Preparation of AHCA Proof of Financial Ability to Operate Form 3100-0009 requires an Accountant to prepare projected financial statements.

Authority AHCA: The following Preparation of AHCA Proof of Financial Ability to Operate Form 3100-0009  is designed to meet the specific requirements of 408.810(8), 408.8065(1), and 400.471, Florida Statutes which require the applicant to show anticipated provider revenue and expenditures, the basis for financing anticipated cash-flow requirements of the provider, and an applicant’s access to contingency financing. All schedules must be prepared in accordance with generally accepted accounting principles (GAAP). An Accountant must prepare, projected financial statements, including summaries of significant assumptions. An applicant will have demonstrated financial ability to operate by completing a proof of PREPARATION OF AHCA PROOF OF FINANCIAL ABILITY TO OPERATE FORM 3100-0009  schedules 1-7 in conformity with the below instructions and GAAP, all relevant rules and statutes, and projections that show assets, credit, and projected revenues meet or exceed projected liabilities and expenses and Independent evidence of sufficient funds for startup, working capital & contingencies.

These forms must accompany any initial or change of ownership (CHOW) application for the following

Health care provider types:

• Adult Day Care Centers (ADCC)
• Health Care Clinics
• Assisted Living Facilities (ALF)
• Home Health Agencies
• Intermediate Care Facilities for the   Hospice
• Developmentally Disabled (ICFDD)    Skilled Nursing Facilities
• Prescribed Pediatric Extended Care Center (PPEC)

General Instructions – Preparation of AHCA Proof of Financial Ability to Operate Form 3100-0009

As an all-inclusive set of schedules, some of the individual detailed items in these forms may not apply to all provider types listed above.  For example, Schedule 3 has an item for Room & Board revenue.  This line would be appropriate for residential facilities like skilled nursing or ALF but would not apply to agencies such as home health.  In the schedule where the option for hours or visits or days is presented, the applicant may use the metric that is appropriate for the agency.  For example, hours are appropriate for home health; visits are appropriate for health care clinics, and days are appropriate for skilled nursing facilities.  Several of the schedules include checklists to assist the Accountant in completing these forms.

Assumptions Used – Schedules 1-7 reflect the anticipated results of future operations.  Since these schedules are forward-looking, the applicant will have to make certain assumptions about future patients, revenues, and expenses.   The assumptions an applicant uses are essential in developing a projected set of financial schedules.  The applicant, at a minimum, must provide assumptions about the number and types of patients it will provide services to, how it plans on acquiring those patients, the staffing required to provide service to those patients, how it plans on recruiting the necessary staffing, and its method of estimating accounts receivable and payable as discussed in the instructions for Schedule 5.  All assumptions used in the projections must be contained in accompanying notes to the projections and all assumptions must be consistent with existing rules and statutes governing minimum staffing requirements and any other requirements that would have a financial impact on the applicant.  Home Health Agencies Only – Section 400.471(2)(d), Florida Statutes, requires a business plan, signed by the applicant, which details the home health agency’s methods to obtain patients and its plan to recruit and maintain staff.  At a minimum, the plan should include a description of the business, services to be provided, the existing market, the level of competition in the market, the applicant’s strategy to enter the market (obtain patients), a time-line of major events (for example, expected date of licensure, certification, etc.), the applicant’s strategy to recruit and maintain personnel, and a description of the applicant’s admission policy.

Schedule 1:  Estimated Provider Costs and Source of Funds – The purpose of this Schedule is to disclose ALL costs needed to begin operations (or resume operations in the case of a CHOW) including all pre-opening costs prior to beginning operations, funding for contingencies, and the funds necessary to sustain the operations until it reaches a positive cash flow.  The sources of the funding must be listed and independent, certifiable documentation of the existence and availability of those funds must be provided.  All funding must be supported by evidence that the entity owns or will have access to funds as needed.  Examples of documents that support funding include copies of bank statements for accounts owned by the proposed entity, a letter of commitment from a bank or other independent lending sources, a copy of a line of credit agreement established for the proposed entity (including the available balance), and any other liquid assets.  Liquid assets are defined as assets that can easily and quickly be converted to cash.  Funding provided by the corporate parent of a proposed entity must be supported with a letter from the parent indicating that such funds are available to the applicant and independent, certifiable documentation of the existence and availability of those funds as defined above.  The most recent Audited Financial Statements of the parent will be considered proof of the parent’s ability to fund the applicant unless the parent’s Audited Financial Statements indicate that current liabilities are greater than current assets and/or long-term debt exceeds net assets, and/or the audit contains a going concern issue.  We do not prepare audited financial statements for the parent or subsidiary. In the case of the purchase price associated with a change of ownership, the executed bill of sale is acceptable proof of funding the purchase price.  The proof of funding for contingencies must include a signed statement from the applicant which identifies the source of contingency funding and guarantying that the contingency funding will be made available to handle extraordinary occurrences that would have a financial impact such as major repairs, purchase of capital equipment, a decrease inpatient days, etc.  All proof of funding documentation must be dated no later than ten (10) days prior to the date the application is received by AHCA.  Attach any other supplementary documentation and/or explanations as needed.  For additional instruction follow the checklist at the bottom of Schedule 1.

Staffing – Preparation of AHCA Proof of Financial Ability to Operate Form 3100-0009

Schedule 2 and 2.1:  Staffing Requirements – The purpose of Schedule 2 is to present the total number of Full-Time Equivalent employees (FTEs) projected to staff the operation and convert these FTEs to the total annual salary cost.  An employee working only 20 hours a week would be shown as .5 FTE.  A full-time employee not hired until the last 3 months of the year would be shown as .25 FTE.  The last column for each year is the product of the number of FTEs times the average annual salary per FTE.  Schedule 2 is for direct employees only (employees that have payroll taxes withheld from their pay).  Schedule 2.1 is for contracted employees.  The staffing presented should be consistent with the respective authoritative rules and statutes regarding minimum staffing required.  The combined staffing hours on Schedule 2 and 2.1 must be equal to or in excess of the hours needed to provide the services billed on Schedule 3.   In addition, the applicant must provide documentation supporting the salary levels for each position.  Documentation supporting salary levels may include, labor market studies, industry published averages, signed statements from individuals agreeing to the projected salary, etc.  For additional instructions refer to the checklist provided at the bottom of the page on Schedule 2 and 2.1.

Schedule 3:  Hours and Charges – The purpose of this Schedule is to disclose the estimated number of service hours, visits, or days (as appropriate for the provider type) along with the amount charged per hour, visit, or day for the first and second year of operations.  Revenue on this schedule must reconcile with Total Gross Revenues on Schedule 4 Line 5, Column 7.  Because the method and type of reimbursement vary among different providers, the following subsections were developed to better reconcile with the provider type:

Part A:  Must be completed by Home Health, Nurse Registry, Skilled Nursing, ALF, ICFDD, PPEC, and ADCC Only.  Home Health applicants must also complete Schedule 4.1 if applying for Medicare and Medicaid Certification.

Part B: Must be completed by Health Care Clinic Applicants only.

Part C: Must be completed by Hospice Applicants only.

All revenue methods will not easily relate to this form, however, please make your best estimates.  Attach notes of explanation as needed.

Schedule 3HME: – The purpose of this schedule is the same as the purpose of Schedule 3; however, it has been specifically designed for home medical equipment applicants.  This Schedule must be completed by Home Medical Equipment Applicants.

Financial Statements – Preparation of AHCA Proof of Financial Ability to Operate Form 3100-0009

Schedule 4:  Projected Operating Revenue – The purpose of this form is to present revenues by payer category.  The Total Gross Revenues (Line 5, Column 7) must reconcile with Schedule 3 and 3HME.  Often times Medicare, Medicaid, and HMOs may reimburse the agency at a different rate than the charges listed on Schedule 3.  The difference must be accounted for as a contractual adjustment on Line 6.  HME providers and any other providers selling medical equipment must record the cost of goods sold on Line 8. Use either hours, visits, or days as appropriate for the provider type.  Medicare and Medicaid net revenues must be consistent with the most recently approved reimbursement methodologies.  The hours, visits, or days section of this schedule does not apply to HME applicants.

Schedule 4.1:  Supplementary Home Health Agency Schedule – If a Home Health applicant indicates in the application that it is applying for Medicare and/or Medicaid certification and/or the applicant includes Medicare and/or Medicaid revenue on Schedule 4, then the Home Health Agency applicant must complete this schedule.  The purpose of this schedule is to address the certification process for Medicare and Medicaid.  Home Health Agencies are required to be operational and have at least 10 skilled patients prior to being surveyed by Medicare and Medicaid.  Approval is not guaranteed and takes approximately six months to complete.  The applicant will not receive reimbursement from Medicare or Medicaid for the treatment of Medicare and Medicaid patients prior to certification.  In order for an initial application to become Medicare and Medicaid certified, the applicant will have to seek accreditation with deemed status from one of three national accreditation organizations.  You must provide a written estimate for the cost of accreditation with deemed status from one of the three national accreditation organizations (Community Health Accreditation Organization, The Joint Commission, and Accreditation Commission for Health Care) and include and clearly identify the cost of the accreditation in the projected financial schedules.  If the applicant is projecting Medicare and Medicaid revenues prior to anticipated certification, an adjustment must be made on this schedule to remove the Medicare and Medicaid revenues prior to certification (Certification Period Reduction).  The Total Net Adjusted Revenue from this schedule must be used on Schedule 6, Line 1, year one instead of the Schedule 4 Net Revenue (Col. 7, Line 13).

Schedule 5:  Balance Sheet – The balance sheet is ultimately the results of the projections on Schedule 6 (Income Statement) and Schedule 7 (Cash Flow Statement) and must reconcile with those schedules.  The applicant must provide notes with an explanation of the assumptions used for the collection of revenues and the paying of expenses.  Particularly, the assumptions for payment of rent which typically are paid at the beginning of a month; the payment of salaries, which may be weekly, bi-weekly, or monthly; all of which impact payables differently.  The assumptions presented for receivables and payables have a direct impact on the cash flow statement and must be consistently applied when completing the cash flow statement.

Schedule 6:  Projected Summary of Revenues and Expenses – The Schedule is designed to show the projected profitability of the applicant.  The revenues on this schedule must reconcile with Schedule 4 and 4.1.  Administrative, direct, and contracted salaries expense on this schedule must reconcile with Schedule 2 and 2.1.  This schedule must include taxes and benefits for direct employees and interest expense on funds borrowed (as indicated on Schedule 1).  The monthly salary allocations must be sufficient to meet all minimum staffing requirements including the staffing required to generate the monthly revenue allocated.  These schedules must include allocations for utilities (phone, electric, etc), supplies (office and medical), and all other costs expected to be incurred in the normal course of business.  If costs are to be shared with an affiliate or parent company, then this schedule should include the applicant’s share of those costs.  If this is a new entity, the revenue projections must reflect the applicant’s assumptions on the growth of patients/ residents expected.  Simply dividing year-end revenues by 12-months will not be considered a reasonable assumption for a new entity.  Existing entities applying for a CHOW may be expected to have a more stable month-to-month revenue stream.  Fixed costs such as rent and administrative overhead must be relatively consistent from month to month while variable costs such as patient care must be proportional to the revenue earned in any one month (matching principle).

The applicant must provide documentation in the form of leases and insurance quotes in support of the rent and insurance expenses projected.  For initial applicants only, financial projections that project a year one operating margin (Schedule 6, Line 36 divided by Schedule 6, Line 1) or any monthly operating margin in year one of 15 percent or greater will be deemed unreasonable and the applicant will be found to have not met its proof of financial ability to operate.

Schedule 7:  Projected Cash Flow Statement – This schedule is designed to determine the working capital needs of the applicant.  Line 1 must equal Schedule 6, Line 39.  Lines 2 through 12 must reconcile with the income statement and balance sheet and must be consistent with the applicant’s assumptions.  Line 13 must equal (Line 1 plus Line 7 less Line 12).  In year one month one, Line 14 must equal Total Pre-Opening Cost from Schedule 1 Line 14.  If the applicant is projecting any capital additions, then the cost of those additions must be included on this schedule.  If the applicant is projecting repaying loan principal, then principal repayments must be included on this schedule.

Total Cash Needs – Line 20, Total Cash Needs, is the total of Line 19 – Total Other Uses of Cash, plus Cash Flows from Operations, Line 13.  A positive cash flow on Line 13 is subtracted from Line 19.  If the positive cash flow is greater than the other uses, the net positive cash needs will be shown as a negative on line 20.

Cumulative Cash Need – Line 21, Cumulative Cash needs, is the running total of last month’s cumulative cash needs (Line 21 from last month plus the Total Cash Needs from Line 20 for the current month).  If the Total Cash Needs this month is a negative amount meaning a positive cash contribution, it would be subtracted from the cumulative cash amount from last month.  The highest monthly amount on Line 21 (considering both years one and year two) will be entered on Schedule 1 as Working Capital.  Year 2, month 1 uses year 1, month 12 for its cumulative beginning.