20-1802

20-1802. Permit required; application;
definition

A. No person may solicit or enter into a life care contract as a provider or as a
provider extend the term of an existing life care contract except pursuant to this
chapter.

B. To qualify for a permit to enter into life care contracts with respect to a
particular facility, a person shall file an application for a permit with the department
on permit application forms provided by the department that shall include as an exhibit a
copy of the proposed form of life care contract to be entered into with residents at each
facility. The application shall contain the following information:

1. The name and business address of the applicant.

2. The name, the address and a description of the physical property of the
facility.

3. The terms and conditions of the life care contracts to be used by the applicant,
including the services to be provided to residents pursuant to the contract and the fees
or charges to be paid by residents, including the method of payment of the fees or
charges.

4. If the applicant is not an individual, such as a corporation, partnership or
trust, a statement naming the fiscal year end date that is the last day of a calendar
month and the type of legal entity and listing the interest and extent of such interest
of each principal in the entity.

5. If the applicant is not an individual, a biographical affidavit on a form
approved by the director for each of the members of the board of directors, officers,
trustees or managing partners.

6. The estimated number of residents of the facility to be provided services by the
applicant pursuant to the life care contracts.

7. A statement of the provisions that have been made or will be made to provide
reserve funding or security by the provider to enable the provider to fully perform the
provider's obligations pursuant to life care contracts, including the establishment of
escrow accounts, accounts in financial institutions, trusts or reserve funds.

8. A statement as to whether the applicant was or is affiliated with a religious,
charitable or other nonprofit organization, the extent of any affiliation and the extent
to which the affiliate organization will be responsible for the financial and contract
obligations of the applicant.

9. If the applicant is a subsidiary corporation or the affiliate of another
corporation, a statement identifying the parent corporation or the other affiliate
corporation and the primary activities of the parent or other affiliate corporation.

10. A description of the business experience of the provider in the operation of
similar facilities and, if the facility will be managed on a day-to-day basis by a
corporation or organization other than the provider, a description of the business
experience of the manager in the operation or management of similar facilities.

11. A statement as to whether the applicant, a promoter, a principal, a parent or
subsidiary corporation or an affiliate has had any injunctive or restrictive order of a
court of record, or any suspension or revocation of any state or federal license or
permit, arising out of or relating to business activity or health care applied against
it, including without limitation actions affecting a license to operate a foster care
facility, a health care institution, a retirement home or a home for the aged.

12. A statement of any periodic rates to be initially paid by residents, the method
by which the rates are determined and the manner by which the provider may adjust the
rates in the future. If the facility is already in operation, or if the provider
operates one or more similar facilities within this state, the statement must include
tables showing the frequency and average dollar amount of each increase in periodic rates
at each facility for the previous five years or any shorter period as the facility may
have been operated by the provider.

13. A statement of the terms and conditions under which a life care contract may be
canceled by the provider or resident, including any health and financial conditions
required for a person to continue as a resident and any conditions under which all or any
portion of the entrance fee will be refunded by the provider.

14. If construction or purchase of the facility has not yet been completed, a
statement of the anticipated source and application of the monies to be used in the
purchase or construction, including all of the following:

(a) An estimate of the cost of purchasing or constructing and equipping the
facility including related costs as financing expense, legal expense, land costs,
occupancy development costs and all other similar costs that the provider expects to
incur or become obligated for before the commencement of operations.

(b) An estimate of the total entrance fees to be received from residents on
completion of occupancy.

(c) A description of any mortgage loan or other long-term financing intended to be
used for the financing of the facility, including the anticipated terms and costs of the
financing.

(d) An estimate of any funds that are anticipated to be necessary to fund start-up
losses and to assure full performance of the obligations of the provider pursuant to life
care contracts including any reserve fund escrow required by the director pursuant to
section 20-1806.

15. Certified financial statements of the provider, promoter and manager as of a
date not more than ninety days before the date the permit application is filed, that
shall include a balance sheet and the related statements of income, retained earnings or
equity and changes in financial position for the three most recent fiscal years or any
shorter period of time as the provider, promoter or manager has been in existence. Each
of these statements shall be prepared in accordance with generally accepted accounting
principles and reported on by a certified public accountant in accordance with generally
accepted auditing standards. If the fiscal year ended more than ninety days before the
date of filing, the provider shall include an income statement, that need not be
certified, covering the period between the date the fiscal year ended and a date not more
than ninety days before the date the application is filed.

16. A feasibility study that shall include a financial forecast of the life care
facility estimating the most probable financial position, results of operations and
changes in financial position for the immediately succeeding five year period. The
feasibility study must set forth the actuarial assumptions for determining that the
project has sufficient revenues and funds, including reserves, for the project to
continue as a viable operating concern. The study must include all of the following:

(a) Beginning cash balance, and in the event that operation of the facility has not
yet commenced, the beginning cash balance shall be consistent with the statement of
anticipated source and application of funds described in paragraph 14.

(b) Anticipated earnings on cash reserves.

(c) Estimates of net receipts from entrance fees, other than entrance fees included
in the statement of source and application of funds required under paragraph 14, less
estimated entrance fee refunds and a description of the actuarial basis and method of
calculation for the projection of entrance fee receipts.

(d) An estimate of gifts or bequests if any are to be relied on to meet operating
expenses.

(e) A projection of estimated income from fees and charges other than entrance
fees, showing individual rates presently anticipated to be charged, including a
description of the assumptions used for calculating the effect on the income of the
facility of subsidized health services to be provided pursuant to the life care
contracts.

(f) A projection of estimated operating expenses of the facility, including a
description of the assumptions used in calculating the expenses, and separate allowances
for the replacement of equipment and furnishings and anticipated major structural repairs
or additions.

(g) An estimate of annual payments of principal and interest required by any
mortgage loan or other long-term financing.

17. An actuarial study prepared by a qualified actuary to be submitted with the
feasibility study for the purpose of demonstrating that the project has sufficient
revenues and funds, including reserves, for the project to continue as a viable operating
concern. The actuarial study shall include a cash flow projection, an evaluation of the
adequacy of current pricing structures and an analysis of the long-term relationship
between the project's assets and liabilities.

18. If the feasibility study required by paragraph 16 indicates that the provider
will have cash balances over and above two months' projected operating expenses of the
facility, a description of the manner in which the reserve funds will be invested and the
persons who will be making the investment decisions.

C. The application shall be signed under oath by the chief executive officer of the
applicant.

D. Copies of the escrow agreements executed with an escrow agent pursuant to
sections 20-1804 and 20-1806 shall be recorded as exhibits to the application.

E. The life care contract shall provide that any person entering into the contract
shall have a period of seven days within which to rescind the life care contract without
penalty or further obligation beginning with the first full calendar day following the
last to occur of the execution of the contract, the payment of an initial sum of money as
a deposit or application fee or receipt of a copy of the provider's most recent annual
report if the provider has filed an annual report with the director pursuant to section
20-1807, or, if the provider has not filed an annual report, a copy of the provider's
application. In the event of a rescission, all money or property paid or transferred by
the person shall be fully refunded by the provider. A person shall not be required to
move into a facility until after the expiration of the seven-day rescission period.

F. The director may charge an applicant the fee prescribed in section 20-167 for
processing the application filed pursuant to subsection B of this section.

G. Nothing in this article requires the director to determine the actual financial
condition of any life care contract provider. The approval of a permit indicates only
that the entity appears to be financially viable based on the information provided to the
director.

H. For the purposes of this section, "principal" means any person or entity having
a ten per cent or more financial interest or, if the legal entity is a trust, each
beneficiary of the trust holding a ten per cent or more beneficial interest.