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WISCONSIN ADMINISTRATIVE CODE
DEPARTMENT OF HEALTH SERVICES
CHAPTER DHS 122. LONG-TERM CARE FACILITY BED ADDITIONS AND CAPITAL EXPENDITURES REVIEW
Date:
08/31/2009
Document:
DHS 122.09 Enforcement.
(1) REPORTING REQUIREMENTS. (a) Each holder of an approval shall submit to the department, on forms provided by the department, regular progress reports which describe the current status of the project. These reports shall include or shall have attached:
1. An up-to-date copy of the proposed building plans;
2. An up-to-date copy of the estimate of construction costs or copies of bids for construction costs, or both;
3. An up-to-date statement of the total project costs;
4. Up-to-date copies of current financing commitment documents, by source of funds; and
5. A narrative description of the current status of the project, specifying any material changes in project scope, cost, proposed per diem rates or design anticipated by the approval holder.
(b) The applicant shall automatically send these status reports to the department according to the following schedule:
1. At the completion of design development drawings;
2. On receipt of bids prior to the start of construction;
3. At 6-month intervals throughout the construction period; and
4. At project completion.
(c) If an approval holder fails to submit the required information according to the schedule in par. (b), the department shall not approve any cost overrun that is incurred or a material change in project scope from that in the original approval.
(d) The department shall review each status report within 5 working days of submittal and issue a determination to the approval holder to proceed with the project unless the status report indicates a potential cost overrun or material change in project scope. The department shall advise the approval holder if additional review under this chapter is required.
(2) COST OVERRUNS. (a) Cost overruns are subject to approval by the department before they are incurred.
(b) Approval holders shall report to the department any anticipated cost overrun.
(c) 1. An approval holder who identified a cost overrun on an approved project shall submit another application for review in the manner described in s. DHS 122.06 (10).
2. The original approval is not affected by the submission of an application involving a cost overrun on a previously approved application. If the department approves the overrun, the original approval shall be amended accordingly. If the department does not approve the overrun, the original approval shall be unchanged.
(d) The department shall not approve an application for a project involving a cost overrun on a previously approved application:
1. If an obligation exceeding the capital expenditure maximum was incurred by the approval holder before the holder notified the department of the cost overrun;
2. If the cost overrun is based on inflation rates which exceed actual rates reported in the Engineering News Record's Building Cost Index;
3: If the cost overrun is the result of a material change in the scope or size of an approved project; or
4. If the cost overrun results in a project that would not be approved under s. DHS 122.07 (1) or (2).
(3) Civil, FORFEITURES. (a) The department shall use the following schedule for determination of forfeitures resulting from approved cost overruns on previously approved projects:
1. A cost overrun resulting from the actual inflation rate which exceeds the rate projected in the approved application or is less than 10% of the approved project cost or $ 300,000, whichever is greater, shall be subject to a forfeiture equal to 10% of the overrun;
2. A cost overrun which is more than 10% or more of the project cost or $ 300,000, whichever is greater, shall be subject to a forfeiture equal to 15% of the overrun; and
3. If a person incurs a second cost overrun on an approved project, the department shall assess a forfeiture equal to 30% of the overrun.
(b) Where a project is subsequently approved after being initiated without departmental approval, the person operating the project shall be subject to a single forfeiture using the following schedule:
1. For an expenditure greater than $ 600,000 but no more than $ 660,000, the person operating the project shall pay a forfeiture equal to 10% of the expenditure exceeding $ 600,000;
2. For an expenditure greater than $ 660,000 but no more than $ 900,000, the person operating the project shall pay a forfeiture equal to 15% of the expenditure exceeding $ 660,000, plus the dollar amount specified in subd. 1.; and
3. For an expenditure greater than $ 900,000, the person operating the project shall pay a forfeiture equal to 50% of the expenditure exceeding $ 900,000, plus the dollar amounts specified in subds. 1. and 2.
(c) 1. The department may not approve a project subject to a forfeiture under par. (a) or (b) until the forfeiture has been paid.
2. The department may not subsequently approve a project which was initiated without departmental approval and which involved construction of space designed to be utilized for a future FDD or other nursing home or to increase the bed capacity of a FDD or other nursing home.
(4) REPEAT VIOLATIONS. (a) The department shall reject an application for approval of a project from any person who has incurred 2 penalties under this chapter within a 5-year period, except for penalties assessed for cost overruns caused by the actual inflation rate exceeding the inflation rate stated in the original application or caused by code corrections mandated by the department as part of an approved plan of correction issued after the original approval.
(b) The department shall impose deadlines for compliance with any approval granted to a repeat violator. Failure to meet the deadlines shall result in voiding of the approval.
(5) MEDICAL ASSISTANCE LINKAGE. (a) 1. Any person submitting an application under this chapter shall state in the application the medical assistance rates anticipated for the first full year of operation following completion of the project or licensure of new beds. These rates shall be the maximum allowable reimbursement granted by the department for the first full year of operation. If the medical assistance facility reimbursement formula generates per diem rates which are less than those stated in the application, the lower rates shall prevail.
2. For the purposes of rate calculations for renovation projects, the useful building life used for depreciation shall be the same as that stated in the application in s. DHS 122.07 (1) (c) 2. for calculating equivalent cost per bed. The useful life selected shall remain constant for the life of the building.
(b) Any person submitting an application for approval of a cost overrun under sub. (2) (c) shall state the impact on medical assistance per diem rates stated in the original application. If approved, the rates in the new application shall be the medical assistance per diem rates for the first full year of operation following completion of the project or licensure of new beds.
(6) TRANSFER OF APPROVAL. An approval is issued in the name of the person submitting an application. Any person who takes a partner after receiving a project approval shall retain an equal or greater financial interest in the project for the approval to remain valid. The sale, lease or donation of a nursing home before the completion or licensure of a project at that nursing home voids the approval.
(7) VALIDITY OF APPROVAL. (a) An approval is valid for one year from the date of issuance unless extended under sub. (8).
(b) The department shall revoke an approval at the end of the period of validity of an approval if the status reports required under sub. (1) indicate that financing in an amount sufficient to complete the project has not been obtained, an obligation has not been incurred for the entire project or 20% of the approved project cost, including fees, has not been spent. An approval holder has obtained financing in an amount sufficient to complete the project when:
1. The interim or long-term mortgage has been executed by all parties, and the proceeds are available to the borrower in an amount sufficient to complete the project; or
2. The bonds have been sold, either publicly or privately, and the proceeds are available to the borrower in an amount sufficient to complete the project.
(8) REQUEST FOR EXTENSION OF PROJECT VALIDITY. (a) A person may request an extension of up to 6 months in the period of validity of an approval. The request shall include documentation of the following:
1. Names of all contractors, subcontractors or suppliers against whom a job action was incurred or a bankruptcy was filed;
2. Dates on which bankruptcies or strikes occurred and the resulting length of delay in project implementation, and dates on which a fire or natural disaster occurred, the extent of damage, and the resulting length of delay in project implementation; and
3. Any cost overruns anticipated as a result of the extension.
(b) Cost overruns on projects for which an extension has been granted shall be reviewed in the manner described in s. DHS 122.06 (10).
(c) The department may grant an extension only if the project is significantly delayed or damaged by fire or natural disaster, or if a strike against or bankruptcy of a contractor, subcontractor or major supplier previously committed to the project occurs.
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