Certificates of Need — Criteria

1. Law
2. Tennessee Code
3. Health, Safety and Environmental Protection
4. Health Facilities and Resources
5. Tennessee Health Services and Planning Act of 2002
6. Certificates of Need — Criteria

1. Notwithstanding the state health plan or any regulation of the agency, this section establishes the criteria for issuance of certificates of need for new nursing home beds regardless of site, including conversion of any beds to licensed nursing home beds. The agency is authorized to grant a certificate of need only if the applicant meets all of the requirements of this section.
2. The first criterion which must be met is the need for the project:
   1. 1. The need for nursing home beds shall be determined by applying the following population-based methodology:

         County bed need = .0004 times population of the county sixty-five (65) years of age and under; plus, 0.01 x population age 65-74; plus, 0.04 x population age 75-84; plus, 0.15 x population age 85 and over.

         Click to view table.(B)  When applying this bed need formula, the agency shall use the formula in effect at the time of initial consideration of an application, rather than a formula in effect at the time of application. County population statistics shall be based upon official statistics provided by the department of health;

   2. The need for nursing home beds shall be projected two (2) years into the future from the current year; and
   3. The actual bed need shall be derived by subtracting the projected bed need from a bed total comprised of the number of nursing home beds licensed in the county, plus certificate of need approved, but yet unlicensed beds.
3. The second criterion that must be met is economic feasibility:
   1. The application must show, and the agency must find, that the project will meet or exceed the following parameters:
      1. A debt service coverage ratio greater than or equal to 1.25 by the end of the second year of projection. Debt service coverage ratio is net income before depreciation and interest expense divided by the annual debt service;
      2. A current ratio greater than or equal to 1.25 by the end of the second year of projections. Current ratio is current assets divided by current liabilities;
      3. Day's cash on hand greater than or equal to fifteen (15) days at the end of each year of projection. Day's cash on hand is cash plus equivalents divided by net operating expenses per day minus depreciation per day; and
      4. Long term debt as a percent of total capital less than or equal to ninety percent (90%). Long term debt as a percent of total capital is long term debt divided by long term debt plus shareholders' equity or fund balance; and
   2. The applicant must show, and the agency must evaluate, the project with reference to:
      1. Whether sufficient financial resources are available to implement and operate the project including levels of patient charges and proof of potential capital financing;
      2. The long range amortization of the project, plus any cost associated with the original building if the proposed project is an addition or conversion of current space;
      3. A comparison of the cost of similar projects, including any construction costs, during the preceding year; and
      4. Projection of total costs over the expected life of facility.
4. When considering simultaneous review of two (2) or more applications for nursing home beds in the same county, the agency shall consider the following criteria in addition to need and economic feasibility:
   1. Any unique qualities or characteristics the application exhibits that distinguish it from other nursing homes, in the form of clientele served or services offered;
   2. The extent to which each project proposes to meet any unmet needs of the area's population; and
   3. The comparative costs of the projects. In simultaneous review applications, the focus shall be more on comparing the cost to the patient or payment source than a comparison of per bed or per square foot costs.
5. The agency shall not approve the settlement of an appeal of the denial or issuance of a certificate of need, if such settlement approves a project that does not meet the requirements of this section.
6. For the purposes of this section and § 68-11-1622, the term “new nursing home beds” shall not include nursing home beds that are relocated from an existing licensed nursing home to a partial replacement nursing home facility on a different site, if the following requirements are met:
   1. A certificate of need is issued for the relocation of the beds, pursuant to § 68-11-1607(a)(3)(D), and for a partial replacement nursing home facility pursuant to § 68-11-1607(a)(5). If all of the requirements of subdivisions (f)(2)-(6) are met, then the relocation of beds and the establishment of the partial replacement facility shall not be considered the establishment of a new health care institution, pursuant to § 68-11-1607(a)(1), or an increase in the number of licensed beds under § 68-11-1607(a)(3)(A);
   2. The nursing home proposing to relocate the beds and partially replace its facility has been granted a certificate of need for a partial replacement nursing home facility on its existing site, between April 1, 2004, and November 3, 2004;
   3. The partial replacement nursing home facility will be located in the same county as the nursing home facility sought to be partially replaced;
   4. The partial replacement nursing home facility and the relocation of beds will not cumulatively result in more licensed nursing home beds in the county than exist prior to the relocation of beds and partial replacement nursing home facility;
   5. The nursing home facility sought to be partially replaced is not fully equipped with fire suppression sprinklers, installation of such sprinklers and renovation or replacement of the entire facility on its current site would require the displacement or transfer of current patients, and the proposed partial replacement nursing home facility will be fully equipped with fire suppression sprinklers; and
   6. The partial replacement nursing home facility will initially be licensed to the same owner as the nursing home facility that is sought to be partially replaced. Nothing in this subsection (f) shall prohibit the transfer of the partial replacement nursing home facility to a different owner following its licensure.

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