Governor Proposes Rule on Determination of Capital Investment Fund
On Monday, 6/7/04, the Governor's Office of Health Policy & Finance published the following draft rule proposing a methodology for determining the Capital Investment Fund, the annual amount of funding to be made available, in accordance with the Dirigo Health legislation (P.L. 2003, Chapter 469), for projects requiring a certificate-of-need.
The draft rule will have a public hearing on Tuesday, 6/29/04 at 9:00 a.m. at the Bureau of Medical Services office, 442 Civic Center Drive, Augusta, Maine. You may send comments to Gordon Smith (email@example.com) or Andrew MacLean (firstname.lastname@example.org) for inclusion in the MMA's comments or you may send written comments not later than 7/9/04 to:
Ellen Jane Schneiter, Deputy Director
Office of Health Policy & Finance
State House Station 15
Augusta, Maine 04333-0015
07 -- Executive Department
102 -- Office of the Governor
Chapter 101 Establishment of the Capital Investment Fund
Summary: This chapter establishes the process to be used in the determination of the amount of the Capital Investment Fund. This rule specifies the manner in which a value for the Fund will be calculated each year, how that amount will be allocated between hospital and non-hospital projects as well as large and small projects subject to review under Maine’s Certificate of Need Act and rules. It also describes the manner in which the input regarding the number will be solicited, obtained and considered.
1. Definitions. For the purpose of this chapter, the following definitions shall apply.
A. Advisory Council on Health Systems Development. “Advisory Council on Health Systems Development” means the council established in accordance with 5 MRSA §12004-I and described in 2 MRSA c. 5 §104.
B. Annual Effective Period. “Annual effective period” means the period covered by the Capital Investment Fund. Such periods will ordinarily run for a 12-month period of time, coinciding with the state fiscal year.
C. Capital Costs. “Capital costs” means costs that under generally accepted accounting principles are not properly chargeable as an expense of operation and maintenance and includes capitalized interest on borrowed funds and the fair market value of any property or equipment that is acquired under lease or comparable arrangement or by donation.
D. Capital Investment Fund. “Capital Investment Fund” means the limit on resource expenditures that may be made as part of any hospital or non-hospital project, which is established on an annual basis pursuant to the provisions of this chapter.
E. Department. “Department” means the Maine Department of Health and Human Services.
F. Extraordinary Project. “Extraordinary project” means a project subject to review under the Maine Certificate of Need Act and rules that is more than two standard deviations apart from the average award in the year the project was approved, made under the Maine Certificate of Need Act and rules, in terms of third year operating costs.
G. Hospital Project. “Hospital project” means a project that is being proposed by or on behalf of a hospital, as defined at 22 MRSA section 328(14), and that relates to facilities, services or equipment, that is subject to review and approval under the Maine Certificate of Need Act and rules.
H. Hospital Component. “Hospital component” means that portion of the Capital Investment Fund specifying the level of capital and operating costs that may be approved by the Department under the Maine Certificate of Need Act and rules for hospital projects.
I. Large Project. “Large project” means a hospital or non-hospital project with third year operating costs greater than or equal to $500,000.
J. Non-hospital Project. “Non-hospital project” means a project that is being proposed by or on behalf of a health care facility as defined in 22 MRSA section 328(8), other than a hospital, that is subject to review and approval under the Maine Certificate of Need Act and rules.
K. Non-hospital component. “Non-hospital component” means that portion of the Capital Investment Fund specifying the level of capital and operating costs that may be approved by the Department under the Maine Certificate of Need Act and rules for non-hospital projects.
L. Office. “Office” means the Governor’s Office of Health Policy and Finance or its successor.
M. Operating Costs. “Operating costs” means the total non-capital incremental costs attributable to a project approved in accordance with the Maine Certificate of Need Act and rules.
N. Small Project. “Small project” means a hospital or non-hospital project with third year operating costs less than $500,000.
O. State Health Plan. “State Health Plan” means the plan developed and issued by the Governor pursuant to 2 MRSA c.5, section 101.
P. Total Costs. “Total costs” means the third year capital and operating costs associated with a hospital or non-hospital project.
2. Responsibility for Determining Capital Investment Fund Amount. The Office shall establish a Capital Investment Fund for each annual effective period, pursuant to the process specified in this rule. Each Capital Investment Fund shall include allocations for both hospital and non-hospital projects, shall reflect the goals of health care cost containment, improvement of health care quality and outcomes and improvement of appropriate access to health care services and shall reflect the guidance provided in the State Health Plan.
3. Process for Determining Capital Investment Fund. The Office shall determine a Capital Investment Fund for each annual effective period as specified below:
A. The Office shall calculate a starting value for the Capital Investment Fund as follows:
(1) The Office shall determine the average total third year capital and operating costs of those hospital projects approved in accordance with the Certificate of Need Program in the five year period beginning six years prior to the outset of the annual effective period. This means in the annual effective period for 2004, the average for the years 1999, 2000, 2001, 2002 and 2003 shall be determined. Extraordinary projects shall be excluded from this calculation.
(2) The five-year average third year operating and capital costs calculated above shall be adjusted for differences between the average cost per discharge, adjusted for variations in wages and case mix, in Maine and the US, using the most recent data available.
(3) The product of the calculation performed in subsection (3)(A)(ii) shall be further adjusted to more adequately reflect differences in the median age of Maine’s population relative to the median age in the US, generally, for the most recent year for which data are available.
(4) If necessary, the product of the calculation performed in subsection (3)(A)(iii) shall be further adjusted to correlate with the number of months the CIF is to apply to, should that number vary from twelve months.
(5) The amount calculated in subsection (3)(A)(iv) shall be adjusted to reflect differences in median income in Maine and the US, using the most recent year for which data are available. This amount shall be the Capital Investment Fund hospital component.
B. The statute at 2 MRSA c. 5, section 102(3) requires that, for the first three years of operation, the non-hospital component of the Capital Investment Fund shall be at least 12.5% of the total Capital Investment Fund. The Office shall next determine the Capital Investment Fund amounts for non-hospital projects as follows:
[Value of the hospital component of the Capital Investment Fund, as calculated in subsection 3(B)] x (0.125) / (0.875)
C. Within both the hospital and non-hospital components of the Capital Investment Fund, there shall be an allocation for large projects and small projects. Within each component, ten percent (10%) of the total Capital Investment Fund component shall be set aside for small projects; the remainder shall be allocated to large projects.
D. The Office will then examine the results of the calculations performed in accordance with subsections (3)(B) and (3)(C) against, at a minimum, the criteria for the Capital Investment Fund set forth at 2 MRSA chapter 5 section 102(2). The Capital Investment Fund shall be further adjusted if the Office finds it does not adequately reflect the considerations listed below. The criteria include:
(1) The State Health Plan developed in accordance with 2 MRSA chapter 5 section 103;
(2) The opportunity for improved operational efficiencies in the state’s health care system;
(3) The average age of the infrastructure of the state’s health care system; and
(4) Technological developments and the dissemination of technology in health care.
E. The Office may consult with one or more experts to gain additional guidance regarding the appropriate value for the Capital Investment Fund or any of its individual components. If, after such consultation, the Office concludes that the value of the Fund arrived at after performing the computations in subsection (C) is inappropriate, the value may be adjusted to reflect the expert guidance.
F. The Office shall consult with the Advisory Council on Health Systems Development regarding the appropriate value for the Capital Investment Fund or any of its individual components. If, after such consultation, the Office concludes that the value of the Fund arrived at after performing the computations in subsection (C) is inappropriate, the value may be adjusted to reflect the guidance provided by the Advisory Council on Health Systems Development.
G. After carrying out the calculations and taking into consideration the criteria set forth in subsection (D), any expert advice sought and the recommendations received from the Advisory Committee on Health Systems Development, the Office shall solicit public input on the Capital Investment Fund by holding a public hearing.
(1) The Office shall provide notice of the public hearing by publication in the Kennebec Journal. The notice will include information regarding the time and place of the public hearing, as well as specify a deadline for receipt of written comments. The public hearing will be held no less than twenty (20) days following publication of the notice.
(2) Notice shall also be provided to all persons who have requested notification by means of asking that their names be placed on a mailing list maintained by the Office or this purpose. This notice shall be provided to all such persons at least five (5) business days prior to the public hearing and shall include a brief description of the Capital Investment Fund, the manner in which it was derived including discussion of expert advice received pursuant to subsection (E) and recommendations received from the Advisory Council on Health Systems Development pursuant to subsection (F). The notice shall also include a description of the policy rationale underlying the Capital Investment Fund.
(3) At the public hearing, the Office will accept comments from any interested person wishing to speak. The Office may arrange the schedule for the public hearing to allow specific constituency groups to be heard together in a single block of time. For example, a schedule may be set out that specifies that comment will first be taken from consumers, to be followed by payers, then providers, and so on. The Office may, at its discretion, limit the time any individual may be allowed for presentation of public comment.
(4) The Office will accept written comments from any interested person for a period of ten (10) days following the date of the public hearing.
(5) Within thirty (30) days of the close of the public comment period, the Office shall, after consideration of the comments received, issue a written notice of the final Capital Investment Fund. In that notice, the Office shall summarize the comments received and shall provide a response to those comments. If the Capital Investment Fund is inconsistent with any of the comments submitted for consideration, the Office shall provide a detailed statement of the reasons for the inconsistency.
4. Use and Operation of the Capital Investment Fund. The Capital Investment Fund amounts, as issued by the Office, shall be used as a limit for annual resource allocation under the Certificate of Need program by the Department of Health and Human Services.
5. Maximum allowance for a Single Project in a Single Year. A maximum of $2,000,000 shall be debited against the Capital Investment Fund level for any individual project in a single year. In the case of an extraordinary project, where the project’s total costs exceed this maximum, the total cost of the project shall be allocated in equal amounts over multiple years, with no one allocation exceeding $2,000,000.
6. Carry Forward. If, after all Certificate of Need approvals are made for a given annual effective period, the hospital portion of the Capital Investment Fund has fund allowances remaining, those allowances shall be credited to the hospital portion of the Capital Investment Fund in the following annual effective period. Similarly, if the non-hospital portion of the Capital Investment Fund has fund allowances remaining, those allowances shall be credited to the non-hospital portion of the Capital Investment Fund in the following annual effective period. [return to top]