This chapter governs the administration of State grant funds for any county, municipal corporation, or nonprofit organization for the conversion of nursing facility beds to provide other health care services under the Nursing Facility Conversion Grant Program, Health-General Article, §§24-1401—24-1408, Annotated Code of Maryland. It is the intent of the Department that State grant funds be used: To assist eligible applicants with the conversion of existing nursing facilities eligible under the Act in accordance with this chapter; and After the applicant has secured all funds available from other sources. In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Health-General Article, §§24-1401—24-1408, Annotated Code of Maryland, which authorizes the disbursement of State grant funds for the purposes of converting nursing facility beds to provide other health care services determined appropriate by the Department. “Admission criteria” means criteria established by a facility for admitting individuals including limitations, if any. “Applicant” means a county, municipal corporation, or nonprofit organization that has submitted an application. “Application” means the forms required and published by the Department, and submitted by the applicant to the Office of Capital Planning, Budgeting, and Engineering Services, to apply for a State grant for a project. “Board of Public Works” means the Board established by Article XII of the Constitution of Maryland, consisting of the Governor, the Treasurer, and the Comptroller of Maryland. “Building” means all or part of an existing nursing facility; “Capital equipment” means items that: With normal maintenance, have a life expectancy of at least 15 years; Have durable construction; and Are necessary to furnish a new health service not previously provided by the facility. “Construction” means an addition to an existing nursing facility building that results in the reduction of comprehensive care beds and therefore, the provision of other health care services. “Conversion” means the work required to modify or adapt the interior arrangement and other physical characteristics of an existing nursing facility building, in order to transform the facility or part of the facility for uses as stipulated in the annual application instructions. “Default” means: Transfer of property to any person, agency, or organization that would not qualify as an applicant or that is not approved as a transferee by the Board of Public Works; Failure to complete a project and to obtain required occupancy permit; Failure to provide a new health service and commence operation within 1 year after obtaining an occupancy permit; Failure to de-license a specified number of comprehensive nursing home beds; or Failure to provide approved health care service upon which a grant was predicated for a period of 30 years after the completion of project. “Department” means the Maryland Department of Health. “Eligible person” means an individual who meets facility admission criteria. “Eligible work” means that work for which the use of State funds is authorized under the Act. “Facility” means: A facility that meets the definition of Health-General Article, §19-1401(e), Annotated Code of Maryland; A facility that is licensed by the Department; and A nursing facility that is wholly owned by and operated under the authority of: A county or a municipal corporation, or both; or A nonprofit nursing facility that is wholly owned by and operated under the authority of a nonprofit organization. “Grant” means any funds competitively awarded from any source to the applicant including a State grant. “Grantee” means a nursing facility that receives State grant funds under the Act, which are approved by the Board of Public Works. “Nonprofit organization” has the meaning stated in Health-General Article, §24-1401, Annotated Code of Maryland. “Office of Capital Planning, Budgeting, and Engineering Services” means the unit within the Department designated by the Secretary to administer this chapter. “Operating costs” means costs associated with the operation of the new service. “Other health care services” means those health care services determined appropriate by the Department as stipulated in the annual grant application instructions. “Project” means the approved proposed scope of work by the Department for the renovation, construction, and equipping of a facility in order to convert existing nursing facility bed space for other health care services. “Renovation” means restoration or modernization of space that results in the reduction of comprehensive care beds in an existing nursing facility. “Retroactive expenditure” means any cost incurred or contracted for before the application for conversion has been received and approved by the Secretary. “Secretary” means the Secretary of Health, or a designated representative. “State grant” means State funds awarded under the Nursing Facility Conversion Grant Program. “Wholly owned” has the meaning stated in Health-General Article, §24-1401, Annotated Code of Maryland. State grant funds for nursing facilities under the Act shall be used solely for projects approved by the Department for the purpose of converting existing nursing facility beds to provide: Other health care services; Purchase of capital equipment; and Planning, design, construction, and renovation of a facility. To be eligible to apply for State grant funds under the Act, an applicant shall: Be a county, municipal corporation, or a nonprofit organization; Have a proposed project that is in accord with the priorities of the Secretary; Be licensed by the Department; Be eligible for certification under, and agree to participate in, Title XVIII and Title XIX of the Social Security Act; Certify that the proposed facility will meet the accessibility requirements of 42 U.S.C. 12101 et seq., or provide a certified waiver from the Department of Housing and Community Development; Not have had any of the following deficiencies cited in any survey conducted by the Department's Office of Health Care Quality during the calendar year preceding the grant application year, using the scope and severity matrix found in the Centers for Medicare and Medicaid Services State Operations Manual for Survey and Certification, Part 7, §7400E: Two or more “G” level deficiencies; or One or more “H” or higher-level deficiencies; and Be approved by the Secretary to receive a grant award. A provider operating a facility with any of the deficiencies described in §A(6) of this regulation may be eligible to apply for a grant if the facility has undergone a change in ownership as a result of an arm's length transaction as determined by the Department, since the latest survey that resulted in the deficiencies. An applicant shall apply for a State grant by: Completing an application with the Department on a form provided by the Department; and Filing the completed application for State grant funds with the Office of Capital Planning, Budgeting, and Engineering Services. The Department shall provide any notice and information to the State Clearinghouse for intergovernmental review that may be required under COMAR 14.24.04. The applicant shall comply with all applicable federal and State laws and regulations in effect at the time of application. At the time of filing the application, the applicant shall file a written statement with the Department containing the following information or material: Current or intended program of services; The number of personnel employed or to be employed at the facility, by occupation, and all perquisites, salaries, and any compensation paid, or to be paid, to the personnel; Expenses incurred, or to be incurred, in carrying out qualified facility operations; Schedule of rates charged, or to be charged, for services rendered at the facility; Agreement to admit eligible persons on the basis of their need for services without regard to race, national origin, color, or disability; A certified, audited profit-and-loss statement and balance sheet for the most current year; and If the applicant is applying for poverty funding under Regulation .08D of this chapter, an agreement that the majority of the individuals served by the applicant will be poverty-designated clients, as defined in Regulation .08D(2) of this chapter, for each year for a period of 30 years following the completion of the conversion of the facility. The Secretary shall recommend to the Board of Public Works applications that: Meet the requirements of this regulation; and Set forth the priorities of the Department as stipulated in the annual application instructions. The Department shall determine the amount of the State grant, if any, for an applicant's approved project after consideration of the following: All approved applications; Priorities of need as established by the Department; The total unallocated State funds available for grants under the Act; The projected amount of anticipated appropriations as provided in the Governor's Five-Year Capital Improvement Program; The reasonableness of the total cost of the project; and Current operating costs or the reasonableness of a projected budget and revenues for the facility. The Department shall determine whether the application is to be recommended to the Board of Public Works for award of State grant funds after consideration of the following: The availability of State grant funds; The receipt of satisfactory evidence from the applicant of the following requirements: Documentation from the Maryland Health Care Commission that: A certificate of need is not required for a decrease in bed capacity or conversion to an alternative health care facility or service proposed by the project; or An applicant has obtained a certificate of need, if required pursuant to Health-General Article, §19-120, Annotated Code of Maryland, for the proposed changes in bed capacity or license category, or to establish the new health care facility or service; Sufficient total financial contribution to complete the project; Control of site, such as deed or lease; Compliance with applicable local zoning requirements; Certified bid tabulation, construction contract; and Compliance with all other applicable provisions of State or federal law. Upon satisfactory completion of §A of this regulation, the Secretary shall recommend to the Board of Public Works that a State grant be made to the approved applicant, together with a written report stating that: A notice, including information in the application, has been provided to the State Clearinghouse; The application has been approved by the Secretary; and The amount of a federal grant, if any is involved, that has been awarded to the applicant. Use of Federal Grants. Any federal grant that is received for an eligible project shall be applied first to the cost of the project. Community development block grants are considered as local matching funds and are not considered as federal grant funds. All other sources of funds shall be expended before any or all of the State grant is expended on an approved project. Limits of State Grant. Except as provided in §D of this regulation, a State grant may not exceed 50 percent of the cost of eligible work remaining unpaid after all federal grants have been applied. A State grant may not be used to fund participation in retroactive expenditures. A State grant may include only those costs incurred or obligations contracted for eligible work after the application has been approved by the Secretary. State grant funds may not be used to pay the following costs: Noncapital equipment; Consultant services; or Off-site improvements. Exceptions on State Grant Limits. A project designated as eligible for poverty area funding under §D of this regulation may receive a State grant to cover up to 75 percent of the cost of eligible work remaining unpaid after all federal grants have been applied. Poverty Area Funding. An applicant is eligible for poverty area funding for a facility if: The project is designated as eligible for poverty area funding under applicable federal regulations and State plans or Departmental regulations; and The majority of individuals served by the facility: Are certified by a local department of social services as eligible for General Public Assistance or Medical Assistance; Are eligible for Supplemental Security Income benefits; or Have income levels which do not exceed 150 percent of the federal poverty level. Funding Contribution Requirements. The grantee shall provide, from other sources, funds equal to the total cost of the eligible project less the State grant award. The grantee shall assume the risk of all costs associated with the project that are incurred before the date of approval of a State grant award by the Board of Public Works. A grantee may not expend the State grant award before other sources of funds are expended. The Department may not consider as contributions: Real or personal property; In-kind contributions; or Funds expended before an application is approved by the Secretary. A grantee may not use a project funded by a State grant primarily: For the furtherance of sectarian religious instruction or services; As a place of sectarian religious worship or instruction; In connection with any program or department of divinity for any religious denomination. Upon the request of the Board of Public Works, the grantee shall submit evidence satisfactory to the Board that none of the proceeds of the grant have been, or are being, used for a purpose prohibited by the Act. Annual Requirements. For a period of 30 years following the conversion of nursing facility beds involving the State grant funds in this chapter, a grantee shall file a written statement annually with the Department containing the following material: A recent certified, audited profit-and-loss statement and balance sheet for the facility; Volume of service in the portion of the building converted with State grant funds, such as days of service rendered to clients; and Other supplemental information required by the Secretary. For a period of 30 years following the completion of a project that receives poverty funding under Regulation .08D of this chapter, the grantee shall submit annually a quantitative statement of its performance in serving designated poverty-area clients. Insurance Requirements. Upon acquisition of the project, the grantee shall provide an all-risk insurance policy that: Provides coverage for an amount at least equal to the replacement cost of the facility; Names the State as a loss payee; Protects the State's interest in the project; and Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any: Cancellation of policy; Material loss covered by the policy; or Material changes in the policy. The grantee shall provide builders' risk insurance coverage during the entire period of project construction or renovation up to and including owner's acceptance of building that: Names the State as a loss payee; Protects the State's interest in the building; Provides an amount at least equal to the replacement cost of the facility; and Requires evidence of the coverage be submitted to the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201. Upon completion of a project, the grantee shall maintain, for a period of 30 years, an all-risk insurance policy that: Provides coverage for an amount at least equal to the replacement cost of the facility; Names the State as a loss payee; Protects the State's interest in the project; Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any: Cancellation of policy; Material loss covered by the policy; or Material changes in the policy. The grantee shall maintain and submit evidence of this insurance annually, for a period of 30 years, to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer's Office, Insurance Division. During the entire period of work on the project and for a period of 30 years after the project has been completed or acquired, the Department may audit the business records of the applicant and the applicant's agents, contractors, heirs, or assigns. Extension of Time for Completion; Other Changes. The applicant shall notify the Secretary promptly and, in any event, not more than 30 days after the applicant knew or should reasonably have known that the applicant is unable to encumber funds: In the manner approved by the Secretary; or Within 2 years of the appropriation by the Maryland General Assembly. For good cause, the Secretary may grant a request by the applicant for a change in the manner or time for encumbrance of funds, including an extension of time. Upon a demonstration of good cause for an extension of time, the Secretary may grant an extension of up to an additional 180 days to encumber funds. Expenditures. State funds may not be released until: The applicant has recorded a notice of the State's right of recovery, as approved by the Secretary, in the land records of Baltimore City or the county in which the property is located; and The applicant is in compliance with this chapter and all applicable federal and State laws. Penalties. If the grantee does not comply with this chapter and all other applicable State and federal laws, the Secretary may: Refuse to consider the grantee for any future funding under the Act; Require an audit of the grantee; Notify the Department's Office of Health Care Quality; and Take other action as appropriate. In the event of default under the terms of the Act and this chapter, a nursing facility financed pursuant to this chapter is subject to the State's right of recovery as set forth in the Act. Health-General Article, §§24-1401—24-1408, Annotated Code of Maryland Effective date: August 13, 2007 (34:16 Md. R. 1432)