MINUTES STATE HEALTH FACILITIES COUNCIL WEDNESDAY, … Minutes and Signed... · minutes state...

MINUTES

STATE HEALTH FACILITIES COUNCIL

WEDNESDAY, OCTOBER 24, 2018

LOCATION: IOWA LABORATORY FACILITY, CONFERENCE CENTER, ROOM 208

DMACC CAMPUS, ANKENY

9:00 AM Roll Call

MEMBERS PRESENT: H.W. Miller, M.D., Chairperson; Roberta Chambers; Steve Dengle; Brenda Perrin;

Connie Schmett

STAFF PRESENT: Becky Swift and Heather Adams, Counsel for the State

I. APPROVAL OF MINUTES OF PREVIOUS MEETING

A motion by Chambers, seconded by Perrin to approve the minutes of October 8, 2018, carried

unanimously by voice vote.

II. EXTENSION OF PREVIOUSLY APPROVED PROJECTS

1. Solon Retirement Village, Solon, Johnson County: Addition of 4 nursing facility beds,

$870,000 (Approved 10/26/2017; First Extension Request)

Staff report by Becky Swift. The applicant was represented by Adam Freed, Brown Winick Law.

The applicant made remarks and answered questions posed by the Council. A motion by Dengle,

seconded by Chambers, to grant a six (6) month extension carried 5-0.

2. AP Homes Ames, LLC a to be formed affiliate of Action Pact Holdings, LLC, Ames, Story

County: Construction of a 20 bed nursing facility, Ames, Story County, $3,806,027 (Approved

10/26/2017; First Extension Request)

Staff report by Becky Swift. The applicant was represented by Chris Cole, AP Homes Ames,

LLC. The applicant made remarks and responded to questions posed by the Council. A motion

by Perrin, seconded by Schmett, to grant a 12 month extension carried 3-2. Chambers and Miller

voted no.

3. Heartland Care Center, Marcus, Cherokee County: Addition of eight skilled nursing facility beds,

$2,904,991 (Approved 10/25/2017; First Extension Request)

Staff report by Becky Swift. The applicant was represented by Ed McIntosh, Dorsey & Whitney.

The applicant made remarks and responded to questions posed by the Council. A motion by

Perrin, seconded by Dengle, to grant a 12 month extension carried 5-0.

4. Keystone Nursing Care Center, Inc., Keystone, Benton County: Addition of 10 skilled nursing

facility beds, $3,713,913 (Approved 10/25/2018; First Extension Request)

Staff report by Becky Swift. The applicant was represented by Ed McIntosh, Dorsey & Whitney.


Chambers, seconded by Schmett, to grant a six (6) month extension carried 5-0.

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5. PHS Walnut Ridge, LLC, Clive, Polk County: Addition of a 60-bed skilled nursing facility,

$12,531,500 (Approved 10/26/2016; Second Extension Request)

Staff report by Becky Swift. The applicant was represented by Doug Gross, Brown Winick Law;

and Allison Bass and Mark Hudson, Presbyterian Homes and Services. The applicant made

remarks and responded to questions posed by the Council. A motion by Perrin, seconded by

Dengle, to grant a 12 month extension carried 5-0

6. Iowa Methodist Medical Center, Des Moines, Polk County: Addition of 22 inpatient

rehabilitation beds, $4,740,000 (Approved 10/27/2016; Second Extension Request)

Staff report by Becky Swift. The applicant was represented by Doug Gross of Brown Winick

Law. The applicant made remarks and responded to questions posed by the Council. A motion by

Dengle, seconded by Chambers, to grant a 12 month extension carried 5-0.

7. CCRC of West Des Moines, West Des Moines, Dallas County: Construction of a 40-bed nursing

facility, $4,923,000 (Approved 2/25/2016; Fifth Extension Request)

Staff report by Becky Swift. The applicant was represented by Gib Wood, Scenic Development.


Schmett, seconded by Perrin, to grant a 12 month extension carried 5-0.

8. CCRC of Cedar Rapids, LLC, Cedar Rapids, Linn County: Construction of a 40-bed nursing

facility, $4,854,000 (Approved 10/28/2015; Third Extension Request)



Chamber, seconded by Dengle, to grant a three (3) month extension carried 5-0.

III. PROJECT REVIEW (Cost Overrun)

1. CCRC of Cedar Rapids, Cedar Rapids, Linn County: Re-review of a project approved 10/28/2015

to construct a 40-bed nursing facility at a cost of $4,854,000. Cost overrun of $1,501,400, (31%

of the approved $4,854,000)


The applicant made remarks and answered questions posed by the Council. A motion by

Chambers, seconded by Schmett, to approve the cost overrun carried 5-0.

IV. REQUEST FOR DETERMINATION OF NON-REVIEWABILITY AND THE DEPARTMENT’S

RESPONSE

1. UnityPoint Health-Des Moines (Lutheran Hospital) Ankeny Facility – change in ownership and

licensure

Staff report by Becky Swift. A motion by Dengle, seconded by Chambers, to affirm the

Department’s decision carried 5-0.

V. REQUEST FOR REHEARING

1. Mercy Medical Center – Dubuque, Dubuque County: Acquisition of a linear accelerator and CT

simulator

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A request for rehearing in the matter of the application of Mercy Medical Center - Dubuque for

the acquisition of a linear accelerator and CT simulator was submitted to the Department. The

Council approved this project on July 25, 2018. A written decision was dated September 7, 2018,

and issued on September 18, 2018. A request for rehearing was filed by UnityPoint Health-

Finley Hospital on October 8, 2018, within 20 days after the issuance of the final decision.

Mercy Dubuque filed resistance to the request for rehearing on October 22, 2018.

The petitioner, UnityPoint Health – Finley Hospital in Dubuque, was represented by Doug Gross

of Brown Winick Law. The applicant, Mercy Medical Center-Dubuque, was represented by

Alissa Smith of Dorsey & Whitney.

Due to a recorded prior conflict of interest, Council member Connie Schmett recused herself from

the rehearing.

The chairperson granted each party 15 minutes for oral arguments regarding the rehearing

request. Granted to the petitioner was a five minute rebuttal.

A motion by Dengle, seconded by Perrin, to approve the rehearing request did not carry. Dengle

and Perrin voted yes. Chambers and Miller voted no. In accordance with 641 IAC 202.5(3) a tie

vote shall mean no action on the motion.

VI. PROJECT REVIEW

Due to their similarity, the applications from Mercy-Kindred and Encompass Health were batched,

meaning the testimony for both was heard prior to voting on each individually.

1. Mercy-Kindred Rehabilitation Hospital, Iowa City, Johnson County – Construction of a 40-bed

rehabilitation hospital

$7,508,963

Staff report by Becky Swift. The applicant was represented by Alissa Smith, Dorsey & Whitney;

Donna Flannery and Nikki Nigg, Kindred Healthcare; and Casey Greene, Mercy Iowa City. The

applicant made a presentation and answered questions posed by the Council. A motion by Perrin,

seconded by Chambers, to enter exhibits presented by the applicant in support of oral testimony

into the record carried unanimously by voice vote.

Affected parties in support included Kim Pattee, Dr. Stephen Scheckel, Renee DeJong, Karrie

Anderson, and Michael Currier.

There were no affected parties in opposition.

The applicant provided closing remarks.

A motion by Perrin, seconded by Schmett, to Grant a Certificate of Need carried 5-0.

2. Encompass Health Rehabilitation Hospital of Iowa City, LLC, Iowa City, Johnson County –

Construction of a 40-bed rehabilitation hospital

$26,853,953

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Staff report by Becky Swift. The applicant was represented by Doug Fulton, Brick Gentry; Troy

DeDecker, Encompass Health; Dr. Matthew Howard, UIHC; Geoffery Lauer, Brain Injury

Alliance; Edward Stall, DHG; Cheryl Miller, Encompass Health; Dr. Richard Shields, UIHC; Dr.

Harold Adams, UIHC (via video); Dr. Andrea Swenson, UIHC; Peggy O’Neil, UIHC. The

applicant made a presentation and responded to questions posed by the Council. A motion by

Chambers, seconded by Dengle, to enter exhibits presented by the applicant in support of oral

testimony into the record carried unanimously by voice vote.

Affected parties in support included Jennifer Vermeer, UIHC and Dr. Stanley Matthew, St.

Luke’s Hospital.

Alissa Smith, Dorsey & Whitney, representing Mercy-Kindred Rehabilitation Hospital, appeared

as an affected party in opposition.

The applicant provided closing remarks and rebuttal.

A motion by Dengle, seconded by Chambers, to Grant a Certificate of Need carried 3-2. Perrin

and Schmett voted no.

3. BVM-PHS Senior Housing, Inc., Dubuque, Dubuque County – Construction of a 60 bed nursing

facility

$19,574,488

Staff report by Becky Swift. The applicant was represented by Fred Dorr, Wasker Dorr,

Wimmer, Marcouiller, P.C.; Mark Hudson, PHS; Sr. Margaret Belanger, Carondelet Village (via

video) and Alan Stache, Sr. Teri Hadro and Sr. Kate Hendel, BVM. The applicant made a

presentation and responded to questions posed by the Council. A motion by Dengle, seconded by

Perrin, to enter exhibits presented by the applicant in support of oral testimony into the record

carried unanimously by voice vote.

Affected parties in support included Sr. Bernadette McManigal, Sr. Carolyn Farrell, Dr. Michael

Ward and Bill Hagstrom; and the following via video: Rev. Msgr. Thomas Toale, Gayle

Chavanelle, Martha Avella Powers, Carol Griffen, Jean Quann and Brendan Quann. A motion by

Schmett, seconded by Chambers, to enter exhibits presented by the affected parties in support of

oral testimony into the record carried unanimously by voice vote.

Affected parties in opposition were represented by Doug Fulton, Brick Gentry; Gretchen Brown,

Stonehill Franciscan Services; Doug Johnson, Hawkeye Care Centers; and Char Schlepp, Care

Initiatives. The opposition made remarks and answered questions posed by the council.

The applicant provided closing remarks and rebuttal.

A motion by Chambers, seconded by Schmett, to Grant a Certificate of Need carried 3-2. Dengle

and Perrin voted no.

Chairperson Miller reminded the Council that the next in-person meeting would be held at this location on

February 20 and 21, 2019.

A motion by Perrin, seconded by Schmett, to adjourn carried unanimously by voice vote.

The meeting adjourned at 7:47 PM.

IOWA DEPARTMENT OF PUBLIC HEALTH


IN THE MATTER OF THE CERTIFICATE OF NEED EXTENSION FOR

AP HOMES AMES, LLC, a to be formed affiliate of ACTION PACT HOLDINGS, LLC

AMES, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Chris Cole, AP Homes Ames.

The project, the construction of a 20 bed nursing facility was originally approved October 26, 2017, at an estimated cost of $3,806,027. The original completion date for the project was May 2019; the new completion date for the project is November 2019. The work completed to date includes architectural floorplan layouts and financial modeling. There had been discussions with the local acute care provider in the community to build on their location, but after several meetings AP Homes Ames, LLC was unable to come to terms on a partnership and financing structure. According to testimony provided at the hearing, this forced the applicant to go back to the market to look for a new location. New location options are currently being negotiated and the final location should be secured within 60 days. Once the acquisition of the land is complete, civil engineering and architectural documents can be finished and they can close on financing the construction. It is anticipated that financial documents will be signed in January 2019. To date $106,990 has been spent on the project.

The Council, after reading the extension request and hearing comments by staff and the applicant, voted 3-2 to Grant an Extension of Certificate of Need per 641 Iowa Administrative Code 202.13. The decision is based upon a finding that progress has been made in developing the project.

The extension is valid for 12 months.

Dated this day of December 2018

ri4A H.W. Miller, M.D.. Chairperson State Health Facilities Council Iowa Department of Public Health

cc: Health Facilities Council Department of Inspections & Appeals, Health Facilities Division



IN THE MATTER OF THE APPLICATION OF

BVM-PHS SENIOR LIVING DECISION

DUBUQUE, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018.

The applicant proposes the construction of a 60 bed nursing facility as part of a continuing care retirement community.

BVM-PHS Senior Living applied through the Iowa Department of Public Health for a Certificate of Need.

The record includes the application prepared by the project sponsor and written analysis prepared by Iowa Department of Public Health staff and all the testimony and exhibits presented at the hearing. Becky Swift of the Iowa Department of Public Health summarized the project in relation to review criteria. Fred Don, Wasker Dorr, Wimmer, Marcouiller, P.C.; Mark Hudson, PHS; Sr. Margaret Belanger, Carondelet Village (via video) and Alan Stache, Sr. Teri Hadro and Sr. Kate Hendel, BVM, were present representing the applicant. The applicant made a presentation and answered questions.

Affected parties in support included Sr. Bernadette McManigal, Sr. Carolyn Farrell, Dr. Michael Ward and Bill Hagstrom; and the following via video: Rev. Msgr. Thomas Toale, Gayle Chavanelle, Martha Avella Powers, Carol Griffen, Jean Quann and Brendan Quann.

Affected parties in opposition were represented by Doug Fulton, Brick Gentry; Gretchen Brown, Stonehill Franciscan Services; Doug Johnson, Hawkeye Care Centers; and Char Schlepp, Care Initiatives.

The Council, after hearing the above-mentioned testimony and after reading the record, voted 3-2 to grant a Certificate of Need. As a basis for their decision the Council, considering all the criteria set forth pursuant to Iowa Code Section 135.64 (1 and 2) (2017) made the following tindings of fact and conclusions of law:

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FINDINGS OF FACT

1. The Sisters of Charity of the Blessed Virgin Mary (-BVM") and Presbyterian Homes and

Services ("PHS") propose a collaboration to build a 60 bed nursing facility on the Mt. Carmel BVM campus in Dubuque, Iowa. In addition to nursing facility services, the project will involve establishing the full continuum of care, including 40 assisted living apartments, 20 memory-care assisted living apartments, 112 independent living apartments and a town center.

2. PHS is a nonprofit provider of housing options for older adults. PHS currently owns and operates two skilled nursing facilities in Iowa (Mill Pond in Ankeny and Highland Ridge Care Center in Williamsburg), and one being built as an addition to their Clive (Walnut

Ridge) campus. Additionally, PHS recently applied for and received a CON for a facility in Pottawattamie County.

3. BVM is headquartered in Dubuque and maintains the Mt. Carmel campus for its sisters. Mt. Carmel is home to retired BVMs and sisters who are active in the Dubuque

community. The campus includes 109 acres on the bluffs of the Mississippi River. BVM

currently offers nursing level care, but that care is limited to BVM sisters. BVM did not previously require a CON for these services as the facility was operated by and for the exclusive use of a religious order and was in operation prior to July 1, 1986. Because BVM is now proposing to admit individuals from the general public and to obtain

licensure a CON is required for this project. (Iowa Code § 135.63(3)).

4. BVM-PHS Senior Housing, Inc. seeks to expand their nursing level of care beyond the need presented by the Sisters of Charity to provide services to older Iowans in Dubuque

County and its surrounding counties. They will seek licensure for these beds from the Department of Inspections and Appeals. BVM-PHS is contractually obligated to serve BVM sisters first.

5. According to testimony, the purpose of expanding services to the community is to leave

an ongoing legacy and to support the BVM mission of service to others. The Mt. Cannel

campus is currently open to neighbors and community members for activities and it provides important services for BVM sisters and the broader community.

6. All of the beds will be Medicare and Medicaid certified.

7. It is expected that the majority of beds in the proposed nursing facility will initially serve BVM's independent living and assisted living residents - many of whom also receive a nursing level of care - allowing them to age in place.

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8. During testimony it was noted that the BVM have 315 sisters worldwide and have 156 sisters living on its current campus. Additionally, there are currently 50 sisters who would likely qualify for the nursing level of care. BVM projects that by 2021 the majority of the beds in the proposed facility would be occupied by BVM sisters. According to testimony, BVM-PHS anticipates that 53 of the 60 beds would be filled by BVM sisters.

9. Based on the current age of members of the BVM congregation, BVM-PHS anticipates serving primarily BVM sisters for at least ten years. During testimony it was noted that the median age of BVM sisters is 82. Among those in the current retirement facility the median age is 88.

10. During testimony it was noted that there have already been inquiries from the community about living on the BVM campus.

11. The current facility on the BVM campus is on multiple levels which requires climbing stairs, the rooms are of various sizes and not private, and residents must share bathrooms. The facility is relatively old and outdated and the applicant testified that a more modern facility is needed to care for sisters as they return to Mt. Carmel.

12. The new facility would feature 56 rooms — 54 private and two semi-private for couples or others who want to share a room - with private bathrooms.

13. Dubuque County is a growing metropolitan area and since 2010, the total population of the county has increased by more than 5 percent. The applicant noted that since 2010, the population of persons over the age of 85 has increased by almost 44 percent; the population of persons between the ages of 75-84 has increased by more than 2 percent; and the population of persons between the ages of 65-74 has increased by almost 25 percent.

14. The calculated bed need formula indicates a current underbuild in all of the four counties

around Dubuque County. The underbuild for Dubuque County is 101 beds. Overall the

five-county area, as calculated by the bed need formula, is underbuilt by 527 beds. See

the following table for additional bed information.

Nursing Facility Beds by County Number Needed by CON Formula/Number Licensed/Difference

County

Projected 2023 Population Age 65+

# of NF Beds needed per bed need formula

# of licensed & approved

Difference — Formula vs. Licensed & Approved*

NF Beds as of 9/18

Dubuque 18,688 1042 9411 -101 Clayton 4,316 299 245 -54 Delaware 3,989 278 191 -87 Jackson 4,830 334 195 -139

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Jones 4,619 322 176 -146 Totals 36,442 2,275 1,748 -527

*A positive (+) number means the county is overbuilt and a negative (-) indicates an underbuild. Approved July 2018: Luther Manor Communities — Grand Meadows Campus, Dubuque County, 16 beds.

All approved beds are included in the count for each county.

15. Over the span of the last three years, the total number of beds in the five county area has

increased by two beds. There has been an increase of 16 beds in the past three years for

Dubuque County (this does not include the 16 beds approved July 2018 but not yet

licensed at Luther Manor Communities- Grand Meadows Campus). See the following

table for additional details.

Licensed Nursing Facility Beds by County Difference in Number Between September 2015 and September 2018

County # of NF Beds (facilities) as of 9/15

# of NF Beds (facilities) as of 9/18

Difference in # of NF Beds

Dubuque 909 (9) 925 (10) 16 Clayton 245 (4) 245 (4) 0 Delaware 191 (2) 191 (2) 0 Jackson 209 (3) 195 (3) -14 Jones 176 (2) 176 (2) 0 Totals 1,730 (20) 1,732 (21) 2

16. There are currently 1,748 licensed and approved nursing facility beds in the five-county

area, with 169 licensed beds in dedicated CCDI units. Additionally, there are 54 NF beds

in hospital-based settings.

Number of CCDI Beds by Coun

County # of CCDI Beds (facilities)

56 (4) Dubuque Clayton 16 (I)

Delaware 36 (1) Jackson 37 (1) Jones 24 (1) Totals 169 (8)

Data Sources: Department of Inspections & Appeals — Summary of Long Term Care Facilities

17. There are 12 nursing facilities in Dubuque County, ranging in occupancy from 100%

(Grand Meadows) to 55% for an average of 83%. There were facilities in the county that

reported low occupancy rates of 64% (Dubuque Specialty Care) and 55% (Ennoble

Skilled Nursing and Rehab). These facilities reported using semi-private as private rooms

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and continuous changes in census due to residents coming and going from skilled nursing. If Ennoble Skilled Nursing and Rehab is suppressed, the census for the County

increases to 86%. The four contiguous counties report occupancies ranging from 57

percent (Clayton County) to 86 percent (Delaware County)..

Phone Survey of Nursing Facilities Located in Dubuque County & Counties Contiguous to Dubuque County

Conducted September 2018

Facility by County Licensed

Beds Current

Occupancy Percent

Occupied

Dubuque County

Bethany Home 66 66 100%

Dubuque Specialty Care 98 63 64%

Ennoble Skilled Nursing and Rehab 102 56 55%

Grand Meadows — Asbury Campus 16 16 100%

Hawkeye Care Center Dubuque 80 67 84%

Luther Manor Communities 103 100 97%

Manorcare Health Services 99 69 70%

Mercy Medical Center —Dubuque SNF 14 12 86%

Mercy Medical Center —Dubuque HSP-NF (Dyersville location)

40 36 90%

Shady Rest Care Center 70 47 67%

Stonehill Care Center 214 204 95%

Sunnycrest Manor 77 75 97%

TOTAL 979 811 83%

Clayton County

Elkader Care Center 44 26 59%

Great River Care Center 50 26 52%

Guttenberg Care Center 93 51 55%

Strawberry Point Lutheran Home 58 36 62%

TOTAL 245 139 57%

Delaware County

Edgewood Convalescent Home 58 53 91%

Good Neighbor Home 133 112 84%

TOTAL 191 165 86%

Jackson County

Crestridge Care Center 75 65 87%

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Maquoketa Care Center 52 39 75%

Mill Valley Care Center 68 49 72%

TOTAL 195 153 78%

Jones County

Anamosa Care Center 76 59 78%

Monticello Nursing and Rehab Center 100 69 69%

TOTAL 176 128 73%

18. The following table displays other levels of service available in the five-county area.

County RCF Beds (Facilities)

Home Health Agencies

Adult Day Services

Assisted Living Units (Facilities)

ALP/D

Dubuque 66 (1) 4 75 (3) 469 (5) 319 (4) Clayton 44 (1) 1 0 131 (6) 56 (1) Delaware 60 (1) 1 25 (1) 128 (2) 0 Jackson 0 0 30 (1) 36 (1) 79 (1) Jones 51 (1) 2 0 80 (2) 0 TOTALS 221 (4) 8 130 (5) 844 (16) 454 (6)

Data source: DIA web site

19. There were five letters of support received. The letters were from the Hospice of

Dubuque, Greater Dubuque Development Corp., Medical Associates Clinic, Mercy Medical Center, and the Office of the Vicar General. These letters cite the need to

enhance care for the Sisters and well as to expand services to the aging members of the

Dubuque community, the growth of the aging population in the area, the commitment to service by both BVM and PHS, and the need to plan for future population growth. There were nine individuals who spoke in support of the project.

20. One affected party in support indicated that there were no nursing facilities in the area of the community where Mt. Carmel is located.

21 There were six letters of opposition received and a historical census. The letters, from Dubuque Specialty Care, Hawkeye Care Center, Luther Manor, Bethany Home, Ennoble Skilled Nursing and Rehabilitation Center and Stonehill Care Center cite a reduction in nursing facility utilization; no need for additional nursing beds in the area; more beds placing an undue hardship on existing facilities; declining census numbers; a market too small to support additional NF beds; the abundance of options individuals have to nursing

care such as assisted living and home care; the lack of a long range plan by BVM-PHS; and difficulty finding qualified staff (both nursing and other) as reasons for their opposition. The historical census, from Dubuque Specialty Care, showed average daily

census percentages ranging from 69.39 in 2015 to 67.57 in 2017. The census further

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projects a utilization rate of 63.27 percent in the years 2019-2021. Four of these facilities

appeared at the hearing in opposition to the project.

22. PHS' sister facilities in Iowa have been actively participating in accountable care

organizations in their communities to provide care and services. The applicant stated that

the proposed facility would actively seek out similar opportunities to partner with area

medical providers.

23. The applicant notes that they have 69 staff in place for this project. Staff in place currently work with the sisters who need nursing facility level of care. BVM-PHS will work closely with their staff to provide extensive training and, where necessary, obtain any required licensure or certification to comply with requirements of nursing facilities. The applicant indicates if additional staff is needed they will work with local colleges in the Dubuque area to recruit high-quality staff

24. The applicant has $1,500,000 on hand and will borrow $18,074,488. A letter from Piper

Jaffery & Co, outlining the financing terms, notes that the issuer will be Iowa Finance

Authority, and the proceeds of the Bonds, together with the Borrower's (Mount Carmel,

Inc.) equity contributions and other sources of funds will be used to finance the project.

The applicant notes a turnkey cost of $301,241.

25. The applicant does not anticipate an operating deficit as a result of this project.

CONCLUSIONS OF LAW

In determining whether to issue a certificate of need, the Council considers the eighteen criteria listed in Iowa Code § 135.64(1)(a)-(r). In addition, the legislature has provided that the Council may grant a certificate of need only if it finds the following four factors exist:

a. Less costly, more efficient or more appropriate alternatives to the proposed institutional health service are not available and the development of such alternatives is not practicable;

b. Any existing facilities providing institutional health services similar to those proposed are being used in an appropriate and efficient manner;

c. In the case of new construction, alternatives including but not limited to modernization or sharing arrangements have been considered and have been implemented to the maximum extent practicable;

d. Patients will experience serious problems in obtaining care of the type which will be furnished by the proposed new institutional health service or changed institutional health service, in the absence of that proposed new service.

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1. The Council concludes that less costly, more efficient or more appropriate alternatives to the proposed health service are not available and the development of such alternatives is not practicable. The Council notes the somewhat unique nature of this project in terms of its location and population to be served. The Council notes the majority of the beds will be used by retired BVM sisters allowing them to age in place. The Council also notes that the applicant has received inquiries from the community about living on the BVM campus. The Council concludes that the primary target audience for the facility is BVM sisters who want to age in place, with some beds available for community members and that alternatives are not available. Iowa Code Sections 135.64(1) and 135.64(2)a.

2. The Council concludes that existing facilities providing health services similar to those proposed will continue to be used in an appropriate and efficient manner and will not be impacted by this project. The calculated bed need formula indicates a current underbuild in all four of the counties around Dubuque County. The underbuild for Dubuque County is 101 beds. Overall the five-county area, as calculated by the bed need formula and including 16 approved, but not yet licensed beds, is underbuilt by 527 beds. The phone survey conducted by Department staff indicates an overall occupancy in Dubuque County of 83%. One facility, Ennoble Skilled Nursing and Rehab, reported a census of 55 percent as it uses some semi-private rooms as private rooms. If this facility is suppressed, the census for Dubuque County increases to 86%. The Council traditionally requires utilization over 85% to indicate appropriate occupancy rates of long term care facilities. Here, the County utilization rate of 86% (with one facility suppressed) supports a conclusion that existing facilities are being utilized in an efficient manner. Iowa Code Sections 135.64(1) and 135.64(2)b.

3. The Council concludes that the proposed project involves construction of 42,169 square foot facility, with 20,212 square feet dedicated to 56 private resident rooms. The Council notes that there are no nursing facilities in the area of Dubuque where the proposed facility will be located. The Council further concludes that alternatives including modernization and sharing arrangements have been considered and implemented to the maximum extent practicable. Iowa Code Sections 135.64(1) and 135.4(2)c.

4. The Council concludes that patients will experience problems in obtaining care of the type which will be furnished by the proposed health service, in the absence of that proposed service. The Council notes that the current facility is outdated and inefficient and it is the desire by residents for private rooms. The Council also notes the BVM have already received inquiries from community members about living on their campus. The City of Dubuque has a rapidly growing elderly population, particularly in the segment over the age of 85. The Council concludes these factors, as well as the high utilization in the county and the need for beds as indicated by the bed need formula, demonstrate that those from within the BVM continuum as well as those in the community seeking nursing care will experience problems obtaining the type of care provided by BVM-PHS Senior Housing, Inc. absent the proposed service. Iowa Code Sections 135.64(1) and 135.64(2)d.

The facts, considered in light of the criteria contained in Iowa Code Section 135.64 (1 and 2) (2017), led the Council to find that a Certificate of Need should be awarded.

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The decision of the Council may be appealed pursuant to Iowa Code Section 135.70 (2017).

It is required in accordance with 641 Iowa Administrative Code 202.12 that a progress report shall be submitted to the Iowa Department of Public Health six (6) months after approval. This report shall fully identify the project in descriptive terms. The report shall also reflect an amended project schedule if necessary.

The Certificate of Need is valid for a twelve (12) month period from the date of these findings. This is subject to the meeting of all requirements of the Iowa Department of Public Health. Requests for extension of a Certificate of Need must be filed in writing to the Iowa Department of Public Health from the applicant no later than forty-five (45) days prior to the expiration of the Certificate. These requests shall fully identify the project and indicate the current status of the project in descriptive terms.

No changes that vary from or alter the terms of the approved application including a change in the approved dollar cost shall be made unless requested in writing to the department and approved. Failure to notify and receive permission of the department to change the project as originally approved may result in the imposition of sanctions provided in Iowa Code section 135.73 (641 Iowa Administrative Code 202.14).

Dated this \ a day of December 2018

tA 11.1loc,. Miller, M.D., Chairperson State Health Facilities Council Iowa Department of Public Health


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IN THE MATTER OF A REQUEST BY

CCRC OF CEDAR RAPIDS, LLC

CEDAR RAPIDS, IOWA

TO MODIFY A CERTIFICATE OF NEED

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018.

The request proposes the modification of an approved project. The request is to increase the cost of the proposal. On October 28, 2015, the Council granted a certificate of need to CCRC of Cedar Rapids to build a 40 bed nursing facility as part of a continuing care retirement community at an estimated cost of $4,854,000. The Council granted a 12 month extension in October 2017 and a three month extension in October 2018. This request proposes an increase of $1,501,400 for a total project cost of $6,355,399.

The record includes the request prepared by the project sponsor and all testimony presented. The applicant was represented by Gib Wood, Scenic Development. The applicant made remarks and answered questions posed by the Council.

No affected parties appeared.

The Council, after hearing the above mentioned testimony and after reading the record voted 5-0 to grant a modification to the original Certificate of Need.

FINDINGS OF FACT

1. CCRC of Cedar Rapids was granted a Certificate of Need on October 28, 2015, to

construct a 40 bed nursing facility as part of a CCRC in Marion, Iowa, at a cost of

$4,854,000.

2. In August 2018 the department received an extension request from the applicant that

reported the project would be completed by November 2018. The Council granted a

three (3) month extension in October 2018.

1

3. The cost overrun was submitted in August 2018. The applicant reports the causes of the

overrun resulted from the cost of sub-contractors being more expensive than originally

anticipated and foundation settlement issues.

4. The applicant notes that the basic project costs have increased $393,334 from $4,854,000

to $5,247,334, which is an 8.10 percent increase and not reviewable per 641 IAC

202.14(2)(b).

5. The repairs and mitigation costs to rectify the settlement issues are $1,108,066. With

repairs the cost of the facility will be $6,355,399, which is 21.1 percent over the

increased cost of $5,247,334 and is reviewable.

6. CCRC of Cedar Rapids has initiated legal proceedings to recover the excess costs

($1,108,066) of the project resulting from the settlement issues.

CONCLUSION

The Council concludes that the proposed change to the originally approved project represents an increase in the cost of the project, but does not substantially alter the nature and scope of the originally approved project.

Pursuant to 641 IAC 202.14, the Council therefore approves the request to modify the Certificate of Need originally granted October 28, 2015, to $6,355,399 as the approved cost of the project.

No changes that vary from or alter the terms of the approved application including a change in the approved dollar cost shall be made unless requested in writing to the department and approved. Failure to notify and receive permission of the department to change the project as originally approved may result in the imposition of sanctions provided in Iowa Code section 135.73 (IAC 641 202.14).

Dated this day of December 2018

C4 4' fl4A \ NO 1-1.-w. Miller, M.D., Chairperson State Health Facilities Council Iowa Department of Public Health


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DECISION CCRC OF CEDAR RAPIDS

MARION, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Gib Wood, Scenic Development.

The project, the construction of a 40 bed nursing facility as part of a Continuing Care Retirement Community, was originally approved October 28, 2015, at an estimated cost of $4,854,000. The original completion date for the project was August 2017; the new completion date is November 2018. The nursing facility is nearly complete and will be ready for occupancy November 1, 2018. Weather conditions delayed the project, also settlement issues related to the foundation took approximately 11 months to resolve. CCRC of Cedar Rapids was first notified of the settlement issues in September 2017. It was determined that the detention ponds were improperly designed, which caused the settlement. Repairs to the foundation took approximately four months. Final work on the ponds, reframing, and landscaping was completed in late July. Work on the nursing facility not affected by the settlement was able to continue. To date $5,779,918 has been spent on the project.

The project sponsor also submitted a cost overrun request. The applicant projects that the cost has increased $393,334 from $4,854,000 to $5,247,334, which is an 8.10% increase and not reviewable. However, the repairs and mitigation costs to rectify the settlement issues were $1,108,066. With repairs the cost of the facility will be $6,355,399, which is 21.1% over the increased cost of $5,247,334. CCRC of Cedar Rapids has initiated legal proceedings to recover the excess costs of the project resulting from the settlement issues. This cost overrun required further review and approval by the Council. The Council voted to grant a modification to the original Certificate of Need.

The Council, after reading the extension request and hearing comments by staff and the applicant, voted 5-0 to Grant an Extension of Certificate of Need per 641 Iowa Administrative Code 202.13. The decision is based upon a finding that significant progress has been made in developing the project.

The extension is valid for three (3) months.

Dated this )2, day of December 2018

LILO . Miller, M.D., Chairperson

State Health Facilities Council Iowa Department of Public Health





CCRC OF WEST DES MOINES

WEST DES MOINES, IOWA

) )

) DECISION ) ) )

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Gib Wood, Scenic Development.

The project, the construction of a 40 bed nursing facility as part of a Continuing Care Retirement Community, was originally approved February 25, 2016, at an estimated cost of $4,923,000. The original completion date for the project was June 2018; the new completion date is January 2020. Due to issues with the parcel of land on which the facility was to be built and the need to build a public road to the site, the location for the project has changed. In July 2017, the applicant entered into a Purchase and Sale agreement for the purchase of land that was ultimately deemed to be unsuitable for the project. On January 8, 2018, the applicant entered into a Purchase and Sale agreement to purchase an alternate site, which had only recently become available. The parcel is approximately a half mile from the original site. The applicant engaged a civil engineer to evaluate this parcel and it was concluded that it is suitable for the project. In April 2018 the applicant authorized the design team to complete construction drawings and in May 2018, these drawings were complete. In June the West Des Moines City Council unanimously approved the project. CCRC of West Des Moines received construction bids on September 25, and the final plat was approved by the City of West Des Moines on October 1. CCRC of West Des Moines closed on the land October 16 and started construction that week. The applicant, in an effort to develop the project cost effectively, entered into a joint venture with UnityPoint Health - Des Moines to develop the project. The project itself will remain unchanged and Scenic Development, the parent company of the CCRC of West Des Moines, will continue to manage the project. The commitment letter from Green Belt Bank and Trust, was renewed in March 2018 and extends to the new location. CCRC of West Des Moines indicated that due to delays negotiating the property purchase, expenditures have been limited. They anticipate the total project costs will be consistent with original projections. To date $184,661 has been spent on the project.



. Miller, M.D., Chairperson State Health Facilities Council Iowa Department of Public Health

Dated this 12.-day of December 2018


IOWA DEPARTMENT OF PUBLIC HEALTH STATE HEALTH FACILITIES COUNCIL


ENCOMPASS HEALTH REHABILITATION

HOSPITAL OF IOWA CITY, LLC

CORALVILLE, IOWA

) ) ) ) DECISION ) )

This matter came before the State Health Facilities Council for hearing on Wednesday, October 24, 2018.

The applicant proposes to build a 40 bed freestanding rehabilitation hospital at an estimated cost of $26,853,953.

Encompass Health Rehabilitation Hospital of Iowa City, LLC ("Encompass Health") applied through the Iowa Department of Public Health for a Certificate of Need.

The record includes the application prepared by the project sponsor and written analysis prepared by Iowa Department of Public Health staff and all the testimony and exhibits presented at the hearing. Becky Swift of the Iowa Department of Public Health summarized the project in relation to review criteria. Doug Fulton, Brick Gentry; Troy DeDecker and Cheryl Miller, Encompass Health; Edward Stall, DHG Healthcare; Geoffrey Lauer, Brain Injury Alliance of Iowa; and Dr. Matthew Howard, Dr. Richard Shields, Dr. Harold Adams (via video), Dr. Andrea Swenson, and Peggy O'Neil, UIHC were present representing the applicant. The applicant made a presentation and answered questions.

Affected parties appearing in support of the project included Jennifer Vermeer, UIHC and Dr. Stanley Matthew, UnityPoint St. Luke's.

Alissa Smith, Dorsey & Whitney, representing Mercy-Kindred Rehabilitation Hospital, appeared in opposition.

The Council, after hearing the above-mentioned testimony and after reading the record, voted 3-2 to grant a Certificate of Need. As a basis for their decision the Council, considering all the criteria set forth pursuant to Iowa Code Section 135.64 (1 and 2) (2017) made the following findings of fact and conclusions of law:

FINDINGS OF FACT

1. Encompass Health proposes to build a 40-bed freestanding inpatient rehabilitation hospital ("Hospital") in Coralville, Johnson County, Iowa.

Encompass Health operates 128 rehabilitation hospitals across the country and their primary patient population are those with conditions such as stroke and brain and spinal cord injuries. This would be their first hospital in Iowa.

3. The project will involve two wholly-owned subsidiaries of Encompass Health Corporation. The first entity, Encompass Health Iowa Real Estate, LLC, will hold all the real estate associated with the project, and the second entity, Encompass Health Rehabilitation Hospital of Iowa City, LLC, will lease the property and be the operator and licensee of the hospital. Both entities are Delaware limited liability companies that have been qualified to do business in Iowa.

4. The proposed Hospital would be part of the Encompass Health central region which features 19 joint venture and wholly owned hospitals with five academic relationships.

5. The Hospital would provide comprehensive, state-of-the-art care for patients with impairments resulting from traumatic medical situations, such as stroke and spinal cord injury, other neurological injuries and disorders, and other medically-complex conditions.

6. The Hospital will serve the growing population of patients who are in need of the level of comprehensive rehabilitative care the Hospital would provide. Providing specialized rehabilitation services to these patients will enhance their functional recoveries, deliver care in the most cost effective setting, and reduce hospital readmissions.

7. During testimony is was noted that Iowa lags behind the nation in utilization and supply of inpatient rehabilitation beds.

8. The Hospital will be accessible to all medically eligible patients, regardless of age, race, ethnicity or handicap.

9. The Hospital anticipates its payor mix to include 16.4% of revenue from Medicaid. The applicant will also offer charity care to qualifying patients on a sliding fee scale based on Federal Poverty Limits.

10. The Iowa City region, the Encompass Health care market, is underserved for inpatient rehabilitation and the demand is expected to grow. The applicant testified that demand exists for its proposed facility and for the Mercy-Kindred Rehabilitation Hospital application based on the lack of inpatient rehab beds in Johnson County, the shortage of such beds in the state as a whole, the optimal utilization of inpatient rehab, the population in the service area and the projected growth in population, and the demonstrated needs of the patients.

11. The target population are those patients requiring a hospital level of care to get back to living at home following an illness, injury or surgery. Patients receive two or more therapy modalities, including occupational, physical and speech and language therapy.

12. The applicant notes that Johnson County is projected to grow by 6.15% by 2023 and overall, the geographic service area for the project is expected to grow by 3.51% by 2023. They state that the average age of patients of Encompass Hospitals is 71 for all payor groups and 76 for Medicare patients. Encompass Health also treats patients under the age of 65.

13. The applicant states that Iowa City and all of Johnson County do not have a continuum of care in place to support the post-acute need of the regions' patients. Due to this many patients who would benefit from an inpatient rehabilitation hospital level of care are discharged to an acute care rehab outside of the primary service area, where it is impracticable or difficult for their treating physician to monitor their progress and for their families or caregivers to participate in their recovery. They also state that patients may also be forced to seek care from a lower acuity provider, such as a skilled nursing facility or home health provider.

14. The primary service area for the Hospital is Johnson County, and the secondary service area includes Benton, Cedar, Iowa, Jones, Keokuk, Linn, Louisa, Muscatine, and Washington Counties.

15. There are currently 24 inpatient rehabilitation beds in at UnityPoint St. Luke's — Cedar Rapids in Linn County, which is part of the applicant's service area. There are also eight rehab beds at Mercy — Cedar Rapids.

16. There were 13 letters of support for the proposal. These letters were from hospitals, healthcare providers, government organizations and officials, a family member, and community organizations. The letters cite excellence in clinical care provided by Encompass Health; inpatient rehabilitation facility outcomes being significantly better than those of skilled nursing facilities; the aging population in the area and the growing demand for health care facilities; the lack of a rehabilitation hospital in the service area; patients being placed in facilities outside of the area making it difficult for their physicians to follow-up due to travel; the addition of jobs to the area; and lack of advanced state of the art technologies in acute inpatient rehabilitation care in the area as reasons for their support. The University of Iowa Hospitals and Clinics (UIHC) and UnityPoint St. Luke's also appeared at hearing as affected parties in support of the project. The hospitals testified about their need for inpatient referral capacity for rehabilitation and the benefits this proposal offers due to the collaborative relationship proposed between the applicant and the affected parties. The UIHC specifically testified that this proposal could lead to enhanced educational, research, and treatment opportunities.

17. There were no letters of opposition received. One affected party in opposition appeared at the hearing. The affected party in opposition referenced a competing application from Mercy Medical Center, Iowa City — Kindred Healthcare (Mercy-Kindred Rehabilitation Hospital) indicating that there was no need for two 40 bed rehabilitation hospitals in the Iowa City area.

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18. The Hospital will have 86.5 FTE positions in year one and increase to 117.9 FTE's by the third year of operation. Encompass Health develops relationships and training programs with local universities, colleges and other training agencies to create and support a local workforce and retain trained professionals.

19. Noted during testimony is that Encompass Health provides education, training and new technologies at their hospitals, all of which helps them recruit staff.

20. Encompass will construct a 47,363 square foot, single story, 40-bed facility featuring all private rooms. There will also be space for physical, occupational and speech therapy.

21. Encompass Health Corporation will fund the project through cash on hand. Encompass Health notes that the estimated lease payment for the first year after rent commencement would be in the range of $1,974,705, with 2% annual escalations. Encompass Health will own the hospital and the lease payment will be an internal process.

22. The applicant does not project an operating deficit after year one.

CONCLUSIONS OF LAW

In determining whether to issue a certificate of need, the Council considered the eighteen criteria listed in Iowa Code § 135.64(1)(a)-(r). In addition, the legislature has provided that the Council may grant a certificate of need only if it finds the following four factors exist:





1. The Council concludes that less costly, more efficient or more appropriate alternatives to the proposed health service are not available and the development of such alternatives is not practicable. The Council concludes that there are currently no dedicated rehabilitation hospitals in the service area. The Council notes that it approved a proposal for a 40-bed rehabilitation hospital in Johnson County ("Mercy Kindred") prior to approving this project; it finds that sufficient need exists for both proposals and that solely approving the Mercy Kindred application was not a more appropriate alternative to this project in light of the significant need for inpatient

4

rehabilitation beds in this service area. Further, the Council finds that skilled nursing facilities cannot provide the level of care patients that would be admitted to the new hospital need. Additionally, the Council finds that treating these patients in rehabilitation beds is a more appropriate, less costly alternative to providing care in traditional acute care beds. Iowa Code Sections 135.64(1) and 135.64(2)a.

2. The Council concludes that existing facilities providing health services similar to those proposed are being and will continue to be used in an appropriate and efficient manner and will not be impacted by this project. The Council notes that there are no similar dedicated rehabilitation hospitals currently operating in the proposed service area, and that the facilities which currently house inpatient rehabilitation beds in Linn County did not object to this project. Additionally, only one existing hospital and no skilled nursing facilities objected to the proposal. The Council notes that 13 letters of support for the project were received, and that two existing facilities — the UIHC and UnityPoint St. Luke's — testified as affected parties in support of this application. Further, no letters of opposition were received, and only one affected party appeared in opposition. The Council concludes that this project would not have a significant impact on similar facilities for these reasons. Iowa Code Sections 135.64(1) and 135.64(2)b.

3. The Council concludes that the proposed project is the construction of a 40-bed freestanding rehabilitation hospital with a total of 47,363 square feet. The Council concludes that alternatives, including modernization and sharing arrangements have been considered and implemented to the maximum extent practicable. Iowa Code Sections 135.64(1) and 135.64(2)c.

4. The Council concludes that patients will experience problems in obtaining care of the type which will be furnished by the proposed health service, in the absence of that proposed service. The Council notes that there are currently only 32 rehabilitation beds and no dedicated rehabilitation hospitals in the service area, and that patients have to travel outside the area to find the type of care the hospital will provided, resulting in hardships to patients and their families. The Council concludes the new hospital is necessary to meet the needs of patients in this service area who require inpatient rehabilitation services. Iowa Code Sections 135.64(1) and 135.64(2)d.



It is required in accordance with Iowa Administrative Code 641- 202.12 that a progress report shall be submitted to the Iowa Department of Public Health six (6) months after approval. This report shall fully identify the project in descriptive terms. The report shall also reflect an amended project schedule if necessary.

The Certificate of Need is valid for a twelve (12) month period from the date of these findings. This is subject to the meeting of all requirements of the Iowa Department of Public Health. Requests for extension of a Certificate of Need must be filed in writing to the Iowa Department of Public Health from the applicant no later than forty-five (45) days prior to the expiration of

5

the Certificate. These requests shall fully identify the project and indicate the current status of the project in descriptive terms.

No changes that vary from or alter the terms of the approved application including a change in the approved dollar cost shall be made unless requested in writing to the department and approved. Failure to notify and receive permission of the department to change the project as originally approved may result in the imposition of sanctions provided in Iowa Code section 135.73 (Iowa Administrative Code [6411202.14).

Dated this I ? day of December 2018

6/1/ 6e4r\ . Miller, M.D., Chairperson

State Health Facilities Council Iowa Department of Public Health

cc: State Health Facilities Council Iowa Department of Inspections and Appeals: Health Facilities Division

6




DECISION HEARTLAND CARE CENTER, INC.

MARCUS, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Ed McIntosh, Dorsey & Whitney.

The project, the addition of eight skilled nursing facility beds, was originally approved October 25, 2017, at an estimated cost of $2,904,991. The original completion date for the project was spring 2020; this has not changed. Heartland Care Center broke ground and worked on shaping the landscape before beginning the process of physical construction. Construction has begun, but is weather dependent. It is expected that construction will take nine months prior to the building being occupiable. Heartland Care Center received official notice from the USDA on March 30, 2018, of its approval for a $2,860,000 loan. A $300,000 loan has been secured from a local bank and will continue to fund the interim financing costs until final USDA loan is obtained, per USDA policy. To date $176,758 has been spent on the project.



Dated this I Zday of December 2018

w.,, Miller, M.D., Chairpelion State Health Facilities Council Iowa Department of Public Health


ay of December 2018

(.,eb

Dated this




DECISION IOWA METHODIST MEDICAL CENTER

DES MOINES, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Doug Gross, Brown Winick Law.

The project, the addition of 22 beds to the Younker Rehabilitation Center located at Iowa Methodist Medical Center, was originally approved October 27, 2016, at an estimated cost of $4,740,000. The original completion date for the project was January 2018; according to testimony provided at the hearing the new completion date for the project is 2020. Methodist has completed phase one of the planned expansion to Younker Rehabilitation Center. In February 2018 the Center for Medicare and Medicaid Services (CMS) approved the request to increase the size of the rehabilitation unit from 23 to 29 beds. These beds were placed into service on July 7, 2018. Due to CMS regulations, Methodist can only add beds once during the provider's fiscal year. Because of this Methodist cannot add additional beds until 2019. Methodist's in-house architectural and construction team is in the final planning stages of the second phase of the project with the goal of beginning renovation of the additional beds in the fourth quarter of 2018. The hospital's high census and demand for beds in the space to be renovated has been a barrier to initiating the next phase of construction. Due to space issues, Methodist plans to add the rest of the beds in phases, with some added in 2019, and some in 2020. A medical director for Younker Rehabilitation Center was brought on board in April 2017. The Director has recruited two additional Physical Medicine and Rehabilitation physicians and one nurse practitioner. Methodist continues to recruit Physical Medicine and Rehabilitation physicians and rehabilitation nurses. Methodist has experienced difficulty in recruiting experienced rehabilitation nurses. To date $77,198 has been spent on the project.



H.W. Miller, M.D., Chairperson State Health Facilities Council Iowa Department of Public Health





DECISION KEYSTONE NURSING CARE CENTER, INC.

KEYSTONE, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Ed McIntosh, Dorsey & Whitney.

The project, the addition of ten skilled nursing facility beds, was originally approved October 25, 2017, at an estimated cost of $3,713,913. The original completion date for the project was December 2018; this has changed to February 2019. The agreement between the owner and design-builder was executed on November 10, 2017. The original promissory note for a construction line of credit was signed on April 13, 2018. At the time they submitted the extension request Keystone anticipated that the building enclosure would be complete by the end of September. This would be followed by interior finish work and final site work. The cost of the project has increased $40,000 which falls below the threshold of Keystone needing to request a cost overrun. To date $619,155 has been spent on the project.


The extension is valid for six (6) months.

Date this \ ay of December 2018

Miller, M.D., Chairperson e Health Facilities Council

Iowa Department of Public Health


Sta

IOWA DEPARTMENT OF PUBLIC HEALTH STATE HEALTH FACILITIES COUNCIL


MERCY MEDICAL CENTER-IOWA CITY

and KINDRED HEALTHCARE, INC

CORALVILLE, IOWA

) ) ) ) DECISION ) )

This matter came before the State Health Facilities Council for hearing on Wednesday, October 24, 2018.

The applicant proposes a joint venture to build a 40 bed freestanding rehabilitation hospital at an estimated cost of $7,508,963.

Mercy Medical Center-Iowa City and Kindred Healthcare Inc. applied through the Iowa Department of Public Health for a Certificate of Need.

The record includes the application prepared by the project sponsor and written analysis prepared by Iowa Department of Public Health staff and all the testimony and exhibits presented at the hearing. Becky Swift of the Iowa Department of Public Health summarized the project in relation to review criteria. Alissa Smith, Dorsey and Whitney; Casey Greene, Mercy Iowa City; and Donna Flannery and Nikki Nigg Kindred Healthcare, were present representing the applicant. The applicant made a presentation and answered questions.

Affected parties in support of the project included Kim Pattee, family member; Dr .Stephen Scheckel, VP of Population Health, Quality and Outreach, Mercy Iowa City; Renee DeJong, Mercy Iowa City Home Health; and Karrie Anderson and Michael Currier, former patients at Mercy Rehabilitation Hospital in Clive.

No affected parties in opposition appeared at the hearing.

The Council, after hearing the above-mentioned testimony and after reading the record, voted 5-0 to grant a Certificate of Need. As a basis for their decision the Council, considering all the criteria set forth pursuant to Iowa Code Section 135.64 (1 and 2) (2017) made the following findings of fact and conclusions of law:

FINDINGS OF FACT

1. Mercy Medical Center — Iowa City ("Mercy") and Kindred Healthcare Inc. ("Kindred") propose a joint venture partnership to build a 40-bed freestanding inpatient rehabilitation hospital ("Hospital") in Coralville, Johnson County, Iowa.

2. The Hospital would provide comprehensive, state-of-the-art care for patients with impairments resulting from traumatic medical situations, such as stroke and spinal cord injury, other neurological injuries and disorders, and other medically-complex conditions.

3. The Hospital will serve the growing population of patients who are in need of the level of comprehensive rehabilitative care the Hospital would provide. There are currently no rehabilitation hospitals in the applicant's service area. Patients needing this level of service have been forced to travel to facilities outside their community or remain in an acute care hospital longer than necessary. Providing specialized rehabilitation services to these patients will enhance their functional recoveries, deliver care in the most cost effective setting, and reduce hospital readmissions.

4. The Hospital will be accessible to all medically eligible patients, regardless of age, race, ethnicity or handicap.

5. The Hospital plans to care for low-income persons as demonstrated through its payor mix, which includes 6.7% of revenue from Medicaid. The applicant will also offer charity care through a formal financial assistance program.

6. The Hospital will be owned and operated through a joint venture organization created by Mercy and Kindred. Kindred is a national health care services company which operates rehabilitation hospitals in several states, including one in a joint venture with Mercy Medical Center — Des Moines located in Clive, Polk County, Iowa. Mercy will provide ancillary services and Kindred will provide management services.

7. Mercy and Kindred have collaborated to create a long-range plan for the new inpatient rehabilitation Hospital that will create an environment of excellent clinical care for patients that builds upon the strength of both organizations.

8. The applicant states that Kindred's experience operating rehabilitation hospitals will complement the acute care that Mercy currently provides resulting in a collaboration that will drive efficiencies and clinical integration and deliver the best in patient care.

9. The principal population to be served by the Hospital is defined as the patient population of Mercy-Iowa City.

10. The service area for the Hospital includes Johnson, Washington, Muscatine, Iowa, Cedar Henry, Keokuk, Jefferson, and Louisa Counties in southeast Iowa.

11. The applicant states that the ten year population estimate for the geographic service area indicates growth of 8% overall and 32% growth in the 65+ age group. These growth increases will result in an increased demand for inpatient rehabilitation care over the next ten years in order to meet the needs of this growing and aging population.

12. Among the annualized Mercy patients evaluated for the need for rehabilitative services, 10,153 would qualify for transfer to an inpatient rehabilitation hospital. It is estimated

2

that 1,120 Mercy patients would have been well served in an inpatient rehabilitation hospital. It was noted by the applicant that an average stay of 13 days in the inpatient rehabilitation facility would result in an average daily census of 39 patients in the Hospital.

13. At the time the joint venture opens and is licensed, Mercy will eliminate 40 acute care beds to keep the total number of licensed beds it operates at 234.

14. Development of rehabilitation services at the current facility is not practicable due to space limitations and patient needs.

15. There were 51 letters of support for the proposal. These letters were from patients; family members and their loved ones; physicians; therapists; a local college; a local home health agency and other health care providers; nursing facilities; hospitals; and business and government leaders. Some of the letters had multiple signatures. The letters cite lack of available rehab beds in the area; training opportunities for nursing, OT, PT, speech therapy, medical and ancillary service students; reduced burden on family and friends who now have to travel to see loved ones who are in rehab care further from their homes; increased length of stay in an acute hospital when no rehab beds are available, which is more costly and stressful to the patient; the high quality of care provided by both Mercy and Kindred Health; the under representation of rehabilitation services and Physical Medicine and Rehabilitation Physicians in the area; inpatient rehabilitation patients having reduced mortality, shorter length of stay, less readmissions, better functional gains and a higher rate of discharge to home than those in a skilled nursing facility; and the need for more intensive rehab care than can be provided in a skilled nursing facility as reasons for their support.

15. In addition to the letters of support, a letter from Doug Fulton, Brick Gentry Attorneys at Law, on behalf of Encompass Health, a competing applicant, states, "My client believes that there is sufficient potential for rehabilitation patients in the Iowa City area to support both applications for 40-bed rehabilitation hospitals." The letter goes on to state, "We believe that approval of both projects would assure the area of quality rehabilitation services and would provide choice for patients and practitioners alike. We would prefer that the Council approve both projects."

16. There were no letters of opposition, and no affected parties appeared in opposition at hearing.

17. The applicant states they expect to increase staffing from approximately 31 FTE nursing positions in the first year of operation to 54 nursing FTE's by the third year of operation when the proposed hospital reaches target occupancy. They further state that non-nursing positions, such as therapists, are also expected to increase from approximately 52 FTE's (including 12 therapists) in the first year, to 64 FTE's (including 21 therapists) by the third year of operation.

3

18. The Hospital will be 51,789 square foot, two story building featuring all private rooms. In addition, the Hospital will feature a main therapy suite on the first floor with a therapy gym, rooms for multiple therapy protocols, private therapy rooms, cooking therapy room, and an activities of daily living therapy room.

19. A Real Estate Investment Trust ("REIT") would own the Hospital building and lease it to the joint venture.

20. The applicant states that they have $2,535,360 cash on hand for the project, that they will receive $1,843,603 in operational cash flow for payment of lease costs, and that the value of the land contributed by Mercy is $3,130,000, for total of $7,508,963.

21. The applicant does not project an operating deficit after year one.

CONCLUSIONS OF LAW

In determining whether to issue a certificate of need, the Council considered the eighteen criteria listed in Iowa Code § 135.64(1)(a)-(r). In addition, the legislature has provided that the Council may grant a certificate of need only if it finds the following four factors exist:





1. The Council concludes that less costly, more efficient or more appropriate alternatives to the proposed health service are not available and the development of such alternatives is not practicable. The Council concludes that there are no rehabilitation hospitals in the service area and that expansion at the current hospital is not practicable due to space limitations and other patient-care related issues. Further, the Council finds that skilled nursing facilities cannot provide the level of care patients that would be admitted to the new hospital need. Additionally, the Council finds that treating these patients in rehabilitation beds is a more appropriate, less costly alternative to providing care in traditional acute care beds. Iowa Code Sections 135.64(1) and 135.64(2)a.

4

2. The Council concludes that existing facilities providing health services similar to those proposed are being and will continue to be used in an appropriate and efficient manner and will not be impacted by this project. The Council found that the Hospital would primarily serve the population of Mercy Medical Center —Iowa City and that there are no similar existing rehabilitation hospitals in the proposed service area. Additionally, no existing hospitals or skilled nursing facilities objected to the proposal. The Council notes that 51 letters of support for the project were received, and no letters of opposition were received. The Council notes that the competing applicant, Encompass Health, requested Council approval of the Mercy-Kindred application. The Council concludes that this project would not have a significant impact on similar facilities for these reasons. Iowa Code Sections 135.64(1) and 135.64(2)b.

3. The Council concludes that the proposed project is the construction of a 40-bed freestanding rehabilitation hospital with a total of 51,789 square feet. The Council concludes that alternatives, including modernization and sharing arrangements have been considered and implemented to the maximum extent practicable. Iowa Code Sections 135.64(1) and 135.64(2)c.

4. The Council concludes that patients will experience problems in obtaining care of the type which will be furnished by the proposed health service, in the absence of that proposed service. The Council notes that there are currently no rehabilitation hospitals in the service area, and patients have to travel outside the area to find the type of care the hospital will provided, causing stress on the patients and their families. The Council concludes the new hospital is necessary to meet the needs of patients in this service area who require inpatient rehabilitation services. Iowa Code Sections 135.64(1) and 135.64(2)d.



It is required in accordance with Iowa Administrative Code 641- 202.12 that a progress report shall be submitted to the Iowa Department of Public Health six (6) months after approval. This report shall fully identify the project in descriptive terms. The report shall also reflect an amended project schedule if necessary.

The Certificate of Need is valid for a twelve (12) month period from the date of these findings. This is subject to the meeting of all requirements of the Iowa Department of Public Health. Requests for extension of a Certificate of Need must be filed in writing to the Iowa Department of Public Health from the applicant no later than forty-five (45) days prior to the expiration of the Certificate. These requests shall fully identify the project and indicate the current status of the project in descriptive terms.

No changes that vary from or alter the terms of the approved application including a change in the approved dollar cost shall be made unless requested in writing to the department and approved. Failure to notify and receive permission of the department to change the project as originally approved may result in the imposition of sanctions provided in Iowa Code section 135.73 (Iowa Administrative Code [641]202.14).

5

Date thisa day of December 2018

. Mil er, M.D., Chairperson State Health Facilities Council Iowa Department of Public Health

cc: State Health Facilities Council Iowa Department of Inspections and Appeals: Health Facilities Division

6

Dated this




DECISION PHS WALNUT RIDGE, LLC

CLIVE, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Doug Gross, Brown Winick Law; and Mark Hudson and Allison Bass, PHS Walnut Ridge.

The project, the addition of a 60-bed skilled nursing facility at its Walnut Ridge campus, was originally approved October 26, 2016, at an estimated cost of $12,531,500. The original completion date for the project was July 2018; this has changed to March 2020. Due to delays resulting from land negotiations with the City of Clive, the project has been delayed approximately 20 months. During summer 2018, Walnut Ridge was unable to come to an agreement with the City of Clive related to the purchase of their preferred parcel of land. As a result, Walnut Ridge is proceeding with construction of the project on their existing property, which eliminates approximately $1,000,000 in site costs. The project will now connect to the east side of the existing campus on Walnut Ridge property. On August 28, 2018, Walnut Ridge signed a construction contract. On September 6, 2018, the construction contractor broke ground on the project. The engineering and architectural firms have completed their plans for the project. On August 30, 2018, Walnut Ridge closed on the issuance of tax exempt City of Clive Senior Housing Revenue Bonds to fund construction. To date $365,903 has been spent on the project.



day of December 2018

1l ler, M.D. Chairperson State Health Facilities Council Iowa Department of Public Health




DECISION SOLON NURSING CARE CENTER D/B/A SOLON RETIREMENT VILLAGE

SOLON, IOWA

This matter came before the State Health Facilities Council for review on Wednesday, October 24, 2018. The applicant was represented by Adam Freed, Brown Winick Law.

The project, the addition of four nursing facility beds, was originally approved October 26, 2017, at an estimated cost of $870,000. The original completion date for the project was April 2018; the new completion date for the project, according to testimony provided at the hearing, is early November 2018. Solon Retirement Village signed a construction contract in April 2018. Construction began in May 2018 and there has been significant progress made on the project. The contractor has completed the foundation, framing and roofing. Most mechanical and electrical work is also complete. Currently under completion are installation of siding and hanging drywall. The facility anticipates offering services by early November 2018. After receiving a $100,000 donation from a community member, the facility determined that it did not need long term financing. To date $221,764 has been spent on the project.


The extension is valid for six (6) months.

Dated,this /—day of December 201

Stale Iealth Facilities Council Iowa Department of Public Health


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