submission of a list of room numbers for which Condition 2 of this recommendation will apply. [LTC] 6. Approval of a waiver to allow single bedded rooms sharing a toilet room with double bedded rooms to be counted as such for the 10% single bedded room requirement (10 NYCCR §713-3.4). [LTC] 7. Submission and approval of an acceptable name for the nursing home. [LTC] 8. Submission of a bank loan commitment for the real estate portion of the purchase price, acceptable to the Department. [BFA] 9. Submission of a bank loan commitment for the personal loan, acceptable to the Department. [BFA] 10. Submission of an executed lease rental agreement, acceptable to the Department. [BFA] 11. Submission of a bank loan commitment for the total project cost, acceptable to the Department. [BFA] Project #131160-B Exhibit Page 3 12. Submission of a working capital loan commitment, acceptable to the Department. [BFA] 13. Submission of a repayment plan for outstanding Medicaid audit liabilities/assessments, acceptable to the Department. [BFA] 14. Submission of a photocopy of the applicant’s executed Certificate of Amendment of its Articles of Organization, acceptable to the Department. [CSL] 15. Submission of a photocopy of an executed amendment to applicant’s operating agreement, acceptable to the Department. [CSL] 16. Submission of a photocopy of the executed Agreement of Lease between 3400 Cannon Place, LLC and the applicant, acceptable to the Department. [CSL] 17. Submission of a photocopy of the applicant’s executed Certificate of Assumed Name, acceptable to the Department. [CSL] 18. Submission of an updated and fully completed Schedule 3 of the CON application, acceptable to the Department. [CSL] 19. The submission of State Hospital Code (SHC) Drawings, acceptable to the Department, as described in BAEFP Drawing Submission Guidelines DSG-05 Outpatient. [AER] Approval conditional upon: 1. The project must be completed within five 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. Restriction of admission to resident rooms at the facility that cannot accommodate wheelchair residents or be able to provide for safe transfers and utilization of assistive devices during transfers. Restrictions to admissions to such rooms will be limited to ambulatory residents who do not require the aforementioned mobility assistance. [LTC] 3. Submission and approval of the patient safety plan by the Metropolitan Area Regional Office, prior to the commencement of construction. The plan should identify the necessary measures to ensure residents will not be exposed to construction debris and seek to minimize the relocation of residents within the nursing home. [LTC] 4. The submission of Final Construction Documents, signed and sealed by the project architect, as described in BAEFP Drawing Submission Guidelines DSG-01, prior to the applicant’s start of construction. [AER] 5. The applicant shall commence construction by August 1, 2015 and complete construction by December 31, 2018. In accordance with 10 NYCRR Part 710.2(b)(5) and 710.10(a), failure to meet the construction dates may constitute abandonment of the approval and this approval may be deemed cancelled, withdrawn and annulled without further action by the Commissioner. [AER] Council Action Date June 12, 2014 Project #131160-B Exhibit Page 4 Need Analysis Background Kingsbridge Heights Rehabilitation and Care Center is an existing 400-bed facility located at 3400 Cannon Place, Bronx, NY 10463. The applicant is seeking approval to establish a new operator (Highland View Care Center Operating Co. LLC), decertify fifteen beds (bringing the bed count to 385), and undertake a major modernization project. Analysis As shown in Table 1, the NYC region has an unmet bed need number of 8,663. Table 1: RHCF Need – NYC Region 2016 RHCF Projected Need Current Beds Beds Under Construction Total Resources Unmet Need 51,071 42,330 78 42,408 8,663 Kingsbridge Heights Rehabilitation and Care Center had a 96.1 percent occupancy rate for 2012. Utilization is slightly lower than the department’s 97 percent planning optimum, but the facility has been recovering while in receivership and shown great improvement. Additionally, the applicant will be decertifying 15 beds, helping the facility reach the 97 percent planning optimum. Currently, Kingsbridge has 378 residents with occupancy of 94.4 percent. Retaining the current residents and decertifying 15 RHCF beds will bring the occupancy up to 98.2 percent. Additional renovations, to be completed, are expected to increase operating efficiencies and enhance both the residency and care provided at Kingsbridge As seen below in Table 2, a detailed NYSDOH analysis of sixteen (16) RHCFs located within a two-mile radius reveals that area facilities could not absorb all discharged patients upon closure of Kingsbridge, deeming it a community resource. There are currently only a 168 vacant beds in Bronx County, and Kingsbridge has 378 patients that would need to be discharged, including 48 physical A and B patients. Table 2: Occupancy Rates of Facilities within a 2-mile Radius Facilities within 2-mile Radius of Kingsbridge Bainbridge Nursing & Rehabilitation Center Beth Abraham Health Services Bronx Park Rehabilitation & Nursing Center Fieldston Lodge Care Center Hudson Pointe at Riverdale Center for Nursing & Rehabilitation Jewish Home Lifecare, Harry & Jeanette Weinberg Campus, Bronx Manhattanville Health Care Center Methodist Home for Nursing and Rehabilitation Mosholu Parkway Nursing & Rehabilitation Center Riverdale Nursing Home Schervier Nursing Care Center RHCF Capacity 2014 Occup. % 2012 Occup. % Current Utilization of Beds 2012 Utilization of Beds Current Vacant Beds 200 93.30% 94.80% 190 190 10 520 97.50% 96.70% 507 503 13 240 94.60% 98.40% 227 236 13 190 93.00% 97.40% 177 185 13 167 91.00% 93.10% 152 155 15 816 97.80% 97.50% 798 796 18 200 97.50% 95.40% 195 191 5 120 94.20% 91.60% 113 110 7 122 99.20% 97.20% 121 119 1 146 364 90.60% 93.40% 93.80% 95.90% 137 340 137 349 9 24 Project #131160-B Exhibit Page 5 St Barnabas Rehabilitation & Continuing Care Center St Patricks Home Terrace Health Care Center University Nursing Home Wayne Center for Nursing & Rehabilitation Totals 144 99.00% 96.60% 143 139 1 264 240 46 92.80% 96.70% 97.80% 97.40% 98.50% 95.10% 245 232 45 257 236 44 19 8 1 225 97.90% 94.00% 220 212 5 3,842 3,858 162 4,004 Kingsbridge Heights Rehabilitation and Care Center’s utilization was lower than that of Bronx County and the NYC planning region for 2011, but increased in 2012 to exceed both, as shown in Table 3 below: Table 3: RHCF Occupancy for Kingsbridge Heights Rehabilitation and Care Center, Bronx County, and NYC Region Facility—Kingsbridge Heights Rehabilitation and Care Center County—Bronx Region—New York City (NYC) % Occupancy 2010 % Occupancy 2011 % Occupancy 2012 Did Not Report 95.8% 95.4% 87.8% 94.3% 94.8% 96.1% 95.9% 94.8% From 2011 to 2012, Kingsbridge Heights saw an 8.3% increase in its patient occupancy. Prior low utilization can partially be attributed to the facility being put into receivership in 2009 and the instability surrounding the facility. Because this project is viewed as a request for net new beds, consideration of this application is subject to subdivision (f) of 10 NYCRR section 709.3, which states in part: Notwithstanding that there is an indication of need in a planning area for additional residential health care facility beds as determined in accordance with subdivision (d) or (e) of this section, there shall be a rebuttable presumption that there is no need for any additional residential health care facility beds in such planning area if the overall occupancy rate for existing residential health care facility beds in such planning area is less than 97% based on the most recently available data. It shall be the responsibility of an applicant in such instances to demonstrate that there is a need for additional residential health care facility beds despite the less than 97% occupancy rate in the applicant's planning area. As noted, the RHCF occupancy rate in Bronx County and in the New York City region as a whole is less than 97 percent. The following local factors serve to rebut the presumption of no need for this application:  Although this application is viewed as a request for net new beds, it is a fact that the facility in question is currently serving residents, with an occupancy rate of over 94 percent.  The requested 15-bed reduction in this application would bring the facility’s occupancy rate to over 98 percent.  The facility’s average Medicaid patient occupancy was 83.2% in 2012, more than double the Department’s 75% planning optimum value of 32.7% for the New York City region. The facility is a significant source of RHCF care for the safety-net population in the region.  Bronx facilities see a large in-migration population, indicating that many people from surrounding area come to the Bronx for RHCF care. Approximately one-third (31.6%) of the residents in facility nearby to Kingsbridge are from outside Bronx County.  The applicant proposes to reduce its bed complement, in keeping with the need for rightsizing of the long-term care system.  The applicant agrees to assume Kingsbridge’s Medicaid liabilities, even though this application is viewed as a request for net new beds. Should this application be disapproved, there would be insufficient capacity at other facilities in the area to accommodate Kingsbridge’s residents. Project #131160-B Exhibit Page 6 Conclusion Kingsbridge Heights Rehabilitation and Care Center has proven to be a significant source of care for the Medicaid population and the larger community. From a need perspective, contingent approval is recommended. Recommendation From a need perspective, contingent approval is recommended. Program Analysis Program Description Facility Name Address RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator Operator Existing Kingsbridge Heights Rehabilitation and Care Center 3400 Cannon Place Bronx, NY 10463 Facility ID: 1234 400 N/A Corporation Proprietary Kingsbridge Heights Care Center, Inc Proposed Highland View Care Center Same Same Same LLC Proprietary Highland View Care Center Operating Co., LLC d/b/a Highland View Care Center Members: Leopold Friedman Bent Philipson Esther Farkovits Gabrielle Philipson Character and Competence - Background Facilities Reviewed Nursing Homes: Avalon Gardens Rehabilitation and Health Care Center Bay Park Center for Nursing and Rehabilitation Crown Center for Nursing and Rehabilitation Diamond Hill Nursing and Rehabilitation Center Little Neck Care Center Nassau Extended Care Facility Park Avenue Extended Care Facility Pathways Nursing and Rehabilitative Center (formerly Hilltop) Rosewood Rehabilitation and Nursing Center South Point Plaza Nursing and Rehabilitation Center (formerly Bayview Nursing and Rehabilitation Center) The Hamptons Center for Nursing Throgs Neck Extended Care Facility Townhouse Center for Rehabilitation & Nursing Peninsula Center for Extended Care and Rehabilitation Project #131160-B Exhibit Page 7 50.0% 5.0% 25.0% 20.0% 03/2004 to present 12/2009 to present 08/2010 to present 08/2010 to present 04/2011 to present 07/2004 to present 07/2004 to present 08/2010 to present 08/2010 to present 03/2004 to present 07/2008 to present 07/2004 to present 07/2004 to present 01/2013 to present Licensed Home Care Services Agency (LHCSA): Ultimate Care, Inc. 02/2010 to present Individual Background Review Leopold Friedman is the Chief Executive Officer of Advanced Care Staffing, Inc., a healthcare staffing agency. Mr.Friedman has health care facility interests with dates of ownership as follows: Ultimate Care, Inc. (LHCSA) 02/2010 to present Receivership: Peninsula Center for Extended Care and Rehabilitation 01/2013 to present Bent Philipson lists his employment, since 1996, as executive managing partner at Woodmere Rehabilitation and Health Care Center in Woodmere, NY. Mr. Philipson discloses the following health facility interests: Avalon Gardens Rehabilitation and Health Care Center 05/2003 to present Bay Park Center for Nursing and Rehabilitation 12/2009 to present Crown Center for Nursing and Rehabilitation 08/2010 to present Diamond Hill Nursing and Rehabilitation Center 08/2010 to present Little Neck Care Center 04/2011 to present Nassau Extended Care Facility 07/2004 to present Park Avenue Extended Care Facility 07/2004 to present Pathways Nursing and Rehabilitative Center 08/2010 to present Rosewood Rehabilitation and Nursing Center 08/2010 to present South Point Plaza Nursing and Rehabilitation Center 04/2003 to present (formerly Bayview Nursing and Rehabilitation Center) The Hamptons Center for Nursing 07/2008 to present Throgs Neck Extended Care Facility 07/2004 to present Townhouse Center for Rehabilitation & Nursing 07/2004 to present Esther Farkovits is currently unemployed. She was previously a yoga instructor at the Lucille Roberts gym from February 2005 to October 2006. Ms. Farkovits discloses the following ownership interests in health facilities: Little Neck Care Center 04/2011 to present Nassau Extended Care Facility 07/2004 to present Park Avenue Extended Care Facility 07/2004 to present Throgs Neck Extended Care Facility 07/2004 to present Townhouse Extended Care Center 07/2004 to present Gabrielle Philipson worked from 11/15/2009 to 04/07/2010 as an Administrative Assistant at Bay Park Center for Nursing & Rehabilitation. Ms. Philipson discloses no other employment. Ms. Philipson discloses no ownership interest in health care facilities. Character and Competence - Analysis No negative information has been received concerning the character and competence of the above applicants identified as new members. A review of Avalon Gardens Rehabilitation & Health Care Center, LLC for the period identified above reveals the following:  The facility was fined $2,000 pursuant to a Stipulation and Order NH-09-014 issued April 21, 2009 for surveillance findings on May 23, 2008. Deficiencies were found under 10 NYCRR 415.12(h)(1)&(2) – Quality of Care: Accidents  The facility was fined $4,000 pursuant to a Stipulation and Order NH-12-034 issued July 16, 2012 for surveillance findings on July 29, 2011. Deficiencies were found under 10 NYCRR 415.12 Quality of Care: Practicable Potential and 415.26 Administration. Project #131160-B Exhibit Page 8 A review of Bay Park Center for Nursing and Rehabilitation for the period identified above reveals the following:  The facility was fined $4,000 pursuant to a Stipulation and Order NH-11-009 issued March 2, 2011 for surveillance findings on December 18, 2009. Deficiencies were found under 10 NYCRR 415.12 - Quality of Care: Highest Practicable Potential and 10 NYCRR 415.12(i)(1) - Quality of Care: Nutrition Status.  The facility was fined $18,000 pursuant to a Stipulation and Order NH-12-030 issued May 30, 2012 for surveillance findings on February 16, 2011. Multiple deficiencies were found under 10 NYCRR 415.4(b)(1)(i) - Free from Abuse; 10 NYCRR 415.4(b) - Development of Abuse Policies; 10 NYCRR 415.12(h)(2) - Quality of Care: Accidents; 10 NYCRR 415.12(i)(1) - Quality of Care: Nutrition; and 10 NYCRR 415.26(c)(1)(iv) - Nurse Aide Competency. A review of Crown Center for Nursing and Rehabilitation for the period identified above reveals the following:  The facility was fined $28,000 pursuant to a Stipulation and Order NH-12-035 issued August 24, 2012 for surveillance findings on April 4, 2011 and February 17, 2011. Deficiencies were found under 10 NYCRR 415.12 - Quality of Care: Highest Practicable Potential; 10 NYCRR 415.12 Quality of Care: Highest Practicable Potential; 10 NYCRR 415.12(c) - Quality of Care: Pressure Sores; 10 NYCRR 415.26(a)(1) – Administration; 10 NYCRR 415.26(b)(3)(4) - Governing Body; 10 NYCRR 415.15(a)(1)(2)(4) - Medical Director; and 10 NYCRR 415.27(a)(c)(3)(i,ii,iv,v)(4) Quality Assurance. A review of South Point Plaza Nursing and Rehabilitation Center for the period identified above reveals the following:  The facility was fined $7,000 pursuant to a Stipulation and Order NH-05-050 issued September 29, 2005 for surveillance findings on November 16, 2004. Deficiencies were found under 10 NYCRR 415.5(h)(2) - Quality of Care: Environment; 10 NYCRR 415.12 - Quality of Care; 10 NYCRR 415.12(c)(1) - Quality of Care: Pressure Sores; and 10 NYCRR 415.12(h)(2) - Quality of Care: Accidents.  The facility was fined $2,000 pursuant to a Stipulation and Order NH-07-046 issued June 13, 2007 for surveillance findings on December 2, 2005. Deficiencies were found under 10 NYCRR 415.11(c)(3) - Comprehensive Care Plans.  The facility was fined $10,000 pursuant to a Stipulation and Order NH-11-065 issued December 16, 2011 for surveillance findings on December 7, 2010. Deficiencies were found under 10 NYCRR 415.12(c)(1) - Quality of Care: Pressure Sores. A review of The Hamptons Center for Nursing for the period identified above reveals the following:  The facility was fined $4,000 pursuant to a Stipulation and Order NH-10-065 issued December 6, 2010 for surveillance findings on September 16, 2009. Deficiencies were found under 10 NYCRR 415.12(h)(1)(2) Quality of Care: Accidents & Supervision and 415.26 Administration.  The facility was fined $10,000 pursuant to Stipulation and Order NH-11-031 issued May 24, 2011 for surveillance findings on July 30, 2010. Deficiencies were found under 10 NYCRR 415.12 - Provide Care/Services for Highest Well Being. A review of operations for the Avalon Gardens Rehabilitation and Health Care Center, Bay Park Center for Nursing and Rehabilitation, South Point Plaza Nursing and Rehabilitation Center, Crown Center for Nursing and Rehabilitation and The Hamptons Center for Rehabilitation and Nursing for the period identified above, results in a conclusion of substantially consistent high level of care since there were no repeat enforcements. A review of operations for Diamond Hill Nursing and Rehabilitation Center, Little Neck Care Center, Nassau Extended Care Facility, Park Avenue Extended Care Facility, Pathways Nursing and Rehabilitative Center, Rosewood Rehabilitation and Nursing Center, Throgs Neck Extended Care Facility, Townhouse Extended Care Center, and Peninsula Center for Extended Care and Rehabilitation for the periods identified above, results in a conclusion of substantially consistent high level of care since there were no enforcements. Project #131160-B Exhibit Page 9 A review of the operations for Ultimate Care, Inc., for the period identified above, results in a conclusion of substantially consistent high level of care since there were no enforcements. Program Review Kingsbridge Heights Rehabilitation and Care Center is currently a 400 bed Skilled Nursing Facility located in the Kingsbridge Heights section of Bronx County. The facility is operating under a court order from the Bronx County Supreme Court and has been in receivership for approximately three years. The Court has indicated to the Department that it wishes to discontinue the Court appointed receivership and for the Department to facilitate the establishment of a permanent operator for the facility. This application is a result of efforts between interested parties to reach an agreement for site control of the facility and to establish an ownership group to stabilize operations at the facility. It is anticipated that the Bronx County Supreme Court will take action to place the applicant group, or a small subset thereof, as receiver of the facility prior to the formal change of ownership taking place. The existing facility is of masonry construction and was constructed as two separate wings (east and west) linked at the ground floor by a central corridor. The east wing is 7 stories, plus a penthouse. The west wing is 6 stories, plus a penthouse. The main entrance to the facility is in the first floor west building, with the first floor of west and the first and second floor of east providing resident support services and administrative offices. Floors 2-6 of the west wing and floors 3-7 of the east wing are dedicated to resident care, with each resident floor in both wings comprised of a 40 bed unit. The penthouse in both wings house mechanical, storage, and staff support areas. Resident quarters in the facility are confined and not conducive to staff providing safe transfers or utilization of assistive devices during transfers. The current 400 bed facility has 150 wheelchair residents, the majority of which require two person transfers. Currently some resident rooms are configured in a manner that does not permit use of a wheelchair or allow for safe transfers, with all resident room toilets inaccessible by wheelchair. The resident toilet rooms are sized so that they can only accommodate a toilet, with the sink located outside of the toilet room and within the resident bedroom. The east wing contains three 4-bedded rooms per resident floor, with all other rooms in the east and west wing being either 2-bedded or single rooms. Most of the units on each floor offer minimal opportunities for the residents to gather or socialize outside of their rooms. Each unit has a small (approx. 500 sq foot) room to use for recreation and other activities. Currently, residents dine in either the 1st floor west or 2nd floor east dining areas. Physical Environment The applicant will upgrade the infrastructure and physical plant in order to improve services, enhance code compliance, and achieve operational efficiencies. This will be achieved through eliminating the 4bedded rooms in the facility, adding a new unit on the second floor of the east wing, and reconfiguring existing space within both wings of the facility. In order to accommodate the physical changes the facility will reduce its certified bed-count from 400 beds to 385 beds. The new 385 bed count will be comprised of a new 25-bed ADA accessible nursing unit on the second floor of the east wing, 34-bed units on floors 3-7 in the east wing, and 38-bed units on floors 2-6 of the west wing. The new 25-bed unit on the second floor of the east wing is a large square with ADA accessible resident rooms and bathing suites on the outside perimeter and a central core consisting of a dining/recreation area and nurses station. There are 14 resident rooms on the floor, 3 single and 11 double bedded rooms, and 2 bathing rooms. All resident rooms in this unit have their own ADA accessible bathrooms. The 2 bathing rooms will allow residents to have a choice between a shower or tub bathing experience. The central core will allow for residents to dine on unit and can accommodate all unit residents in one sitting. Entry to the unit via the main elevators will welcome visitors in a lobby like environment that can also be conducive to socialization for the residents and visitors. The layout of this unit is more in line with modern nursing home design concepts than the other units in the facility. Resident floors 3-7 in the east wing contain 19 resident rooms in a T-shape design with standard central corridors that offer little or no congregational space for the residents. This design will remain after renovation. The renovations proposed will focus on increasing ADA accessibility in the unit and provide the ability for all residents to dine on unit simultaneously. The small multipurpose room on the unit will be Project #131160-B Exhibit Page 10 expanded and set up to achieve simultaneous resident dining. An ADA accessible toilet room was also added to this space. The central bathing room will be modified to be fully ADA accessible and offer residents a choice of tub or shower bathing. Eight (8) out of the 34 beds on the unit will have access to ADA accessible toilet rooms directly from the resident room. Each of these units contain 4 single bedded rooms, though these single bedded rooms share a toilet room with another room. Two of the single bedded rooms on the unit shares a bathroom with a double bedded room. These single bedded rooms will require a waiver if it is going to be used to count towards the 10% single bedded room requirement (10 NYCCR §713-3.4). Twelve (12) of the double rooms on each unit in the wing will remain in their current condition and will not be able to accommodate wheelchair residents or be able to provide for safe transfers and utilization of assistive devices during transfers. Resident floors 2-6 in the west wing are of linear design and have double-loaded corridors with 21 rooms. This design will remain, and the renovations proposed will focus on increasing ADA accessibility in the unit and provide the ability for all residents to dine on unit simultaneously. The small multipurpose room on the unit will be expanded and set up so that all residents can dine on unit simultaneously. An ADA accessible toilet room was also added to this space. The central bathing room will be modified to be ADA accessible and offer residents a choice of tub or shower bathing. Twenty seven (27) of the 38 beds on the unit will have access to ADA accessible toilet rooms directly from the resident room. Each unit in the west wing contains 4 single bedded rooms, though these single bedded rooms share a toilet room with another room. One of the single bedded rooms on the unit shares a bathroom with a double bedded room. This single bedded room will require a waiver if it is going to be used to count towards the 10% single bedded room requirement (10 NYCCR §713-3.4). Four (4) of the double rooms on each unit in the wing will remain in their current condition and will not be able to accommodate wheelchair residents or be able to provide for safe transfers and utilization of assistive devices during transfers. Large recreational areas for residents will be located on the 1st floor of the east and west wings. The storage and staff locker rooms in the first floor east wing will be relocated to the penthouse so that the recreational area can be expanded and an ADA accessible toilet can be added. A smoking room will be removed from the first floor west wing so that the recreational space can be enlarged. These 2 larger recreational areas will be used for residents to congregate for large central events such as holiday parties. Project Review Approval of the application will establish a permanent operator for the facility who will dedicate resources to refurbish the facility to improve services, enhance code compliance, and achieve operational efficiencies. ADA accessibility in the current plan is virtually non-existent. The new 25-bed nursing unit on the second floor east wing reflects a more modern approach to nursing home design and is fully ADA accessible. The new operator will undertake renovations to the remaining nursing units that will improve ADA accessibility for residents. Conditions will be placed on the approval that will ensure that admissions to the remaining non-ADA accessible rooms will be restricted to only ambulatory residents. In addition to ADA accessibility improvements, the operator will also expand on-unit dining capability and expand recreational areas on the first floor of each wing. All resident rooms, resident support, and common areas will be refurbished aesthetically to provide a warm and homelike environment. The facility is in compliance with CMS 2013 sprinkler mandates. Recommendation From a programmatic perspective, contingent approval is recommended. Project #131160-B Exhibit Page 11 Financial Analysis Real Estate Purchase Agreement The applicant has submitted an executed real estate purchase agreement for the site, as summarized below: Premises: Seller: Purchaser: Purchase Price: The premises located at 3400-3426 Cannon Place, Bronx, New York. C G Limited Partnership 3400 Cannon Place, LLC $30,000,000. The Parties acknowledged and agree that the Tenant’s receipt of the Approval may require the assumption of the Medicaid, New York State Department of Health and union liabilities of the prior operator of the Nursing Home. As a material inducement to the Parties to enter into this Agreement, Seller has agreed to provide Purchaser with a credit at Closing in the amount of $5,000,000 in exchange for Tenant’s agreement to assume the Liabilities, notwithstanding the amount of the Liabilities actually assumed by the Tenant. The applicant submitted an affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring its interest, without releasing the transferor of its liability and responsibility. The applicant’s financing plan for the $30,000,000 purchase price is as follows: Credit at Closing Personal Loan (6% interest rate for a seven year term) Bank Loan (6% for a thirty year term) $5,000,000 $3,000,000 $22,000,000 Lease Rental Agreement The applicant has submitted a draft lease rental agreement for the site where the nursing home will be situated, summarized below: Premises: For the premises located at 3400 Cannon Place, Bronx, New York Lessor: 3400 Cannon Place, LLC Lessee: Highland View Care Center Operating Co., LLC Term: 30 years Rental: $1,800,000 annually. Total Project Cost and Financing Total project cost, which is for renovations and the acquisition of moveable equipment, is estimated at $27,379,068, further broken down as follows: Renovation and Demolition Asbestos Abatement or Removal Design Contingency Construction Contingency Architect/Engineering Fees Other Fees (Consultant) Moveable Equipment Financing Costs Interim Interest Expense CON Fee Additional Processing Fee Total Project Cost $16,142,872 69,940 1,614,286 1,614,286 585,000 500,000 3,314,080 821,055 2,565,798 2,000 149,750 $27,379,068 Project #131160-B Exhibit Page 12 The applicant’s financing plan appears as follows: Equity Personal Loan (6% interest rate for a seven year term) Bank Loan (6% interest rate for a twenty year term) $2,000,000 $4,082,697 $21,296,371 Operating Budget The applicant has submitted an operating budget, in 2014 dollars, for the first and third years, summarized below: Year One Year Three Revenues: Medicaid Managed Care $31,063,770 $31,605,524 Medicare Fee For Service 6,581,488 8,764,544 Private Pay 2,616,576 2,726,748 Total Revenues $40,261,834 $43,096,815 Expenses: Operating Capital Total Expenses $35,300,130 4,919,527 $40,219,657 $36,600,573 4,919,527 $41,520,100 Net Income $42,177 $1,576,716 Utilization: (patient days) Occupancy 133,499 95.00% 139,120 99.00% The following is noted with respect to the submitted operating budget:  The capital budget component of Medicaid revenues is based on the interest and amortization reimbursement methodology.  The case mix index for the nursing facility beds is 1.0691, which is based on historical experience.  Utilization broken down by payor source, during the first and third years is as follows: Medicaid Managed Care Medicare Private Year One 84.50% 8.50% 7.00% Year Three 82.50% 10.50% 7.00% Expense and utilization assumptions are based on the historical experience of Kingsbridge Heights Rehabilitation and Care Center, and taking into account the facility going from 400 beds to 385 beds. Capability and Feasibility The total project cost of $27,379,068 will be met as follows: Equity of $2,000,000 to be provided by the proposed members of Highland View Care Center Operating Co., LLC, a personal loan of $4,082,697 to the proposed members, and the remainder of $21,296,371 will be financed via a bank loan at an interest rate of 6% for a twenty year term. The real estate purchase price of $30,000,000 will be financed as follows: Forgiveness of $5,000,000 for assuming Medicaid, New York State Department of Health, and union liabilities of the prior operator of the nursing home; personal loan to the proposed members of $3,000,000, and $22,000,000 bank loan at an interest rate of 6% for a thirty year term. Working capital requirements are estimated at $6,920,016, which is equivalent to two months of third year expenses. The applicant will finance $3,460,008 via a bank loan at an interest rate of 6% for a three year term. The remainder, $3,460,008, will be provided via a personal loan taken out by Bent Philipson. BFA Attachment A are the personal net worth statements of the members of Highland View Care Center Operating Co., LLC, which indicates the availability of sufficient funds for the equity contributions to meet the total project cost. The applicant submitted an affidavit indicating that the members are willing to contribute resources disproportionate to ownership percentages. Also, Bent Philipson has demonstrated Project #131160-B Exhibit Page 13 the capability to pay back his personal loan. BFA Attachment B is the pro-forma balance sheet as of the first day of operation, which indicates a positive net asset position of $10,558,798. The submitted budget indicates a net income of $42,177 and $1,596,716 during the first and the third years after the project completion. Revenues are based on current reimbursement methodologies for nursing homes. The budget appears reasonable. Staff noted that with the expected 2014 implementation of managed care for nursing home residents, Medicaid reimbursement is expected to change from a state wide price with a cost-based capital component payment methodology, to a negotiated reimbursement methodology. Facility payments will be the result of negotiations between the managed long term care plans and the facility. At this point in time, it cannot be determined what financial impact this change in reimbursement methodology will have on this project. The applicant has indicated that the reason for the losses for Throgs Neck (BFA Attachment C) was due to the Department’s Medicaid retroactive adjustment and the Department’s elimination of the trend factors. The facility improved operations by reducing nursing expenses and overtime. The applicant has indicated that the reason for the negative working capital position and the negative net asset position is related party loans. The applicant has indicated that the reason for the negative working capital position for Avalon Gardens (BFA Attachment C), is due to OMIG audits of approximately $1.7 million liabilities for prior years that were accrued. In 2013, according to internal financial statements, Avalon returned to substantial profitability and has substantially paid off the OMIG liability. The applicant has indicated that the reason for the negative working capital position for Bayview Nursing (BFA Attachment C), is due to liabilities which include $700,000 in related party loans. Bayview’s operations were significantly affected by Super Storm Sandy, which resulted in a very low census during that time. It took them time to recover from the impact of the storm. The nursing facility has recovered and is now operating at a census above 95%. The applicant has indicated that the reason for the losses for Pathway Nursing (BFA Attachment C), were due to a 5% decrease in census due to changes in management in 2011 and survey related issues that negatively impacted the facility. The facility improved operations by reducing nursing expenses and overtime. The applicant has indicated that the reason for the negative working capital position and the negative net asset position is related party loans. The applicant has indicated that the reason for the losses for the Park Avenue Facility (BFA Attachment C), was that the facility’s day care reimbursement rates were reduced. The facility improved operations by reducing nursing expenses and overtime. The applicant has indicated that the reason for the losses for Bay Park (BFA Attachment C), were due to the Department’s Medicaid retroactive adjustment and the Department’s elimination of the previous trend factors. The facility improved operations by reducing nursing expenses and overtime. The applicant has indicated that the reason for the negative working capital position and the negative net asset position is the result of related party loans. The applicant has indicated that the reason for the negative working capital position for Throgs Neck (BFA Attachment C), is the result of the facility having related party loans of $388,000. The applicant has indicated that the reason for the negative working capital position and the negative net asset position for Little Neck Care Center (BFA Attachment C), is related party loans. The applicant has indicated that the reason for the 2012 losses are the result of the following: a prior year Medicaid adjustment of almost $282,000; above average spending in the ancillary services and a reduction in the private pay census. The applicant has indicated that they implemented the following steps to improve operations: there was a reduction in the area of nursing services (approximately $60,000) and therapy and ancillaries (approximately $80,000) and there have been significant marketing efforts to increase occupancy of the nursing facility. Project #131160-B Exhibit Page 14 The applicant has indicated that the reason for the average losses from 2010 through 2012, is attributed to decreases in the facility’s Medicaid rate, and an increase in the allowance for doubtful accounts of $800,000 due to the reserving of potential bad debts. The facility has improved operations by reducing nursing expenses and overtime. Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A BFA Attachment B BFA Attachment C BHFP Attachment Personal Net Worth Statements of Proposed Members Pro-forma Balance Sheet Financial data for affiliated facilities Map Project #131160-B Exhibit Page 15 Public Health and Health Planning Council Project # 132306-E Northwoods Rehabilitation and Extended Care Facility at Moravia County: Cayuga Purpose: Establishment Program: Residential Health Care Facility Acknowledged: December 6, 2013 Executive Summary Description Northwoods Operating Associates, LLC d/b/a Northwoods Rehabilitation and Nursing Center at Moravia, requests approval to be established as the operator of Northwoods Rehabilitation & Extended Care Facility at Moravia, an existing 40-bed proprietary skilled nursing facility located at 7 Keeler Avenue, Moravia. The applicant entered into a transfer agreement dated November 4, 2013, with Howd LTC Management, LLC. Additionally, Northwoods Real Estate Associates, LLC will acquire the real estate from Howd Manor Group, LLC. The proposed real estate entity will have the same owners as the proposed operator. The current and proposed operator are as follows: Current Howd LTC Management, LLC Proposed Northwoods Operating Associates, LLC Members: Eugene Nachamkin Dianna Koehler Howard Krant Scott Bialick Members: Boruch Sheps Pamela Sheps Kenneth Rozenberg 1% 49% 25% 25% Program Summary No negative information has been received concerning the character and competence of the proposed applicants identified as new members. No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. Financial Summary The purchase price of $143,000 for the operation will be met as follows: Equity of $35,750 from the proposed members and $107,250 to be financed. The purchase price of $457,000 for the real estate will be met as follows: Equity of $114,250 from the proposed members and $342,750 to be financed. Budget: 85% 5% 10% Revenues Expenses Net Income $2,406,778 2,355,469 $51,309 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. DOH Recommendation Contingent Approval Need Summary Northwoods Rehabilitation & Extended Care Facility at Moravia’s utilization was 83.7% in 2010, 87.1% in 2011, and 88.3% in 2012. Project #132306-E Exhibit Page 1 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 2. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily be limited to, ways in which the facility will:  Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program;  Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility;  Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and  Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two year period. [RNR] 3. 4. 5. 6. Submission of a loan commitment for the operation purchase, acceptable to the Department. [BFA] Submission of a loan commitment for the real estate purchase, acceptable to the Department. [BFA] Submission of a working capital loan commitment, acceptable to the Department. [BFA] Submission of evidence, acceptable to the Department, that Kenneth Rozenberg is bound by the terms of the Operating Agreement. [CSL] Approval conditional upon: 1. The project must be completed within one year 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] Council Action Date June 12, 2014 Project #132306-E Exhibit Page 2 Need Analysis Background Northwoods Operations Associates, LLC d/b/a Northwoods Rehabilitation and Nursing Center at Moravia seeks approval to become the established operator of Northwoods Rehabilitation & Extended Care Facility at Moravia. Northwoods Rehabilitation & Extended Care Facility at Moravia is an existing 40-bed Article 28 residential health care facility located at 7 Keeler Avenue, Moravia, 13118, in Cayuga County. Analysis There is currently a surplus of 27 beds in Cayuga County as indicated in Table 1 below. However, the overall occupancy for Cayuga County is 90.7% for 2012 as indicated in Table 2. Table 1: RHCF Need – Cayuga County 2016 Projected Need Current Beds Beds Under Construction Total Resources Unmet Need 502 529 0 529 -27 Table 2: Northwoods Rehabilitation & Extended Care Facility at Moravia/Cayuga County Occupancy Facility/County/Region Northwoods Rehab & ECF at Moravia Cayuga County % Occupancy 2010 % Occupancy 2011 % Occupancy 2012 83.7% 87.1% 88.3% 90.0% 90.0% 90.7% Northwoods Rehabilitation & Extended Care Facility at Moravia’s (Northwoods) utilization was 83.7% in 2010, 87.1% in 2011, and 88.3% in 2012. The reason for the low utilization at this facility was due to the lack of dedicated admissions staff and lack of training on the part of the operator, which resulted in the facility’s inability to accommodate higher acuity residents. The current operator of Northwoods does not accept residents who require IVs or who smoke, which has led to a low Case Mix Index (CMI) of 0.78 for residents. As noted by the applicant, of the 123 potential residents that sought admission to Northwoods over the past six months, 25 were turned down because they required either IV services or were smokers. The new operator will work collaboratively with hospitals and other area entities to help reduce/prevent unnecessary and expensive hospital admissions. The new operator plans to immediately, upon approval of this project, begin admitted higher acuity patients who would otherwise not have been served by the facility. The new operator understands that the staff of the facility has already been trained and has the desire and willingness to take care of these higher acuity residents. By doing this, utilization at the facility will immediately increase. Northwoods is the only RHCF within 26 minutes of the nearest RHCF facility in Cayuga County and 29 minutes from the nearest RHCF in Cortland County. The exact distances are as follows: Cayuga County RHCFs Auburn Nursing Home Auburn Senior Services, Inc. (Mercy Health & Rehab Center NH) Finger Lakes Center for Living Auburn Senior Services, Inc. (Cayuga County NH) *Source: Google Maps, 2014 18.2 miles, 26 minutes 18.3 miles, 26 minutes 19.2 miles, 28 minutes 21.6 miles, 36 minutes Project #132306-E Exhibit Page 3 Cortland County RHCFs Cortland Regional Nursing & Rehab Cortland Park Rehab and Nursing Crown Center for Nursing & Rehab *Source: Google Maps, 2014 18.9 miles, 32 minutes 19.9 miles, 29 minutes 21.0 miles, 32 minutes Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patient’s admissions is at least 75% of the planning area percentage or the Health Systems Agency percentage, whichever is applicable. Northwoods Rehabilitation & Extended Care Facility at Moravia’s Medicaid admissions of 45.0% in 2011 and 8.7% in 2012 exceeded the Cayuga County 75% rates in 2011 and 2012 of 17.0% and 7.1%, respectively. Conclusion Approval of this application will help foster higher occupancy and fuller utilization of a facility that is a source of needed RHCF care in Cayuga County. Recommendation From a need perspective, contingent approval is recommended. Program Analysis Program Description RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator Existing Northwoods Rehabilitation and Extended Care Facility at Moravia 7 Keeler Avenue Moravia, NY. 13118 40 N/A Proprietary Limited Liability Company Operator Howd LTC Management LLC Facility Name Address Members: Dianna Koehler Howard Krant Scott Bialick Eugene Nachamkin 49% 25% 25% 1% Project #132306-E Exhibit Page 4 Proposed Northwoods Rehabilitation and Nursing Center at Moravia Same Same Same Proprietary Limited Liability Company Northwoods Operations Associates LLC Members: Boruch Sheps Kenneth Rozenberg Pamela Sheps 85% 10% 5% Character and Competence – Background Facilities Reviewed Nursing Homes Boro Park Center for Rehabilitation and Healthcare Bronx Center for Rehabilitation and Health Care Brooklyn Center for Rehabilitation and Residential Health Care Bushwick Center for Rehabilitation and Health Care Chittenango Center for Rehabilitation and Health Care Corning Center for Rehabilitation Dutchess Center for Rehabilitation and Healthcare Fulton Center for Rehabilitation and Healthcare Holliswood Center for Rehabilitation and Healthcare Queens Center for Rehabilitation and Residential Health Care Richmond Center for Rehabilitation and Specialty Healthcare Rome Center for Rehabilitation and Health Care University Nursing Home Wartburg Lutheran Home for the Aging Waterfront Center for Rehabilitation and Health Center Williamsbridge Manor Nursing Home Washington Center for Rehabilitation and Health Care Essex Center for Rehabilitation and Health Care 05/2011 to present 05/2004 to present 03/2007 to present 05/2011 to present 07/2008 to present 07/2013 to present 08/2004 to present 04/2012 to present 11/2010 to present 06/2004 to present 04/2012 to present 07/2008 to present 05/2004 to present 06/2008 to 05/2011 08/2011 to present 05/2004 to present 02/2014 to present 03/2014 to present Nursing Home in Receivership Daughters of Jacob Nursing Home 08/2013 to present Certified Home Health Agency Alpine Home Health Care (CHHA) 07/2008 to present Licensed Home Care Services Agency Amazing Home Care (LHCSA) 05/2006 to present Emergency Medical Services Senior Care Emergency Ambulance Services, Inc. (EMS) 05/2005 to present Individual Background Review Boruch Sheps has been a New York State Licensed Nursing Home Administrator since January 2013 and is considered to be in good standing. He has been employed at the Elant at Brandywine nursing home since May 2013. Prior to his employment at Elant at Brandywine, Mr. Sheps was employed as the administrator at Golden Gate Rehabilitation and Health Care from April 2013 through May 2013. Prior to his employment at Golden Gate, he was the assistant administrator at Dutchess Center for Rehabilitation and Health Care and Northern Metropolitan Residential Health Care Facility before becoming an Associate Administrator at Richmond Center for Rehabilitation and Health Care, a position he held for two months before becoming the administrator at Golden Gate. Mr. Sheps discloses no ownership interests in health facilities. Kenneth Rozenberg is a licensed nursing home administrator in good standing, and a licensed paramedic in good standing. He lists current employment as CEO at Bronx Center for Rehabilitation & Health Care since 1998. Mr. Rozenberg discloses extensive health care facility interests as follows: Boro Park Center for Rehabilitation and Healthcare Bronx Center for Rehabilitation and Health Care Brooklyn Center for Rehabilitation and Residential Health Care Bushwick Center for Rehabilitation and Health Care Wartburg Lutheran Home for the Aging Receivership Chittenango Center for Rehabilitation and Health Care Stonehedge–Chittenango Receivership Corning Center for Rehabilitation (formerly Founders Pavilion) Project #132306-E Exhibit Page 5 05/2011 to present 10/1997 to present 03/2007 to present 05/2011 to present 06/2008 to 05/2011 05/2011 to present 07/2008 to 04/2011 07/2013 to present Dutchess Center for Rehabilitation and Healthcare Fulton Center for Rehabilitation and Healthcare Holliswood Center for Rehabilitation and Healthcare Holliswood Center Receivership Queens Center for Rehabilitation and Residential Health Care Richmond Center for Rehabilitation and Specialty Healthcare Rome Center for Rehabilitation and Health Care Stonehedge- Rome Receivership University Nursing Home Waterfront Center for Rehabilitation and Health Center Waterfront Center Receivership Williamsbridge Manor Nursing Home Washington Center for Rehabilitation and Health Care Essex Center for Rehabilitation and Health Care Daughters of Jacob Nursing Home Company Inc. (Receiver) Alpine Home Health Care (CHHA) Amazing Home Care (LHCSA) Senior Care Emergency Ambulance Services, Inc. (EMS) 08/2004 to present 04/2012 to present 05/2013 to present 11/2010 to 04/2013 06/2004 to present 04/2012 to present 04/2011 to present 07/2008 to 04/2011 08/2000 to present 01/2013 to present 08/2011 to 12/2012 11/1996 to present 02/2014 to present 03/2014 to present 08/2013 to present 07/2008 to present 05/2006 to present 05/2005 to present Pamela Sheps is a New York State licensed speech language pathologist and is considered to be in good standing. Ms. Sheps was employed by Yeled V’Yalda an early childhood center as a speech therapist from March 2002 through June 2006. She resigned her position to focus on starting a family. Pamela Sheps discloses no ownership interests in health facilities. Character and Competence - Analysis No negative information has been received concerning the character and competence of the above applicants identified as new members. A review of operations of Bronx Center for Rehabilitation and Health Care for the period identified above reveals:  The facility was fined $2,000 pursuant to a Stipulation and Order issued October 23, 2007 for surveillance findings on April 27, 2007. Deficiencies were found under 10 NYCRR 415.12 Quality of Care and 415.12(i)(1), Quality of Care: Nutrition.  The facility was fined $4,000 pursuant to a Stipulation and Order issued August 25, 2011 for surveillance findings on April 16, 2010. Deficiencies were found under 10 NYCRR 415.12 (h)(2) Quality of Care: Accidents and Supervision and 415.26 Administration. A review of the operations of Chittenango Center for Rehabilitation and Health Care (formerly known as Stonehedge Health & Rehabilitation Center - Chittenango) for the period identified above reveals:  The facility was fined $20,000 pursuant to a Stipulation and Order issued February 17, 2012 for surveillance findings on January 20, 2011. Deficiencies were found under 10 NYCRR 415.12(c)(1)(2) Quality of Care: Pressure Sores and NYCRR 415.12(d)(1) Quality of Care: Catheters.  The facility was fined $4,000 pursuant to a Stipulation and Order issued November 15, 2010 for surveillance findings on October 22, 2009. Deficiencies were found under 10 NYCRR 415.12(h)(1,2) Quality of Care: Accidents and Supervision, and 415.26(b)(3)(4) Governing Body. A review of the operations of Waterfront Center for Rehabilitation for the period identified above reveals:  The facility was fined $2,000 pursuant to a Stipulation and Order issued April 24, 2013 for surveillance findings on September 27, 2011. Deficiencies were found under 10 NYCRR 415.12(h)(1)(2) Quality of Care: Accidents and Supervision. A review of Williamsbridge Manor Nursing Home for the period identified above reveals:  The facility was fined $1,000 pursuant to a Stipulation and Order issued July 8, 2008 for surveillance findings of December 19, 2007. A deficiency was found under 10 NYCRR 415.12 Quality of Care. Project #132306-E Exhibit Page 6 The review of operations for Williamsbridge Manor Nursing Home, Bronx Center for Rehabilitation and Health Care, Waterfront Health Care Center, and Chittenango Center for Rehabilitation and Health Care for the time periods indicated above results in a conclusion of substantially consistent high level of care since there were no repeat enforcements. The review of operations of University Nursing Home, Dutchess Center for Rehabilitation and Healthcare, Queens Center for Rehabilitation and Residential Health Care, Brooklyn Center for Rehabilitation and Residential Health Care, Bushwick Center for Rehabilitation and Health Care, Boro Park Center for Rehabilitation and Healthcare, Wartburg Lutheran Home for the Aging, Rome Center for Rehabilitation and Health Care, Holliswood Center for Rehabilitation and Healthcare, Fulton Center for Rehabilitation and Healthcare, Richmond Center for Rehabilitation and Specialty Healthcare, Corning Center for Rehabilitation, Washington Center for Rehabilitation and Healthcare, Essex Center for Rehabilitation and Healthcare, and Daughters of Jacob Nursing Home Company for the time periods indicated above reveals that a substantially consistent high level of care has been provided since there were no enforcements. A review of Alpine Home Health Care, LLC and Amazing Home Care reveals that a substantially consistent high level of care has been provided since there were no enforcements. The review of Senior Care Emergency Ambulance Services, Inc. reveals that a substantially consistent high level of care has been provided since there were no enforcements. Project Review No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Conclusion No negative information has been received concerning the character and competence of the proposed applicants identified as new members. Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Asset Purchase Agreement The applicant has submitted an executed asset purchase agreement for the purchase of the nursing home, summarized below: Date: Seller: Purchaser: Assets Acquired: November 4, 2013 Howd LTC Management, LLC Northwoods Operations Associates, LLC Business and operation of the Facility, except for the Excluded Assets; all leasehold improvements, furniture, fixtures and equipment owned or leased by Seller; all inventory, supplies and other articles of personal property, except foe the Excluded Assets; all transferable contracts, agreements, leases, undertakings, commitments and other arrangements; all residential funds held in trust; the name “Northwoods Rehabilitation & Extended Care Facility and any and all other trade names, logos, trademarks and service marks associated with the Facility; all security deposits and prepayments, if any, for future services held by Seller; all menus, policies and procedures manuals and computer software; all telephone numbers and telefax numbers used by Project #132306-E Exhibit Page 7 Excluded Assets: Assumed Liabilities: Retained Liabilities: Purchase Price: Payment of Purchase Price: the Facility; all employee and payroll records relating to the Facility; goodwill; copies of all other books and records relating to the Facility; all licenses and permits held or owned by Seller relating to the ownership or operation of the Facility and the Basic Assets; the Seller’s Medicare and Medicaid provider numbers and provider agreements; all rate increases and/or lump sum or other payments, resulting from rate appeals, audits or otherwise, with respect to third party payments and all accounts receivable, regardless of when billed, relating to services rendered by the Facility at any time on and after the Closing Date. The real estate which is the subject of the Real Estate Contract; all insurance policies; all rights and interests of Seller under and pursuant to this agreement and any documents executed in connection with the Closing; all rate increases resulting from rate appeals, with respect to third party payments, which become effective or paid on or after the Closing for services rendered by the Facility prior to the Closing Date; all amounts due from third parties related to the Seller; and all accounts receivable of any nature, regardless of when billed, relating to services rendered by the Facility at any time prior to the Closing Date; all cash, deposits and cash equivalents held by Seller before the Closing Date; all payments or cash equivalent credits relating to the Facility resulting from claims, insurance premium rate reductions, or insurance or other dividends paid or accruing for services prior to the Closing Date and the van identified as follows 2012 Toyota Siena shall be redeemed by Seller. Buyer shall assume only the following liabilities at the Closing; all liabilities and obligations exclusively arising with respect to the operation of the Facility and/or the Basic Assets on and after the Closing Date. Seller is retaining and shall remain liable for, any and all liabilities and obligations arising from or relating to the ownership or operation of the Facility prior to the Closing Date. $143,000 $14,000 upon execution of this agreement and the remainder due at Closing. Pamela Sleps has provided $14,000 in escrow for the operation purchase agreement. The applicant has submitted an affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments, or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring its interest, without releasing the transferor of its liability and responsibility. Currently, the facility has no outstanding liabilities. Real Estate Purchase Agreement The applicant has submitted an executed real estate purchase agreement for the site where the nursing home is located on, which is summarized below: Date: Seller: Purchaser: Purchase Price: Payment of Purchase Price: November 4, 2013 Howd Manor Group, LLC Northwoods Real Estate Associates, LLC $457,000 $45,000 upon execution of this agreement and the balance of the purchase price will be paid at Closing. Pamela Sleps has provided $45,000 in escrow for the real estate purchase agreement. Project #132306-E Exhibit Page 8 Lease Rental Agreement The applicant has submitted an executed lease rental agreement for the site where the nursing home will be located, which is summarized below: Date: Premises: Lessor: Lessee: Term: Rental: Provisions: November 27, 2013 The site located at 7 Keeler Avenue, Moravia, New York. Northwoods Real Estate Associates, LLC Northwoods Operations Associates, LLC 10 years $62,043 annually The lessee shall be responsible for insurance, taxes and utilities Operating Budget The applicant has submitted an operating budget, in 2014 dollars, for the first year after the change in operator, summarized below: Revenues: Medicaid Managed Care Medicare Fee For Service Private Pay Total Revenues Expenses: Operating Capital Total Expenses Per Diem Total $154.42 375.00 219.48 $1,543,130 417,000 446,648 $2,406,778 $171.24 8.01 $179.25 $2,250,198 105,271 $2,355,469 Net Income $51,309 Utilization: (patient days) Occupancy Breakeven Occupancy 13,140 90.00% 88.12% Utilization, broken down by payor source during the first year after the change in operator is summarized below: Medicaid Managed Care Medicare Fee For Service Private Pay 76.05% 8.47% 15.48% Expense assumptions are based on the 2012 experience with adjustments during the first year. Utilization assumptions are based on current 2012 historical experience by payor source. Utilization is projected to increase from 88.27% in 2012, to 90.00% during the first year after the change in operator. The applicant has indicated that the reasons for the increase in the projected utilization are the result of the following: the applicant will initiate a Community Outreach Plan in order to ensure that the facility will be well utilized. Northwoods will develop a community outreach program that will inform surrounding hospitals, home health agencies, assisted living facilities and adult care facilities of the change in ownership of the facility. Cayuga County has three certified home health agencies, one long term home health care program, one hospice program, and four licensed home care services agencies serving the County. Additionally, Cayuga County has one acute care hospital and five adult care facilities within the county. The new operator will reach out to these facilities and also contact representatives of the local social service district, senior citizen centers, churches and other community groups and agencies to inform them of the change in ownership and to provide community education programs to better serve the community. The current operator of Northwoods does not currently admit residents who require intravenous therapy and only admits residents who require a lower level of care. The proposed operator Project #132306-E Exhibit Page 9 of the facility will train its staff in order to be able to serve residents who require intravenous therapy and accept residents at a level that the Centers for Medicare and Medicaid Services and New York State expects from residential health care facilities. Likewise proposed operator will notify facilities/agencies in the region of its ability to take care of these higher level of residents. Expenses are also decreasing during the first year when compared with 2012 as some of the facility’s existing assets will become fully depreciated by year 1 of operations. Capability and Feasibility The operational purchase price of $143,000 will be met as follows: Equity of $35,750 from the proposed members and $107,250 financed at an interest rate of 6.00% for a ten year term. The real estate purchase price of $457,000 will be met as follows: $114,250 from the proposed members and $342,750 to be financed at an interest rate of 6.00% for a ten year term. The applicant has indicated that Pamela Sheps has contributed equity in escrow a total of $59,000. Working capital requirements are estimated at $392,578, which appears reasonable based on two months of first year expenses. The applicant will finance $196,289 at an interest rate of 6.00% for a five year term. The remainder, $196,289, will be provided via equity from the proposed members personal resources. BFA Attachment A are the personal net worth statements of the proposed members of Northwoods Operating Associates, LLC, which indicates the availability of sufficient funds for the equity contribution. The applicant has submitted an affidavit indicating that the equity will be provided disproportionate to ownership interests. BFA Attachment C is the pro forma balance sheet of Northwoods Rehabilitation and Extended Care Facility at Moravia, which indicates a positive net asset position of $217,783 as of the first day of operation. The submitted budget projects a net income of $51,309 during the first year after the change in operator. Revenues are based on current reimbursement methodologies for nursing homes. The budget appears reasonable. Staff notes that with the expected 2014 implementation of managed care for nursing home residents, Medicaid reimbursement is expected to change from a state-wide price with a cost based capital component payment methodology, to a negotiated reimbursement methodology. Facility payments will be the result of negotiations between the managed long term care plans and the facility. At this point in time, it cannot be determined what financial impact this change in reimbursement methodology will have on this project. BFA Attachment B is a financial summary of Northwoods Rehabilitation and Extended Care Facility at Moravia from 2010 through 2012. As shown, the facility had an average positive working capital position and an average positive net asset position from 2010 through 2012. The facility incurred an average operating net income of $5,865 from 2010 through 2012. The applicant has indicated that the reason for the 2012 losses are as follows: a reduction in the average census from 35 to 31; $134,406 in bad debts; and additional depreciation of over $14,500 for new equipment purchased for the facility. The current operator has taken several steps to improve operations including increasing the census of the facility and cost reduction strategies. The applicant achieved a net income of $370,862 in 2013. BFA Attachment D are the financial summaries of the other facilities that the proposed members own. The facilities have maintained positive income from operations for the periods shown with the exception of Chittenango Center for Rehabilitation, which was due to the one-time audit recoupment. Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Recommendation From a financial perspective, contingent approval is recommended. Project #132306-E Exhibit Page 10 Attachments BFA Attachment A BFA Attachment B BFA Attachment C BFA Attachment D Personal Net Worth Statements Financial Summary- Northwoods Rehabilitation and Extended Care Facility Pro-forma Balance Sheet Financial Summaries of affiliated entities. Project #132306-E Exhibit Page 11 Public Health and Health Planning Council Project # 132349-E Lincoln Center for Rehabilitation and Healthcare, LLC County: Queens Purpose: Establishment Program: Residential Health Care Facility Acknowledged: December 31, 2013 Executive Summary Description Lincoln Center for Rehabilitation and Healthcare, LLC seeks to become the new operator of Flushing Manor Geriatric Center, Inc. d/b/a Dr. William O. Benenson Rehabilitation Center, an existing proprietary business corporation and a 302-bed Residential Health Care Facility (RHCF), which includes a 20-ventilator dependent bed unit, located at 36-17 Parsons Boulevard in Flushing. Ownership of the facility operation before and after the requested change is as follows: Current Flushing Manor Geriatric Center, Inc. Michael Benenson 17.3% Sharon Sydney Benenson 17.3% Amy Benenson 17.3% Blanche Benenson 17.3% Esther Benenson 30.8% Bernard Fuchs has a 6% membership interest in Hopkins Center for Rehab, a 288-bed RHCF located in Brooklyn, and as of January 19, 2012, a 25% membership interest in Bensonhurst Center for Rehab, a 200-bed RHCF located in Brooklyn. CON 132355 and CON 132352 will be reviewed at the same time due to the Omnibus Sale Agreement. DOH Recommendation Contingent Approval Need Summary Dr. William O. Benenson Rehab Pavilion’s utilization was 97.0% in 2010, 97.4% in 2011, and 98.3% in 2012, which meets or exceeds the Department’s optimum planning goals. In 2013, RHCF utilization for this facility was 98.5%. The change in ownership will not result in any change in beds or services. Proposed Lincoln Center for Rehabilitation and Healthcare, LLC Bernard Fuchs 50.0% Deana Hersh 25.0% Richard Platschek 25.0% Program Summary No negative information has been received concerning the character and competence of the proposed applicants identified as new members. Richard Platschek has 4.5% membership interest as of October of 2012 in Williamsville Surburban Nursing Home, a 220-bed RHCF located in Williamsville, No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. Ridgeview Manor Nursing Home, a 120-bed RHCF located in Buffalo, and Sheridan Manor Nursing Home, a 100-bed RHCF located in Tonawanda. Project #132349-E Exhibit Page 1 Financial Summary There are no project costs associated with this application. BUDGET: Revenues: Expenses: Gain: Subject to noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. $38,638,255 35,330,130 $ 3,308,125 Project #132349-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. Submission of an executed building lease, acceptable to the Department. [BFA] 2. Submission of a commitment for a permanent mortgage for the project to be provided from a recognized lending institution at a prevailing rate of interest that is determined to be acceptable by the Department. Included with the submitted permanent mortgage commitment, must be a sources and uses statement and debt amortization schedule, for both new and refinanced debt. [BFA] 3. Submission of an executed working capital loan, acceptable to the Department of Health. [BFA] 4. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 5. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily be limited to, ways in which the facility will: a) Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program; b) Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility; c) Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and d) Implement the plan. The plan should include but not be limited to:  Information on activities relating to a-c above;  Documentation pertaining to the number of referrals and the number of Medicaid admissions; and  Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two year period. [RNR] 6. Submission and approval of an acceptable name for the facility. [LTC] 7. Submission of executed Articles of Organization, acceptable to the Department. The Article of Organization must specify that the Manager must be a member. The Articles of Organization must list the address of the entity’s principal office, which must be the same as that of the facility. [CSL] 8. Submission of an executed Operating Agreement, acceptable to the Department. [CSL] 9. Submission of evidence of site control, acceptable to the Department. [CSL] Project #132349-E Exhibit Page 3 Approval conditional upon: 1. The project must be completed within one year 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] Council Action Date June 12, 2014 Project #132349-E Exhibit Page 4 Need Analysis Project Description Lincoln Center for Rehabilitation and Healthcare, LLC seeks approval to be established as the operator of Flushing Manor Geriatric Center, Inc. d/b/a Dr. William O. Benenson Rehabilitation Center. Dr. William O. Benenson Rehab Pavilion is a 302-bed residential health care facility (RHCF) located at 36-17 Parsons Boulevard, Flushing, 11354, in Queens County. This facility consists of 282 RHCF beds and 20 ventilator-dependent beds. Analysis There is currently a need for 8,663 beds in the New York City Region as indicated in Table 1 below. However, the average occupancy for New York City is 94.8%, as indicated in Table 2. Table 1: RHCF Need – New York City Region 2016 Projected Need 51,071 Current Beds 42,330 Beds Under Construction 78 Total Resources 42,408 Unmet Need 8,663 Dr. William O. Benenson Rehabilitation Pavilion’s utilization was 97.0% in 2010, 97.4% in 2011, and 98.3% in 2012. The facility has continually met or exceeded the 97% optimum occupancy rate over the last five years. Table 2: Dr. William O. Benenson Rehab Pavilion/Queens County/New York City Region Occupancy Facility/County/Region % Occupancy 2010 % Occupancy 2011 % Occupancy 2012 Dr. William O. Benenson 97.0% 97.4% 98.3% Rehab Pavilion Queens County 94.7% 94.4% 94.0% New York City Region 95.4% 94.8% 94.8% Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patients’ admissions is at least 75% of the planning area percentage or the Health Systems Agency percentage, whichever is applicable. Dr. William O. Benenson Rehabilitation Pavilion’s Medicaid admissions rate of 36.7% in 2011 and 35.2% in 2012 exceeded the Queens County 75% rates of 30.4% in 2011 and 29.7% in 2012. Conclusion Approval of this application will result in the maintenance of a necessary resource that provides services to both the Medicaid patient population and the larger community. Project #132349-E Exhibit Page 5 Recommendation From a need perspective, contingent approval is recommended. Program Analysis Facility Information Facility Name Address RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator Operator Existing Dr. William O. Benenson Rehabilitation Center 36-17 Parsons Boulevard Flushing 302 N/A Proprietary Corporation Flushing Manor Geriatric Center, Inc. Proposed Lincoln Center for Rehabilitation and Healthcare, LLC Same Same Same Proprietary Limited Liability Company Kennedy Pavilion RH I, LLC Managing Member: Richard (Aryeh) Platschek 25.0% Members: Bernard Fuchs Deena Hersh Character and Competence – Background Facilities Reviewed Nursing Homes Williamsville Suburban LLC Ridge View Manor LLC Sheridan Manor LLC Hudson Pointe at Riverdale Center for Nursing and Rehabilitation Hopkins Center for Rehabilitation and Healthcare Bensonhurst Center for Rehabilitation and Healthcare 50.0% 25.0% 10/2012 to present 10/2012 to present 10/2012 to present 01/2006 to 08/2010 03/2011 to present 01/2012 to present Individual Background Review Richard (Aryeh) Platschek lists his occupation as sales at Stat Portable X-ray, a portable x-ray service located in Oakland Gardens, New York. He has been employed there since January 2007. Previously, Mr. Platschek was employed at Treetops Rehabilitation Care Center as a purchasing agent. Richard (Aryeh) Platschek discloses the following ownership interests in health facilities: Williamsville Suburban LLC 10/2012 to present Ridge View Manor LLC 10/2012 to present Sheridan Manor LLC 10/2012 to present Bernard Fuchs is the CEO and Chief Investment Officer at Tiferes Investors LLC, an investment company located in Lawrence, New York. Bernard Fuchs discloses the following ownership interests in health facilities: Hudson Pointe at Riverdale Center for Nursing and Rehabilitation 01/2006 to 08/2010 Hopkins Center for Rehabilitation and Healthcare 03/2011 to present Bensonhurst Center for Rehabilitation and Healthcare 01/2012 to present Deena Hersh discloses no employment history and discloses no ownership interest in health facilities. Project #132349-E Exhibit Page 6 Character and Competence - Analysis No negative information has been received concerning the character and competence of the applicants. A review of Hopkins Center for Rehabilitation and Healthcare for the period reveals that the facility was fined $4,000 pursuant to a Stipulation and Order issued August 24, 2012 for surveillance findings on April 11, 2011. Deficiencies were found under 10 NYCRR 415.12(h)(1)(2) – Quality of Care: Accidents; and 10 NYCRR 415.26 – Administration. A review of operations for Hopkins Center for Rehabilitation and Healthcare for the periods identified above, results in a conclusion of substantially consistent high level of care since there were no repeat enforcements. A review of operations for the Williamsville Suburban LLC, Ridge View Manor LLC, Sheridan Manor LLC, Hudson Pointe at Riverdale Center for Nursing and Rehabilitation, and Bensonhurst Center for Rehabilitation and Healthcare for the periods identified above, results in a conclusion of substantially consistent high level of care since there were no enforcements. Project Review No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Conclusion No negative information has been received concerning the character and competence of the proposed applicants identified as new members. Recommendation From a programmatic perspective, contingent approval is recommended. Financial Analysis Asset Purchase Agreement The change in ownership will be effectuated in accordance with an executed asset purchase and sale agreement, the terms of which are summarized below: Date: Seller: Purchaser : Purchased Assets: Excluded Assets: Assumed Liabilities: Purchase Price: Payment of Purchase Price: August 21, 2013 Flushing Manor Geriatric Center, Inc. d/b/a William O. Benenson Rehabilitation Center Kennedy Pavilion RH I, LLC All assets used in operation of the facility. Facilities; equipment; supplies and inventory; prepaid expenses; documents and records; assignable leases, contracts, licenses and permits; telephone numbers, fax numbers and all logos; resident trust funds; deposits; accounts and notes receivable; cash, deposits and cash equivalents; Any security, vendor, utility or other deposits with any Governmental Entity; any refunds, debtor claims, third-party retroactive adjustments and related documents prior to closing, and personal property of residents. Those associated with purchased assets $10,645,500 for the operating interest. $909,872 has been paid in cash and put into escrow with The balance of $9,735,628 to be paid at closing. Project #132349-E Exhibit Page 7 Kennedy Pavilion RH I, LLC will be renamed Lincoln Center for Rehabilitation and Healthcare, LLC. The proposed members have submitted an original affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring interest, without releasing the transferor of its liability and responsibility. Omnibus Sale Agreement An Omnibus Sale Agreement has been executed between the sellers: Flushing Manor Geriatric Center, Inc. d/b/a William O. Benenson Rehabilitation Center; Flushing Manor Dialysis Center, LLC; FMNH, LLC d/b/a Flushing Manor Nursing and Rehabilitation Center; Flushing Manor Care Center, Inc.; and QueensLong Island Certified Home Health Agency, LLC and the buyers: Kennedy Pavilion RH I, LLC; Kennedy Pavilion RH II, LLC; Kennedy Pavilion RH III, LLC; Kennedy Pavilion RH IV, LLC; and Kennedy CHHA, LLC, whereas each Operating Asset Purchase Agreement and Real Estate Purchase Agreement shall simultaneously close upon receipt of the Buyer of all necessary regulatory approvals and other closing conditions. The aggregate purchase price is $117,000,000 with the operational assets totaling $28,457,400. Lease Agreement Facility occupancy is subject to a draft lease agreement, the terms of which are summarized as follows: Premises: Landlord: Tenant: Terms: Rental: Provisions: A 302-bed RHCF located at 36-17 Parsons Boulevard, Flushing 3617 BH Parsons Realty, LLC Kennedy Pavilion RH I, LLC 26 years commencing on the execution of the lease with a ten year option to renew. Annual rent is equal to the Landlord’s annual HUD debt service payment, HUD mortgage insurance premiums, real property taxes and property and liability insurance. Tenant is responsible for general liability insurance, utilities and maintenance The lease arrangement is a non-arm’s length agreement. The applicant has submitted an affidavit attesting to the relationship between the landlord and operating entity. Operating Budget Following is a summary of the submitted operating budget, presented in 2014 dollars, for the first year subsequent to change in ownership: Revenues: Medicaid Medicare Private Pay/Other Total RHCF $24,695,601 10,079,624 3,863,030 $38,638,255 Expenses: Operating Capital Total $32,339,291 2,990,839 $35,330,130 Net Income $3,308,125 Total Patient Days 107,964 Project #132349-E Exhibit Page 8        Medicaid capital component includes lease rental payment. Medicare and private pay revenues are based on current payment rates. Medicaid rates are based on 2014 Medicaid pricing rates with no trend. Overall utilization is projected at 97.94%. Utilization by Payor source is anticipated as follows: Medicaid 79.14% Medicare 14.46% Private/Other 6.40% Breakeven utilization is projected at 89.45%. The budgeted utilization is based on the 2012 historical Payor mix. Capability and Feasibility There are no project costs associated with this application. The total purchase price for the operations is $10,645,500 and will be paid by $2,129,100 of the proposed members’ equity, with the remaining $8,516,400 to be financed through a mortgage with 4.5% interest rate over a 30 year amortization. A bank letter of interest from Greystone Funding Corporation has been submitted by the applicant. Working capital requirements are estimated at $5,888,355 based on two months’ of first year expenses and will be satisfied from the facility’s existing cash and receivables and a bank loan. Net cash and receivables (minus accounts payable) were $4,243,401 at December 31, 2013, resulting in a need for additional equity of $1,644,954, which will come from a bank loan over 5 years at 6% interest. A bank letter of interest from Greystone Funding Corporation has been submitted by the applicant. The submitted budget indicates that a net income of $3,308,125 would be maintained during the first year following change in ownership. DOH staff notes that the first year budget was based on 2012 historical occupancy of 98.5%, with a more conservative approach to payor mix. The 2013 payor mix is heavily skewed to private pay, which creates additional revenues that may not be achievable in the first year budget. BFA Attachment C presents the pro-forma balance sheet of Lincoln Center for Rehabilitation and Healthcare. As shown, the facility will initiate operation with $6,968,507 members’ equity. It is noted that assets include $10,645,500 in goodwill, which is not an available liquid resource, nor is it recognized for Medicaid reimbursement purposes. Thus members’ equity would be negative $3,676,993. The budget appears reasonable. Staff notes that with the expected 2014 implementation of managed care for nursing home residents, Medicaid reimbursement is expected to change from a state-wide price with a cost-based capital component payment methodology, to a negotiated reimbursement methodology. Facility payments will be the result of negotiations between the managed long term care plans and the facility. At this point in time it cannot be determined what financial impact this change in reimbursement methodology will have on this project. BFA Attachment D, financial summary of Flushing Manor Nursing Home, shows negative working capital, net equity, and a net loss from operations of $1,711,925 as December 31, 2013. The negative net equity in 2012 and the net loss in 2012 and 2013 were due to operational inefficiencies. The new operator intends to increase revenues by reducing staff without patient interruption, outsourcing contractual needs, and increasing utilization of the 10 vent beds most recently operationalized. BFA Attachment E, financial summaries of proposed member Richard Platschek’s affiliated homes, shows the three RHCFs had experienced negative working capital and net equity, and maintained positive net income for the period shown. The negative working capital and net equity for the affiliated homes were due to bankruptcy related liabilities and Medicaid payments being withheld. BFA Attachment F, financial summaries of proposed member Bernard Fuchs’s affiliated homes, shows the two RHCFs had positive net income, working capital and net equity for the period shown. Based on the preceding and subject to noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #132349-E Exhibit Page 9 Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA-Attachment A BFA-Attachment B BFA-Attachment C BFA-Attachment D BFA-Attachment E BFA-Attachment F Organizational Chart Net Worth of Proposed Members Pro-forma Balance Sheet, Lincoln Center for Rehabilitation & Healthcare Financial Summary, Flushing Manor Geriatric Center, 2011- November 30, 2013 Financial summary of proposed member, Richard Platschek, affiliated Nursing Homes Financial summary of proposed member, Bernard Fuchs, affiliated Nursing Homes Project #132349-E Exhibit Page 10 Public Health and Health Planning Council Project # 132355-E Flushing Center for Rehabilitation and Healthcare, LLC County: Queens Purpose: Establishment Program: Residential Health Care Facility Acknowledged: December 30, 2013 Executive Summary Description Flushing Center for Rehabilitation and Healthcare, LLC is requesting to become the new operator of FMNH, LLC d/b/a Flushing Manor Nursing Home, an existing proprietary 227-bed Residential Health Care Facility (RHCF) and 131-slot Long Term Home Health Care Program (LTHHCP), located at 35-15 Parsons Boulevard and 36-25 Parsons Boulevard, respectively, in Flushing. Ownership of the facility operation before and after the requested change is as follows: Current FMNH, LLC Name Michael Benenson Sharon Sydney Benenson Amy Benenson Blanche Benenson Percentages 25.0% 25.0% 25.0% 25.0% Proposed Flushing Center for Rehabilitation and Healthcare, LLC Name Percentages Bernard Fuchs 30.0% Deana Hersh 35.0% Richard Platschek 35.0% Richard Platschek has 4.5% membership interest as of October of 2012 in Williamsville Suburban Nursing Home, a 220-bed RHCF located in Williamsville, Ridgeview Manor Nursing Home, a 120-bed RHCF located in Buffalo and Sheridan Manor Nursing Home, a 100-bed RHCF located in Tonawanda. Concurrently, CON 132356, CON 132349, CON 132352 are being reviewed due to the Omnibus Sale Agreement, which also includes the sale and acquisition of the Queens-Long Island Certified Home Health Agency (CHHA). The CHHA will go before the Public Health and Health Planning Council at a later date. DOH Recommendation Contingent Approval Need Summary Flushing Manor Nursing Home’s utilization was 95.5% in 2010, 92.0% in 2011, and 92.6% in 2012. As of December 4, 2013, utilization for this facility was 96.0%. The change in ownership will not result in any change in beds or services. Program Summary No negative information has been received concerning the character and competence of the proposed applicants identified as new members. No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. Bernard Fuchs has 6% membership in Hopkins Center for Rehab, a 288-bed RHCF located in Brooklyn and as of January 19, 2012, a 25% membership in Bensonhurst Center for Rehab, a 200-bed RHCF located in Brooklyn. Project #132355-E Exhibit Page 1 Financial Summary There are no project costs associated with this application. Budget: Revenues: Expenses: Gain: $27,941,283 26,880,462 $ 1,060,821 Subject to noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #132355-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 2. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily be limited to, ways in which the facility will:  Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program;  Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility;  Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and  Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two year period. [RNR] 3. Submission and approval of an acceptable name for the facility. [LTC] 4. Submission of an executed building lease, acceptable to the Department. [BFA, CSL] 5. Submission of a commitment for a permanent mortgage for the project to be provided from a recognized lending institution at a prevailing rate of interest that is determined to be acceptable by the Department of Health. Included with the submitted permanent mortgage commitment, must be a sources and uses statement and debt amortization schedule for both new and refinanced debt. [BFA] 6. Submission of executed Articles of Organization, acceptable to the Department. The Article of Organization must specify that the Manager must be a member. The Articles of Organization must also the address of the entity’s principal office, which must be the same as that of the facility. [CSL] 7. Submission of an executed Operating Agreement, acceptable to the Department. [CSL] 8. Submission of evidence of site control, acceptable to the Department. [CSL] 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] Council Action Date June 12, 2014 Project #132355-E Exhibit Page 3 Need Analysis Background Flushing Center for Rehabilitation & Healthcare, LLC seeks approval to be established as the operator of FMNH, LLC d/b/a Flushing Manor Nursing Home. Flushing Manor Nursing Home is a 227-bed residential health care facility (RHCF) located at 35-15 Parsons Boulevard, Flushing, 11354, in Queens County. Analysis There is currently a need for 8,663 beds in the New York City Region, as indicated in Table 1 below. However, the average occupancy for New York City is 94.8%, as indicated in Table 2. Table 1: RHCF Need – New York City Region 2016 Projected Need Current Beds Beds Under Construction Total Resources Unmet Need 51,071 42,330 78 42,408 8,663 Flushing Manor Nursing Home’s utilization was 95.5% in 2010, 92.0% in 2011, and 92.6% in 2012. The applicant intends to achieve viability through a reduction in FTE’s where over-staffing is indicated, by outsourcing where applicable in order to reduce costs, and by increasing the case mix of the residents. Table 2: Flushing Manor Nursing Home/Queens County/New York City Region Occupancy Facility/County/Region Flushing Manor NH Queens County New York City Region % Occupancy 2010 95.5% 94.7% 95.4% % Occupancy 2011 92.0% 94.4% 94.8% % Occupancy 2012 92.6% 94.0% 94.8% Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patients’ admissions is at least 75% of the planning area percentage or the Health Systems Agency percentage, whichever is applicable. Flushing Manor Nursing Home’s Medicaid admissions of 43.7% in 2011 and 37.8% in 2012 exceeded the Queens County 75% rates of 30.4% in 2011 and 29.7% in 2012. Conclusion Approval of this application will result in maintaining a necessary resource that provides services to both the Medicaid patient population and the community it serves. Recommendation From a need perspective, contingent approval is recommended. Project #132355-E Exhibit Page 4 Program Analysis Program Description Facility Name Address Existing Flushing Manor Nursing Home Proposed Flushing Center for Rehabilitation and Healthcare, LLC Same RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator 35-15 Parsons Boulevard Flushing, NY. 11354 227 N/A Proprietary Limited Liability Company Same N/A Proprietary Limited Liability Company Operator FMNH, LLC Kennedy Pavilion RH III, LLC Michael Benenson Sharon Sydney Blanche Benenson Amy Benenson 25% 25% 25% 25% Character and Competence – Background Facilities Reviewed Nursing Homes Williamsville Suburban LLC Ridge View Manor LLC Sheridan Manor LLC Hudson Pointe at Riverdale Center for Nursing and Rehabilitation Hopkins Center for Rehabilitation and Healthcare Bensonhurst Center for Rehabilitation and Healthcare Managing Member: Richard (Aryeh) Platschek 35.0% Members: Bernard Fuchs Deena Hersh 30.0% 35.0% 10/2012 to present 10/2012 to present 10/2012 to present 01/2006 to 08/2010 03/2011 to present 01/2012 to present Individual Background Review Richard (Aryeh) Platschek lists his occupation as sales at Stat Portable X-ray, a portable x-ray service located in Oakland Gardens, New York. He has been employed there since January 2007. Previously, Mr. Platschek was employed at Treetops Rehabilitation Care Center as a purchasing agent. Richard (Aryeh) Platschek discloses the following ownership interests in health facilities: Williamsville Suburban LLC 10/2012 to present Ridge View Manor LLC 10/2012 to present Sheridan Manor LLC 10/2012 to present Bernard Fuchs is the CEO and Chief Investment Officer at Tiferes Investors LLC, an investment company located in Lawrence, New York. Bernard Fuchs discloses the following ownership interests in health facilities: Hudson Pointe at Riverdale Center for Nursing and Rehabilitation 01/2006 to 08/2010 Hopkins Center for Rehabilitation and Healthcare 03/2011 to present Bensonhurst Center for Rehabilitation and Healthcare 01/2012 to present Deena Hersh discloses no employment history and discloses no ownership interest in health facilities. Project #132355-E Exhibit Page 5 Character and Competence - Analysis No negative information has been received concerning the character and competence of the applicants. A review of Hopkins Center for Rehabilitation and Healthcare for the period reveals that the facility was fined $4,000 pursuant to a Stipulation and Order issued August 24, 2012 for surveillance findings on April 11, 2011. Deficiencies were found under 10 NYCRR 415.12(h)(1)(2) – Quality of Care: Accidents; and 10 NYCRR 415.26 – Administration. A review of operations for Hopkins Center for Rehabilitation and Healthcare for the periods identified above, results in a conclusion of substantially consistent high level of care since there were no repeat enforcements. A review of operations for the Williamsville Suburban LLC, Ridge View Manor LLC, Sheridan Manor LLC, Hudson Pointe at Riverdale Center for Nursing and Rehabilitation, and Bensonhurst Center for Rehabilitation and Healthcare for the periods identified above, results in a conclusion of substantially consistent high level of care since there were no enforcements. Project Review No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Conclusion No negative information has been received concerning the character and competence of the proposed applicants identified as new members. Recommendation From a programmatic perspective, contingent approval is recommended. Financial Analysis Asset Purchase Agreement The change in ownership will be effectuated in accordance with an executed asset purchase and sale agreement, the terms of which are summarized below: Date: Seller: Purchaser : Purchased Assets: Excluded Assets: Assumed Liabilities: Purchase Price: Payment of Purchase Price: August 21, 2013 FMNH, LLC d/b/a Flushing Manor Nursing Home Kennedy Pavilion RH III, LLC All assets used in operation of the facility. Facilities; equipment; supplies and inventory; prepaid expenses; documents and records; assignable leases, contracts, licenses and permits; telephone numbers, fax numbers and all logos; resident trust funds; deposits; accounts and notes receivable; cash, deposits and cash equivalents; Any security, vendor, utility or other deposits with any Governmental Entity; any refunds, debtor claims, third-party retroactive adjustments and related documents prior to closing, and personal property of residents. Those associated with purchased assets $9,103,900 for the operating interest. $778,111 has been paid in cash and put into escrow with the balance of $8,325,789 to be paid at closing. Kennedy Pavilion RH III, LLC will be renamed Flushing Center for Rehabilitation & Healthcare, LLC. Project #132355-E Exhibit Page 6 The proposed members have submitted an original affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring interest, without releasing the transferor of its liability and responsibility. Omnibus Sale Agreement An Omnibus Sale Agreement has been executed between the sellers: Flushing Manor Geriatric Center, Inc. d/b/a William O. Benenson Rehabilitation Center; Flushing Manor Dialysis Center, LLC; FMNH, LLC d/b/a Flushing Manor Nursing and Rehabilitation Center; Flushing Manor Care Center, Inc.; and QueensLong Island Certified Home Health Agency, LLC, and the buyers: Kennedy Pavilion RH I, LLC; Kennedy Pavilion RH II, LLC; Kennedy Pavilion RH III, LLC; KPRH IV Operations, LLC; and Kennedy CHHA, LLC, whereas each Operating Asset Purchase Agreement and Real Estate Purchase Agreement shall simultaneously close upon receipt of the Buyer of all necessary regulatory approvals and other closing conditions. The aggregate purchase price is $117,000,000 with the operational assets totaling $28,457,400. Lease Agreement Facility occupancy is subject to a draft lease agreement, the terms of which are summarized as follows: Premises: Landlord: Tenant: Terms: Rental: Provisions: A 227-bed RHCF located at 35-15 Parsons Boulevard, Flushing 3515 BH Parsons Realty, LLC Kennedy Pavilion RH II, LLC 26 years commencing on the execution of the lease with a ten year option to renew. Annual rent is equal to the Landlord’s annual HUD debt service payment, HUD mortgage insurance premiums, real property taxes and property and liability insurance. Tenant is responsible for general liability insurance, utilities and maintenance The lease arrangement is a non-arm’s length agreement. The applicant has submitted an affidavit attesting to the relationship between the landlord and operating entity. Operating Budget Following is a summary of the submitted operating budget, presented in 2014 dollars, for the first year subsequent to change in ownership: Revenues: Medicaid Medicare Private Pay/Other Total $17,137,428 5,770,000 5,033,855 $27,941,283 Expenses: Operating Capital Total $24,457,584 2,422,878 $26,880,462 Net Income $1,060,821 Total Patient Days Total Visits 80,290 38,892 Project #132355-E Exhibit Page 7       Medicaid capital component includes lease rental payment. Medicare and private pay revenues are based on current payment rates. Medicaid rates are based on 2014 Medicaid pricing rates adjusted for CMI increase with no trend. Overall utilization is projected at 96.87%. Utilization by payor source is anticipated as follows: Medicaid 71.57% Medicare 11.77% Private/Other 16.66% Breakeven utilization is projected at 93.2%. Capability and Feasibility There are no project costs associated with this application. The total purchase price for the operations is $9,103,900, and will be paid by $1,820,780 of the proposed members’ equity, with the remaining $7,283,120 to be financed through a mortgage with 4.5% interest rate over a 30 year amortization. A bank letter of interest from Greystone Funding Corporation has been submitted by the applicant. Working capital requirements are estimated at $4,480,077 based on two months’ of first year expenses, and will be satisfied from the facility’s existing cash and receivables and additional members’ equity. Net cash and receivables ($4,833,952) minus accounts payable ($1,997,537) were $2,836,315 at December 31, 2013, resulting in a need for additional equity of $1,643,762 from the proposed members. An affidavit from proposed applicant member, Bernard Fuchs, states that he is willing to contribute resources disproportionate to his ownership percentage. Review of BFA Attachment B, net worth of proposed members, reveal sufficient resources to satisfy the working capital requirements for the RHCF change in ownership. The submitted budget indicates that a net income of $1,060,821 would be maintained during the first year following change in ownership. BFA Attachment G is the budget sensitivity analysis based on December 31, 2013 current utilization of the facility, which shows the budgeted revenues would decrease by $37,406, resulting in a net income in year one of $1,023,415. In 2013, the facility was able to increase its occupancy to approximately 94.6% from the 92.8% recorded in 2012. The most recent reported rate on the NYSDOH website, as of March 19, 2014, is 94.3%. Mr. Fuchs and Mr. Platschek have considerable experience successfully turning around other RHCFs in New York State subsequent to acquisition. The applicant intends to implement at this facility, many of the strategies used by Mr. Fuchs and Mr. Platschek in those successful endeavors, to improve utilization percentages and realize high-quality and fiscally viable operations. The applicant also expects that utilization will increase due to the six (6) additional dialysis stations that will be operated by a related entity at the site, which will bring more people to the facility, many of whom are most at risk for requiring skilled 24-hour-per-day nursing care due to their advanced debilitating chronic conditions. As an example, if the additional six (6) stations operate for 2.5 shifts per day, there will be 30 additional dialysis patients annually (conservatively assuming no patient turnover). If just three (3) of those patients require a nursing home stay for the traditional “Medicare first 100 days”, utilization will increase to 95%. Minor incremental patient volume increases from the other programs will allow the applicant to reach approximately 97% occupancy. Finally, a profit of $1,060,821 is projected in Year 1, at the projected utilization percentage of 96.87%. If that percentage is reduced to the most recent percentage of 94.3%, it would be a reduction of 2,129 patient days. Multiplying that total by $298.19 (the projected average daily rate) equals $634,958. Even at the lower occupancy percentage, the facility would continue to break even. The budget appears reasonable. BFA Attachment C presents the pro-forma balance sheet of Flushing Center for Rehabilitation & Healthcare. As shown, the facility will initiate operation with $6,540,410 members’ equity. It is noted that assets include $9,103,900 in goodwill, which is not an available liquid resource, nor is it recognized for Medicaid reimbursement purposes. Thus, members’ equity would be negative $2,563,490. Project #132355-E Exhibit Page 8 Staff notes that with the expected 2014 implementation of managed care for nursing home residents, Medicaid reimbursement is expected to change from a state-wide price with a cost-based capital component payment methodology, to a negotiated reimbursement methodology. Facility payments will be the result of negotiations between the managed long term care plans and the facility. At this point in time, it cannot be determined what financial impact this change in reimbursement methodology will have on this project. Review of BFA Attachment D, financial summary of Flushing Manor Nursing Home, shows positive working capital, net equity and a net profit from operations of $848,862 as December 31, 2013. The negative net loss from operations in 2012 was due to lower utilization, which was corrected in 2013. Review of BFA Attachment E, financial summaries of proposed member Richard Platschek’s affiliated homes, shows the three RHCFs had experienced negative working capital and net equity, and maintained positive net income for the period shown. The negative working capital and net equity for the affiliated homes were due to bankruptcy related liabilities and Medicaid payments being withheld. Review of BFA Attachment F, financial summaries of proposed member Bernard Fuchs’s affiliated homes, shows the two RHCFs had positive net income for the period shown. Based on the preceding and subject to noted contingencies, 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 BFA Attachment B BFA Attachment C BFA Attachment D BFA Attachment E BFA Attachment F BFA Attachment G Organizational Chart Net Worth of Proposed Members Pro-forma Balance Sheet, Flushing Center for Rehabilitation & Healthcare Financial Summary, Flushing Manor Nursing Home, 2011- July 31, 2013 Financial summary of proposed member, Richard Platschek, affiliated Nursing Homes Financial summary of proposed member, Bernard Fuchs, affiliated Nursing Homes Budget Sensitivity Analysis Project #132355-E Exhibit Page 9 Public Health and Health Planning Council Project # 132357-E URNC Operating, LLC d/b/a Utica Rehabilitation & Nursing Center County: Oneida Purpose: Establishment Program: Residential Health Care Facility Acknowledged: December 31, 2013 Executive Summary Description URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center, is seeking approval to be established as the new operator of St. Joseph Nursing Home Company of Utica, Inc., an existing 120-bed not-for profit residential health care facility (RHCF) located at 2535 Genesee Street, Utica (Oneida County). URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center, entered into an Operations Transfer Agreement with St. Joseph Nursing Home on October 4, 2013, to sell and acquire the operating interests of the 120-bed facility. The purchase price for the operations of St. Joseph Nursing Home is $10. Ownership after the requested change is as follows: BFA Attachment A presents a summary net worth statement of the proposed members of URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center. Several of the proposed members have ownership interest in the following RHCF facilities; Tarrytown Hall Care Center, Alpine Rehabilitation & Nursing Center, Norwich Rehab & Nursing Center, and Highland Rehab & Nursing Center. DOH Recommendation Contingent Approval URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center Need Summary St. Joseph Nursing Home Company of Utica, Inc.’s utilization was 96.8% in 2010, 95.8% in 2011, and 93.7% in 2012. Current utilization, as of January 1, 2014, at this facility is 85.8%. Ephraim Zagelbaum Yechiel Zagelbaum Yoel Zagelbaum Alexander Barth Yehuda Walden Program Summary No negative information has been received concerning the character and competence of the proposed applicants identified as new members. 50.00% 5.00% 5.00% 20.00% 20.00% A separate but related real estate company, URNC Realty, LLC, will acquire the facility’s property. Ownership of the real estate after the requested change is as follows: No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. URNC Realty, LLC Ephraim Zagelbaum Yechiel Zagelbaum Yoel Zagelbaum Alexander Barth Yehuda Walden 50.00% 5.00% 5.00% 20.00% 20.00% Project #132357-E Exhibit Page 1 Financial Summary On October 4, 2013, an Operational Transfer Agreement was entered into between St. Joseph Nursing Home Company of Utica, Inc. and URNC Operating, LLC, d/b/a Utica Rehabilitation and Nursing Center to sell and acquire the operating interests of the 120-bed facility. The purchase price for the operations of St. Joseph Nursing Home is $10. There are no project costs associated with this proposal. A separate asset purchase agreement was entered into on October 4, 2013 by St. Joseph Nursing Home Company of Utica, Inc. and URNC Realty, LLC, a separate but related company. Year 1 Budget Revenues Expenses Gain/(Loss) $8,820,600 8,690,756 $129,844 Subject to noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Project #132357-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 2. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily be limited to, ways in which the facility will:  Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program;  Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility;  Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and  Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two year period. [RNR] 3. Submission of an executed building lease, acceptable to the Department. [BFA] 4. Submission of an executed working capital loan, acceptable to the Department. [BFA] 5. Submission of a commitment for a permanent mortgage for the project to be provided from a recognized lending institution at a prevailing rate of interest that is determined to be acceptable by the Department. Included with the submitted permanent mortgage commitment must be a sources and uses statement and debt amortization schedule, for both new and refinanced debt. [BFA] 6. Submission of a photocopy of the executed Operating Agreement of URNC Operating, LLC, acceptable to the Department. [CSL] 7. Submission of a photocopy of an executed Certificate of Amendment of the Articles of Organization of URNC Operating, LLC, acceptable to the Department. [CSL] 8. Submission of a photocopy of an executed Certificate of Dissolution or Certificate of Amendment of the Certificate of Incorporation of St. Joseph’s Nursing Home Company, acceptable to the Department. [CSL] Approval conditional upon: 1. The project must be completed within one year 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] Council Action Date June 12, 2014 Project #132357-E Exhibit Page 3 Need Analysis Background URNC Operating, LLC seeks approval to become the established operator of St. Joseph Nursing Home Company of Utica, Inc., a 120-bed Article 28 residential health care facility located at 2535 Genesee Street, Utica, 13501, in Oneida County. Upon approval, the facility will do business as Utica Rehabilitation and Nursing Center. Analysis There is currently a surplus of 330 beds in Oneida County, as indicated in Table 1 below. The overall occupancy for Oneida County was 93.9% for 2012, as indicated in Table 2. Table 1: RHCF Need – Oneida County 2016 Projected Need Current Beds Beds Under Construction Total Resources Unmet Need 2,276 2,606 0 2,606 -330 St. Joseph Nursing Home Company of Utica, Inc.’s utilization was 96.8% in 2010, 95.8% in 2011, and 93.7% in 2012. In contrast to many other nursing homes, this facility does not employ a Director of Admissions/Marketing, which hindered the facility’s ability to maximize utilization. In addition, the facility does not provide extensive wound care, wound vac, tracheotomy or IV care services. The lack of these modernized and diversified services contributed to the facility’s negative reputation in the community as a primarily longterm care facility. The proposed operator plans to increase utilization by hiring an experienced Director of Admissions/Marketing, performing renovations to the facility, both physically and operationally, that will attract new residents while accommodating current residents. The facility will provide services not previously offered, including a new sub-acute rehabilitation program that will operate six to seven days a week. The operator will also actively pursue expansion of current partnerships with community hospitals and physicians to improve care for residents. Table 2: St. Joseph Nursing Home Company of Utica, Inc./Oneida County Occupancy Facility/County/Region St. Joseph Nursing Home Company of Utica, Inc. Oneida County % Occupancy 2010 % Occupancy 2011 % Occupancy 2012 96.8% 95.8% 93.7% 94.3% 95.5% 93.9% Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. Project #132357-E Exhibit Page 4 An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patient’s admissions is at least 75% of the planning area percentage or the Health Systems Agency percentage, whichever is applicable. St. Joseph Nursing Home Company of Utica, Inc.’s Medicaid admissions for 2011 and 2012 was 20.0% and 21.3%, respectively, which exceeds the Oneida County 75% rates in 2011 and 2012 of 18.3% and 19.8%, respectively. Conclusion Approval of this application will result in the maintenance of a community resource that provides needed services to the Medicaid population. Recommendation From a need perspective, contingent approval is recommended. Program Analysis Program Description Facility Name Address RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator Operator Existing St Joseph Nursing Home Co of Utica Proposed Utica Rehabilitation & Nursing Center 2535 Genesee Street Utica, NY 13501 PFI: 0607 120 N/A Not for Profit Corporation Voluntary St Joseph Nursing Home Co of Utica Inc. Same Same Same Limited Liability Company Proprietary URNC Operating, LLC d/b/a Utica Rehabilitation & Nursing Center Members: Ephraim Zagelbaum Alexander Barth Yahuda Walden Yechiel Zagelbaum Yoel Zagelbaum Character and Competence - Background Facilities Reviewed Nursing Homes Tarrytown Hall Care Center Alpine Rehabilitation and Nursing Center Norwich Rehabilitation and Nursing Center Highland Rehabilitation and Nursing Center Massachusetts Nursing Homes Cambridge Rehabilitation and Nursing Center Medford Rehabilitation and Nursing Center Rehabilitation and Nursing Center at Everett 04/2008 to present 07/2009 to present 01/2011 to present 02/2013 to present 09/2010 to present 04/2012 to present 01/2013 to present Project #132357-E Exhibit Page 5 50.0% 20.0% 20.0% 5.0% 5.0% Individual Background Review Ephraim Zagelbaum is a licensed New York State nursing home administrator with license in good standing. Mr. Zagelbaum is a managing partner at Personal Healthcare Management LLC since January 2013. Prior employment was as administrator at Windsor Park Nursing from 2004 to 2012. Mr. Zagelbaum discloses the following health facility ownership interests: Alpine Rehabilitation and Nursing Center 07/2009 to present Cambridge Rehabilitation and Nursing Center (MA) 09/2010 to present Norwich Rehabilitation and Nursing Center 01/2011 to present Tarrytown Hall Care Center 04/2008 to present Medford Rehabilitation and Nursing Center (MA) 04/2012 to present Rehabilitation and Nursing Center at Everett (MA) 01/2013 to present Highland Rehabilitation and Nursing Center 02/2013 to present Alexander Barth a licensed New York State nursing home administrator with license in good standing. Mr. Barth Zagelbaum is a managing partner at Personal Healthcare Management LLC since January 2013.Prior employment was as administrator at Tarrytown Hall Care Center from 2007 to 2012. Mr. Barth holds a current EMT license in good standing. Mr. Barth discloses the following health facility ownership interests: Alpine Rehabilitation and Nursing Center 07/2009 to present Cambridge Rehabilitation and Nursing Center (MA) 09/2010 to present Norwich Rehabilitation and Nursing Center 01/2011 to present Tarrytown Hall Care Center 01/2010 to present Medford Rehabilitation & Nursing Center (MA) 04/2012 to present Rehab & Nursing Center at Everett (MA) 01/2013 to present Highland Rehab & Nursing Center 02/2013 to present Yehuda Walden is a manager at Personal Healthcare, a healthcare company located in Tarrytown. Mr. Walden discloses the following health facility ownership interest: Cambridge Rehabilitation and Nursing Center (MA) 09/2010 to present Medford Rehabilitation & Nursing Center (MA) 04/2012 to present Rehab & Nursing Center at Everett (MA) 01/2013 to present Highland Rehab & Nursing Center 02/2013 to present Yechiel Zagelbaum is a pediatrician in private practice in Brooklyn since 2002. Dr. Zagelbaum is a New York State physician with license in good standing; and current certification in general pediatrics. Mr. Zagelbaum discloses the following health facility ownership interests: Alpine Rehabilitation and Nursing Center 07/2009 to present Cambridge Rehabilitation and Nursing Center (MA) 09/2010 to present Norwich Rehabilitation and Nursing Center 01/2011 to present Tarrytown Hall Care Center 04/2008 to present Medford Rehabilitation & Nursing Center (MA) 04/2012 to present Rehab & Nursing Center at Everett (MA) 01/2013 to present Highland Rehab & Nursing Center 02/2013 to present Yoel Zagelbaum is an attorney in good standing who serves as the President of Riverside Abstract, LLC, a title insurance company, located in Brooklyn. Mr. Zagelbaum is a U.S. patent attorney in good standing. Mr. Zagelbaum discloses the following health facility ownership interests: Alpine Rehabilitation and Nursing Center 07/2009 to present Cambridge Rehabilitation and Nursing Center (MA) 09/2010 to present Norwich Rehabilitation and Nursing Center 01/2011 to present Project #132357-E Exhibit Page 6 Tarrytown Hall Care Center Medford Rehabilitation & Nursing Center (MA) Rehab & Nursing Center at Everett (MA) Highland Rehab & Nursing Center 04/2008 to present 04/2012 to present 01/2013 to present 02/2013 to present Character and Competence - Analysis No negative information has been received concerning the character and competence of the above applicants identified as new members. A review of operations for Alpine Rehabilitation and Nursing Center, Norwich Rehabilitation and Nursing Center, Tarrytown Hall Care Center, Highland Rehab & Nursing Center, Cambridge Rehabilitation and Nursing Center (MA), Rehab & Nursing Center at Everett (MA), and Medford Rehabilitation & Nursing Center (MA) for the periods identified above, results in a conclusion of substantially consistent high level of care since there were no enforcements. Project Review No changes in the program or physical environment are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Operations Transfer Agreement The applicant has submitted an executed operations transfer agreement, the terms of which are summarized below: Date: Transferor: Transferee: Purchase Price: October 4, 2013 St. Joseph Nursing Home Company of Utica, Inc. URNC, LLC d/b/a Utica Rehabilitation and Nursing Center $10 Payable at closing Assets Transferred: All rights, title and interest in the patient trust funds and property, all resident contracts or other agreements with residents of the Facility to the extent assignable, excluding rights to payments of monies due to St. Joseph Nursing Home Company of Utica, Inc. related to the period prior to the closing date, all licenses, permits, accreditations, Medicaid and Medicare contracts, and other regulatory approvals, and all rights of older operator under any government or nongovernment provider agreements or any other third party payor programs, if any, issued by any federal, state, municipal or local governmental authority relating to the use, maintenance or operation of the facility running to, or in favor of, old operator, to the extent legally assignable (including all modifications thereto or renewals thereof, all guaranties or warranties then in effect, if any, with respect to the facility and the Personal Property, the trade name “ St. Joseph Nursing Home”, as well as any trademarks, logo-types or other similar descriptive items associated with such names, and all of the goodwill symbolized and associated with such name, to the extent permitted by the laws of the Roman Catholic Church and any other assets required to be assigned to New Operator pursuant to this Project #132357-E Exhibit Page 7 agreement Assumed Liabilities: None Asset Purchase Agreement The change in ownership of the real estate will be effectuated in accordance with an asset purchase agreement, the terms of which are summarized below: Date: Seller: Purchaser: Purchased Assets: Excluded Assets: October 4, 2013 St. Joseph Nursing Home Company of Utica, Inc. URNC Realty, LLC Seller’s right, title and interest in and to all assets of Seller other than the excluded assets, including but not limited to all of the tangible and intangible assets which comprise or are used or are held for use in connection with or are necessary to the operation of the business at the Nursing Home facility. The property consisting of those certain plots, pieces or parcels of land located in Utica, NY (Land), all of seller’s buildings and all other structures, facilities or improvements presently or hereafter located in or on the land including without limitation, that certain 120-skilled bed nursing home facility commonly known as “St. Joseph Nursing home” and located at 2535 Genesee Street, Utica, NY, all other items of seller’s personal property and fixtures, systems and equipment, attached or appurtenant to, located on or used in connection with the ownership, use, operation or maintenance of the Land, the improvements and/or the Nursing Home facility, except for excluded assets. All of the seller’s right, title and interest, if any, in and to the land lying in the bed of any street or highway in front or adjoining the land to the center line thereof, any unpaid award for any taking by condemnation or any damage to the land or the improvements by reason of a change of grade of any street or highway, all easements, licenses, rights and appurtenances relating to any of the foregoing, any intangible property of seller, the warranties, the permits and the name of the nursing home facility( to the fullest extent permitted pursuant to the Canon law of the Roman Catholic Church) as well as any trademarks, logo-types or other similar descriptive items associated with such names, and all of the goodwill symbolized and associated with such names, and any other assets of the seller located at or used in connection with the Nursing Home facility. Seller’s rights arising under this agreement or under any other agreement between purchaser and seller, all cash, cash equivalents, accounts receivable, unbilled services, investments or any other right to receive the payment of money as of the closing date, all rights to refunds from whatever source including without limitation, for taxes, fees, assessments and charges and those arising out of retrospective premium adjustments under insurance policies covering the Nursing home facility or the operations thereof for periods ending prior to the closing date all casualty, general liability and other insurance policies Project #132357-E Exhibit Page 8 Liabilities Assumed : Purchase Price: Payment of Purchase Price: which cover seller, the nursing home facility or the operations thereof, corporate organizational documents, minute books, tax records and seals of seller and any and all books and records not related to any purchased assets, any personal property located in the chapel of the nursing home facility and used for worship by the Roman Catholic church, including, without limitation, any special vessels or other items used in the chapel or that may not be transferred to purchaser by reason of Canon Law or other rules of the Roman Catholic Church and all prepaid expenses Excluded assets shall also include the specific property of seller which shall be transferred to the New operator pursuant to the terms of the OTA. N/A $4,135,000 $3,308,000 mortgage loan from M&T bank and $827,000 from members equity $215,000 has already been paid in escrow remaining amount due at closing is $612,000. The applicant has submitted an original affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring its interest, without releasing the transferor of its liability and responsibility. The members of the reality entity; URNC Realty, LLC, are as follows: Proposed Members Percentage Ownership Ephraim Zagelbaum 50.00% Yechiel Zagelbaum 5.00% Yoel Zagelbaum 5.00% Alexander Barth 20.00% Yehuda Walden 20.00% Lease Agreement and Medicaid Capital Reimbursement Facility occupancy will continue to be subject to a lease agreement. The terms of the draft agreement are summarized as follows: Date: To be Determined Premises: A 120-bed RHCF located at 2535 Genesee Street, Utica, New York Lessor: URNC Realty, LLC Lessee: URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center Term: 10 years commencing with 10 additional (1) year extensions Rental: $438,865 per year ($36,572.08 per month) Provisions: Triple Net Lease The draft lease arrangement is a non-arm’s length agreement. The applicant has submitted an affidavit attesting to the relationship between the Landlord and operating entity. Operating Budget Following is a summary of the submitted operating budget, presented in 2014 dollars, for the first year subsequent to change in ownership: Per Diem Total Revenues: Medicaid $162.70 $5,321,787 Medicare 450.00 1,680,750 Private Pay/Other 317.00 1,493,076 Medicaid 324,987 Assessment Project #132357-E Exhibit Page 9 Total $8,820,600 Expenses: Operating Capital Total $7,989,356 701,400 $8,690,756 Net Income $129,844 Utilization: (patient days) Occupancy 41,155 93.96% The following is noted with respect to the submitted operating budget:  Overall utilization is projected at 93.96%, while utilization by Payor source is expected as follows: Medicaid 79.48% Medicare 9.08% Private 11.44% Pay/Other  Breakeven utilization is projected at 92.57%. Capability and Feasibility URNC Operating LLC, d/b/a Utica Rehabilitation and Nursing Center, will acquire the operating interest in the RHCF for $10 and URNC Realty, LLC, will acquire the RHCF real property for $4,135,000. Funding will be as follows: $827,000 in member equity, of which $215,000 has already been placed in escrow with $612,000 left to be funded, and the remaining $3,308,000 balance being financed through M&T bank. There is a relationship via similar members between URNC Realty, LLC (the landlord) and URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center (the nursing home operator). There are no project costs associated with this application. Working capital requirements are estimated at $1,448,459, based on two months’ of first year expenses, which $724,259 will be satisfied from the proposed member’s equity, and the remaining $724,200 will be satisfied through a loan from M&T bank at 5.5% over 5 years. A letter of interest has been supplied by M&T bank. BFA Attachment A is the Net Worth statement of the proposed members of URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center (the nursing home) and the proposed members of URNC Realty, LLC (Real Estate). The ownership is the same for both entities. The statement shows sufficient resources to cover both the purchase price of the operations and real estate, and the working capital requirements of the operations. BFA Attachment B is the pro-forma balance sheet of URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center, which indicates positive members’ equity of $790,342 as of the first day of operations. BFA Attachment C is the pro-forma balance sheet of URNC Realty, LLC, which indicates positive members’ equity of $827,000 as of the first day of operations. The submitted budget indicates that a net income of $129,844 would be generated in the first year after the change in ownership. The following is a comparison of the 2012 historical and projected revenue and expense: Projected Income Projected Expense Projected Net Income Annual 2012 Income Annual 2012 Expense $8,820,600 8,690,756 $129,844 $8,176,533 9,010,733 Project #132357-E Exhibit Page 10 Annual 2012 Net Income (Loss) Incremental Net Income (Loss) ( $834,200) $964,044 It is estimated that the incremental net revenue for all payors will increase approximately $964,044 as the results of the following: Medicaid revenues are expected to increase by approximately $86,696 or approximately $2.65 per patient day as the result of an increase in the average daily rate, going from $160.05 per patient day in 2012 to $162.70 per patient day in 2014; Medicare revenues are expected to increase by approximately $232,384 or approximately $62.22 per patient day going from 387.78 per patient day in 2012 to 450.00 per patient day in 2014; and private pay revenues are expected to remain the same. Utilization is expected to remain the same from the current year 2012 at 93.96% through both years 1 and 3. The facility is also receiving a Medicaid Assessment of $324,987 for years 1 and 3. Expenses are expected to decrease approximately $319,977 in year 1 and $334,643 in year 3, which represents reductions in administrative, fiscal and purchased services expenses based on the applicant’s experience. The budget appears reasonable. Staff Notes that with the expected 2014 implementation of managed care for nursing home residents, Medicaid reimbursement is expected to change from a state-wide price with cost-based capital component payment methodology, to a negotiated reimbursement methodology. Facility payments will be the result of negotiations between the managed long term care plans and the facility. At this point in time, it cannot be determined what financial impact this change in reimbursement methodology will have on this project. As shown on BFA Attachment D, St. Joseph Nursing Home for the years 2010 through 2012, the RHCF generated an average net loss of $343,531, had an average positive net asset position, and had an average positive working capital position. The losses at St. Joseph Nursing Home are due to the current owners of the facility not being able to adapt to the changing reimbursement and utilization modes. In addition, the facility has an extremely low CMI, which has adversely impacted the Medicaid rate. These factors lead to the decision to sell the facility to the proposed new owners. It should be noted that the proposed new owners are averaging over $35 more per patient day than St. Joseph. The new owners will bring their experience at their other facilities to bear in operating St. Joseph Nursing Home. As shown on BFA Attachment E, Financial Summary for Tarrytown Hall Care Center, the facility had an average negative working capital position, an average positive net asset position, and generated an average net income of $500,131 during the period 2010 through 2012. The 2011 net loss was due to the facility receiving approximately $2.8 million from Medicaid for the base year and categorizing the money as an expense on the facility’s books, and as revenue on the realty books. The 2011 Financial statements for the totality of Tarrytown’s operations is included as part of BFA Attachment E. The $2.8 million is part of the total $3,987,500 elimination shown on the attached 2011 financial statements. The negative working capital is due to the facility receiving Medicaid Part B monies but categorizing them as liabilities, due to the fact that Medicaid can audit the Part B monies and take the monies back. The facility classifies these monies as current liabilities until the audit has occurred. If an audit does not occur, then the monies are then reclassified as income. For 2012, Medicaid has advised the facility that they will not be audited and therefore, some of the other current liability money will be reclassified as income. Also, a line of credit of approximately $744,000, which currently is classified as liability, may not be used and would therefore, not be an actual liability. Without these items, the Medicaid Part B, which for 2012, was $797,552, and the aforementioned line of credit, the facility would have had a positive average working capital position for 2010-2012. As shown on BFA Attachment F, Financial Summary for Alpine Rehabilitation and Nursing Center, the facility had an average negative working capital position, an average positive net asset position, and generated an average net income of $162,102 during the period 2010 through 2012. The 2011 loss was due to two adjustments in the facility’s Medicaid rate; one adjustment was in April 2011, with the facility receiving their revised Medicaid rates, which resulted in a reduction of over $80,000 dollars in revenue; and the second adjustment was in November of 2011, which reduced the rates by approximately $100,000 dollars. Due to the fact that the final adjustment happened so late, the facility was not able to act in time to reduce expenses to eliminate the operating loss for 2011, but they have taken these adjustments into consideration for 2012, which can been seen with the positive net income of $172,080 shown for 2012. Project #132357-E Exhibit Page 11 As shown on BFA Attachment G, Financial Summary for Norwich Rehabilitation & Nursing Center, the facility had an average negative working capital position, an average negative net asset position, and generated an average net loss of $44,804 during the period 2011 through 2012. The reason for the loss is due to the facility being acquired in 2011 and still attempting to recover from the financial struggles that plagued the previous owners. The new owners were able to turn the facility around by 2012 and made a profit of $146,570 by implementing the necessary systems and infrastructure needed to form a solid financial foundation to build ongoing forward, which would enable the facility to continue growing. 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 contingent approval is recommended. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA-Attachment A BFA-Attachment B BFA-Attachment C BFA-Attachment D BFA-Attachment E BFA-Attachment F BFA Attachment G Net Worth of Proposed Members URNC Operating LLC d/b/a Utica Rehabilitation and Nursing Center and URNC Realty, LLC Pro-forma Balance Sheet, URNC Operating, LLC d/b/a Utica Rehabilitation and Nursing Center (the Center) Pro-forma Balance Sheet, URNC Realty, LLC Financial Summary St. Joseph Nursing Home for 2010-2012 Financial Summary Tarrytown Hall Care Center 2010-2012 Financial Summary Alpine Rehabilitation and Nursing Center 2010-2012 Financial Summary Norwich Rehabilitation & Nursing Center 2011-2012 Project #132357-E Exhibit Page 12 Public Health and Health Planning Council Project # 132360-E NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation County: Kings Purpose: Establishment Program: Residential Health Care Facility Acknowledged: January 2, 2014 Executive Summary Description NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation is requesting approval to be established as the new operator of Cabs Nursing Home Company, Inc., an existing 157-bed not-for-profit residential health care facility (RHCF) located at 270 Nostrand Avenue, Brooklyn (Kings County). A separate realty entity, NNRC Properties, LLC, will acquire the facility’s real property. Ownership of the operations and real property after the requested change is as follows: Proposed Operator NNRC, LLC, d/b/a Nostrand Center for Nursing and Rehabilitation Joel Landau Marvin Rubin Solomon Rubin Membership Proposed Realty Operator NNRC Properties, LLC Joel Landau Marvin Rubin Solomon Rubin Membership 33.3334% 33.3333% 33.3333% 33.3334% 33.3333% 33.3333% The proposed members have ownership interest in four RHCF facilities: Hamilton Park Multicare, LLC d/b/a Hamilton Park Nursing and Rehabilitation Center; Hopkins Ventures, LLC d/b/a Hopkins Center for Rehabilitation and Healthcare; Alliance Health Associates, Inc. d/b/a Linden Gardens Rehabilitation and Healthcare; and St Marks Brooklyn Associates, LLC d/b/a Crown Heights Center for Nursing and Rehabilitation. DOH Recommendation Contingent Approval Need Summary The proposed change of operator would result in the maintenance of an RHCF that serves as a needed community resource and maintains a high Medicaid enrollment. Program Summary No negative information has been received concerning the character and competence of the proposed applicants identified as new members. No changes in the program or physical environment are proposed in this application. No administrative service or consulting agreements are proposed in this application. Financial Summary NNRC, LLC, d/b/a Nostrand Center for Nursing and Rehabilitation will acquire the RHCF operating assets for $5,000,000, which will be funded as follows: $500,000 from member’s equity, which has already been paid into escrow, and a two year (up to) $5,000,000 promissory note issued by NNRC, Inc., carrying an adjustable interest rate, currently at 4.25%. The promissory note is secured by two year standby letter of credit from Skyline Capital with a 3% interest rate. NNRC Properties, LLC, the applicant’s landlord, is purchasing the real property for $15,600,000, and its members will contribute $1,560,000 in equity along with entering into a $14,040,000 loan for 10 years at 5% interest rate with a 25 year amortization schedule. A letter of interest for the real property loan has been Project #132360-E Exhibit Page 1 provided by Skyline Capital. There are no project costs associated with this proposal. Budget: Revenues: Expenses: Gain/ (Loss) Subject to the noted contingencies, the applicant has demonstrated the capability to proceed in a financially manner. $16,715,506 14,760,653 $ 1,954,853 Project #132360-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily be limited to, ways in which the facility will: Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program; Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility; Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two year period. [RNR] Submission of an executed promissory note to purchase nursing home operations, acceptable to the Department. [BFA] Submission of a letter of credit commitment to purchase nursing home operations, acceptable to the Department. [BFA] Submission of a working capital commitment, acceptable to the Department. [BFA] Submission of a real property loan commitment, acceptable to the Department. [BFA] Submission of executed building lease, acceptable to the Department. [BFA] Submission of a completed Schedule 3, acceptable to the Department. [CSL] Submission of an executed Certificate of Assumed Name, acceptable to the Department. [CSL] Submission of an executed Amended and Restated Operating Agreement, acceptable to the Department. [CSL] Submission of an executed Certificate of Amendment of the Articles of Organization, acceptable to the Department. [CSL] Submission of an executed Asset Purchase Agreement, acceptable to the Department. [CSL] Submission of an executed Agreement for the Sale of Real Property, acceptable to the Department. [CSL] Submission of an executed Medical Affidavit, acceptable to the Department. [CSL] Submission of an executed Lease Agreement that is acceptable to the Department. [CSL] Approval conditional upon: 1. The project must be completed within one year 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] Council Action Date June 12, 2014 Project #132360-E Exhibit Page 3 Need Analysis Background NNRC LLC, seeks approval to become the new operator of Cabs Nursing Home Company, a 157-bed Article 28 residential health care facility located at 270 Nostrand Avenue, Brooklyn, 11205, in Kings County. Upon approval, the facility will be known as Nostrand Center for Nursing and Rehabilitation. Cabs Nursing Home Company’s utilization was 93.0% in 2010, 95.5% in 2011, and 96.7% in 2012. Current utilization, as of April 16, 2014, at this facility is 94.9%. The new operator plans to increase utilization in the following ways:  Develop a program focusing on stroke patients, specifically designing services specific to the population and investing in equipment proven to benefit stroke patients;  Develop a kosher kitchen within the facility in order to meet the dietary needs of many of the residents from the facility’s service area; and  Continue to develop positive working relationships with the community and discharge planners at area hospitals, including Maimonides Medical Center, NYU Langone Medical Center, Beth Israel, Wyckoff, Kingsbrook Jewish, and Brooklyn Hospital. Analysis There is currently a need for 8,863 beds in the New York City Region as indicated in Table 1 below. However, the overall occupancy for the New York City Region was 94.8% for 2012 as indicated in Table 2. Table 1: RHCF Need – New York City Region 2016 Projected Need Current Beds Beds Under Construction Total Resources Unmet Need 51,071 42,330 78 42,408 8,663 Cabs Nursing Home Company’s utilization was 93.0% in 2010, 95.5% in 2011, and 96.7% in 2012. It is the understanding of the applicant that the low utilization was due to the facility’s inability to adapt to the constant changes in the healthcare industry and to identify the programming and service needs of the facility’s service area. Table 2: Cabs Nursing Home Company/Kings County/New York City Region Occupancy Facility/County/Region Cabs Nursing Home Company Kings County New York City Region % Occupancy 2010 93.0% 95.0% 95.4% % Occupancy 2011 95.5% 94.3% 94.8% % Occupancy 2012 96.7% 94.4% 94.8% Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patient’s admissions is at least 75% of the planning area percentage or the Health Systems Agency percentage, whichever is applicable. Project #132360-E Exhibit Page 4 Cabs Nursing Home Company’s Medicaid admissions for 2011 and 2012 was 99.0% and 98.7%, respectively, which exceeds Kings County 75% rates in 2011 and 2012 of 30.9% and 34.9%, respectively. Conclusion Approval of this application will result in the maintenance of a community resource that provides needed services to the Medicaid population. Recommendation From a need perspective, contingent approval is recommended. Program Analysis Program Description Facility Name Existing Cabs Nursing Home Company Inc. Address RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator 270 Nostrand Avenue 157 N/A Voluntary Corporation Proposed Nostrand Center for Nursing and Rehabilitation Same Same N/A Proprietary Limited Liability Company Operator Cabs Nursing Home Company Inc. NNRC LLC Managing Members: Joel Landau Marvin Rubin Solomon Rubin Character and Competence – Background Facilities Reviewed Nursing Homes Linden Center for Nursing and Rehabilitation Crown Heights Center for Nursing and Rehabilitation Hamilton Park Nursing and Rehabilitation Center Hopkins Center for Rehabilitation and Healthcare 33.33% 33.33% 33.33% 01/2013 to present 01/2013 to present 08/2009 to present 03/2012 to present New Jersey Nursing Home Norwood Terrace Health Center 09/2003 to present Licensed Home Care Services Agency (LHCSA) True Care, Inc. 03/2011 to present Individual Background Review Joel Landau is the Director of Care to Care, LLC, a radiology benefit management company. He is also the owner of The Intelimed Group, a medical contracting and credentialing company and E-Z Bill, a medical billing company. Joel Landau is a notary public, licensed by the Department of State in New York State. Mr. Landau discloses the following ownership interests in health facilities: Linden Center for Nursing and Rehabilitation Crown Heights Center for Nursing and Rehabilitation Project #132360-E Exhibit Page 5 01/2013 to present 01/2013 to present Marvin Rubin is a manager at the Hamilton Park Nursing and Rehabilitation Center. Marvin Rubin discloses the following ownership interests in health facilities: Linden Center for Nursing and Rehabilitation Crown Heights Center for Nursing and Rehabilitation Hopkins Center for Rehabilitation and Healthcare Hamilton Park Nursing and Rehabilitation Center True Care, Inc. 05/2013 to present 04/2013 to present 03/2012 to present 12/2012 to present 03/2011 to present Solomon Rubin is the controller for the Grandell Rehabilitation and Nursing Center and the Beach Terrace Care Center. He is also a manager at Hamilton Park Nursing and Rehabilitation Center. Solomon Rubin discloses the following ownership interests in health facilities: Hamilton Park Nursing and Rehabilitation Center Linden Center for Nursing and Rehabilitation Crown Heights Center for Nursing and Rehabilitation Norwood Terrace Health Center 08/2009 to present 05/2013 to present 04/2013 to present 2000 to present Character and Competence - Analysis No negative information has been received concerning the character and competence of the applicants. A review of operations for the Linden Center for Nursing and Rehabilitation, Hopkins Center for Rehabilitation and Healthcare, Hamilton Park Nursing and Rehabilitation Center, and Crown Heights Center for Nursing and Rehabilitation for the period identified above, results in a conclusion of substantially consistent high level of care since there were no repeat enforcements. A review of operations the Norwood Terrace Health Center in Plainfield, New Jersey for the period identified above, results in a conclusion of substantially consistent high level of care since there were no enforcements. A review of the licensed home care services agency True Care, Inc. reveals that a substantially consistent high level of care has been provided since there were no enforcements. Project Review No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Conclusion No negative information has been received concerning the character and competence of the proposed applicants identified as new members. Recommendation From a programmatic perspective, approval is recommended. Project #132360-E Exhibit Page 6 Financial Analysis Asset Purchase Agreement The applicant has submitted an executed agreement to purchase the RHCF operating interest; the terms are summarized below: Date: Seller: Purchaser: November 22, 2013 Cabs Nursing Home Company, Inc. NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation Assets Transferred Operations: Rights, title and interest in the assets free and clear of all liens. Assets include: equipment, assigned contracts, resident records, operating manuals, Medicare & Medicaid agreements and provider numbers, permits, business records, allowable deposits and warranties, and all other assets used in the operations including, tangible and intangible assets, and goodwill. Excluded Assets: The names “CABS Nursing Home” and “CNH Long Term Home Health Program”, tax losses, refunds, non-assigned contracts, pre-closing accounts receivable. Assumed Liabilities: Those accruing after closing date. Purchase Price: $5,000,000 Payment of Purchase Price: $ 500,000 escrow deposit paid on signing $5,000,000 promissory note The Asset Purchase Agreement (APA) provides that the $5,000,000 purchase price may be increased or decreased at the time of closing. As a result, the initial deposit $500,000 and the Promissory note in the principal amount of $5,000,000 will ensure that the Closing Payment will be satisfied at the time of closing. In the event the Closing Payment is less than $5,000,000 (above note), the buyer will receive a Closing Refund to reflect that amount, which the buyer can apply as a payment against the promissory note principal balance. The purchase price is proposed to be satisfied as follows: Equity – NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation, members paid into escrow Promissory Note issued by NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation, – 2 year terms, at Prime rate (currently 3.25% plus 1% or 4.25% adjusted quarterly) $500,000 $5,000,000 Skyline Capital has provided a letter of interest to provide a two year standby Letter of Credit at 3% to secure the promissory note. BFA Attachment A are the proposed members’ net worth summaries for NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation and NNRC Properties, LLC, which reveal sufficient resources to meet the equity requirement. It is noted that liquid resources may not be available in proportion to the proposed ownership interest. Marvin Rubin has provided an affidavit stating that he is willing to contribute resources disproportionate to his membership interest. Project #132360-E Exhibit Page 7 Purchase/Sale Agreement for the Real Property The applicant has submitted an executed agreement to purchase the RHCF real property, the terms are summarized below: Date: Seller Realty: Purchaser Realty: Assets Transferred Realty: Purchase Price: Payment of Purchase Price: November 22, 2013 Cabs Nursing Home Company, Inc. NNRC, Properties LLC All rights, title and interest in parcel of land, building/s, improvements, fixtures, easements and appurtenances, located at 270 Nostrand Avenue, Brooklyn, New York and known as Block 1778 and Lot 55. $15,600,000 $ 1,560,000 escrow $14,040,000 due at closing The purchase price is proposed to be satisfied as follows: Equity – NNRC Properties, LLC members Loan – 5% interest, 10-year terms with 25 year amortization Total $1,560,000 $14,040,000 $15,600,000 The letter of interest for the loan has been provided by Skyline Capital. The members have provided an affidavit to personally fund the balloon payment, should terms acceptable to the Department of Health be unavailable at the time of refinancing. BFA Attachment A are the proposed members’ net worth summaries for NNRC Properties, LLC and NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation, which reveal sufficient resources to meet the equity requirement. It is noted that liquid resources may not be available in proportion to the proposed ownership interest. Marvin Rubin has provided an affidavit stating that he is willing to contribute resources disproportionate to his membership interest. The applicant has submitted an original affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring its interest, without releasing the transferor of its liability and responsibility. Currently, there are no Medicaid and Assessment liabilities. Lease Agreement and Medicaid Capital Reimbursement The applicant has submitted a draft lease agreement, the terms of which are summarized below: Premises: Owner/Landlord: Lessee: Term: Rent: Provisions: 157-Bed RHCF located at 270 Norstrand Avenue, Brooklyn NNRC Properties, LLC NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation Twenty years with the intend of (1) renewal option with a 10-year term $1,500,000 per year 1st & 2nd years ($125,000 per month) & in the 3rd year rent increases to $1,800,000 per year Triple net lease The lease arrangement is a non-arm’s length agreement. Currently, Medicaid capital cost is reimbursed based on the interest and depreciation reimbursement methodology. After the change in the ownership, capital reimbursement will be based on the return of and return on equity methodology. Based on depreciable asset value, the estimated real property’s life is approximately nine years. Project #132360-E Exhibit Page 8 Operating Budget The applicant has provided an operating budget, in 2014 dollars, for the first year and third years subsequent to the change in ownership. The budgets are summarized below: Per Diem Revenues: Medicaid Medicare Private Pay Other Operating* Total Revenues: $184.86 600.00 400.00 Expenses: Operating Capital Total Expenses: Net Income (Loss): Utilization (resident days) Occupancy *Office rent and vending machine revenue First Year Total $8,305,760 5,052,000 1,124,000 30,106 $14,511,866 Per Diem $200.00 650.00 430.00 Third Year Total $8,424,000 6,571,500 1,689,900 30,106 $16,715,506 $12,660,094 2,092,602 $14,752,696 $12,433,216 2,327,437 $14,760,653 $(240,830) $1,954,853 56,160 98% 56,160 98% The following is noted with respect to the submitted operating budget:  Medicaid revenues are based on the current rates.  Medicare revenues are based on the current rates  Private revenues are based on the current rates.  Overall utilization is projected at 98%. Utilization for the years from 2006 through 2012 averaged 95.59% and on March 5, 2014 the facility reported on the DOH’s Nursing Home Profile a 92.4% occupancy rate. The applicant states the occupancy rate has risen 3% since reporting on March 5, 2014. Additionally the facility intends to increase occupancy further through attracting the high local population by developing programs directed towards them and establishing a kosher kitchen through an administrative modification. These changes will help serve the local community and increase occupancy.  Utilization by payer source for the first and third years is expected to average as follows: Year 3 Year 1 Medicaid 80.0% 75.0% Medicare 15.0% 18.0% Private/Other 5.0% 7.0%  Breakeven point is estimated at 87.73% in the third year By the third year the applicant expects to generate an operating surplus of $1,954,853. The areas that offers opportunities are: increasing the case mix index (CMI), currently Cabs Nursing Home Company, Inc. is at 0.80, which is the lowest CMI when compared to all other nursing homes in Kings County, and 37.5% lower than the 1.10 median CMI for Kings County. The applicant intends to develop a dedicated stroke unit, which should increase the rehabilitative services and help realign payers between Medicare and private pay patients Capability and Feasibility NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation proposes to acquire the operating interest of Cabs Nursing Home Company, Inc., a 157-bed RHCF, for $5,000,000. The members have contributed equity of $500,000 and will enter into (up to) $5,000,000 secured promissory note with Cabs Nursing Home Company, Inc. at the above stated terms. Project #132360-E Exhibit Page 9 Working capital is estimated at $2,458,783, and is based on two months of the first year expenses; half, or $1,229,392, will be satisfied from members equity. The remaining $1,229,391 will be satisfied through a 5 year loan at 5% from Skyline Capital. Review of BFA Attachment A, summary of net worth, reveals sufficient resources for working capital equity. It is noted that liquid resources may not be available in proportion to the proposed ownership interest. Marvin Rubin has provided an affidavit stating that he is willing to contribute resources disproportionate to his membership interest. BFA Attachments B is the pro-forma balance sheets for NNRC, LLC d/b/a Nostrand Center for Nursing and Rehabilitation and shows the entity will start off with equity in the amount of $1,729,392. The proforma balance sheet shows total assets includes $5,000,000 in intangible assets, which is not a liquid resource nor is it recognized for Medicaid reimbursement. If intangible assets were eliminated from the equation, total net asset would become a negative $3,270,608. The submitted budget indicates $1,954,853 surplus would be generated in the third year after the change in ownership. The following is a comparison of the 2012 historical and the projected revenues and expenses: Projected Revenue Projected Expense Projected Net Income $16,715,506 14,760,653 $1,954,853 Annual 2012 Operating Revenue* Annual 2012 Other Income** Total Annual 2012 Revenue Annual 2012 Expense* Annual 2012 Net Income (Loss) $12,099,520 205,502 $12,305,022 13,898,930 ($1,593,908) Incremental Net Income (Loss) $3,548,761 *The Long Term Home Health Care program (LTHHCP) isn’t being purchased by the applicant, therefore the revenue and expenses of $3,084,869 and $2,823,551, respectively, have been excluded from the 2012 numbers. ** The Other Income is primarily interest income and reimbursement of overhead. It is estimated that incremental revenues will increase approximating $4,410,484, coming primarily from the following realignment of utilization: a drop of 7,863 in Medicaid inpatient days going from 49,963 or 90% to 42,120 or 75%, (reducing revenues $592,556); increase Medicare inpatient days going from 5,509 or 10% to 10,110 or 18% (increasing revenues $3,524,969); increasing private utilization by approximately 6%, which adds $1,653,467 to the revenue stream; and eliminating $175,396 in other income. The Department has determined the facility would still be profitable with achieving only 25% of the projected realignment by the third year. The applicant projects expenses to climb by a net $861,723 primarily from the following: rent and depreciation and interest expenses are projected to increase by $1,803,357; offset by a $941,634 reduction in expenses, primarily from salaries, employee benefits, professional fees, purchased services, and other direct expenses. The budget was created taking into consideration the proposed new owners experience in operating similar facilities. The budget appears reasonable Staff notes that with the expected 2014 implementation of managed care for nursing home residents, Medicaid reimbursement is expected to change from a state-wide price with cost-based capital component payment methodology to a negotiated reimbursement methodology. Facility payments will be the result of negotiations between the managed long term care plans and the facility. At this point in time, it cannot be determined what financial impact this change in reimbursement methodology will have on this project. Project #132360-E Exhibit Page 10 As shown on BFA Attachment C, Cabs Nursing Home Company, Inc. for the period from 2010 through 2012, had an average positive working capital position of $2,981,591, average net asset position of $8,292,684, and generated an average loss of $724,382. The operating losses from 2010 -2012 were primarily due to a reduction in the Medicaid rate, a low CMI, and the recording a $786,266 allowance for bad debts in 2012. The applicant states the facility has one of the lowest Medicaid rates in Kings County. As shown on BFA Attachment D, Hamilton Park Multicare, LLC d/b/a Hamilton Park Nursing and Rehabilitation Center for the period from 2011 through September 30, 2013, had an average negative working capital position of $1,723,559, average positive net asset position of $2,412,771, and generated an average operating surplus of $1,030,786. The negative working capital was the result of investing in capital improvements, which includes adding 50 beds to the facility. The working capital shortage is being rectified, as these beds are currently occupied and will generate an additional operating surplus. The average occupancy for the period was 97.64%. It appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA Attachment A BFA Attachment B BFA Attachment C BFA Attachment D Net Worth of Proposed Members, NNRC, LLC, d/b/a Nostrand Center for Nursing and Rehabilitation and NNRC Properties, LLC Pro-forma Balance Sheet, NNRC, LLC, d/b/a Nostrand Center for Nursing and Rehabilitation Financial Summary, Cabs Nursing Home Company, Inc. Financial Summary, Hamilton Park Multicare, LLC d/b/a Hamilton Park Nursing and Rehabilitation Center Project #132360-E Exhibit Page 11 Public Health and Health Planning Council Project # 141029-E Ontario Operations Associates LLC d/b/a Ontario Center for Rehabilitation and Healthcare County: Ontario Purpose: Establishment Program: Residential Health Care Facility Acknowledged: January 22, 2014 Executive Summary Description Ontario Operations Associates, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare requests approval to be established as the new operator of Ontario County Health Facility, an existing 98-bed notfor-profit residential health care facility (RHCF) located at 3062 County Complex Drive, Canandaigua, New York (Ontario County). A separate realty entity, Ontario Land Associates, LLC, will acquire the facility’s real property. The current sole member of Ontario County Health Facility is the County of Ontario, a municipal corporation of the State of New York. Ownership of the operating interests of the proposed operator is as follows: Proposed Operator Ontario Operations Associates, LLC d/b/a Ontario Center for Rehabilitation and Healthcare Amir Abramchik Deborah Abramchik 95% 5% BFA Attachment A presents the proposed members’ net worth statements. Amir Abramchik has ownership interest in five RHCF facilities: Chittenango Center, LLC d/b/a Chittenango for Rehabilitation and Health Care; Rome Center, LLC d/b/a Rome Center for Rehabilitation and Health Care; Fulton Center for Rehabilitation and Healthcare, LLC; SV Operating Three, LLC d/b/a Richmond Center for Rehabilitation and Specialty Healthcare, and Pavilion Operations, LLC d/b/a Corning Center for Rehabilitation and Healthcare. DOH Recommendation Contingent Approval Need Summary Ontario County Health Facility’s utilization was 95.9% in 2010, 88.9% in 2011, and 87.4% in 2012. Current utilization, as of March 5, 2014, was 94.9%. The proposed operator plans to create outreach programs with both hospitals and managed long term care plans in the service area. The proposed operator will also focus on increased training to all staff members in order to ensure that the facility is capable of accepting and retaining hard to place residents, such as dementia patients and individuals with low case mix scores Program Summary No negative information has been received concerning the character and competence of the proposed applicants identified as new members. No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Project #141029-E Exhibit Page 1 Financial Summary Ontario Operations Associates, LLC, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare will acquire the RHCF operating assets for $1,000,000, to be funded as follows: $100,000 from member’s equity, which has been deposited into escrow, and a $900,000 loan, with a 20-year amortizing schedule at a 5% interest rate. There are no project costs associated with this proposal. Budget: Revenues: Expenses: Gain/ (Loss) $7,495,184 7,359,410 $ 135,774 Subject to noted contingencies, the applicant has demonstrated the capability to proceed in a financially manner. Project #141029-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 2. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily limited to, ways in which the facility will:  Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program;  Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility;  Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and  Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two year period. [RNR] 3. Submission of a loan commitment, acceptable to the Department. [BFA] 4. Submission of a working capital commitment, acceptable to the Department. [BFA] 5. Submission of executed building lease, acceptable to the Department. [BFA] 6. Submission of a photocopy of the executed Certificate of Amendment of the Articles of Organization of Ontario Operations Associates, LLC, acceptable to the Department. [CSL] 7. Submission of a photocopy of an executed Certificate of Assumed Name of Ontario Operations Associates, LLC, acceptable to the Department. [CSL] Approval conditional upon: 1. The project must be completed within one year 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] Council Action Date June 12, 2014 Project #141029-E Exhibit Page 3 Need Analysis Background Ontario Operations Associates, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare, seeks approval to become the established operator of Ontario County Health Facility, a 98-bed Article 28 residential health care facility located at 3062 County Complex Drive, Canandaigua, 14424, in Ontario County. Analysis There is currently a surplus of 82 beds in Ontario County as indicated in Table 1 below. The overall occupancy for Ontario County is 89.7% for 2012 as indicated in Table 2. Table 1: RHCF Need – Ontario County 2016 Projected Need Current Beds Beds Under Construction Total Resources Unmet Need 533 615 0 615 -82 Ontario County Health Facility’s utilization was 95.9% in 2010, 88.9% in 2011, and 87.4% in 2012. It is the proposed operator’s understanding that utilization has suffered over the years because the current operator has been limited in its ability to direct resources towards outreach programs. Table 2: Ontario County Health Facility/Ontario County Facility/County/Region Ontario County Health Facility Ontario County % Occupancy 2010 95.9% 94.7% % Occupancy 2011 88.9% 91.8% % Occupancy 2012 87.4% 89.7% Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patient’s admissions is at least 75% of the planning area percentage or Health Systems Agency percentage, whichever is applicable. Ontario County Health Facility’s Medicaid admissions for 2011 and 2012 was 33.3% and 74.1%, respectively. This facility exceeded Ontario County 75% rates in 2011 and 2012 of 9.7% and 17.8%, respectively. Conclusion Approval of this application will result in the maintenance of a needed source of RHCF care for Ontario County. Project #141029-E Exhibit Page 4 Recommendation From a need perspective, contingent approval is recommended. Program Analysis Program Description Facility Name Address RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator Operator Existing Ontario County Health Facility Proposed Ontario Center for Rehabilitation and Healthcare Same 3062 County Complex Drive Canandaigua, NY 14424 PFI: 0683 98 N/A County Public County of Ontario Same Same Limited Liability Company Proprietary Ontario Operations Associates LLC d/b/a Ontario Center for Rehabilitation and Healthcare Members: Amir Abramchik Deborah Abramchik Character and Competence-Background Facilities Reviewed Nursing Homes Chittenango Center for Rehabilitation and Health Care Rome Center for Rehabilitation and Health Care Fulton Center for Rehabilitation and Health Care Richmond Center for Rehabilitation and Specialty Health Care Corning Center for Rehabilitation and Health Care 95.00% 5.00% 100.00% 05/2011 to present 05/2011 to present 04/2012 to present 04/2012 to present 06/2013 to present Individual Background Review Amir Abramchik is a licensed nursing home administrator, in good standing, in New York and New Jersey. Mr. Abramchik is employed by Centers for Specialty Care as the director of special projects since 2007. Prior employment was as administrator at Queens Center for Rehabilitation and Health Care and Dutchess Center for Rehabilitation and Health Care. Mr. Abramchik discloses the following health facility interests with associated ownership percentages: Chittenango Center for Rehabilitation and Health Care Rome Center for Rehabilitation and Health Care Fulton Center for Rehabilitation and Health Care Richmond Center for Rehab and Specialty Health Care Corning Center for Rehabilitation and Health Care (2%) (2%) (10%) (2%) (5%) 05/2011 to present 05/2011 to present 04/2012 to present 04/2012 to present 06/2013 to present Deborah (Itzkowitz) Abramchick retired in 2005 as bookkeeper at Samuel Kunstler Textiles. Ms. Abramchick discloses no ownership interests in health care facilities Project #141029-E Exhibit Page 5 Character and Competence- Analysis No negative information has been received concerning the character and competence of the above applicants identified as new members. A review of operations for Chittenango Center for Rehabilitation and Health Care, Rome Center for Rehabilitation and Health Care, Fulton Center for Rehabilitation and Health Care, Richmond Center for Rehabilitation and Specialty Health Care, and Corning Center for Rehabilitation and Health Care for the periods identified above, results in a conclusion of substantially consistent high level of care since there were no enforcements. Project Review No changes in the program or physical environment are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Asset Purchase Agreement The applicant has submitted an executed agreement to purchase the RHCF operating interest, the terms are summarized below: Date: December 6, 2013 Seller: County of Ontario Purchaser: Ontario Operations Associates, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare Assets Transferred Operations: Rights, title and interest in the assets free and clear of all liens. Assets shall mean all assets, properties and rights used or usable in the operations of the Facility, tangible or intangible. Rights to continue to participate in the programs. To the extent transferable all contracts, licenses, certificates, and permits to operate relating to the operation of the facility. Documents necessary to operate the facility. Information related to providers for services and provider agreements. Inventory and supplies, transferrable business and marketing records. Computers and software programs, right to intellectual property, Medicare and Medicaid provider numbers, security deposits, resident funds, telephone and fax numbers. Excluded Assets: Cash, marketable securities, pre-closing accounts receivable, third party claims, refunds, loans receivable and retroactive rate increases. Assumed Liabilities: Those accruing after closing date. Purchase Price: $1,000,000 Payment of Purchase Price: $ 100,000 escrow deposit paid on signing $ 900,000 at closing The purchase price is proposed to be satisfied as follows: Equity: Ontario Operations Associates, LLC, members paid into escrow $ 100,000 Loan: 10 year terms, 20-year amortizing schedule at 5% interest rate 900,000 Total $1,000,000 Project #141029-E Exhibit Page 6 The applicant has submitted an original affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring its interest, without releasing the transferor of its liability and responsibility. Currently there are no Medicaid and Assessment liabilities. Ontario Land Associates, LLC will be the new owners of the real property and their members are as follows: Ontario Land Associates, LLC Daryl Hagler Kenneth Rozenberg Membership 50% 50% Ontario Land Associates, LLC entered into a Land Sale Contract on December 6, 2013, with County of Ontario for the purchase of the nursing home’s real property (98-bed RHCF located at 3062 County Complex Drive, Canandaigua, New York Ontario County) for $1,000,000. A deposit of $100,000 has been escrowed. At this time, Ontario Land Associates, LLC has not decided whether it will finance the real property purchase or use members’ equity. The applicant has noted that its members have other business relationships with Daryl Hagler and Kenneth Rozenberg. Lease Agreement and Medicaid Capital Reimbursement The applicant has submitted a draft lease agreement, the terms of which are summarized below: Date: Premises: Owner/Landlord: Lessee: Term: Rent: Provisions: December 17, 2013 98 Bed RHCF located at 3062 County Complex Drive, Canandaigua, New York 14424 Ontario Land Associates, LLC Ontario Operations Associates, LLC, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare Ten years with the intend of (1) renewal option with a 10-year term $400,000 per year ($33,333.33 per month) Triple net lease The lease arrangement is an arm’s length agreement. Currently, Medicaid capital cost is reimbursed based on the interest and depreciation reimbursement methodology. After the change in the ownership, capital reimbursement will be based on the return of and return on equity methodology. Based on depreciable asset value, the estimated real property’s life is approximately thirteen years. Operating Budget The applicant has provided an operating budget, in 2014 dollars, for the first year and third years subsequent to the change in ownership. The budgets are summarized below: Revenues: Medicaid Medicare Private Pay Total Revenues: Per Diem First Year Total Per Diem Third Year Total $185.90 192.11 408.33 $5,409,552 261,839 1,436,497 $7,107,888 $192.10 207.35 418.41 $5,708,674 291,951 1,494,559 $7,495,184 Project #141029-E Exhibit Page 7 Expenses: Operating Capital Total Expenses: $7,044,540 509,721 $7,554,261 $6,852,510 506,900 $7,359,410 Net Income (Loss): $(446,373) $135,774 33,981 95% 34,697 97.0% Utilization (resident days) Occupancy The following is noted with respect to the submitted operating budget:  Medicaid, and Private revenues are based on the current rates  Overall utilization is projected at 97%. Utilization for the years from 2006 through 2012 averaged 93.94% and for 2013, it averaged 82.78%.  Utilization by payor source is anticipated as follows: Medicaid 85.65% Medicare 4.05% Private/Other 10.30%  Breakeven point is estimated at 95.5% in the third year The applicant is committed to increase utilization through new and creative outreach programs with both hospitals and managed long term care plans in the service area. Further, the proposed operator states they are focused on the occupancy rate and will actively conduct outreach in order to maintain sufficient occupancy levels. Also, it is the applicants’ understanding that the current operator (County of Ontario) was unable to direct resources towards outreach programs. By the third year, the applicant expects to generate an operating surplus of $135,774. The areas that offer opportunities are: increasing the case mix index (CMI), currently at 0.9; create operating efficiencies though realigning staff and centralizing some administrative and clerical departments; increasing occupancy by 2%. Based on the applicants’ experience, they believe the current CMI of .09 is lower than other similar facilities. Capability and Feasibility Ontario Operations Associates, LLC, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare proposes to acquire the operating interest of Ontario County Health Facility, a 98-bed RHCF, for $1,000,000. The members have already deposited $100,000 of equity into the escrow account and will enter into a loan with Greystone for $900,000 at the above stated terms. Working capital is estimated at $1,259,044 and is based on two months of the first year expenses. Half, or $629,522 will be satisfied from members equity. The remaining $629,522 will be satisfied through a five year loan at 5% from Greystone. Review of BFA Attachment A, summary of net worth, reveals sufficient resources for working capital equity. BFA Attachments B, the pro-forma balance sheets for Ontario Operations Associates, LLC, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare, shows the entity will start off with equity in the amount of $729,522. The pro-forma balance sheet shows total assets include $1,000,000 in intangible assets, which is not a liquid resource nor is it recognized for Medicaid reimbursement. If intangible assets were eliminated from the equation, then total net asset would become a negative $270,478. Project #141029-E Exhibit Page 8 The submitted budget indicates a $135,774 surplus would be generated in the third year after the change in ownership. Following is a comparison of 2012 historical and projected revenues and expenses: Projected Income $ 7,495,184 Projected Expense 7,359,410 Projected Net Income $135,774 Annual 2012 Operating Income Annual 2012 Non-Operating Income* Total Annual 2012 Income Annual 2012 Expense Annual 2012 Net Income (Loss) $6,555,482 3,482,518 $10,038,000 9,438,982 $599,018 Incremental Net Income (Loss) $(463,244) *Contributions from County Subsidies of $2,000,000 and Intergovernmental Transfers (IGT) of $1,482,518. Excluding Ontario County Health Facility’s non-operating income of $3,482,518, it is estimated that incremental net revenue will increase approximately $939,702, coming from an increase in inpatient days of 3,359. The majority of the increase, or 2,880 inpatient days, is from added Medicaid inpatients days, at the current rate of $192.10 per day or $719,803; the remaining balance comes from 151 added Medicare inpatient days at $207.35 per day or $50,475, and an increase in private inpatient days of 328 at $418.41 per day, or $169,424. The applicant projects expenses to decline by $2,079,572, primarily from reduction in the following: decline in fringe benefits of $1,091,466 going from 55.6% to 34%; a reduction in wages and salaries of $805,921 (staffing is expected to decline from 120.9 FTE to 70.6 FTE, a net reduction of -50.3 FTE’s). The reduction is made up of the following: reduction in management of - 5.8 FTE; reduction in clerical of 29 FTE; reduction in aids, orderlies and attendants of -23.7 FTE; reduction in licensed practical nurses of -6.6 FTE; reduction in various of -2 FTE; an increase in registered nurses of 7 FTE; increase in infection control, environment, and food service of 9.8 FTE). The applicant expects to create operating efficiencies through realigning staff and centralizing some administrative and clerical departments. A reduction of $420,601 in expenses (primarily in purchase services and other direct expenses) was offset by increases in depreciation, rent, and interest expense brought the net reduction to $182,185. The budget was created taking into consideration the proposed new owners experience in operating similar facilities. The budget appears reasonable Staff notes that with the expected 2014 implementation of managed care for nursing home residents, Medicaid reimbursement is expected to change from a state-wide price with cost-based capital component payment methodology, to a negotiated reimbursement methodology. Facility payments will be the result of negotiations between the managed long term care plans and the facility. At this point in time, it cannot be determined what financial impact this change in reimbursement methodology will have on this project. As shown on BFA Attachment C, Ontario County Health Facility, for the periods from 2010 through 2012, shows a surplus in years 2012 and 2011, and a loss in 2010. The key to whether the facility enjoyed positive results or a loss, stems from whether the facility received substantial added support from the County and from Intergovernmental transfers, which, when combined averaged $3,887,699 per year. The applicant states profitability is a challenge in the light of rising health care and pension costs coupled with diminishing reimbursements. Occupancy averaged 88.4% during this period. As for 2010, the facility experienced a loss, as they received only $165,000 in support. As shown on BFA Attachment D, Chittenango Center, LLC d/b/a Chittenango for Rehabilitation and Health Care for the period from 2010 through 2012, the facility had an average negative working capital position of $132,674; average net asset position of $603,905, and generated an average operating surplus of $304,881. The $65,779 loss in 2012 was primarily due to a net reduction in the Medicaid rate, which totaled approximately $430,361for the year. The Medicaid rate adjustment was one the factors that the working capital turned negative. The average occupancy for the period was 97.84%. Project #141029-E Exhibit Page 9 As shown on BFA Attachment E, Rome Center, LLC d/b/a Rome Center for Rehabilitation and Health Care for the period from May 1, 2011 through 2012, the facility had an average negative working capital position of $23, 817, a positive average net asset position of $1,653,639, and generated an average operating surplus of $847,961. The negative capital arose because the members withdrew slightly more equity than they earned. The average occupancy for the period was 97.25%. As shown on BFA Attachment F, Fulton Center for Rehabilitation & Healthcare, LLC for the period from April 1, 2012 (start of operations) through December 31, 2012, the facility had a negative working capital position of $1,438,371, positive net asset position of $464,157 and generated an operating surplus of $472,157. The negative capital is the results of investing in capital equipment. The average occupancy for the period was 90.90%. As shown on BFA Attachment G, SV Operating Three, LLC d/b/a Richmond Center for Rehabilitation and Specialty Healthcare for the period from April 1, 2012 (start of operations) through December 31, 2012, the facility had a positive working capital position of $38,819, positive net asset position of $5,319,897 and generated an operating surplus of $764,047. The occupancy for the period was 94.77%. It appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Recommendation From a financial perspective, contingent approval is recommended. Attachments BFA-Attachment A BFA-Attachment B BFA-Attachment C BFA-Attachment D BFA-Attachment E BFA-Attachment F BFA Attachment G Net Worth of Proposed Members, Ontario Operations Associates, LLC, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare Pro-forma Balance Sheet, Ontario Operations Associates, LLC, LLC, d/b/a Ontario Center for Rehabilitation and Healthcare Financial Summary, Ontario County Health Facility Financial Summary, Chittenango Center, LLC d/b/a Chittenango for Rehabilitation and Health Care Financial Summary, Rome Center, LLC d/b/a Rome Center for Rehabilitation and Health Care Financial Summary, Fulton Center for Rehabilitation & Healthcare, LLC Financial Summary, SV Operating Three, LLC d/b/a Richmond Center for Rehabilitation and Specialty Healthcare Project #141029-E Exhibit Page 10 Public Health and Health Planning Council Project # 141091-E Atlantis Operating LLC d/b/a The Phoenix Rehab and Healing Center County: Kings Purpose: Establishment Program: Residential Health Care Facility Acknowledged: March 6, 2014 Executive Summary Description Atlantis Operating, LLC d/b/a The Phoenix Rehab and Healing Center requests approval for the change in operator of Atlantis Rehabilitation & Residential Health Care Facility, a 400-bed nursing home located in Kings County. There will be no change in services provided. Concurrent with Atlantis Operating, LLC entering into the Asset Purchase Agreement, GPNZ Realty Co., LLC, a related party, will enter into an agreement with Atlantis Property, LLC for the sale and acquisition of the real property interests of the facility. Atlantis Property, LLC, as landlord and Atlantis Operating, LLC, as tenant, will enter into a lease for site control of the facility. Atlantis Operating, LLC, and Atlantis Property, LLC have common ownership. The current and proposed operator is as follows: Current Atlantis Rehabilitation & Residential Health Care Facility, LLC Members: Cheryl Guttmann 3.89% Steven Neuman 6.71% Jeremy Newman 6.70% Jonathan Newman 6.70% Betty Kreiger 3.00% Elias Pelman 2.00% Ashira Ostrow 7.00% Ayeet Goldberg 7.00% Jonathan Pelman 7.00% Diane Rice 8.00% Brian Glattstein 9.00% Sharon Singer 9.00% Michele Klerer 4.80% Rachelli Levine 4.80% Ariella Weiss 4.80% Moshe Zakheim 4.80% Rena Zakeim 4.80% Need Summary Atlantis Rehabilitation & Residential Health Care Facility’s utilization was 93.6% in 2010, 92.6% in 2011, and 95.8% in 2012. Current utilization, as of February 26, 2014, is 96.5%. The change in ownership will not result in any change in beds or services. Program Summary No negative information has been received concerning the character and competence of the proposed applicants identified as new members. No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. Proposed Atlantis Operating, LLC Members: Devorah Friedman Sharon Einhorn Sanjay Ahuja Vanita Mudgil Namita Mohan Harold Weinstein Aaron Schlosser Israel Minzer DOH Recommendation Contingent Approval 40.0% 40.0% 5.0% 2.5% 2.5% 2.5% 2.5% 5.0% Financial Summary The purchase price for the acquisition of the operating interests of Atlantis Rehabilitation & Residential Health Care Facility, LLC is $29,250,000. The purchase price will be met as follows: Equity contributions of $5,850,000 and a mortgage of $23,400,000 at a rate of 5% for a term of 25 years. The purchase price for the acquisition of the real estate interests is $25,250,000. The real property purchase price will be met as follows: Equity of $5,050,000 and a mortgage of $20,200,000 at a rate of 5% for a term of 25 years. Several of the proposed members have ownership interest in additional RHCF facilities. Project #141091-E Exhibit Page 1 Total Budget: Revenues: Expenses: Net Income: in a financially feasible manner, and contingent approval is recommended. $ 41,955,187 41,015,296 $939,891 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed Project #141091-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. The submission of a commitment signed by the applicant which indicates that, within two years from the date of the council approval, the percentage of all admissions who are Medicaid and Medicare/Medicaid eligible at the time of admission will be at least 75 percent of the planning area average of all Medicaid and Medicare/Medicaid admissions, subject to possible adjustment based on factors such as the number of Medicaid patient days, the facility’s case mix, the length of time before private paying patients became Medicaid eligible, and the financial impact on the facility due to an increase in Medicaid admissions. [RNR] 2. Submission of a plan to continue to enhance access to Medicaid residents. At a minimum, the plan should include, but not necessarily limited to, ways in which the facility will:  Reach out to hospital discharge planners to make them aware of the facility’s Medicaid Access Program;  Communicate with local hospital discharge planners on a regular basis regarding bed availability at the nursing facility;  Identify community resources that serve the low-income and frail elderly population who may eventually use the nursing facility, and inform them about the facility’s Medicaid Access policy; and  Submit an annual report for two years to the DOH, which demonstrates substantial progress with the implement of the plan. The plan should include but not be limited to: o Information on activities relating to a-c above; o Documentation pertaining to the number of referrals and the number of Medicaid admissions; and o Other factors as determined by the applicant to be pertinent. The DOH reserves the right to require continued reporting beyond the two year period. [RNR] 3. 4. 5. 6. 7. 8. 9. 10. 11. Submission of an executed mortgage bank loan, acceptable to the Department. [BFA] Submission of an executed working capital loan, acceptable to the Department. [BFA] Submission of an executed asset purchase agreement, acceptable to the Department. [BFA] Submission of an executed lease rental agreement, acceptable to the Department. [BFA] Submission of an executed Certificate of Assumed Name, acceptable to the Department. [CSL] Submission of an executed Operating Agreement, acceptable to the Department. [CSL] Submission of a Restated Article of Organization, acceptable to the Department. [CSL] Submission of an executed Lease Agreement, acceptable to the Department. [CSL] Submission of an executed Asset Purchase Agreement, acceptable to the Department. [CSL] Approval conditional upon: 1. The project must be completed within one 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] Council Action Date June 12, 2014 Project #141091-E Exhibit Page 3 Need Analysis Background Atlantis Operating, LLC d/b/a The Phoenix Rehab and Healing Center seeks approval to become the established operator of Atlantis Rehabilitation & Residential Health Care Facility, a 400-bed residential health care facility located at 140 St. Edwards Street, Brooklyn, 11204, in Kings County. Analysis There is currently a need for 8,663 beds in the New York Region as indicated in Table 1 below. However, the overall occupancy for the New York Region is 94.8% for 2012 as indicated in Table 2. Table 1: RHCF Need – New York Region 2016 Projected Need Current Beds Beds Under Construction Total Resources Unmet Need 51,071 42,330 78 42,408 8,663 Atlantis Rehabilitation & Residential Health Care Facility’s utilization was 93.6% in 2010, 92.6% in 2011, and 95.8% in 2012. Utilization declined in 2011 due to the current operator’s desire to bring in a different payor mix, which was unsuccessful. In 2012, the facility returned to its traditional admissions standards, resulting in increased utilization. The proposed operators plan to meet with local community leaders, hospitals, and physicians to determine need and will design programs specific to meeting those needs. Table 2: Atlantis Rehabilitation & Residential Health Care Facility/Kings County/New York Region Occupancy Facility/County/Region Atlantis Rehabilitation & Residential Health Care Facility Kings County New York Region % Occupancy 2010 % Occupancy 2011 % Occupancy 2012 93.6% 92.6% 95.8% 95.0% 95.4% 94.3% 94.8% 94.4% 94.8% Access Regulations indicate that the Medicaid patient admissions standard shall be 75% of the annual percentage of all Medicaid admissions for the long term care planning area in which the applicant facility is located. Such planning area percentage shall not include residential health care facilities that have an average length of stay 30 days or fewer. If there are four or fewer residential health care facilities in the planning area, the applicable standard for a planning area shall be 75% of the planning area percentage of Medicaid admissions, or of the Health Systems Agency area Medicaid admissions percentage, whichever is less. In calculating such percentages, the Department will use the most current data which have been received and analyzed by the Department. An applicant will be required to make appropriate adjustments in its admission policies and practices so that the proportion of its own annual Medicaid patient’s admissions is at least 75% of the planning area percentage or Health Systems Agency percentage, whichever is applicable. Atlantis Rehabilitation & Residential Health Care Facility’s Medicaid admissions rates for 2011 and 2012 were 17.1% and 25.0%, respectively. This facilty did not exceed Kings County 75% rates in 2011 and 2012 of 30.9% and 34.9%, respectively and will be required to follow the contingency plan as noted below. Project #141091-E Exhibit Page 4 Conclusion Approval of this application will result in the maintenance of a needed RHCF resource for the affected community. Recommendation From a need perspective, contingent approval is recommended. Program Analysis Program Description Existing Atlantis Rehabilitation and Residential Health Care Facility 140 St. Edwards Street Brooklyn, NY. 11204 Proposed The Phoenix Rehab and Healing Center Same RHCF Capacity ADHC Program Capacity Type of Operator Class of Operator 400 N/A Proprietary Limited Liability Company Same N/A Proprietary Limited Liability Company Operator Atlantis Rehabilitation and Residential Health Care Facility, LLC Atlantis Operating, LLC Facility Name Address Members: Brian Glattstein Sharon Singer Ashira Osrow Avelet Goldberg Jonathan Pelman Michelle Klerer Diane Rice Steven Neuman Jeremy Neuman Jonathan Neuman Cheryl Guttman Betty Krieger Elias Pelman Rachelli Levine Ariella Weiss Moshe Zakheim Rena Zakheim Project #141091-E Exhibit Page 5 Managing Members: Devorah Friedman Sharon Einhorn Members: Israel Minzer Sanjay Ahuja Vanita Mudgil Namita Mohan Harold Weinstein Aaron Schlosser 40.0% 40.0% 5.0% 5.0% 2.5% 2.5% 2.5% 2.5% Character and Competence - Background Facilities Reviewed Nursing Homes Bellhaven Center for Rehabilitation and Nursing Center Dumont Center for Rehabilitation Glengariff Health Care Center Ramapo Manor Center for Rehabilitation & Nursing St. James Rehabilitation & Healthcare Center Sans Souci Rehabilitation & Nursing Center The Grand Pavilion for Rehabilitation at Rockville Center The Riverside Waters Edge at Port Jefferson for Rehabilitation and Nursing 03/2010 to present 08/2010 to present 09/2008 to present 05/2006 to present 08/2012 to present 10/2009 to present 08/2012 to present 08/2013 to present 09/2008 to present Individual Background Review Devorah Friedman holds a New York State speech language pathologist license and is considered to be in good standing. She is currently employed as the owner/operator of Bellhaven Center for Rehabilitation and Nursing. Ms. Friedman discloses the following ownership interests: Sans Souci Rehabilitation & Nursing Center 10/2009 to present Dumont Center for Rehabilitation 08/2010 to present Bellhaven Center for Rehabilitation and Nursing Center 03/2010 to present Ramapo Manor Center for Rehabilitation & Nursing 07/2012 to present St. James Rehabilitation & Healthcare Center 08/2012 to present The Grand Pavilion for Rehabilitation at Rockville Center 08/2012 to present The Riverside 08/2013 to present Sharon Einhorn discloses no employment history over the last 10 years. following ownership interests: Dumont Center for Rehabilitation Bellhaven Center for Rehabilitation and Nursing Center Ramapo Manor Center for Rehabilitation & Nursing St. James Rehabilitation & Healthcare Center The Grand Pavilion for Rehabilitation at Rockville Center The Riverside Ms. Einhorn discloses the 08/2010 to present 03/2010 to present 07/2012 to present 08/2012 to present 08/2012 to present 09/2013 to present Israel Minzer is the president of Healthcare Equipment and Parts, a diagnostic medical equipment supplier in Brooklyn, NY. Mr. Israel Minzer discloses the following ownership interests: Dumont Center for Rehabilitation 08/2010 to present Bellhaven Center for Rehabilitation and Nursing Center 03/2010 to present Ramapo Manor Center for Rehabilitation & Nursing 07/2012 to present St. James Rehabilitation & Healthcare Center 08/2012 to present The Grand Pavilion for Rehabilitation at Rockville Center 08/2012 to present Sanjay Ahuja is the Chief Executive Officer of Glengariff Health Care Center, a nursing home located in Glen Cove, New York. Mr. Ahuja discloses the following ownership interests in health care facilities: Glengariff Health Care Center 09/2008 to present Waters Edge at Port Jefferson for Rehabilitation and Nursing 09/2008 to present Ramapo Manor Center for Rehabilitation and Nursing 05/2006 to present Project #141091-E Exhibit Page 6 Vanita Mudgil discloses no employment history over the last 10 years. Ms. Mudgil discloses the following ownership interests in health care facilities: Glengariff Health Care Center 09/2008 to present Waters Edge at Port Jefferson for Rehabilitation and Nursing 09/2008 to present Ramapo Manor Center for Rehabilitation and Nursing 05/2006 to present Namita Mohan is a licensed nursing home administrator in New York State and is considered to be in good standing. She lists her employment as a member/manager of Glengariff Health Care Center. Ms. Mohan discloses the following ownership interests in health facilities: Glengariff Health Care Center 09/2008 to present Waters Edge at Port Jefferson for Rehabilitation and Nursing 09/2008 to present Ramapo Manor Center for Rehabilitation and Nursing 05/2006 to present Harold Weinstein is a vice president of Max Kahan, Inc., a precious metals refinement company located in New York, New York. Mr. Weinstein discloses the following ownership interest in health care facilities: St. James Rehabilitation & Healthcare Center 08/2012 to present Aaron Schlosser lists his employment as sales at Robert Klein Diamonds, a jewelry company located in New York, New York. Mr. Schlosser discloses the following ownership interest in health care facilities: St. James Rehabilitation & Healthcare Center 08/2012 to present Character and Competence – Analysis No negative information has been received concerning the character and competence of the applicants. A review of Sans Souci Nursing Home for the period reveals that the facility was fined $10,000 pursuant to a Stipulation and Order for surveillance findings on February 11, 2011. Deficiencies were found under 10 NYCRR 415.12(j): Quality of Care – Hydration. A review of operations for the Sans Souci Rehabilitation and Nursing Center for the period results in a conclusion of substantially consistent high level of care since there were no repeat enforcements. A review of Bellhaven Center for Rehabilitation and Nursing, Dumont Center for Rehabilitation and Nursing, Glengariff Health Care Center, Ramapo Manor Center for Rehabilitation & Nursing, St. James Rehabilitation and Healthcare Center, The Grand Pavilion for Rehabilitation at Rockville Center, The Riverside, and Waters Edge at Port Jefferson for Rehabilitation and Nursing reveals that a substantially consistent high level of care has been provided since there were no enforcements for the time period reviewed. Project Review No changes in the program or physical environment are proposed in this application. No administrative services or consulting agreements are proposed in this application. The facility is in compliance with CMS 2013 sprinkler mandates. Conclusion No negative information has been received concerning the character and competence of the proposed applicants identified as new members. Recommendation From a programmatic perspective, approval is recommended. Project #141091-E Exhibit Page 7 Financial Analysis Asset Purchase Agreement The applicant has submitted an executed asset purchase agreement for the purchase of the operations of Atlantis Rehabilitation and Residential Health Care Facility, which is summarized below: Date: Seller: Purchaser: Assets Acquired: Excluded Assets: Assumed Liabilities: Liabilities Not Assumed: Purchase Price: Payment of Purchase Price: January 6, 2014 Atlantis Rehabilitation and Residential Health Care Facility, LLC Atlantis Operating, LLC Business and operation of the Facility; fixed equipment; non-fixed equipment; all inventory and supplies owned by the Company for use in the Facility; all resident records and other records of those residents who are being treated as of the Closing Date; all menus, policy and procedures manuals and compliance programs related to the operation of the Business; the Medicare and Medicaid provider agreements related to the Business; and all Permits by the Company that are necessary to operate the Facility and the Business; all prepaid expenses, credits, security deposits, deferred charges, advanced payments, prepayment and prepaid items of the Company; all computer software, programs, operating systems owned or leased by or licensed to the Company; all telephone numbers and facsimile numbers used by the Company; goodwill and other intangible assets of the Company and all warranties and guaranteeing made by or received from any person with respect to the Purchased Assets. Cash, deposits and cash equivalents; all of the accounts and loans receivable due to the Company; any vehicles owned by the Company; the Purchase Price and all rights of the Company pursuant to the Transaction Documents; all payments or cash equivalent credits relating to the Business resulting from claims, insured premiums rate reductions or insurance or other dividends paid or accruing for periods prior to the Closing Date; all rate increases and/or lump sum payments, resulting from rate appeals with respect to third party payments and any personnel records and other records that the Company is required by Law to retain in its possession. The accounts payable of the Company arising or incurred from the operation of the Facility and the Business prior to the Closing; liabilities and obligations related to the operation of the Facility; all of the liabilities and obligations of the Company arising under the Assumed Contracts; all Post Closing Date Healthcare Program Liabilities and all obligations as of the Closing under the Real Property Lease that arise on or after the Closing Date. All liabilities arising as a result of the conduct of any Business by the Company other than the Business; pre closing date payables, except the Assumed Accounts Payable; all cash receipts assessments relating to all revenue received by the Company before and after the Closing Date; all pre closing after the healthcare program liabilities; any liability arising from or relating to claims of medical malpractice of the Company and all workers compensation obligations of the Company. $29,250,000 Member equity of $5,850,000, mortgage of $23,400,000. The purchase price will be financed as follows: Equity of $5,850,000 and a mortgage of $23,400,000 at a rate of 5% for a term of 25 years. . Project #141091-E Exhibit Page 8 The applicant submitted an affidavit, which is acceptable to the Department, in which the applicant agrees, notwithstanding any agreement, arrangement or understanding between the applicant and the transferor to the contrary, to be liable and responsible for any Medicaid overpayments made to the facility and/or surcharges, assessments or fees due from the transferor pursuant to Article 28 of the Public Health Law with respect to the period of time prior to the applicant acquiring its interest, without releasing the transferor of its liability and responsibility. Real Estate Purchase Agreement The applicant has submitted an executed real estate purchase agreement for the purchase of the real estate; which is summarized below: Date: Premises: Seller: Purchaser: Purchase Price: January 6, 2014 The premises located at 137-71st Avenue, Flushing, New York GPNZ Realty Co., LLC Atlantis Property LLC $25,250,000 The purchase price for the acquisition of the real estate interests is $25,250,000. The purchase price will be met as follows: Equity of $5,050,000 and a mortgage of $20,200,000 at a rate of 5% for a term of 25 years. A letter of interest has been submitted. . Lease Rental Agreement The applicant has submitted an executed lease rental agreement for the site where the nursing home is situated, summarized below: Date: Premises: Landlord: Tenant: Term: Rental: February 24, 2014 The premises located at 137-71 71st Avenue, Flushing, New York. Atlantis Property, LLC Atlantis Operating LLC 30 years The base rent shall be equal to the landlord’s debt service on its mortgage covering the demised premises and $240,000. The total base rent shall be equal to $20,000 per month. Operating Budget The applicant has submitted an operating budget, 2014 dollars, for the first year subsequent to change in ownership: Revenues: Medicaid Medicare Private Pay Commercial Total Revenues: $252.07 $605.00 $300.00 $275 $26,100,134 $ 8,700,505 $ 431,430 $6,723,118 $41,955,187 Expenses: Operating Expense Capital Expense Total Expense $36,224,282 $ 4,791,014 $41,015,296 Net Income $ Utilization: (Patient Days) Occupancy: 939,891 143,926 98.58% Project #141091-E Exhibit Page 9 The following is noted with respect to the submitted RHCF operating budget.  Expenses include lease rental.  Medicaid, Medicare and Private Pay revenues are based on the current payment rates for 2013 with no increase.  Overall utilization for year one is projected at 98.58%, which is the current occupancy rate through September 30, 2013, while utilization by payer source is expected as follows: Medicaid 77% Medicare 9% Private Pay 1% Commercial 13% Capability and Feasibility The operation purchase price for the facility is $29,250,000. The proposed operators will meet the purchase price via member equity of $5,850,000 and a mortgage in the amount of $23,400,000 at a rate of 5% for a term of 25 years. BFA Attachment A is the net worth of the proposed members indicating sufficient equity for the contribution. Also, a letter of interest from a financial institution for the operational portion of this purchase has been submitted. The real estate purchase price is $25,250,000. The purchase price will be met via equity of $5,050,000 from the proposed members and $20,200,000 in the form of a mortgage loan at a rate of 5% for a term of 25 years. A letter of interest from the bank has been submitted. Working capital requirements are estimated at $6,835,883, which appears reasonable based on twomonths of first year expenses. The applicant has submitted a letter of interest to finance $3,200,000 at an interest rate of 4.5% for a ten-year term. The remainder, $3,635,883, will be provided as equity by the proposed members of Atlantis Operations LLC. BFA Attachment A is the net worth statements of the proposed members of Atlantis Operations, LLC, which reveals the availability of sufficient funds for the equity contribution to meet the purchase price and the working capital requirement. It is noted that resources are not available in proportion to ownership percentages, and each proposed member provided an affidavit stating he or she is willing to contribute resources not in proportion to ownership percentages. BFA Attachment B is the pro-forma balance sheet and Income Statement of Atlantis Rehabilitation Center, LLC, for 2010 thru 2012. As shown, the operating entity, subsequent to the change in operations, indicates a positive net income of $939,891 during the first year of operation. Projected Revenue Projected Expenses Projected Net Revenue $41,955,187 $41,015,296 $ 939,891 2012 Historical Income 2012 Historical Expenses 2012 Net Income $39,917,786 $37,136,503 $ 2,781,283 Incremental Income Incremental Expenses Net Incremental Income (Loss) $2,037,401 $3,878,793 ($1,841,392) The applicant has indicated that the incremental income during the first year is based on the following assumptions:  Occupancy is increasing from 96.11% in 2012, to 98.58% during the first year after the change in operator.  Medicaid utilization is decreasing by 6.73%, while Medicare and Private Pay utilization is increasing by 2.15% and 4.65% during the first year after the change in operator. The projected utilization is consistent with the 2013 utilization. Project #141091-E Exhibit Page 10 The applicant has indicated that the incremental expenses during the first year is based on the following assumptions:  Salaries and Wages ($444,436) and Employee Benefits ($192,357) are increasing based on trending from 2012.  The following expenses also are increasing from 2012: Professional Fees ($35,221); Medical and Surgical Supplies ($44,268); Non-med, non-surg supplies ($21,139); Utilities ($18,080); Purchased Services ($310,516) and Other Direct Expenses ($161,935).  Interest/rent is increasing by $410,655 from 2012 due to interest expense on the operation purchase and additional lease rental payments due to the debt service on the real estate purchase interests. As shown in Attachment B, the facility has an average negative working capital position and an average positive net asset position during the period shown. Also, the applicant achieved an average net income of $551,372 for the period shown. BFA Attachment C is a financial summaries of the affiliated facilities.  Bellhaven Center for Rehabilitation has maintained an average positive working capital position and average positive net asset position during the period shown. Also, the facility achieved an average net income of $3,053,970 during the period shown.  Dumont Operating, LLC has maintained an average positive working capital position and an average positive net asset position during the period shown. Also, the facility achieved an average operating net income of $1,701,057 for the period shown.  Ramapo Nursing Manor has maintained an average working capital position and average positive net asset position during the period shown. Also, the facility achieved an average net income of $2,093,091 during the period shown.  Rockville Operating, LLC has maintained an average negative working capital position and average positive net asset position during the period shown. Also, the facility incurred a net income of $453,819 in 2012, and incurred a net loss of $375,479 and $101,573 during 2011 and 2010, respectively. Please note that this facility was under new ownership in 2012, at which there are not any current financials available.  Westchester Park, LLC has maintained an average negative working capital position and average negative net asset position during the period shown. Also, the facility achieved an average operating income of $1,568,831 for the period shown.  St. James Rehabilitation facility has maintained an average positive working capital position and positive net asset position. Also, the facility achieved an average operating income of $2,357,352 for the period shown.  Glengariff Corporation has maintained an average positive working capital position and positive net asset position. Also, the facility achieved an average operating income of $1,238,207 for the period shown. BFA Attachment E is the pro-forma balance sheet of Atlantis Operating, LLC, as of the first day of the change in operator. As shown, the applicant will initiate operations with a positive member’s equity position of $10,246,683. It is noted that the assets include $19,291,065 in goodwill, which is not an available liquid resource, nor is it recognized for Medicaid reimbursement purposes. BFA Attachment D is the pro-forma balance sheet of GPNZ Realty Company, LLC, as of the first day of the change in the real estate entity. As shown, the real estate entity will have a positive member’s equity of $5,050,000 subsequent to the change in operator. Subject to the noted contingencies, 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. Project #141091-E Exhibit Page 11 Attachments BFA Attachment A BFA Attachment B BFA Attachment C BFA Attachment D BFA Attachment E Personal Net Worth Statement Financial Summary, Atlantis Operating, LLC Financial Summaries Affiliated Facilities Pro-forma, Real Estate Entity (Atlantis Property, LLC) Pro-forma, Atlantis Operating, LLC Project #141091-E Exhibit Page 12 Public Health and Health Planning Council Project # 141051-E Oswego Health Home Care, Inc. County: Oswego Purpose: Establishment Program: Certified Home Health Agency Acknowledged: February 12, 2014 Executive Summary Description Oswego Health Home Care, LLC, a to-be-formed entity, requests approval to become the operator of the Certified Home Health Agency (CHHA) operated by Oswego Health Home Care, Inc. The CHHA is licensed to operate in Oswego County and the proposed operator will maintain and continue all currently certified services. The office location of the CHHA, 113 Schuyler Street in Fulton, will remain via a lease assignment. There are no construction and/or equipment costs associated with the request. BFA Attachment A is the organizational chart for Oswego Health Home Care, LLC. The current and proposed operator of the CHHA is as follows: Current Oswego Health Home Care, Inc. (operator) Oswego Health, Inc. - sole member Administrators, an entity related to Embracing Age. The new proposed operator also intends on entering into a service agreement with St. Joseph’s Hospital Health Center. Oswego Health, Inc. and Affiliates, a not-for-profit corporation, was established in 1997, to further promote and support the charitable purposes of Oswego Hospital and Affiliates, OH Properties, Inc., Seneca Hill Manor, Inc., Springside at Seneca Hill, Inc., and Oswego Health Home Care, Inc. The Company serves as the sole member of each of these entities, and is also the sole shareholder of Ontario Medical Practice, P.C. and O.H. Services, Inc., both for-profit entities. Embracing Age, Inc. was formed on July 30, 2012, for the intention of applying for charitable purposes. DOH Recommendation Contingent Approval Proposed Oswego Health Home Care, LLC Members: Oswego Health, Inc. 60% Embracing Age, Inc. 40% Need Summary There will be no Need recommendation for this project. Embracing Age, Inc. is part of the family of health services provided by Franciscan Association in Syracuse. Oswego Health, Inc. will transfer all of the assets of Oswego Health Home Care, Inc. into Oswego Health Home Care, LLC. Embracing Age will purchase its 40% share of Oswego Health Home Care, LLC. The new proposed operator intends on entering into an Administrative Services Agreement and Consulting Agreement with Health Care Management Program Summary This proposal seeks approval of the change of ownership of Oswego Health Home Care, Inc. Oswego Health Home Care, LLC, requests approval to become the owner of the current Certified Home Health Agency (CHHHA) licensed to operate in Oswego County. The new proposed operator will maintain and continue all currently certified services. The CHHA will continue to operate out of 113 Schuyler Street in Fulton. Project #141051-E Exhibit Page 1 Financial Summary The purchaser is assuming all the assets and liabilities. Embracing Age, Inc. will purchase their interests for $300,000 and will finance $300,000 at an interest rate of 5% for a six year term. Budget: Revenues Expenses Excess of Revenues over Expenses $3,970,236 3,871,362 $ 98,874 Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner, and contingent approval is recommended. Project #141051-E Exhibit Page 2 Recommendations Health Systems Agency There will be no HSA recommendation for this project. Office of Health Systems Management Approval contingent upon: 1. Submission of an executed contribution, assignment and assumption agreement, acceptable to the Department. [BFA] 2. Submission of an executed transfer and assignment agreement of membership interest, acceptable to the Department. [BFA] 3. Submission of an executed lease assignment, acceptable to the Department. [BFA] 4. Submission of an executed administrative services agreement, acceptable to the Department. [BFA] 5. Submission of an executed contract services agreement, acceptable to the Department. [BFA] 6. Submission of a photocopy of the applicant’s executed Articles of Organization, acceptable to the Department. [CSL] 7. Submission of a photocopy of the applicant’s executed operating agreement, acceptable to the Department. [CSL] 8. Submission of a photocopy of an executed amendment to the Certificate of Incorporation of Oswego Health, Inc., acceptable to the Department. [CSL] 9. Submission of a photocopy of the executed Administrative Services and Consulting Agreement between the applicant and Health Care Management Administrators, Inc., acceptable to the Department. [CSL] 10. Submission of a photocopy of the executed Contribution, Assignment and Assumption Agreement from Oswego Health Home Care, Inc. to Oswego Health, Inc., acceptable to the Department. [CSL] 11. Submission of a photocopy of the executed Contribution, Assignment and Assumption Agreement from Oswego Health, Inc. to the applicant, acceptable to the Department. [CSL] 12. Submission of a photocopy of the executed Transfer and Assignment Agreement of Membership Interest from Oswego Health, Inc. to Embracing Age, Inc., acceptable to the Department. [CSL] Approval conditional upon: 1. The project must be completed within two 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] Council Action Date June 12, 2014 Project #141051-E Exhibit Page 3 Program Analysis Review Summary Oswego Health Home Care, LLC, a to-be-formed entity, requests approval to become the owner of the Certified Home Health Agency (CHHHA) operated by Oswego Health Home Care, Inc. The CHHA is licensed to operate in Oswego County and the proposed operator will maintain and continue all currently certified services. The CHHA will continue to operate from 113 Schuyler Street in Fulton through a lease assignment. The proposed operator, Oswego Health Home Care, LLC, has two members. Oswego Health, Inc., the current sole member of the current operator, will hold a 60 % membership. Embracing Age, Inc., a current entity part of the family of health services provided by Franciscan Associates in Syracuse, will be a 40% member. Oswego Health, Inc. will transfer all of the assets of Oswego Health Home Care, Inc. into Oswego Health Home Care, LLC. Embracing Age will purchase its 40% shares of Oswego Health Home Care, LLC through a Transfer and Assignment Agreement. The proposed operator will be managed by a Board of Managers. This Board of Managers will have three members, two appointed by Oswego Health, Inc. and one appointed by Embracing Age, Inc. The new proposed operator intends on entering into an Administrative Services and Consulting Agreement with Health Care Management Administrators, an entity related to Embracing Age. The new proposed operator also intends on entering into service agreements with Oswego Health, Inc. and St. Joseph’s Hospital Health Center. Oswego Health and Embracing Age believe that transferring the certified home health agency to the proposed joint venture will; further the overall development of home health services in Oswego County, enhance the organization and overall delivery of home health services, and further the development of new programs and services to best meet the needs of patients needing home health care services in the Oswego County area, in a cost-effective manner. The applicant proposes to continue to operate the CHHA from an office located at 113 Schuyler Street, Fulton, New York 13069 and serve Oswego County. The applicant proposes to continue to provide the following home health care services: Nursing Physical Therapy Nutritional Home Health Aide Medical Social Services Occupational Therapy Medical Supplies, Equipment, and Appliances Speech Language Pathology The proposed Board Members of Oswego Health, Inc. comprises the following individuals: Atom Avery – Director Owner/Operator, Avery Rental Property/Beacon Hotel/All Seasons Inn Barbara B. Bateman – Director Senior Vice President, Alliance Bank Affiliations:  Oswego Hospital (6/13--Present)  Hospitals Home Health Care (6/13-Present)  Seneca Hill Manor, Inc. (NH) (6/13-Present) Affiliations:  Oswego Hospital (6/11-6/13)  Hospitals Home Health Care (6/11-6/13)  Seneca Hill Manor, Inc. (NH) (6/10–6/13) Chris Burritt – Director Owner, Burritt Motors Pamela D. Caraccioli – Director Business Manager, Caraccioli & Associates, PLLC Affiliations:  Oswego Hospital (6/11-6/13)  Hospitals Home Health Care (6/11-6/13)  Seneca Hill Manor, Inc. (NH) (6/10–6/13) Affiliations:  Oswego Hospital (6/11-Present)  Hospitals Home Health Care (6/11Present) Project #141051-E Exhibit Page 4  William Clark – Vice Chair Owner, The Great Outdoors Affiliations:  Oswego Hospital (6/11-6/14)  Hospitals Home Health Care (6/11-Present)  Seneca Hill Manor, Inc. (NH) (6/11-Present)  Albert Lindley Lee Memorial Hospital (1/015/09) Harold J. Henning. Jr., MD – Director Self Employed/Physician, Harold Henning, MD Chief of Medical Staff, Oswego Hospital Affiliations:  Oswego Hospital (1/14-Present)  Seneca Hill Manor, Inc. (NH) (1/14-Present)  Oswego Health Home Care, Inc. (1/14Present) Seneca Hill Manor, Inc. (NH) (6/11Present) Peter K. Cullinan – Director Emergency Plant Instructor, Human Performance Manager, EPS Specialist, EP Manager, Entergy Nuclear Northeast Affiliations:  Oswego Hospital (6/11-6/13)  Hospitals Home Health Care (6/11-6/13)  Seneca Hill Manor, Inc. (NH) (6/10–6/13) Adam C. Gagas – Treasurer Principal, Breakwall Asset Management, LLC Affiliations:  Oswego Hospital (6/11-6/13)  Hospitals Home Health Care (6/11-6/13)  Seneca Hill Manor, Inc. (NH) (6/11–6/13) William Galloway – Director Real Estate Broker, Century 21 Galloway Realty Ann C. Gilpin – President and CEO President and CEO, Oswego Health Affiliations:  Oswego Hospital (6/11-Present)  Hospitals Home Health Care (6/11-Present)  Seneca Hill Manor, Inc. (NH) (6/11-Present) Affiliations:  Oswego Hospital (1/07–6/12)  Hospitals Home Health Care (1/07–6/12)  Seneca Hill Manor, Inc. (NH) (1/07–6/12) Bernie Henderson – Director Retired Ellen M. Holst, RN – Director Senior Director/Administrator for Health & Nutrition, Oswego County Opportunities, Inc. Affiliations:  Oswego Hospital (6/11-6/13)  Hospitals Home Health Care (6/11-6/13)  Seneca Hill Manor, Inc. (NH) (6/11–6/13) Affiliations:  Oswego Hospital (6/11–6/12)  Hospitals Home Health Care (6/11–6/12)  Seneca Hill Manor, Inc. (NH) (6/11–6/12)  Oswego County Department of Health (3/99-2011) Renato Mandanas, MD – Director Physician, Renato Mandanas Mary E. McGowan, Esq. – Director Attorney, Reynolds & McGowan, PLLC Adjunct Professor, State University of New York at Oswego Affiliations:  Oswego Hospital (6/11–6/12)  Hospitals Home Health Care (6/11–6/12)  Seneca Hill Manor, Inc. (NH) (6/11–6/12) Affiliations:  Oswego Hospital (6/00-Present)  Hospitals Home Health Care (6/11Present)  Seneca Hill Manor, Inc. (NH) (6/11Present) Patricia Mears – Director Corporate Secretary, Ernest Mears, D.D.S., P.C. Rose Ann Parsons – Director Managing Editor, Oswego County Weeklies Project #141051-E Exhibit Page 5 Affiliations:  Oswego Hospital (6/02-Present)  Hospitals Home Health Care (6/11Present)Seneca Hill Manor, Inc. (NH) (6/11Present) Affiliations:  Oswego Hospital (2/13-Present)  Hospitals Home Health Care (2/13Present)Seneca Hill Manor, Inc. (NH) (2/13-Present) Yvonne A. Petrella – Director Dean of Extended Learning, SUNY Oswego Ivan Proano, MD – Director Physician, Ivan Proano, M.D. Affiliations:  Oswego Hospital (6/11–6/12)  Hospitals Home Health Care (6/11–6/12)  Seneca Hill Manor, Inc. (NH) (6/11–6/12) Affiliations:  Oswego Hospital (12/11-Present)  Hospitals Home Health Care (12/11Present)  Seneca Hill Manor, Inc. (NH) (12/11Present) Thomas W. Schneider – Chair President and CEO, Pathfinder Bank Mark Slayton, CPA – Director Director of Finance/Oswego College Foundation, SUNY at Oswego Affiliations:  Oswego Hospital (6/11-6/13)  Hospitals Home Health Care (6/11-6/13)  Seneca Hill Manor, Inc. (NH) (1/07–6/13) Affiliations:  Oswego Hospital (6/11–6/12)  Hospitals Home Health Care (6/11–6/12)  Seneca Hill Manor, Inc. (NH) (6/11–6/12) Linda Terrell – Director Owner, Harbor Towne Gifts Scott VanGorder, DO – Director Physician/Associate Medical Director, Northern Oswego County Health Services, Inc. Affiliations:  Oswego Hospital (6/11-Present)  Hospitals Home Health Care (6/11-Present)  Seneca Hill Manor, Inc. (NH) (6/11-Present) Affiliations:  Oswego Hospital (6/13-Present)  Hospitals Home Health Care (6/13Present)  Seneca Hill Manor, Inc. (NH) (6/13Present) Michael D. Stephens, MD – Director Physician, Oswego Family Physicians Affiliations:  Oswego Hospital (9/13-Present)  Seneca Hill Manor, Inc. (NH) (9/13-Present)  Oswego Health Home Care, Inc. (9/13Present) The proposed Board of Directors of Embracing Age, Inc. comprises the following individuals: Frank L. Smith, Jr., RT – Director Vice President for Special Health Programs, St. Joseph’s Health Center Vice President for Corporate Development, St. Joseph’s Health Center President/CEO, Franciscan Companies Affiliations: Gregory Fernandez, CPA – Director Vice President for Fiscal Affairs, Franciscan Management Services, Inc. Affiliations:  PACE of CNY (2012-Present)  Lourdes Health Support, LLC (DME) (2006-Present) Project #141051-E Exhibit Page 6   CNY Infusion Services, LLC (1999-Present) Independent Living Services, Inc. (1998Present)   St. Elizabeth Health Support Services, Inc. (DME) (2006–Present) Loretto Health Support, LLC (DME) (2006Present) April Stone, RN – Director Owner, Manager, President, Empire Infusion, Inc. Affiliations:  Owner/President, Empire Infusion, Inc. (1994 – Present)  Owner/Managing Member, CNY Infusion Services, LLC (1999–Present) The proposed Board of Managers of Oswego Health Home Care, LLC comprises the following individuals: Frank L. Smith, Jr., RT – Manager (Previously Disclosed) Patricia Mears – Manager (Previously Disclosed) Valerie Favata – Manager (Previously Disclosed) A search of all of the above named board members, employers, and affiliations revealed no matches on either the Medicaid Disqualified Provider List or the Office of the Inspector General’s Provider Exclusion List. The Office of the Professions of the State Education Department, the New York State Physician Profile, and the Office of Professional Medical Conduct, where appropriate, indicate no issues with the licensure of the health professionals associated with this application. The applicant has confirmed that the proposed financial/referral structure has been assessed in light of anti-kickback and self-referral laws, with the consultation of legal counsel, and it is concluded that proceeding with the proposal is appropriate. A Certificate of Good Standing has been received for the attorney affiliated with this application. A seven year review of the operations of the following facilities was performed as part of this review (unless otherwise noted): Oswego Hospital Oswego Health Home Care, Inc. (CHHA) Seneca Hill Manor, Inc. (NH) Franciscan Health Support, Inc. (LHCSA) St. Joseph’s Hospital Health Center Hospitals Home Health Care (6/11-6/13) Albert Lindley Lee Memorial Hospital (1/07-5/09) Empire Infusion, Inc. CNY Infusion Services, LLC PACE of CNY Oswego Hospital entered into a settlement agreement with the Office of Inspector General (OIG) and the Office of the New York State Medical Inspector General (OMIG) for alleged violations of provisions the Physician Self-Referral Law (Stark Law) and the Anti-Kickback Statute and they agreed to a settlement amount of $2,134,037. Most of the alleged violations involved the hospital’s alleged failure to comply with Stark law requirements for recruitment arrangements, office leases, professional service arrangements, and the alleged provision of discounted employee benefit plan premiums to non-employed physicians. Project #141051-E Exhibit Page 7 St. Joseph’s Hospital Health Center was fined six thousand dollars ($6,000.00) on May 27, 2008 for wrong side surgery. A brief description is as follows: Based on the findings of an investigation into the occurrence of a wrong sided surgery. A patient suffering from a right hip fracture had multiple fixation screws inserted into his left hip. The error was discovered in the recovery room and the patient underwent a second operation. St. Joseph’s Hospital Health Center was fined twenty-two thousand dollars ($22,000.00) on September 13, 2012 for fall/overdose. A brief description is as follows: Based on the investigation of two complaints. The first a patient with a known risk for falls who was left unattended in the bathroom and fell and a drug overdose patient who had an inadequate neurological assessment. The information provided by the Division of Certification and Surveillance has indicated that the applicant has provided sufficient supervision to prevent harm to the health, safety and welfare of residents and to prevent recurrent code violations The information provided by the Division of Home and Community Based Services has indicated that the applicant has provided sufficient supervision to prevent harm to the health, safety and welfare of residents and to prevent recurrent code violations. The Information provided by the Bureau of Quality Assurance for Nursing Homes has indicated that the applicant has provided sufficient supervision to prevent harm to the health, safety and welfare of residents and to prevent recurrent code violations. A review of all personal qualifying information indicates there is nothing in the background of the proposed members and managers to adversely effect their positions in the organization. The applicant has the appropriate character and competence under Article 36 of the Public Health Law. Recommendation From a programmatic perspective, approval is recommended. Financial Analysis Asset Purchase Agreement The applicant has submitted a draft contribution, assignment and assumption agreement, which is summarized below: Assignor: Oswego Health Home Care, Inc. Assignee: Oswego Health, Inc. Purpose: To transfer all of its liabilities and assets to Oswego Health, Inc. Assignment Price: $0 The applicant has submitted a draft transfer and assignment agreement of membership interest, which is summarized below: Assignee: Oswego Health, Inc. Assignee: Embracing Age, Inc. Purpose: The purchase of 40% of the ownership interest in Oswego Health Home Care, LLC Purchase Price: $300,000 Embracing Age, Inc. has submitted a letter of interest to finance $300,000 at an interest rate of 5% for a six year term. Project #141051-E Exhibit Page 8 Lease Rental Agreement The applicant has submitted a draft lease assignment for the site that they will occupy, which is summarized below: Premises: Lessor: Lessee: Term: Rental: 2,200 square feet located at 113 Schuyler Street, Fulton, New York Nellis and Peterson Properties Oswego Health Home Care, LLC Five years $30,000 annually ($13.63 per sq. ft.) Administrative Services Agreement The applicant has submitted a draft administrative services agreement, which they will enter when the change in operator occurs, as summarized below: Operator: Contractor: Term: Services Provided: Compensation: Oswego Health Home Care, LLC (OHHC) Health Care Management Administrators, Inc. (HCMA) Three years The Contractor will provide the following services: day to day management services to operate the CHHA under the direction of the Administrator; the administrator will be appointed by HCMA subject to the approval of OHHC; appoint representatives for the Committee; assist in the development of an annual marketing plan under the direction of the Committee; provide clinical leadership and supervision on an as needed basis for the OHHC CHHA’s staff or contractors; oversee the development and implementation by OHHC or its contractees, subject to OHHC’s approval, patient care policies and procedures ensuring that there is consistent evaluation/assessment, treatment and discharge planning for all patients by OHHC; oversee the development and implementation of a plan for efficient patient flow from hospital discharge, clinical assessment/intake, services required, supervising patient, with a goal of improved patient outcomes and satisfaction; arrange with St. Joseph’s Hospital Health Center or an affiliate for nursing, physical therapy and speech therapy services as required to meet daily staffing needs of OHHC; meet regularly with the Administrator of OHHC regarding administration matters arising out of the OHHC CHHA; assist OHHC CHHA with the OHHC CHHA’s compliance with all applicable requirements of the New York State Department of Health, the Joint Commission, the Conditions for Participation in Medicare, and other applicable regulatory agencies; assist in any Corporate Compliance activities, as necessary; HCMA will provide oversight for billing and collection services; assist committee, as necessary, with the review of the monthly financial statements; HCMA will provide medical records administration oversight services for OHHC or its contractees and review and provide recommendations for OHHC capital and operating budgets concerning the OHHC CHHA. Annual Fee of $76,584. The applicant will retain approval over the following functions relating to the CHHA:          Approval of OHHC CHHA’s operating and capital budgets. Independent control and physical possession of OHHC CHHA’s books and records. Approval and adoption of any operating policies and procedures relating to OHHC CHHA. Adoption of policies effecting delivery of health care services at OHHC. Authority over disposition of assets and authority to incur debts. Approval of certificate of need applications filed or on behalf of OHHC CHHA. Approval of contracts for management or clinical services. Approval of debt necessary to finance the cost of compliance of operational or facility standards required by law. Authority to hire or fire the administrator. Project #141051-E Exhibit Page 9 Service Agreement The applicant has submitted a draft contract services agreement, which is summarized below: Parties: Purpose: Services Provided: Term: Compensation: St. Joseph’s Hospital (St. Joseph’s) and Oswego Health Home Care, LLC St. Joseph’s will provide OHHC with the services and staff as described in this Agreement with the goal of maximizing operating efficiencies and realizing cost containments for OHHC. Administration Nursing Support/On Call/Weekends; billing, home care coordination; intake/referral processing; education/orientation to new clinical staff and therapy service coordination. 1 year with one year renewal periods $229,428 annually Operating Budget The applicant has submitted an operating budget, in 2014 dollars, for the first year after the change in operator, which is summarized below: Revenues: Medicaid Managed Care Medicare Fee For Service Medicare Managed Care Commercial/Other Total Revenues $563,750 2,243,681 617,040 545,765 $3,970,236 Expenses: Operating Capital Total Expenses $3,819,244 52,118 $3,871,362 Excess of Revenues over Expenses $98,874 Visits Hours 27,039 26,483 Expense and utilization assumptions are based on the historical experience of the current CHHA. Revenues are reflective of the current payment rates including the Medicaid Episodic Payment System. Utilization, broken down by payor source during the first year after the change in operator is summarized below: Medicaid Managed Care Medicare Fee For Service Medicare Managed Care Commercial/Other Charity Care 19.44% 45.36% 13.41% 19.79% 2.00% Capability and Feasibility The purchaser is assuming all of the assets and liabilities of the facility. Embracing Age, Inc. will purchase their interests for $300,000, of which they will finance $300,000 at an interest rate for 5% for a six year term. Working capital requirements are estimated at $645,227, which appears reasonable based on two months of first year expenses. The applicant is assuming all of the assets and liabilities of the CHHA, inclusive of accounts receivable. The cash flow of the CHHA is not expected to be impacted by the change in ownership in any material amount. The cash flow of the new entity will closely resemble that of the current entity after the transaction period. BFA Attachment B is the pro-forma balance sheet of Project #141051-E Exhibit Page 10 Oswego Health Home Care, LLC as of the first day of operation after the change in operator, which indicates a positive net asset position of $790,000. The submitted budget indicates an excess of revenues over expenses of $98,874 during the first year after the change in operator. Revenues are based on current payment rates, including the Medicaid Episodic Payment System. The applicant has indicated that the planned referral expansion efforts will be a continuation of those already in place. Oswego Hospital is the only hospital located in Oswego County. Oswego Health is currently the sole member of the existing agency and will be a 60% owner upon the change in ownership completion. As such, there is and will continue to be, a close working relationship between Oswego Hospital and the Agency. The applicant has indicated that they will employ 1.0 FTE’s Home Care Coordinator assigned to Oswego Hospital. In addition, Embracing Age, Inc., the proposed 40% owner, has a close relationship to St. Joseph’s Hospital Health Center. St. Joseph’s Hospital Health Centers CHHA currently has 3.0 full time Home Care Coordinators that work at SJHHC, and 1.6 FTE’s Home Care Coordinator assigned to SUNY Upstate Medical Center and Community General Hospitals. The Home Care Coordinators are responsible for identifying and facilitating the patient’s transition from the hospital setting at home. Identified patients with Oswego County residency that could benefit from certified home health care are and will be referred to the Agency. There is also continued efforts to expand the referral base at the other local hospitals treating patients from Oswego County, as well as community based referral sources such as Physician Offices, Long Term Care Providers, Managed Care Providers and Medical Home Providers. BFA Attachment C are the 2011 and 2012 certified financial statements of Oswego Health Home Care, Inc. As shown on Attachment C, the entity had an average positive working capital position and an average positive net asset position from 2011 through 2012. Also, the entity incurred average losses of $226,266 from 2011 through 2012. The applicant has indicated that the reason for the losses were the result of insufficient staffing resources and not maximizing the referral base. The applicant established a steering committee that developed a turnaround plan that focused on recruiting staff and increasing referrals. BFA Attachment D is the November 30, 2013 internal financial statements of Oswego Health Home Care, Inc. As shown on BFA Attachment D, the facility had a positive working capital position and a positive net asset position through November 30, 2013. Also, the entity incurred loss from operations of $9,843 through November 30, 2013. The applicant indicates that the reason for the loss was the result of not maximizing the referral base. BFA Attachment E are the 2012 certified financial statements and the 2013 draft certified financial statements of Oswego Health, Inc. and Affiliates. As shown on Attachment E, the entity had an average positive working capital position and an average positive net asset position from 2012 through 2013. Also, the entity achieved average operating income of $779,985 from 2012 through 2013. BFA Attachment F is the November 30, 2013 internal financial statements of Embracing Age, Inc. As shown, the entity had a negative working capital position and a negative net asset position through November 30, 2013. Also, the entity incurred losses of $199,619 through November 30, 2013. The applicant has indicated that the reason for the negative working capital position, negative net asset position and losses from operations, were due to the volume of subscribers not being large enough to support the fixed costs associated with promotion and startup of Embracing Age. The liabilities are all owed to affiliated companies. When cash flow improves, the liabilities will be paid. Subject to the noted contingencies, it appears that the applicant has demonstrated the capability to proceed in a financially feasible manner. Recommendation From a financial perspective, contingent approval is recommended. Project #141051-E Exhibit Page 11 Attachments BFA Attachment A BFA Attachment B BFA Attachment C BFA Attachment D BFA Attachment E BFA Attachment F Organizational Chart of Oswego Health Home Care, LLC Pro-forma Balance Sheet Financial Summary- 2011 and 2012 certified financial statements of Oswego Health Home Care, Inc. November 30, 2013 internal financial statements of Oswego Health Home Care, Inc. Financial Summary- 2012 certified financial statements and the 2013 draft certified financial statements of Oswego Health, Inc. and Affiliates. November 30, 2013 internal financial statements of Embracing Age, Inc. Project #141051-E Exhibit Page 12 STATE OF NEW YORK- DEPARTMENT OF HEALTH MEMORANDUM TO: Public Health and Health Planning Council FROM: James EfJ";[ shall be op~rated exclusively for tl1e benefit of Planned Parentl)ood of BU:ffaln and .Erie County, Inc.,. a New York not-for-profit corporation exempt from tax under Sec~on )Ol(c)(3) of the Code (as hereafter defined) (th.e "Aniliate"). To this end the corporation shall have tb.e power: (a) To op~rate .exclusively for charitable purposes; specifically, !o solicil, accept, receive, hold, invest, reinvest; apply, spend, admlni$ter, and tna911ge any contributi0 qs, gifts, bequests, devises, bll!lefits of tl;ust (but not to act as a trust~ of any trust) and properly of any sort, with()ut !imitation as to amount or value, and to use, disburse or donate the income andArr the principal thereof to or for the use or benefit of the. Afftliate, ils. progritms and purposes from tlme to time as may be deerne(l appropriate in the discretion of the Board of Directors of the corporation. (b) purposes of, .the Affiliate. To support the activities of; actlti cormectiOJl with, arid further. the (c) · In tlcle event that the Board of Directors of the corporation shall jetermine that funds or pro!lllrtY ca,nnot qe u!Wfully held or distributed to tM Affiliate, to hold or -distribute such funds or property to or for the benefit of suo!) oi,her charitable organizations as shall qualify under Sectiol1 50l(c)(3) of the fntem~l Re,·'enue Code of 198~. as amended (or Ute. correspondh1g provisior.s otany future United States Internal Revenue Law) (the ''Code") as the Board of Pirector~ in it.S discre.tion shall determine•. { (d) Do any other act or thing incidental to or c.dnnected with :he foregoing purposes or in advancement !hereof, but not for lhp pecuniary Pr<)tit or financial gain of its members, officers or directors ot of any private individual, except to the extent pennltted · ·· under Article 5 of the Not-for-Profit Corporation Law. FOURTH: In furtherance of its corporate purp¢ses, the corporation shall have .all general powers en~met~ted in $'ectiqt! 202. ofthe \'IQt-f~r;]'io.lit Corpora(iOrt Law' ·· FIFTH: l'i'lthi~g c.dntamed herein >hall author4:e the corporMon to establish, operate, construct, lease or maintain a hospital, o~ ((! provide hospital services or healfrl r.eliited serarion Ll\vf. 8l.GHTH: TlJ~ cotpo(atipn is a'):ype B cgrpop!tioh u11der Sectloil 201 of the Mot-forProfit Coiporation Law. NfNT~: Notwith;;tanding any pther provi~on of this Certificate, the corporation is be operated exeluslve!y for charitallle purposM within the meaning pf Section 50t(¢)(3) of t.he Cod~. and s)lall not c!ll'& on any activities n<:it pennitted to be. carried on by ~n organization ex.empt from federal income tax underSect.ion :SOl (¢)(3) of the Code, or by an organizatlqn, ~nlributior.s lo which w-e deductible unqei Sectioii l70(c)(2) ofthe Code. organi7~d and s)l~U . TENTB; No part or the !\SS.is; incoine, ptof\ts or aet e>Unings of the corporati\in shall be distributable to, or inure to the be~eflt of, illly member; t!wtee, d.lfector or officer oftl1e corpofiltion, or any otlierprivale (ndivi!iiial, ell.cepttiiati:e!;Sonab\e compensation maybep!ii.d foi services rendered to or for the corporation afl'ecling cne or more of its pur:poses, and no member, trustee, diri;Jetor Of oi,Iicer Of the CJTH: No substantial part of the activities of the corporation shall be devoted to the carrying on of propaganda, or otherwise attempting, to intlt!<'nce legislation, (e>;~¢pt as "'Otherwise provided by Sectlon 50l(h) of the Code), and the corporatio11 sb.a!lnot pa1tlcipate fn, ol intervene in (lricludillg tl1e publication or di.s:lrib.ution of.s:latements), any p.oliticat campaign on behalf of (or in opposition to) any candidate for public office. 2 .. ..' . . .... ..... ~~ -- • ·. T\VELFTH: _in the event of dissolution of the corporation, all of the assets and propertY of the. corporation re\1)ainin,g after 1he payment of the corporation's Jla)liH\ies shall be. distributed to the Affiliate; provided that the Afnliate shall then quailcy under Sectioll501(~)(3) ofthe Code subject to an order of a Justice of the Supn:f!1e Co\lrt of the Sita!)'. of State is hereby desl~n~ted as age~\ of the corporation upon whom proci!!ss againSt i.t may be served •. the post office ~ddre~s to whi.ch the Secretary the filing o£ the Certifica~e of lncqrporation of the Foundation for Planned Parenthood of Buffalo and Erle Cou.nty; Inc., dated D.<:cember 5, 2000. Sincerely, ~~--(?~~ Karen. S. Westervelt Ex~cl!tive Secretary j / ~ .. ~:' "· • .. CERTIFICATE OF INCORPORAl:WN or· .• .· TilE FOmlDAUON l'OR PLANNaD . .l'AkENTHUOD ·o:v'· RUFl'AIO ·AND ERIE COUNT):, INC. U.nder S_.ection 402 of tlle Not-for""·.-'frqfit corvoration La,~r ~c I. :""'\\. €'- ·t::;;\ j -Jl ~~-'it .. 0b 0 ~ I"""' 0 en 0 w c 0 0 t'\ 1:1:\ ,..,en _-a:~ . rs. 1···t ~ ~·· . ~· -~): tlf.~_;~r· , . ·.·4:'(' ~~ '!< c:> <.H "" 8 - ' ~P: ~.::.-4 ;;:;: \ '"0""' CJ g0~ ..·~.· <:J1 p <:') w e ..,. -< ~Q ~.. . • V,MDA'?. :;>-. 1 li;li~"'-~-·-\!'• '"-.. . : '·:! l;.':: -.1 QA~-J~JN -.&- .Mt-.l'U·I··:\' i:.t,l• IOOO.C'ATH.IWI;t.lo.l.. P.Ui.t!E ~i;i"8;-:~~_#.N:.,.f$:r~~<;1:1' :Sui"f.:<"LQ~,':Nt¥1' ¥-d."'~-, 14a®·.4Q96 0 0 . SJ o;;i-:i::o:i";;;~,.,;'::;f~~.:i-;i~~:.:..:..,_~"­ ENTIT'i ~~"_~~, 'l'~ ~otn!J)F.':rrql,'l-r'Ql.~ocfu-o)!' - - :bdC'JMEN'l'_ 'l/YPE:-t -- - ;;.i;:s'I'EIDJ:•JiEW.- YORK, .. ~4Elli'l'l'RQet:ss (o(}l;!ElSTIC NJ.'Cll) mAIIE - - . - .. .. . ....... J:>lJ'RJ?os:Es SERYl§Z~ COl~':~, *"· ~g SER'T.[pt, ·~~~lf.· ~~~~-~~~;;;~~:.;~~-~.,;~;~-~~2~~~:~~~~-~-~t :~~~;;-=~S·w~·~:~~-=ra~-~~~:citti~-~=#~i;~~~-~-~--=·-~-~~-~:~~22 ~~-~~~;~ ::~ t::!; ~ #,f)..M fi 1 06ii26'0Q~~q!) .. ···. ·t.ommss•FORl'RoCESS< Fli.SIJ:i:i/2'6;/2Q'?~ Otlll,.~MiY ·':-----,·/· " NY 1~207 -·. -_.-___________ ' CER'r COl':tillS lll\Nnti#G o.oo . (). 00 CliE~K' .. c~ni 1\Loo riR.i<\WJOwN 50;0;0 ·OPAL . R-.E:l"i:mlri o, ofu: • oo · ~o. ().00•' .. q, 00 u, oo . o,oo.: ,.. CEJ1TIFICATKQJr AJ,il£NJjMEkf m<'TQE .. c..iarnllCATE OFINCORFO.lM:rtON :.. · ·.····. . O.F ... ·····•: ·...····.· ·.• ····''.·• ·... · tll&]'(}uNn~TION Fok.l'~'E:O P~tnoo;O oF B1lFf!..UJJ.A\'I\D ~Nt.:;oumy,!Nc. · . . UNl)J]iR SECTIONS03 Ol'\Ti.ll!; j\jOT~FOR-l?:ROllTCORJ'O)tA:TI()i'!.J..lW: ·. . .·. 1, eWe uiiri:'}, ~.lhJ:~f~ W; . -· . --- -follows: . . . - . . . --... ' ""- ,-, --- - ' ' - -' --· -- ···trhel:l<~.ine'Otilie CI~Piir~ Gf~oand 'ti.~~ csJlliM J'hc,:.' . .. . . . . . . < '' . . • ·' •; . .. . . :·-:_::·:::-::~ • -_ '- -l ",. ·. :. . . • ~.:!~~~t~~[t~~~~~t~t.!i~~nfat!::~tt~~;:. . l. --- . -- _,- - - - ... . - ::~::~:~o~=:~,:::~:~~::u:=I~~~i:!;~;~~~e. ', " :_ '. - ', ' -' '' ' ' '.-_' ____ --. ---- ' - '' " '- - P~graph FlRST~fili~ C~fjc;ru; cifincoirfurati;>nofthe Gulj>Q~il!l·~ Mtehy .. . . tilium~ed to_.-_-.read iri-· full :ll\, follh»'s; ·.. ._,_ ; ,' :·" ' --- ___ ". Par~nthood ofWestefuNewYiirk,fne."•· 5. Tlie firsl.iUU ~grt~p~ ofP~r;l~aph .'IJimr) oftJ;e Ci'ltificite ofiiico"G'oratinn of the · Corporiuicin is lleriby lll~erld<'d to read in ihR a.~follgwll: . -' : _; '.: -: i·_ ---;-: ; '; ;r_'_::,:·; i .•......•..• -: .· .·.. :- \:::\;_?::·~-} '' -:,; ,--~ . •. Jaw an.d s1la:fte!>nliotle to be'._ a.Typj.>B-:--. eo$\raijbn ~fte~ilie fi.Gng. of:ihls .ceruficati of · .- -·-· '·· __, . - ' ·- • - ~ '. \ 1..: l '.•.·.:' ··.•. :..:c. ::::-~-'- ·--~- . " ' . . ~ ..," .. IDID: Th.··eCo.rpnration is organizeda11d.slm:il:be <'rpetalidexdtiS~l~ "TI. . . . -- --- - fui.thel>en¢1'tt of Pj,;nne,d F~~4wod ilf Wq;terl). oft11e Code (iisJwci~£ defined) Cihe ''Amli;cte'j, r(l tl~s encithe -;c-..-·-- ~; . .... 'ritlsCer1itxcate of A;nendtlleni of iile Cto!tiifeaie.ot' h'l.<:()rpor.ufolt ~,; !liJtborlzed by or ·· · •r;;J.ion UpO!f'W~O!Tl ~llr;:i.CeOip~eSs ~ @y l\CiJo11 ()rprcop_yofanp\ICJ,~~i!l: .· · · ' '--. . ; . .ST ~TE Of NEW YO!lK D£l'ARTMENT llf Hl:AlT!f tDSNING TOW~ BU(I..01!lll A\,1\ANY.Jt'f. 122:17. · Pu.;uuc HE.AlTnO'ouaotL · ' ._, ' -, .' '- -- ---- . _._' i: Mr. Peter J~ Mil!Pek. Esq.. . tf1Xo11P~hodfi.LP ' •·. o¥ fW;i; Suite 9QO · :;o.s.:~uth !!ear~: sui« · Ai~y, New York: UZ07~349'i . ~il'iUt~ly'; .. . .. . . . .. . .----~ Z&if~hn.lll1la W. Nteci>n · ·· Ex¢utive Stl;retlliy . /m>.:::·_:::_.< _::>- ,, <:-,=·_ ,~-:~-_:-:·:·-.:·:·--:-·-.- - :_·,-·<_:'·;.~-~, ' >-_-·_.:_.,-=:<:··.. :c.:•.-:._ · ~rci>ront corpQh!tign~~"'' appti>~'lng ..\,~;.,.,. Sertrfi~ie QfJn~ ()is..$& .. .. .-.I' , -- .. - . , , - ---- - -· ·---·. --···- ·- ....• " .. •··•· Cqq,ptation ~4 ~Mni! \llo nJlllgn . -: ·' - - -- __ ' --- - Lnw; and ~fli~dment design.ated ru; ExJ1ibii B. t1lciell4 illlil it ;~pp;titring tliilt too Attorney Gene,.al of flie .. ·. · -. . '-- -- _--. ' •,' _, _- -· -- --' ,.-_, ---.- ., .. ··-·.·: ··'· . "---, __:<· ·:'·:.- _,_·;:··.-::-.:-::-:·:· -_ .. sl&t~QfN,,,,., . .. _. . -··:---.. . . '.:. - - ·-- - ' - - _,, · -. - Jlcld tlieroon, inld it appea.-'inglliaf tl;iefut~ofsaid l;;(IIJ)o,ration illli\llit:ptiblii;ihtedrunen.Jm~ll!. it is - ORDERED, ihattill: wnend!jl<:!)lS r~ 1:11.:: d)rpi1ralion 's Ci:,i\.fiGatb<;>f ltlrorpiJl:iitioit .~hil>it£4 (\i.,r<@hc allli thp s~drul~# will1 ~eefiJ'!ot~FPR·ittoFttCO}tfQRl'UW{J~\V ?nW NLXON l'EABi:mY LU' . . 3QS<>i>thPeori~ Albany, NEivr '{ntk 12201 .. (5l8)427·2,<>?Ch . (p.··.• EXHIBIT Public Heaith and Health Planning Council Aggravai (To be obtained.) PROPOSED VERIFIED PETITION In the Matter of the Application of THE FOUNDATION FOR PLANNED PARENTHOOD OF WESTERN NEW YORK, INC. For Approval of Certificate of Dissolution pursuant to Section 1002 of the Not-for-Profit Corporation Law. VERIFIED PETITION TO: THE ATTORNEY GENERAL OF THE STATE OF NEW YORK OFFICE OF THE ATTORNEY GENERAL Main Place Tower~ Suite 300A 350 Main Street Buffalo, New York 14202 Petitioner, THE FOlJNDATION FOR PLANNED PARENTHOOD OF WESTERN NEW YORK, INC. (the "Corporation"), by Daniel Sharpe, Chairperson of the Corporation, for its Verified Petition alleges: I. The Corporation, whose principal address is 2697 Main Street, Buffalo, New York 14214, was incorporated pursuant to New York's Not-for-Profit Corporation Law on May 3, 200 I. Attached hereto as Exhibit A is a copy of the Certificate of Incorporation of the Corporation (together with all amendments). 2. follows: The names, addresses and titles of the Corporation's officers and directors are as Name Daniel Sharpe Rev Jeremy Lopez Carirna EI-Behairy David Brock Gerald Marchand J. Bradley Rauch Tara Vogel Ileah Welch Directorffitle Address Director/Chairperson 2697 Main Street, Buffalo, NY 14214 DirectorNice 2697 Main Stre.et, Buffalo, NY 14214 Chairperson Director/Treasurer 2697 Main Street, Buffalo, NY 14214 Director Director Director Director Director 2697 Main Street, Buffalo, NY 14214 2697 Main Street, Buffalo, NY 14214 2697 Main Street, Buffalo, NY 14214 2697 Main Street, Buffalo, NY 14214 2697 Main Street, Buffalo, NY 14214 3. The purposes for which the Corporation was organized, as substantially set forth in its Certificate of Incorporation, as amended, are as follows: To operate exclusively for the benefit of Planned Parenthood of Western New York, Inc. (f/k/a Planned Parenthood of Buffalo and Erie County, Inc.), a New York not-for-profit corporation exempt from tax under Section 50l(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). To this end, the Corporation has the power to: (a) operate exclusively for charitable purposes; specifically, to solicit, accept, receive, hold, invest, reinvest, apply, spend, administer, and manage any contributions, gifts, bequests, devises, benefits of trust (but not to act as a trustee of any trust) and property of any sort, without limitation as to amount or value, aod to use, disburse or donate the income and!or the principal thereof to or for the use or benefit of Planned Parenthood of Westem New York, Inc., its programs aod purposes from time to time as may be deemed appropriate in the discretion of the Board of Directors of the Corporation; (b) support the activities of, act in connection with, aod further the purposes of, Plaoned Parenthood of Western New York, Inc.; (c) hold or distribute funds or property to or for the benefit of such other charitable organizations as shall qualify under Section 50l(c)(3) of the Code as the Board of Directors io its discretion shall determine; and (d) do aoy other act or thing incidental to or connected with the foregoing purposes or in advaocernent thereof, but not for the pecuniary profit or financial gain of its member, officers or directors or of any private individual, except to the extent permitted under Article 5 of the Not-for-Profit Corporation Law. 4. The Co.rporation is a Type B corporation. 5. A meeting of the Board of Directors of the Corporation was held on December 11, 2013 (notice being duly waived in accordance with New York law, a quonun being present at all times) at 4:00 p.m. at which a resolution was duly passed by the majority vote of the Directors of the Corporation adopting a Plan of Dissolution and authorizing the filing of a Certificate of Dissolution in accordance with Section 1003 of the Not-for-Profit Corporation Law. A certified copy of the Plan of Dissolution, executed by the Chairperson of the Corporation, is attached hereto as Exhibit B. 6. The sole member of the Corporation, Planned Parenthood of Western New York, Inc. (the "Sole Member"), has appr~ved the dissolution by written consent. A copy of the written consent of the Sole Member approving the dissolution is attached hereto as Exhibit C. 7. A certified copy of the Corporation's Plan of Dissolution was filed with the Office of the Attorney General. 8. The Corporation has no. assets or liabilities and its final report showing zero assets and zero liabilities has been filed with the Attorney General. 9. Approval of the dissolution of the Corporation is required to be obtained from the Public Health and Health Planning Council of the State of New York, and such approval is attached hereto as Exhibit D. 10. With this Petition, the original Certificate of Dissolution is being submitted to the Attorney General for approval pursuant to Not-for-Profit Corporation Law Section 1003. A copy of the Certificate of Dissolution is attached hereto as Exhibit E. [Remainder ofPage Left Intentionally Blank] #18761 16.2 - 2- WHEREFORE, the Corporation requests that the Attorney General approve the Certificate of Dissolution of TilE FOUNDATION FOR PLANNED PARENTHOOD OF WESTER."' NEW YORK, INC., a New York not-for-profit corporation, pursuant to Not-forProfit Corporation Law Section I 003. IN "'1TNESS WHEREOF, the Corporation has caused this Petition to be executed this _day of , 20_ by: Daniel Sharpe, Chairperson VERIFICATION STATEOFNEWYORK COUNTY OF ERIE ) ) SS: ) Daniel Sharpe, being duly sworn, deposes and says: I am the Chairperson of THE FOUNDATION FOR PLANNED PARENTHOOD OF WESTERN NEW YORK, INC., the corporation named in the above Petition and make this verification at the direction of its Board of Directors. I have read the foregoing Petition and know the contents thereof to be true of my own knowledge, except those matters that are stated on information and belief and as to those matters I believe them to be true. Daniel Sharpe, Chairperson Sworn to before me this _ _ _ _ _,20 ~-day Notary Public . EXBJBIT A Certi?cate of Incamomtion .' N; ':i: S, DEJ?ARTMEIIT OF STATE . ' nt"VISIDN OF COR!?ORATIONS AND STATE RECORDS' FILING R.ECEIPT ~ =====. = ==:::::-==~==.;:c~ :::.::= ::= ::!_==~ = =::::-== ===== =.1!!!: =:::::;:;.:o;:n:~ur;:o o =. =====:;:;;:;:;:;;;;::;.::;::::;:;::;::::.= =;;; c; = =;;a:====·&c~:::: = ::i=:==.= ~'l'ITY NAME: THE FOUNpA'.l'ION FOR PLl\NNED l?ARI'lNTHOOD OF BUFFALO AND Elll.IE ::::: :::il COUNTY, INC . IlOCUMENT TYPEl: INCORJ?ORATION (NOT·FOR:-PROFI'l;') 'J;'YPE: B COuNTYl ElUEl SERVICE: COMPANY: EMpiRE COlU'O_RATi;: & HlFORMATION SERVICE: ~~ <= ===~====== ==::::.= =.::;:; SElRVICE CODE: i2 ===.==_:=·=.= -=-=__=_;:;0,.;;-c= = =:==.=::::;= == ===~=:o:J=== == =.= =.===-===-=.~!~~~= ===:t.::.=it~-==== i:ii:l =i: =' ]fiLED: 05/03/20()1 DUAAT!ON: l?ERPETU;I>.L CASH# :·0.10 .503000S65 FILii #: 010,503ll{l~83;! .. _. ,.. . ;,._,... __ ADPRZSS FOR l?.ROCESS THE CO:Rl?ORATIOJ::T 2697 MAN. STRBET BUFFALo. NY 14 214 REGlST;Ell.ED AGENT • " • • :-!,:; FILER_ DAMON & MOREY LLP 1000. C."-THEDlU\.L PLACE 29B W\.!N STREET BUFFALO, NY 14202-4096 ' FEE:S piLINQ Tll.X CERT COPlES lll\NPLING . • ~ ... EO.OO 75.00 0.00 0.00 l(j. oo 25. O.d PAY!~ENTS 120.. ____ ...__0 ....0 CASH CHECK o. Ob C.li'lll'..G:S 0.06 ~.. QQ o@w!JQ~ ElLLED. 1:l1L 0.0 REFuNu a.Gb o.• d.b ;;;;;;-:tf;;::::::Ol::==-.==::;;-::;::;;:;;:;;:;;:;;;:;;:::~·;:;;=;:::;;==;:;;:;;:;::======:=.=:.o:=:;::==o:;;""=============;;;l,'====~~=:--===e:r..e:~===-=~·=~=- I?OS-102 5. (11/89) OF Tl-IE FOUNDATION FOR PLANNED I'AAEN1'l{QOD OF BUFFALo AND ERIE COUNTY; INC. Under Section 4{)2 of the 't--ldt-for-Pto!it Corporation Law THE UNDERSIGNED, being a natural person of !he age of eighJeen (18) )'eilrS or over ru1d desiring to form a. not-for-profit corporation pursuant to the Not-for-Profit Corporation taw of New Yritk, hereby certities: , .· FIRST: The. name of the corpo!"iltlmt is TIJE FOUNDATION FOR PL&'lNEl) PARENTHOOD OF BUFFALO AND ERIE COUNTY, INC. SECOND: The corporation is a corporation as defined in subparagraph (a)(5), ()f Section 102 of t!J act ils a trustO:e of any ti'usl) · and property of any sort, without limitation as to amount or value, and to use, disburse or dotlate tlie income and/or the principal therporation, (b) To support the activities of. act in connectiou with, arid further .the purposes of, the Affiiiale, (c) · In the event that the Board of Directors of the corpcration shall jatermjne that funds or property Cl\tmot \J~ use!illly held or disiribut~ to thll. Affiliate" tO. hGli! or -distribute such fJnds or properly to or for the benefit of such ather charitable orgaqizations as shall qualify undM Sectiou50l(c)(3) of the. Jntemal Revenue Code of 1986, as amended (or lite corresponding provisions of!lllY future United Stales Internal Revenue Law) (the "Cooe'') as the Board of Di~ctors in its discre.tion shall determin.e . { (d) Do any oth.er act or thing incidental to or coanectecl with tile foregoing purposes or in advancement thereof, but not for thepecuriill!Y prqiit or financial ga;tn of l~s members, officers or ditectqrs or of any private individual, eKcept to t~ eKtent permltte.d under Article 5 of the Not-for·Profit Corporation Law, · ·· FOURTH: In furtherance. of its corporate purposes, the col'p(lratlon shall have llll general powers enumerated in &ectlon202."?fthe No\-for,profit Corporatii:m Law; · ·· FIFT}l: Nollllllg contain~ ~ereln sMI\ autl\t1ri+e the cotporatipn to establish, operate, construct, leasee or maintain a hospi!al,. or !o )l~avide hospital services. or health, relatration L~w. ·· . Bl.OfiTH: TlJe COrpther pJivate indjVld1l~l, shail be entitled to share in the distribution of any of the corporate assets upon dissol1ltion of the cprporatJon. . ELEVENTH: No substantial part of the activities of the corporation shall be devoted to the carrylng on of propaganda, or o.therwlse atteni~ting, to influence legislation, (e;wept as "'Otherwise provided by Section 501(h) of the Code), and the corporation shaH not partlcipate fo, or intertene in (including the publication or disftibutipn of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. 2 ol'.~ -· o. .: ~-~ -- 1 -. TWELFTH: In the eveot of dLsso!ution of tile corporation, all of the assets an~ pr6p¢:ft]r of the corporation remaini~g after the t,Jayment of the corporation's lia)lili\ies sl!ai.J he. distributed to the Affiliate; provided that the Affiliate shall then quaiify under Sectictn 50l(c)(3) ofth~ Cod¢, subJect to. an order of a Justice .of the Supi:eme Qo\ltt of the State of New York. lf the Affiliate shall not so qualitY at the time of dissolution, then disiribution shall be ma,!e to such oil'!~ .organiza\io.n or organiz&ti(lns ·'IS. cshl)ll at the time qi)~ify as an e~empt organization. or organizations under Secti.on 50l(c)(3} of tl1e Code, subJect to ar1 otr each Cl\Xaple ye;ll at such time 4n.;! in s:treh. tax on .undistributed income. under Section 4942 .of n\~.nner as not to subject the corpOration to the Code; (c) nqt retai.n any exce}s l:!~iness holdings in such trianner as. to subject the corporation to tax under Section 49.43 Q'fdie Cbd~; (d) not m:a!\e any mvestm¢ni.s .i.n St!ch m!Ul1ler as to subject the corporation to tax under Secdon 4944 of the Code; and (e} Section4945 of the cdde, l)Oi make an.y. ~xahle e: '-" ~- ~)'>': -~-~ :;;s::·o §~ ...,.., o::E ~ Ot . w p <:::::> e -r.t....::: 9. ~Q ~'·~l·Dn'~'-:~ -tJti~\[\1 - . ,,;·n! T/ ·.: 1 0 0 ..,J 0 0 -~" -~.,·c ,~.' ~-, [if~.~Jtl jj/ .. ·.· ~-- .i :., .. ····-~ .0AM"Pf'.I-J.'I\;.--.Muk.Ih.'- f..-J:,t• 1000 C,r.,.tH£08~1.. P_u.c.:a: ~-'ii,$;~~...1.N-".5:r_~~ ;SuYFA(Q_/til·~~-'tQ,JiK:, I ~~"':4Q9:5 S~ ,, . $' -_,, - - ·r-. .. •- ~ . r-'' . ;t.';{_ .J~ .•-; ·. (:.:~-~~· ~- ····' . :· : -:.4.:'1" - - '; --~ ciJ. CJv ~- 'l' :s•. PEPARTMENT \Jli' ~Tl\Tll br'V:rstoi<' oil' ooR'PonA-r:.t:i>N~ i.\'!:l sti>:'l'l' .!L ~.¢oEDs •F'It.;J:NG P..E(;El:p'l' ;;<~ ~ ;.;,:~ci:.'::r:.;..=~=~:~~ ~-~*=~~;;:::._~·.:...\cildt:'::i:;·,k:;;;~~~:=·~~\.;;'..;._..._:;.;:~z:~;;;~=::="""-;;-=;;;;-:::::;;S:i~'.i#·~~~~~=·~=-=-~·=-'~~-- : ft1riii ,~ra: i~ B'Oblll!!lic'r:J:brt. li'().l< l?LARNEO P#\ll.ii:l'Utooi::l O;F ~>~'l'E)l!f 1'EW YoRi<, · · IN:C.• Dda.lm;JN'l'•.T'h'Bf··~l:JMENT •(J){}f~Tta···.NF!?} Ptl'Rl?OS.ES ' l?ll.OCESS Nl\ME ..· -- S~V:ICE .. CODJ;J:. 00 :·:·:~~~~~~£~~~~-~~~l~-~:~~~-~·L_:~~;,i~,i:2=~:~~~i_L=_~~:;._;:~~~-~~-~-~-~~-~~~~-=~~:~-~=.,-:t~:~8'~~:~~~L~~2-~~--~·~~-~~:~::--:i_: fiPED: l;!/~6/i{lg~P~'Ic'l';li<):J:<:***'~"** ·~· · p:.t§Hlf:Q!lJ,22GQ1JOG'l'i · E'~LM' #: P.61~:2iSOOtrG09 ···•·.tiDoru;ss ¥0~ ~it()Cl'!;l.S •· ·• ·. •·. •· . Nl\iiPN. PEABODY Lt!:i .· ..·.·. ··•·• · ? tl •SOWH i'EJ'RL STREE'r ..~BAN"¥-,';·_~ '1~·.2.6!- --···- '.-- ;NY-_ -- R~r~'l'truiD .--~- AGID-'f _;,;;:-2=~;::.,#=;;~~~~;:~-!!:!::~:zo: i'.tilt~~:"'"""-~~~-~-:-_:_:.:;£,;;!::;-;:;:!:;-~~:~~17'::::~=:::::.-ii!::::.:'!i.:=t.~i;,;;~.,.-i:!:!..h3~it!!_~~-~~==-.==-b;:;:::;::::=:;:::z~-~.:.ii::::=-~~: .-!. l)'E)l$ 90i0Q Pl)~');l> 9a,oq -._,:.;_ !f:r:.LJm. · ~-= ~!:EXON PEABODY LLP ? o soU'I'H P!W.:!Lti!G ~o.oo .. cMa. o.oo· Q ; ()(j CFIEC\r CHAAGJS :l.OAti DAAWDvwN st ~ ao: 1 oPAL B~l!'tmri . ()' (') t'f >·· O•oQ.·· o. /0:-tf-. :· · c!]o;I:HF • n~ (}\) : CERTJYlCAJJ!: {)Jf A.ME~Oll~ • . .oli'T'QE . C:Jj:R:r~·ii:;A_'l'E ()r wdolll'oliA'I'i~ oli' • Tln;:i!O!J'NDAXIQN FOR P~DPAmtN-t.ffoOboF · lnJFFALOANDEruE:Ctilll'ltY";n.ic...... - - -. . - ·-·" - , ,,- ,-; , ,_,-. -· , . -- ·;.·_, ·- ..•. -. ·------ ..-, .. ·' - .. ·c~. _,_, __ ,._. . UNDElRorttttinp{)~tltiNtt\W. ~ tl1e mi&~rSi~<4 ~ipg ~l're$iden1 oftli~ B~d ot,~!<'m ~f'lli~ f'&lllldaltgnfor Plill'Jicd Pilrn.is•·a~~brffrloe·.~·fit coro,of,;uon taw and is llt)#B e!JrP"(.at\oJi ~rilierSeetiPa20t o{s~t! · kw after th£< ijlirig of:this Certificate .qf . ami shall oontini!C ;o '" be a'l'~ B~o~im .. .. -: - .-----:-- .---- '· ''' .--.---, -,,. ··'- .: ,'. .-- _.-. ___ . - _. ' - - .A!rteridment 4. iarag.:aph i!RSToftlle Certi$ate ofincorpbrl\lionof theC.ol}Wl'atioit i!ih~lly ·. ·. ru:pende.d t<:> read itt full Iii fl:!I!~~ .','FIRST: \1l;l tillpl,e qfthe Corpm'ation ii The Foimcl~tidQ fer l'lpetll.teJ>tlhlm.~xun&rSd~(ie (as lietelr.Jliler ~eflli¢£1) (ihe ''Aft11~1i:h/ Io ~~ t!tdth~ .· .... C!:il)l"tatiol) Shall )lltve tlie PO\i;et" 6;' Tirl" C~C~R~i . pfth~ of~~w i'o~kllcr¢hy ci6sl~t:,~:i, 7. · .. . Tile Secrf;tacy t;fStat¢ State 1M "Sent 9ft1Kl. · .~o.IJ)Qration)\P<)Jl \v)wrli·~i~ . 9fp7s~·~ll1ltll~onor.pro~effi!G~agatn~~ Co~piti9A maybe m;\ved.. Th(o po,;t,offiee ,;dtft¢ss;toW1Jiclttlie ~ of State J;ha]l :j:·;.-:=:,·:-:1··:·_ ;·- :y;·;~··:'i STItT!! OF NEW Yil:AK · p$'ilirrMOO rll'H~All'* l!!lllNUi6l1lWER WllllllllJ . · ALBANY, ~~. r: 12:ct1 · -_.0_ -,-_:- w,J'~,tbdill()i;k, Esq. ::.:'·~,:-('_::):?: --:,--' · '.):·, . NlxTOT~FOR-PROFI'l;') SERVICE COMPANY: EMPIRE CQ)U'ORATE TYPE: B COuNTY! 'ERiE & INFQRMA';!'ION sERVICE: SERVICE cohE: 12 ~~-==!" =c~::=~=-==== <::1::::: t:; ;::;:;;:; ;:;;-:;;_"'"' =::-=·=-= .:£= _=.011!1-.c = ~; :;;_: === :=1 •====-.:::::- :=;:::::;:::.:::~ = = = ===;:;:;=;= ===-=""~ i::f~=il::tn::>;:= =.=:::::::. !?ILED:OS/03/4091 DlTAA.TtoN: PERl?ETU;l\L CASHif:: 0.10.,503000865 FILM #: 010SI)3e~9B~ 2 ADDRESS FOR P.RQCESS -:- -----~--- ,.._ --- .... -- THE CORl?OR.'·TION 2697 MAN' STRE.ET BUFFALo, ____ NY 14214 .. REl G lST:ERED .AGE]!;T_ .... ___ ______ . • •• +" FILER_ FEES 11(),00 P.'\YMENTS llQ. 00 -------~--=- DJiu\lON & !«JREY LLP lDOO c.>miEDRAL PLACE 298 MAIN STREET . . BOf'FALO, l<'Y 14202-4096 i"ILIN.G T!IX CERT COP!ES !:lAJ.>IPL!NG 75.00 CASH 0.00 CHECK 0.00 c.l1ARG$ liLOO DR1\,WDQ'iffi BILLED. REFUND zs.oo 0. Otl ~:~g lliLO.O 0.00 0.00 =_=::=;c-==!:;;;.==-=-====::;:::::::~::::~::::::;::::=::;;:;:::::;:::::::::::===#:::D~==:::=;:::;=:;;:;=::;::;:==;;::-::::;·===•~~====<,::;.;::;:=·=="""-!!:!=i====t==l:!:i• DOS~iQ2 5. (1l/B9i -~- ' OF TJ{E FOuNDATION FOR PLA.NNED PARENTHOOD OF BUFFALO AND. ER!E COUl'.'TY; . . INC. Under Secliqn 402 oflhe Not-for-Frptit Corporation Law THE UNDERSIGNED, being a natl.Lral person of t])e a,ge. of eighteen (1 3) y.ea!S or over and desiring to form a oot-for-profil corporation. pursuant to the Not-flwProfit Corporation Law of New York, hereby certlJ:ies: · •". FIRST: . The name ofthe corporation is TilE FOUNDATION FOR PLANNEl) PARENTHOOD OF BUFFALO AND ERIE COUNTY, JNC. SECOND:. The corpoll!lion is a corporation as defined In subparngrapu (a)(5). of SectiQn 10.2 of!])~ Not-fet.-Pro.fi~ Q9rpora\ion Law. THIRD: . The c~rporation is organized al)d shall be operated eJ<¢lusively for tbe benefit of Pla.nned Parenthood of Buffalo and Erie Cqunty, Inc., a New York not-for-profit corporation exempt from tax under Section 50l(cX3) of the Code (as hereafter <)efmed)' (thl: "A ffi Iiate"). To thi_s end the corpo:ratioo shall },live the power: (a) To operate .exclus)vely for charitable purposds; specifically, to solicit, accept, receive, hold, invest, reinvest, apply, spend, administer, and ma;mge any contributillc He~ltf1 Law, or ,in adult care facility as defmed in and .:overed by Ariicle 1 ofthe Social Services Law. SIXTH: Nothing herein shall authorize' the cul:]Jora!ion to engage I!i the practice of meoicil)e .,\l''. '· mmrr!f: T4e col'pQratioil is, a. t)lpe B c;0rpolf!tion u11der Sectcon 201 Prafit Cor~oration Law. N!NTti: o,f ~he N~t-ft'li- · Notwith;;tiirldlng any other proviSiqil of this Ckttificat8, the corporation, is mga~i~ed and sh~ll be opetated eJ<.clusi;.:eiy for charita~le purposes. Wi~ the meaning of Set;tion 50!(1;:)(3)oftM Code, and s]lail not carry Qnny activlties n.ot pennltted to be carried on by an organization exempt from fecl\!ral income tax underSectk>n 50!(c)(3} ofthe Code, qr by an organiZlltion; conlributiQns lo which are ded11ctible un(jer S¢ctionl70(c)(2) ofthe.Code. . TENTH; No part of the asse.ts, income, pro±its or net earnings of the corpordti9n shall be distributable to, odnure to the benefit of, any member; trustee, director at officer of the corporation, or any other private h1dJvidilal; e){cepttlilit rel!So~able compensatio11 may be paid for services rendered to or for the corporation affecting one or more of its plliJ'Oses, and no member, trustee, dli:;:etor or officer of the cofil9ralion, or Cept as -otherwise provided by Section 50l(h) of the Code), and the corporation shaH not participate ln, or lnter't.ehfi In (inc!udirlg tl;e publication or dis!tibutlpn of statements), any political cimipaign on behalf of (or in opposition to) any candidate for public office. 2 -- • ·. TWELFTH: .In the event of dissolution of the corporation, all of the ?SSets a.;d p!Qp~rty· of the. corporation re111aining afier tlte payment of the corporation's liabiliiies shall be. distributed to the Affiliate, provided that the Affiliate shall then quaiify under SectiGn. 5(l\ (c)(3) cifthe Cod¢, subject to ~n order of a Justic.e of the Supreme Qo\ltt of the St;lte of New York; ff the Affiliate shall not so qualify at the time of dissolutio.n, then distribution shall be made to st.lch o.lhi!r .orgalli~tion or orga:nizlitipn'.; as shijU a.t the dh!e ql)!l.lify ao an "*enipi orgl\niz;atio~. ~r org:anizations under Sec.ti.on 50l(cX3) of the Corle, suoject to an ot'd.~r 6f a Justke gf t,b:e Supreme Qourt of the State of New York. THIRTEENTH: lnll.ny t~al)le y~a:r in whlc):l the corporatipn is<; private fo~ndat~o.n as defined under Section 509 of the Code; the corporation·.sbaJI: (a) Section 4941 ofthe Code; not engage in any act of se!f"dealing that is subject to tax uno~t {b) distribute i.ts income lqr each tl1X•iil~ ]tar at such time~ in sud1 nt;~.niler as not to subject the corp.oratlon to ta.~ on lindistributed income, unde~ Section 4942 of the Code;. (c) .not retai.n any exce,;s b.l1S.iness holdings irt such manner as. to S(lbject the corporation to tax under Section. 49.43 of the Code; (d) not mlll\e a!l.Y irivestme!'ts .i.ri such mllh!)er as to subject the corporation to tax under Seciion 4944 of the Cod"; and (e) Seetioq 4945 of the Cod¢. ~oi make any taxabie expenditures, that are subject to ta~ und~r FOURTEENTH: The rutn1es and addresses of Board ofDirectors of the corporation are: tli~ persons constituting tl;e inifil\l Address David G. Brock. 49 Northington Drive E. Amherst, New York 14051 Jmet Wis.baum 130 Greenaway Road Eggertsville, New York 14226 One Marina Park South Elizabeth Clatk Bufl'alo, New York 14202 44 New Amsterdam Avenue Robert W. Constantine B~ffalo, 3 New York 14216 FIFTEENTH~ Th~ of(ice of ihe corpor~ion. is tp be locltle-. -; ..1 0 0 '~·~ ' . : ':-•:fi 0 ."""'Cl-'~ ,;:. f>AM~)N.,.~'-_MUlU{\' .. s:.l_,t•· tOoo. C>o~.THittlfll:t.l.. P.L.,..i.alt ·i!~~ta(f4AJ;.r$r~e.t:"t . :St.~'Fr..to.~Q!i;'fi·tw.Y-0.R~---1~·--4Q9.6 0 0 . S ~ Q(j t;::'' •·. '·.- _·: • t. ; I' ·.;;, ·, __, •• ! . ~.. · .-':.· . tQ. .··.-. --~.--.;:-.-. ·~··· .~,.'i:f ' . : - w ·~ fl. I y. ' . ·.· C;i!:R'tiFICA.:tl! OF AME.~:m.fF..NT.· .... -- --· . - .. - - ,_ - '·- - · - ' ·.. OF· - - -- . . . cllitTI.FicA'i:E o:F lrkiifu>oiL\tiD'N ol? " . ·-.--. -. . -<-.c.-''· - ' - - c. . · .. -. -. - -- .. x~,vo~t.l'ru1S~o~r~E~l'_~6o~.··· ·biUiUFli'Al.,O ,U.'D EJW;i t:;OUJ'irt¥; n.,'C ··. · .. ON!)~~s~X'fiON~030F'tttjet .· . · Albany, New. Yml< 122!}7 · (~l&l42.7c2-' . E~l'l'r'.t"f N)Ui!E; .~ ~QUJ:li)l\,T!Ol;f FQP; l?'LANNJ>!:!, Pft~OOJ) OF i'lE.S'l'f;!Q STRlR~S CERTJli'ICATE 0~ Al\1El'IDMENT . ..... (}JtiWl . . ·.· . ' . c~a'i1FtCAUOFJN(;QRPbluiriqr.f OF ...• TaEl'OtJND~TrON ~'()RFL~n l':UutNtiJoon OF riic ... ll~!Jl!Ai.O.AND.ERl&tZOUNTY ~ ' . - . ' - .. - ' ' ' ' - _, bd11~ - -- . --· ' ' jl;_ - - --- m~ard .. Ul1c unsrii;nea, !lui. Premdent of the 11fPirectofs o.fThe Folllldlldon tor -: _-____ ,_-:' ,._---.-' <--·:.- _,__<-:-:. ·.Planned,_ PatenthoO\l. ofBtrffaioai.4ErfeC.miniy,Inc,.(the. ''Coiporatton')..;:lri n.k-eby. certicyl!S · '' ·:· . ·. . ' . -' _ ::----~--- .. -- . :::-::>_: -- --_- -: .:-: ': _·- . . ,___~:· '- '_ -' __-__ '_· ··: ·:: _·-.·-. :. :- -- . '' -. .::--_-: :---_,-.' '-"~----_-'_:"_ ·: _ >_-: -:_.' - - ~:; - - ' -_ ' - ' - '' - ' - ·.Mlliws: •. L . 3 .. ' . 11ie C<>rJ>ocirion is a~q1ora)i!>~ ~ d~~edm$u~~ph ~a){$) (lf~~ lOZ of!he Nof:"for~i>rnftic.)rportUlori Law and!s ;r Type B~\Ionun!let ~tipncZQl "fSfli4 .. Jaw ,..,.(d ~al~ c?ritinuet(l•1Je ;r TyPe:B ~Qil)Ora#on ll)iertlw ~ ofthis. Cerlilkate nf · A!"" rn:lmflneofllilrllllon of:ille.tqlJl()rlltl(ln iS h~hy . ---- 5. .. . '' ----- --:. -- - - .. . . Tl~eifirsttWli"'JJill~'Wl<'-'f!:am~p~ 'THJ}IDofthe e«~Clite of.incotpOni!il}n nfthe ccirj:mratiol) iS 1lcyi,J,y ilri\:etld\!d. to relilt in fuU ru; fnll!lW5J · ... ''lli}.RD:. The Ct>i'poratlon isor!l!'ni2,d and ~hall be 6pi!:tllt-cliJ.s!Vely. thrtl1e bei'.eat ori'1linnl>:l i>ar~tifudod nf\'ic&em 'New %;1<, me;, a N'!lVI.; York rtot.fot-profltc6tP6rati6ll ¥mpt from'~~~•r S~~n5tJ1(c)(>)··' · •ofih~: Cod$' (ashe~"kfi'er defmroj{\he '....1A;fhik~·')> T" this 1IDd t~ .. . ' --- -' ' '·' '.- .. -- ---- _,___ .·-. ·'· ·- --· '·· ... -'·- -:.·--.-- -- -·· ,., . ·-----' -- '-- _._ -.. ·:-- ' .,, -- ' - -- : ' '- -•. ' ' ' - -- ---- '·'- ' - - " _- '. -.- _,-' -··-·- ' ' - ._- ., • - ', . ·'- --.-. - --· ' ' ·.-. ,., .. - --- -;o._, - :.--.- - '- - ._--. ' ', . . - . ' ~~ c!'ntil.¢atepfAmoo~e!l(of: !hi dcrli~cak oflll~rptlratiolt·\tasautllorlicd bj' •. · 7,· ..• ~ctio11 ~~l?~"'~.l ~f~¢~r~an~~ l'l~nll>i'ts()~Ine¢~Pn,• · i'h~ Se~etilry of~1a~ pftheStateofNew Y~kis n~~byde$\g~~·#~ ag~(~f~ Qqrpot>\tion "JlD!i '"hPro servioo ofprocess iJ> lilly ~~tion orproceed.'hg aj>Mn~f'i4e• • ¢oqmration rpay be s~rye{t 'fhe p;st c~~e '!ddfesS\(>;Wlfi~~ th~ S~e~ ~t S~t~ $lUUt . mru1•a eopy oia:tl~· socilf.roC.:Ss.il>: .• --·' --"· . .. - ASPf!!tL\:. --- -··-"-- - - '. .Mi: P¢¢if;Mil!~J¥lii, 'N'1Xon Peabody LLl." ' . · OD'iiii i>lata; sUite 9oo 3~Srlmh l'f.N~ .•.·. '{orlc; .held :fu.ca!ldf6r th<:1CountY.<1f ~~;~n: !Ill\ L~ day of De~couwr OF I"~ESTXTEOF}{Ew:'toRK · · · · ·.·. ··. · · .· co~Ql!"Elffi!. 1/)theMatteroftbeA~pllca!iollof . ....... ·..... ·.·..... •·•·· .· Tl!Jil fQUNl)ATlON FQR~rfll:.'OJ>A.RENTHOOD OF Ji{iFifAtQ·A.'

Eti i· t;aJfi~. ~;';\·:-.'-:::_o ·"t%1o/~~on"J•·!m~~ll}'iiide!1lin~~iD~.,Cfipn_liM~t¥~~t-;:·. Lf:::·········,······ · f6~PiollfCoh?o~l1¥n kw,,apj>~YfttgAinen#"'\!s toJ,\' ~!Qfalion~nJailth<>rizl~giheflJlhgQfaCettlficaleof;.~1ths¢~~~··· .S()A.Qfttre~oHqt-P;~~t·Co\1lilrtrltbn,£,w,.and 3~ro . appll~tion.lla~~g (e:;ul.;ly.r<>p>et<>t>e·· · heard, NowuP<'Ur~ of~eV<:rified Peuiion ofsaid Corp~tlon, ruidthe ~Ji.,M., of ·... .;\.m¢ndment de~ignated a$ EiliblU~ ilie£ein; mid t~ ilpfl~g t)lat th~ ~ttooie¥(.l~t>-a1 '?ftl1« .. tfl' objetn ... lltJ:rai>y,l-r~stateof'.New · •. York;held.Jn.~,foi~~"f. Etie on-th~;:·.ts<"day· ofD.e:Cethbei ,,,.-t.--., ... - - - - - - - ..J.: - · _.-'.~.-- :woi5, "--- P'~~~, .. ···· .· · ·.·... '·. /. • J(l}iNA,MliJI:I~;J.SC. ~~tr~o1~Qf'JTIE!lTAT~()F~YQ~~····. in ili:·_·_/_:-.::- _- -_--; __ : _:,_ ._,_ ,:. __ -_·_.. --:·- -, .J Tt~]!:VtJQNP~'f'l()NF()JtPI,.i!.NN.ltll;I"4RID~UlOODO:i<' .. j J>Olfl'ALoA!'!r!~GoUN"FY,IN:C. ·.. · . · .·. \ · ForianApem~ofAln~~Iolts.G~fictito:of · §8il-h>f!hd~ot-t'or-Prtifit ·-Jn~ienl>Urnl.lt.i cmm~illn )Aw, $(l saliJ a~li~lioAna~lng l'<)~iany ~eio ~.; . !tror VQrifte4 l'etitionofsaid Corporalioi~> ~d ~~~d;illcate oi . Amendmentcl~i~tedat l!~Jlihitifiher#n,and iflippeannglh~ !heAt~mt:y ~l:.iemtof~ .· .·· Stat~ ofN¢\ll Yorkhi~$ ny Ill<; proposoo amendments, it is -_ ' . ·- - -- - - -- - cntoER'Eb, lliatthe mileilJitnenis ta the O;Jtppi,ition':S Ci:rtl:fic;ifi, <)fli!ti()l]>oi:ation eill\l\iif~ !h~'lll fi<,and !h~.~~Ne Ue.r~bt11Pttr~>~¢~di~i§.fllrtl>~····· .· ,- · ._ . -_:-:_-_cc-_ :::-_----:····. -. ·.· .··_-.· .. : __ "- · :- -·- .. - -.-::-·- .· --: QRPEl~Dtha~ the aforesaid Cert!fi~ Q'f Afuenrlnienti~. a\;1.110!·izIihlby tlie ·... ~ey~roi~fStateilfail~C\>\VI$ S~o~ ~!),~ of~ N!ll7Fot·rro~J ~ratiimla\\',in .. .··.·wl;lcb-l:o~#k.~a~'>"'''*)' {!tt!ril;bnler shah be ·~ta. . . •. . j - 13mm Plan of Bissclution CERTIFICATE OF DISSOLUTION OF THEFOt~ATIONFORPUL~DPARENTHOOD OF WESTERN NEW YORK, INC. Pursuant to Section 1003 of the Not-for-Profit Corporation Law Filed By: DAMON MoREY LLP 200 Delaware Avenue, Suite 1200 Buffalo, New York 14202 #1876115.2 CERTIFICATION OF PLAN OF DISSOLUTION I, Daniel Sharpe, Chairperson of THE FOUNDATION FOR PLANNED PARENTHOOD OF WESTERN NEW YORK, INC., a New York not-for-profit corporation {the "Corporation"), hereby certify under penalties for perjury that a special meeting of the Board of Directors of the Corporation was duly held at 4:00 p.m. on the lith day of December, 2013 via telephone conference and the Plan of Dissolution attached hereto as Exhibit A {the "Plan") was duly submitted and passed by a majority vote of the Board of Directors and that, thereafter, the Plan was duly approved by the sole member of the Corporation by written consent. Daniel Sharpe, Chairperson Dated the __ day of _ _ _ _ _ _, 20_ #1877756.2 STATE OF NEW YORK-DEPARTMENT OF HEALTH MEMORANDUM TO: FROM: ----DA~E:·--May-S,-2o:I4·----- SUBJECT: Proposed Restated Certificate of Incorporation of AC Center, Inc. Attached is the proposed Restated Certificate of Incorporation of AC Center, Inc. This not-for-profit corporation seeks approval to change its corporate name to "Trillium Health, Inc." The Public Health Council established the corporation under the name CommUnity Health Network, Incorporated as the operator of a diagnostic and treatment center in Monroe County in 1990. Public Health and Health Planning Council approval for a change of corporate name is therefore required by Not-for-Profit Corporation Law§ 804 (a) and 10 NYCRR § 600.11 (a) (1). Also attached is a letter dated March 12, 2014 from Joseph G. Casion, attorney for the corporation. As explained in that letter, the name chang~· is "intended to connote the organization's commitment to (i) providing integrated imd personalized primary and secondary health services and (ii) access to a full continuum of supportive programs in order to (iii) meet the comprehensive health and social 11eeds of its diverse and underserved populations with chronic illnesses.'' To that end, the purposes of the corporation are also amended to delete specific references to HIVI AIDS and replace them with more general references to chronic conditions, thereby more accurately reflecting the community it endeavors to serve. Further amendments effectuated by the Restated Certificate of Incorporation do not require the Council's approval. · The Department has no objection to the proposed name change, and the proposed Restated Certificate of Incorporation is in legally acceptable form. Attachments .., RESTATED CERTIFICATE OF INCORPORATION OF AC CENTER, INC. Under Section 805 of the Not-for-Profit Corporation Law FIRST: The name of the Corporation is AC Center, Inc. The Corporation was formed under the name Community Health Network, Incorporated. SECOND: The Certificate of Incorporation was filed by the State of New York Department of State on January 22, 1990. THIRD: The Corporation is a corporation as defined in subparagraph (a)(S) of Section 102 of the Not-For...Profit-CorporatiortLaw and is a Type B corporation under Section 201 of the Not"For-Profit - - c~~oo~. FOURTH: The Certificate of Incorporation of the Corporation is hereby amended to effect the amendments specified below: A. Paragraph 1. of the Certificate of Incorporation is hereby amended to change the name of the Corporation, so that said Paragraph I shall provide in its entirety as follows: 1. The name ofthe Corporation is Trillium Health, Inc. B. Paragraph 3. of the Certificate of Incorporation, which sets forth the purposes of the Corporation, is hereby amended so that said provision shall provide in its entirety as follows: 3. The purposes for which the Corporation is formed are: (a) The Corporation is formed and shall be operated exclusively for charitable, educational and scientific purposes in order to provide integrated health care, support programs, pharmacy services, health education and prevention to underserved, diverse individuals with unmet medical and social needs in a welcoming, accepting environment for comprehensive primary and specialty care generally in connection with their diagnosed chronic conditions and treatment plans for illnesses such as HIVI A IDS, hypertension, diabetes, hepatitis, etc. for the benefit of such individuals and the entire community. (b) Specifically, without limitation on the foregoing, the purposes of the Corporation shall be: ( l) To operate a diagnostic and treatment center providing multidisciplinary primary, chronic illness and related care in a community-based practice setting; (2) To provide medical care to patients with the full spectrum of acute conditions and chronic 23J090o_ 1 illnesses, with emphasis on early intervention in the care and follow-up of asymptomatic persons; · (3) To develop a network of communitybased physicians and health care providers, and to impart concepts of care to physicians and other health care professionals; To collaborate in research activities with (4) universities and other organizations en.gaged in medical research; and (5) To collaborate with other community agencies, providers and programs to improve care in the - StateofNew York, including·Rochester, New-York-and its surrounding area. (c) Nothing herein shall authorize the Corporation to operate or maintain an institution of higher learning or to grant degrees. Nothing herein shall authorize the Corporation to provide professional training .in the profession of medicine or any other profession required to be licensed by Title VIII of the Education Law. C. Paragraph 6. of the Certificate of Incorporation, which sets forth the names and addresses of the initial directors of the Corporation is hereby deleted in its entirety pursuant to Section 805(S)(c) of the Not-for-Profit Corporation Law which states a restated certificate of incorporation need not include statements as to the incorporator or incorporators, or the first directors. D. Paragraph 7. of the Certificate of Incorporation, which sets forth the address of the Corporation, is hereby amended and renumbered due to the deletion of the existing Paragraph 6, as stated above, so that said provision shall provide in its entirety as follows: 6~ The Secretary of State of the State of New York is hereby designated as the agent of the Corporation upon whom process in any action or proceeding against the Corporation may be served. The post office address to which the Secretary of State shall mail a copy of any such process is: 259 Monroe Avenue, Rochester, NY 14607. FIFTH: The Certificate of Incorporation of the Corporation is hereby restated to set forth its entire text as amended heretofore as follows: 2330906 _I CERTIFICATE OF INCORPORATION OF TRILLIUM HEALTH, INC. Under Section 402 of the Not-for-Profit Corporation Law 1. The name of the Corporation is Trillium Health, Inc. 2. The Corporation is a corporation as defined in subparagraph {a)(S) of Section l 02 of the Not-for-Profit Corporation Law and is not fonned, conducted or operated for purposes of pecuniary profitodinancial gain. The Corporation is a Iy_pe B Corporation under Section 20 l of the Not-for-Profit Corporation Law. · 3. The purposes for which the Corporation is fonned are: (a) The Corporation is fanned and shall be operated exclusively for charitable, educational and scientific purposes in order to provide integrated primary and specialty health care, support programs, phannacy services, health education and prevention to underserved, diverse individuals with complex, unmet medical and social needs in a welcoming, accepting environment in connection with their diagnosed chronic conditions and treatment plans for illnesses such as HlVI AIDS, diabetes, cancer, etc. for the benefit of such individuals and the entire community. (b) shall be: Specifically, without limitation on the foregoing, the purposes of the Corporation ( l) To operate a diagnostic and treatment center providing multidisciplinary chronic illness and related care in a community-based practice setting; (2) To provide medical care to patients with the full spectrum of chronic illnesses, with emphasis on early intervention in the care and follow-up of asymptomatic persons; (3) To develop a network of community-based physicians and health care providers, and to impart concepts of chronic illness and related care to physicians and other health care professionals; (4) To collaborate in research activities with universities and other organizations engaged in chronic illness research; and (5) To collaborate with other community agencies, providers and programs to improve chronic care in the State ofNew York, including Rochester, New York and its surrounding area. (c) Nothing herein shall authorize the Corporation to operate or maintain an institution of higher learning or to grant degrees. Nothing herein shall authorize the Corporation to provide professional training in the profession of medicine or any other profession required to be licensed by Title Vlll of the Education Law. 2330906 I 4. (a) No part of the net earnings of the Corporation shall inure to the benefit of any member, trustee, director or officer of the Corporation or any private individual, except that reasonable compensation may be paid for services rendered to or for the Corporation. No member, trustee, director of officer of the Corporation or any private individual shall be entitled to share in the distribution of any of the corporate assets on dissolution of the Corporation. (b) No substantial part of the activities of the Corporation shall be carrying on propaganda or otherwise attempting to influence legislation, except as otherwise provided by Section 501 (h) of the Internal Revenue Code of 1986. The Corporation shall not participate or intervene (including the publication or distribution of statements) in any political campaign on behalf of or in opposition of any candidate for public office. (c) Notwithstanding any other provision of these articles, the Corporation is organized exclusively for one or more of the following purposes: religious, charitable, scientific, ~ting for pub1iCSarety, literary, or educational purposes, orfor the prevention of-cruelty to children or animals, as specified in Section 50l(c)(3) of the Internal Revenue Code of 1986. The Corporation shall not carry on any activities not permitted to be carried on (i) by a corporation exempt from Federal income tax under section 50l(c)(3) of the Internal Revenue Code of 1986 or (ii) by a corporation contributions to which are deductible under Section 170(c)(2) of the Internal Revenue Code of 1986 (or the corresponding provisions of any future United States internal revenue law). (d) In the event the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary or by operation of Jaw, all of the remaining assets and property of the Corporation shall after necessary expenses thereof be distributed to one or more organizations which are then qualified under Section 50J(c)(3) of the Internal Revenue Code of 1986 (or the corresponding provisions of any future United States internal revenue law) to be used in such manner as in the j udgment of a Justice of the Supreme Court of the State of New York will best accomplish the general purposes for which this Corporation was fonned. 5. County of Monroe. The office of the Corporation in the State of New York shall be located in the 6. The Secretary of State ofthe State ofNew York is hereby designated as the agent of the Corporation upon whom process in any action or proceeding against the Corporation may be served. The post office address to which the Secretary of State shall mail a copy of any such process is: 259 Monroe A venue, R~chester, NY 14607. 1330906_1 SIXTH: This Amended and Restated Certificate of Incorporation was authorized by the Board of Directors of the Corporation in accordance with Section 802 of the Not·for·Profit Corporation Law and the By-laws of the Corporation. Ja(s.udman, President and Chief Executive Officer ..------ l11~D1l Harter Secrest & Emery LLP ATTORNEYS AND COUNSEl- ORS WWW, HSC.L.W.COM March 12, 2014 l-~~ren'0'~[Q) Michael M. Stone, Assistant Counsel Bureau of House Counsel New York State Department of Health Corning Tower, 24th Floor Empire State Plaza AlbaJ!y, New York 12237-0031 Re: I 1 7 Z0\4 I eureal, of House Counsel _NYS ~;vision of Legal Affairs AC Center, Inc. Dear Mr. Stone: We are writing in response to your e-mail of February 19, 2014, a copy of which is attached, (1) requesting further explanation for the reason for the proposed name change of AC Center, Inc. to Trillium Health, Inc. and (2) summarizing the changes to the corporate purposes. The rationale for both changes, name and purposes, is essentially the same. As advances in health care have led to a prolonged life expectancy for individuals with HIVI AfDS, and those individuals require different services depending on a variety of circumstances and may have developed other chronic conditions in some cases, the organization feels it has the requisite expertise to expand its mission to care for its traditionally underserved population beyond just treatment for HIVI AIDS. Accordingly, the organization would like to change its name, which was derived from its predecessor organizations, AIDS Rochester and Community Health, and still generally associated with HIVIAIDS to Trillium Health. "Trillium" is a three-petaled flower above a whorl of three leaves, native to North American, and is intended to connote the organization's commitment to (i) providing integrated and personalized primary and secondary health services and (ii) access to a full continuum of supportive programs in order to (iii) meet the comprehensive health and social needs of its diverse and underserved population with chronic illnesses. Similarly, the organization wishes to change its corporate purposes to delete specific references to HIVIAIDS in several places and replace them with references to chronic conditions more generally so that the organization can continue to serve its existing population and others in the community suffering from such conditions in the most comprehensive, patient-centered and efficient manner. I hope that the foregoing provides you with the information you require. Enclosed is a copy of our petition and the proposed Restated Certificate of Incorporation which sets forth the amendments to the corporate name and purposes. Please note that the third page of the Restated 16 00 B4US C >I (5. L.OMB PL4 C£ ROCHESTER , NY 14l604·27 11 FtO C H E S TER , H EW Y O AK • B UF' FAL.O ~ t.4 £ W YORK • F'MO N £ : ALB ANY , 5 8 !5 .2 .32 .6500 "' ~ W Y ORK • FAX. 565. 232 2 152 N .4.P LE.S . f'L.O R I OA " Harter Secrest & Emery LLP ATTORNEYS AND COUNSEL-ORS Michael Stone, Esq. March 12, 2014 Page2 Certificate should state "Certificate of Incorporation of Trillium Health, Inc." (rather than "Certificate of Incorporation of AC Center, Inc.") as that would be the corporate name following approval and filing. The corrected Restated Certificate is enclosed. Please contact me if you have any questions. Respectfully submitted, :cas cc: Audrey Cooper, Assistant Attorney General STATE OF NEW YORK- DEPARTMENT OF HEALTH MEMORANDUM TO: Public Health and Health Planning Council FROM: DATE: April 3, 2014 SUBJECT: HCWNY Foundation, Inc. HCWNY Foundation, Inc. ("the Foundation") requests that the Public Health and Health Planning Council ("PHHPC") approve the attached proposed Application for Authority. Public Health Law§ 2801-a(6) and Not-for-Profit Corporation Law§§ 404(o) and 1304 require that the application for authority of a not-for-profit foundation that solicits contributions on behalf of an Article 28 facility must be approved by PHHPC. The Foundation's proposed beneficiary is the Hemophilia Center for Western New York, an Article 28 facility. In addition to the proposed executed Application for Authority, the following documents and information are attached in support of the Foundation's request for approval: I) A copy of the Foundation's Certificate oflncorporation in the State of Delaware; 2) A copy of the Foundation's proposed bylaws; 3) A letter, dated March 6, 2014, from a representative of the Article 28 beneficiary acknowledging that it will accept funds and other donations from the Foundation; 4) A letter, dated March 31,2014, from the applicant's attorney providing: (a) a generalized description of the fundraising activities to be undertaken by the Foundation; (b) information regarding the Foundation's proposed Board of Directors; and (c) a statement identifying the organizational relationship between the Foundation and the Article 28 beneficiary. The proposed Certificate oflncorporation is in legally acceptable form. Attaclunents APPLICATION .FOR AUTHORITY OF HCWNY FOUNDATION, INC. Under Section 1304 of the Not-for-Profit Corporation Law The undersigned, Michael Cimato, being the President of HCWNY Foundation, Inc., does hereby certify as follows: FIRST: The name of the corporation is HCWNY Foundation. Inc. SECOND: The Certificate of Incorporation of the corporation was filed on September 13, 20!3 in the State of Delaware. THIRD: The corporation is a foreign corporation as defined in subparagraph (a)(7) of Section I 02 (Definitions) of the Not-for-Profit Corporation Law. Jt shall be a Type B corporation under Section 201 (Purposes) of the Not-for-Profit Corporation Law. FOURTH: The purposes that the corporation shall pursue in New York are the following charitable purposes: to solicit, receive, and maintain funds and other property and to grant, convey or lease such funds and other property exclusively to Charitable Organizations, as defined below, for use by such Charitable Organizations in activities that further Charitable Purposes, as defined below. As used in this Article Fourth, "Charitable Organizations" means (a) coq)orations, trusts, funds, foundations or community chests organized and operated exclusively for Charitable Purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation and which do not participate in or intervene in (including the publication or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office, and (b) specifically includes Hemophilia Center of Western New York, Inc., a New York not-for-profit corporation that is formed for Charitable Purposes. As used in this Article Fourth, "Charitable Purposes" means charitable purposes within the meaning of the law of the State of New York and Section 50l(c)(3), or any successor section, of the Internal Revenue Code of 1986, as amended, or any successor statute. FIFTH: The activities the corporation proposes to conduct in New York State, in addition to holding meetings of its directors and maintaining bank accounts, are: maintaining an administrative office and soliciting, receiving, and maintaining real and personal property. SIXTH: Nothing in Articles Fourth or Fifth, or in any other provision, of this Application for Authority (I) shall directly or indirectly authorize the corporation to have any of the purposes or conduct any of the activities described in paragraphs (a) through (s) and (u) through (w) of Section 404 of the Not-for-Profit Corporation Law or (2) shall authorize the corporation to establish, operate, or maintain a hospital, home care services agency, hospice, health maintenance organization, or comprehensive health services plan, as provided for by Articles 28, 36, 40, and 44 of the Public Health Law, respectively; provide hospital service or related service; establish, operate or maintain an adult care facility, as provided for by Article 7 of the Social Services Law; or solicit any funds, contributions or grants, from any source, for the establishment or operation of any adult care facility. SEVENTH: The corporation is authorized to conduct all of the purposes and the activities enumerated in Articles Fourth and Fifth above in the State of Delaware, the jurisdiction of incorporation of the corporation. EIGHTH: located in the County of Erie. The office of the corporation within the State ofNew York is to be NINTH: The Secretary of State of the State of New York is designated as the agent of the corporation upon whom process against it may be served. The post oftice address to which the Secretary of State shall mail a copy of any process against the corporation served upon him or her is c/o William C. Moran & Associates, Inc., 6500 Main Street, Suite 5, Williamsville, New York 14221. TENTH: The corporation has not, since its incorporation, done any act in this state, except as set forth in paragraph (b) ofsectionl301 of the Not-for-Profit Corporation Law. Dated:-¥?'_, 2014 APPLICATION FOR AUTHORITY OF HCWNY FOUNDATION, INC. Under Section 1304 of the Not-for-Profit Corporation Law Filed by: Susan J. Facer, Esq. William C. Moran & Associates, P.C. Attorneys at law 6500 Main Street, Suite 5 Williamsville, NY 14221 . I t])e[aware PAGE 1 %e :first State I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY "HCWNY FOUNDATION, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO FAR AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE SEVENTH DAY OF FEBRUARY, A.D. 2014. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CORPORATION IS AN EXEMPT CORPORATION. AND I DO HEREBY FURTHER CERTIFY THAT THE SAID "HCWNY FOUNDATION, INC." WAS INCORPORATED ON THE THIRTEENTH DAY OF SEPTEMBER, A.D. 2013. 5398867 8300C You may verify this certificate online at corp.delaware.govjauthver.shtml . ' SHEET R lNCORl'ORATINV. SECTION G.tNC:RAt. INFORMATIO/'J P.o. eox see STATE OF 0Et.AWARE 3021739. 3073 DEPARTMENT OF STATE NAME: RCStl'fVATION Jeffrey FRANCHISE TAX St::CTJON w. Bullock, Secretary 01VlSION OF COA'PORATIONS P.O. ao.x 7040 30:21?39. 6900 900/420. 8042 FRANCHISE TAX SECTION UNIFORM COMMEI'ICIAL CODE' JOHN G, TOWN$1iNP EH.JIL.DING 302/739 • 4226 P.O. BOX 793 DUKE OF' YORK STRI!:ET UNIF"ORM COMMERCIAl. COO£ DOVER, OEI..AWARI;i: I &901 3021739 • 4279 00V~R, 0£\...AWARl: ! 9_903 ******************************************************************************* SRV#: 131088577 Priority: 6 Agent: 9030670 Mail Code E File#: 5398867 Package#: 000660221 Date: 09/16/13 User: SDOCSAS Comments: Attn: Agent: AGENTS AND CORPORATIONS, INC. 1201 ORANGE ST STE 600 ONE COMMERCE CENTER WILMINGTON DE Items Included: Item Typ'il ====:;;::;;;:;;:;:; Invoice Imag'il 19801 Copies ------ ====-======= -----001 001 ******************************************************************************* St;a te of Delaware Secretary of State Division of-Corporations Delivered 03:55 PM 09/13/2013 FTLED 03:51PM 09/13/2013 SRV 131088577 - 5398867 FTLE CERTIFICATE OF INCORPORATION OF HCWNY FOUNDATION, INC. Under the Delaware Qeneral Cor11oration Law FIRST: The name of the corporation is HCWNY Foundation, Inc. SECOND: The corporation is a non· profit corporation and shall not have any capital stock. The Hemophilia Center of Western New York, Inc. shall be the sole member of the corporation. THIRD: The corporation is fonned exciiJsively for Charitable Purposes, as hereinafter defined, and for the following specific charitable purposes: (a) To operate exclusively for the benefit of, perform the functions of, and to carry out the purposes of the Hemophilia Center of Western New York, Inc.; (b) To solicit, receive and maintain funds and other assets for Charitable Purposes, as hereinafter defined, and to that end (i) to take and hold by bequest, devise, gift, grant, purchase, lease or otherwise, either absolutely or jointly with any other person, persons or corporations, any property, whether real, personal, tangible or intangible, or any undivided interest therein, without limitation as to amount or value; (ii) to sell, convey or otherwise dispose of any such property; (iii) to invest, reinvest, or deal with the principal or income thereof, all in such manner as, in the judgment of the directors, will best promote the purposes of the corporation without limitation, except such limitations, if any, as may be contained in the instrument under which such property is received, this certificate of incorporation or any laws applicable thereto, and (iv) to the fullest extent permitted by applicable law, to modify any restriction or condition on the distribution of funds for any specified charitable purpose or to specified organizations if in the sole judgment of the board of directors such restriction or condition becomes unnecessary, incapable of fulfillment, or inconsistent with the charitable purposes of the corporation (c) Without limiting the foregoing, to make gifts, grants, leases, or other use or dispositions of property to or for Charitable Purposes, as hereinafter defined, in accordance with (to the extent applicable) the tenns of gifts, bequests or devises to the corporation not inconsistent with the corporation's purposes as set forth in this certificate of incorporation or in accordance with determinations made by the board of directors pursuant to this certificate of incorporation; and (d) To do any other act or thing incidental to or in connection with the foregoing purposes or in advancement thereof, but not for the pecuniary profit or financial gain of the corporation's directors or officers. As used in this Article Third, "Charitable Purposes" means charitable or educational purposes as those terms are used under applicable state Jaw and in Section 50l(c)(3), or any 2 successor section, of the Internal Revenue Code of I986, as amended, or any successor statute (the "Code"). FOURTH: (A) Notwithstanding any other provision of this certificate, the corporation is organized exclusively for charitable purposes as specified in Section 50l(c)(3), or any successor section, of the Code, and shall not carry on any activities not permitted to be carried on by a corporation exempt from federal income tax under Section 50 l (c)(3), or any successor section, of the Code, or by a corporation, contributions to which are deductible under Section 170(c)(2), or any successor section, of the Code. (B) No part of the net earnings of the corporation shall inure to the benefit of any member, director or officer of the corporation, or any private individual (except that reasonable compensation may be paid for services rendered to or for the corporation), and no member, director or officer of the corporation or any private individual shall be entitled to share in the distribution of any of the corporate assets on dissolution of the corporation. (C) No substantial part of the activities of the corporation shall be carrying on propaganda, or otherwise attempting to influence legislation (except as otherwise provided by Section 50 I(h), or any successor section, of the Code), and the corporation shall not participate in or intervene in (including the publication or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. FIFTH: (A) The income of the corporation shall be distributed at such time and in such manner as not to subject the corporation to tax on undistributed income under Section 4942, or any successor section, of the Code; and (B) The corporation and its directors shall not: (i) engage in any act of self-dealing as defined in Section 4941 (d), or any successor section, of the Code; (ii) retain any excess business holdings as defined in Section 4943(c), or any successor section, of the Code; (iii) make any jeopardizing investments so as to subject the corporation to tax under Section 4944, or any successor section, of the Code; or (iv) make any taxable expenditures as defined in Section 4945(d), or any successor section, of the Code, SIXTH: Upon dissolution of the corporation, whether voluntary or involuntary, after payment of all debts and liabilities of the corporation of whatsoever kind or nature, its remaining funds and other property and rights shall be distributed, granted, conveyed and assigned for one or more exempt purposes within the meaning of Section 501 (c)(3), or any successor section, of the Code. SEVENTH: The name and address of the incorporator of the corporation is: Susan J. Facer, Esq. 6500 Main Street, Suite Five Williamsville, New York 14221 EfOHTH: The address of its registered office in the State of Delaware is 120 I Orange Street, Suite 600, Wilmington, County of New Castle, Delaware I 980 l. The name of its registered agent at such address is Agents and Corporations, Inc. . ' 3 NINTH: No director shall be liable to the corporation for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law, (ili) under Section 174 of the General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Dated: September 12,2013 is/Susan J. Facer. Esq. Susan J. Facer, Esq. Sole Incorporator Adopted January 27, 2014 BY-LAWS OF HCWNY FOUNDATION, INC. A non-profit corporation formed under the Delaware General Corporation Law ARTICLE I MEMBERS Section 1. Members. The sole member of HCWNY Foundation (the "Corporation") shall be Hemophilia Center of Western New York, Inc., a New York not-for-profit corporation, or its successor (the "Sole Member"). References in these by-laws to "members" or the "membership" shall be deemed to be a reference to the Sole Member. No additional members shall be admitted except by the Sole Member. ARTICLE II BOARD OF DIRECTORS Section I. Management of Corporate Affairs. Except as otherwise provided by law, the certificate of incorporation of the Corporation or these by-Jaws, the activities, property and affairs of the Corporation shall be managed by the Board of Directors. Section 2. Number and Qualifications. The Board of Directors shall consist of not less than three and not more than seven individuals, and the size of the Board shall be deemed fixed at the number of directors elected by the Sole Member at each annual meeting. Directors shall be 2 elected at the annual meeting of the Sole Member. All of the directors shall be at least eighteen ( 18) years of age. Section 3. Election and Term of Office. Except as otherwise provided by law or these by-laws, each director of the Corporation shall be elected at an annual meeting of the Sole Member, which meeting, for the purposes of these by-laws, shall be deemed the annual meeting, and shall hold office until the next annual meeting of the Sole Member and until his or her successor has been elected and qualified. Section 4. Honorary Directors. The Sole Member may elect honorary directors for such periods and in such numbers as the Board may determine. Honorary directors shall be given notice of all Board meetings but shall not be required to attend, shall not be counted for the purpose of a quorum, and shall not vote or have any liability with respect to any action taken by the Board of Directors. Section 5. Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board of Directors for any reason may be filled by a vote of a majority of the directors then in office, although less than a quorum exists. If any such newly created directorships or vacancies occurring in the Board of Directors for any reason shall not be filled prior to the next annual meeting of the Sole Member, they shall be filled by vote of the Sole Member at the annual meeting. Section 6. Resignation. Any director of the Corporation may resign at any time by giving his or her resignation to the President, the Vice President or the Secretary. Such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 7. Removal. Any director may be removed with or without cause by the Sole Member. Section 8. Contracts with Comoration. No member of the Board shall be interested, directly or indirectly, in any contract for furnishing supplies thereto, unless authorized by the 3 concurring vote of a majority of the entire Board not including the vote of each such interested director. Section 9. Compensation. No director of the Corporation shall receive, directly or indirectly, salary, compensation or emolument from the Corporation, except reasonable compensation for services actually performed and reimbursement of expenses necessarily incurred in effecting one or more of the corporate purposes of the Corporation. Section 10. Special Advisors. From time to time, the Board of Directors may designate as special advisors a chosen number of outstanding persons from the community who are interested in the objectives of the Corporation to assist the Corporation in its operations. Selection as a special advisor shall not confer upon those selected any right to vote or to participate in the management of the Corporation, nor any liability with respect thereto. ARTICLE III Meeting of Directors Section I. Regular Meetings. Regular meetings of the Board of Directors shall be held at the main office of the corporation, except as otherwise fixed by the Board of Directors. Section 2. Special Meetings. Special meetings of the Board of Directors may be called at any time by the President, or in his or her absence or disability, the Vice-President, and must be called by such officer on written request by one-third of the entire Board of Directors. Such request shall state the purpose or purposes for which the meeting is to be called. Each special meeting of the Board of Directors shall be held at such time and place as the person calling the meeting shall determine and the notice of the meeting shall specify. Section 3. Annual Meeting. The annual meeting of the Board of Directors shall be the held in the same month of each year as the annual meeting of the Sole Member. Section 4. Notice of Meetings. Notice of each regular or special meeting of the Board of Directors stating the time and place thereof shall be given by the President, the Vice-President or 4 the Secretary to each member of the Board not less than three (3) days before the meeting, by mailing the notice, postage prepaid, addressed to each member of the Board at his or her residence or usual place of business, or not less than two (2) days before the meeting, be delivering the notice to each member of the Board personally, by facsimile, by e-mail, or by telephone, Section 5. Quorum and Action by Board. At all meetings of the Board of Directors, except as otherwise provided by law, the certificate of incorporation or these by-laws, a quorum shall be required for the transaction of business and shall consist of not less than one-third of the entire Board, and the vote of a majority of the directors present at the time of a vote, if a quorum is present at such time, shall decide any question that may come before the meeting. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time or place without notice other than armouncement at the meeting of the time and place to which the meeting is adjourned. Section 6. Procedure. The order of business and all other matters of procedure at every meeting of the directors may be determined by the person presiding at the meeting. Section 7. Action Without a Meeting. Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board or committee. Section 8. Presence at the Meeting by Telephone. One or more members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation in a meeting by such means shall constitute presence in person at the meeting. 5 ARTICLE IV COMMITTEES OF DIRECTORS Section 1. Designation of Committees. The Board of Directors, by resolution or resolutions adopted by a majority of the entire Board, may designate from among its members an executive committee and other committees, each consisting of three or more directors with one director being designated as the committee chairman, and may designate one or more directors as alternate members of any such committee who may replace any absent member or members at any meeting of such committee. In the interim between meetings of the Board of Directors, the executive committee shall have all the authority of the Board of Directors except as otherwise provided by law and shall serve at the pleasure of the Board of Directors. Each other committee designated shall have such a name as may be provided from time to time in the resolution or resolutions of the Board of Directors, shall serve at the pleasure of the Board of Directors and shall have, to the extent provided in such resolution or resolutions, all the authority of the Board of Directors except as otherwise provided by law. Section 2. Acts and Proceedings. All acts done and power and authority conferred by the executive committee from time to time within the scope of its authority shall be, and may be deemed to be, and may be specified as being, an act under the authority of the Board of Directors. The executive committee and each other committee shall keep regular minutes of its proceedings and report its actions to the Board of Directors when required. Section 3. Meetings of Committees. Committees of directors shall meet at such times and places as the chairmen of the committees shall determine and the notice of the meeting shall specify. Meetings of committees of directors shall be governed by the provisions of Sections 4, 5, 6, 7 and 8 of Article III of these by-laws, which govern meetings of the entire Board of Directors. ' 6 ARTICLE V OFFICERS Section 1. Officers. The Sole Member, at the annual meeting of the Sole Member, shall appoint or elect a President, Vice-President, a Secretary, and a Treasurer. The Sole Member may from time to time elect or appoint such additional officers as it may detem1ine. Such additional officers shall have such authority and perform such duties as the Sole Member may from time to time prescribe. Section 2. Term of Office. The President, Vice President, the Secretary and the Treasurer shall, unless otherwise determined by the Sole Member, hold office until the next annual meeting of the Board of Directors and until their successors have been elected or appointed and qualified. Each additional officer appointed or elected by the Sole Member shall hold office for such term as shall be determined from time to time by the Sole Member and until his or her successor has been elected or appointed and qualified. Any officer, however, may be removed or have his or her authority suspended by the Sole Member at any time, with or without cause. If the office of any officer becomes vacant for any reason, the Sole Member shall have the power to fill such vacancy. Section 3. Resignation. Any officer may resign at any time by notifying the Board of Directors, the President or the Secretary of the Corporation in writing. Such resignation shall take effect at the time specified therein unless otherwise specified in such resignation, the acceptance thereof shall not be necessary to make it effective. Section 4. Duties of Officers May Be Delegated. In case of the absence or disability of an officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board, except where otherwise provided by law, may delegate, for the time being, the powers or duties of any officer to any other officer, or to any member of the Board. Section 5. The President. The President shall be the chief executive and administrative officer of the Corporation and shall have the general powers and duties of supervision and • 7 management of the Corporation and shall perform all such other duties as usually pertain to the office or are properly required by the Board of Directors. The President shall preside at all meetings of the Board of Directors. Section 6. The Vice-President. The Vice-President shall, in the absence or at the request of the President, perform the duties and exercise the powers of the President. The Vice-President shall also have such powers and perform such duties as usually pertain to the office or as are properly required by the Board of Directors. Section 7. The Secretary. The Secretary shall issue notices of all meetings of directors where notices of such meetings are required by law or these by-laws. The Secretary shall attend all meetings of the Board of Directors and keep minutes thereof. The Secretary shall affix the corporate seal to and sign such instruments as require the seal or the Secretary's signature and shall perform such other duties as usually pertain to the office or are properly required by the Board of Directors. Section 8. The Treasurer. The Treasurer shall have the care and custody of all the moneys and securities of the Corporation. The Treasurer shall cause to be entered in the books of the Corporation to be kept for that purpose full and accurate accounts of all moneys received and paid on account of the Corporation. The Treasurer shall make and sign such reports, statements and instruments as may be required of him or her by the Board of Directors or by the laws of the United States or of any state or country, and shall perform such other duties as usually pertain to the office or as are properly required of the Treasurer by the Board of Directors. Section 9. Officers Holding Two or More Offices. Any two or more offices, except those of President and Secretary, may be held by the same person, but no officer shall execute or verify any instrument in more than one capacity if such instrument is required by law or otherwise to be executed or verified by two or more officers. ' 8 Section 10. Compensation. No officer of the Corporation shall receive, directly or indirectly, salary compensation or emolument from the Corporation, except [reasonable compensation for services actually performed and] reimbursement of expenses necessarily incurred in etiecting one or more of the corporate purposes of the Corporation. ARTICLE VI INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 1. Right of Indemnification. Each director and officer of the Corporation, whether or not then in office, and any person whose testator or intestate was such a director or officer, shall be indemnified by the Corporation for the defense of, or in connection with, any threatened, pending or completed actions or proceedings and appeals therein, whether civil, criminal, administrative or investigative, in accordance with and to the fullest extent permitted by the General Corporation Law of the State of Delaware or other applicable law, as such law now exists or may hereafter be adopted or amended; provided, however, that the Corporation shall provide indemnification in connection with an action or proceeding (or part thereof) initiated by such a director or officer only if such action or proceeding (or part thereof) was authorized by the Board of Directors. Notwithstanding anything to the contrary in this Article, the corporation shall not provide any indemnification for any liability or expense of the director or officer if providing such indemnification would constitute "self dealing" under applicable provisions of the United States Internal Revenue Code of 1986 and regulations promulgated thereunder, as such law or regulations may be amended from time to time. Section 2. Advancement of Expenses: Expenses incurred by a director or officer in connection with any action or proceeding as to which indemnification may be given under Section 1 of this Article may be paid by the Corporation in advance of the final disposition of such action or proceeding upon (a) the receipt of an undertaking by or on behalf of such director or officer to repay such advancement in case such director or officer is ultimately found not to be • 9 entitled to indemnification as authorized by this Article and (b) approval by the Board of Directors acting by a quorum consisting of directors who are not parties to such action or proceeding or, if such a quorum is not obtainable, then by vote of a majority of the entire Board of Directors. To the extent permitted by law, the Board of Directors, shall not be required to find that the director or officer has met the applicable standard of conduct provided by law for indemnification in connection with such action or proceeding before the Corporation makes any advance payment of expense hereunder. Section 3. Availability and Interpretation: To the extent permitted under applicable law, the rights of indemnification and to the advancement of expenses provided in this Article (a) shall be available with respect to events occurring prior to the adoption of this Article, (b) shall continue to exist after any rescission or restrictive amendment of this Article with respect to events occurring prior to such rescission or amendment, (c) shall be interpreted on the basis of applicable law in effect at the time of the occurrence of the event or events giving rise to the action or proceeding or, at the sole discretion of the director or officer, (or, if applicable, at the sole discretion of the testator or intestate of such director or officer seeking such rights), on the basis of applicable law in effect at the time of such rights are claimed and (d) shall be in the nature of contract rights that may be enforced in any court of competent jurisdiction as if the Corporation and the director or officer form whom such rights are sought were parties to a separate written agreement. Section 4. Other Rights. The rights of indemnification and to the advancement of expenses provided in this Article shall not be deemed exclusive of any other rights to which any director or officer of the Corporation or other person may now or hereafter be otherwise entitled, whether contained in the certificate of incorporation, these by-laws, a resolution of the Board of Directors or an agreement providing for such indemnification, the creation of such other rights being hereby expressly authorized. Without limiting the generality of the foregoing, the rights of indemnification and to the advancement of expenses provided in this Article shall not be deemed • JO exclusive of any rights, pursuant to statute or otherwise, of any director or officer of the Corporation or other person in any action or proceeding to have assessed or allowed in his or her favor, against the Corporation or otherwise, his or her costs and expenses incurred therein or in connection therewith or any part thereof. Section 5. Severability. If this Article or any part hereof shall be held unenforceable in any respect by a court of competent jurisdiction, it shall be deemed modified to the minimum extent necessary to make it enforceable, and the remainder of this Article shall remain fully enforceable. Any payments made pursuant to this Article shall be made only out of funds legally available therefor. ARTICLE VII CORPORATE FINANCE Section I. Corporate Funds. The funds of the Corporation shall be deposited in its name with such banks, trust companies or other depositories as the Board of Directors may from time to time designate. All checks, notes, drafts and other negotiable instruments of the Corporation shall be signed by such officer or officers, agent or agents, employee or employees as the Board of Directors from time to time may designate. No officers, agents or employees of the Corporation, alone or with others, shall have the power to make any checks, notes, drafts or other negotiable instruments in the name of the Corporation or to bind the Corporation thereby, except as provided in this section. Section 2. Fiscal Year. The fiscal year of the Corporation shall be the calendar year unless otherwise provided by the Board of Directors. Section 3. Loans to Directors and Officers. No loans shall be made by the Corporation to its directors and officers. Section 4. Gifts. The Board of Directors, the executive committee or any authorized officer, employee or agent of the Corporation may accept on behalf of the Corporation any ( ]] contribution, gift, bequest or devise for any general or special purpose or purposes of the Corporation. Section 5. Voting of Securities Held bv the Corporation. Stocks or other securities owned by the Corporation may be voted in person or by proxy as the Board of Directors or the executive committee shall specify. In the absence of any direction by the Board of Directors or executive committee, such stocks or securities shall be voted by the President as he or she shall determine. Section 6. Income from Corporation Activities. All income from activities of the Corporation shall be applied to the maintenance, expansion or operation of the lawful activities of the Corporation. ARTICLE VIII CORPORATE SEAL Section I. Form of Seal. The seal of the Corporation shall be in such form as may be determined from time to time by the Board of Directors. ARTICLE IX AMENDMENTS Section 1. Procedure for Amending By-Laws. By-Laws of the Corporation may be adopted, amended or repealed only by the Sole Member. HCWNY FOUNDATION, INC. 936 Delaware Avenue Buffalo, New York 14209 Phone: (716) 896-2470 March 6, 2014 New York State Public Health and Health Planning Council c/o Justin D. Pfeiffer, Senior Attorney New York State Department of Health Bureau of House Counsel Corning Tower, Room 2482 Albany, New York 12237-0026 Ladies and Gentlemen) RE: Contributions from HCWNY Foundation, Inc. On behalf ofthe Hemophilia Center of Western New York, Inc. (the "Center"), I acknowledge that the Center will accept funds raised for it by HCWNY Foundation, Inc. Laurie Reger, Executive Hemophilia Center of We Inc. WIIJJA1"1 C. MOR.fu'l" c1 AssoCIATES, P.c. An(_'J