In this chapter, the following terms have the meanings indicated. Terms Defined. “Act” means Human Services Article, Title 10, Subtitle 4, Parts I—V and VII—IX, Annotated Code of Maryland. “Actuarial balance sheet” means a balance sheet that uses actuarial principles and practices to determine the value of certain items in the balance sheet based on actuarial techniques involving reasonable assumptions about contingencies, inflation, and the time value of money as applied to current subscribers, which items include the present value of: Future periodic fees; The costs of providing promised future services; and The obligation for refundable entrance fees. “Agreement” means the residence and care agreement between the provider and subscriber that is the contract to provide continuing care. “Assisted living unit” means a unit in which the services rendered will require the provider to be licensed either as an assisted living program under Health-General Article, §19-1805, Annotated Code of Maryland, or as a domiciliary care home under Health-General Article, §19-318, Annotated Code of Maryland. Authority Recognized by the Department. "Authority recognized by the Department" means a person whom the Department determines has the knowledge and experience of the continuing care industry necessary to produce the particular materials required by a given regulation in this chapter. "Authority recognized by the Department" includes an independent consultant or an employee of a provider or related entity. “Authorized officer” means an individual holding one of the following positions with a provider: An officer; A general partner; Any individual that serves on the governing body; or A trustee of the provider. “Certified financial statement” means a financial statement, prepared in accordance with generally accepted accounting principles by an independent certified public accountant, that includes an audit opinion, balance sheet, income statement, statement of cash flows, and the related notes to the financial statement. “Certified financial statement for the most recent fiscal year for which a certified financial statement is available” means: For providers who annually receive a certified financial statement within 120 days of the end of their fiscal year, the most recently dated financial statement; and For any other providers, assuming that a certified financial statement is obtainable under generally accepted auditing standards, a certified financial statement that is not greater than 120 days old. “Chief executive officer” means the individual whose primary responsibility is to oversee all aspects of the operation of the provider. “Committee” means Financial Review Committee. “Continuing care” means furnishing shelter and services to the public under all the following conditions: Services consist of shelter plus health services; Health services provided shall include at least one of the following services: Medical and nursing services, A formal arrangement between the provider and a nursing home by which the nursing home grants priority to subscribers for admission to the nursing home, or Assistance with the activities of daily living other than the provision of meals; Services may be paid for by the following methods: An entrance fee in advance of receipt of services, Regular periodic charges which guarantee health services whenever needed, Purchase of services at the option of the subscriber as services are needed, or Any combination of the arrangements in §B(11)(c)(i)—(iii) of this regulation; Services are offered to individuals who are: 60 years old or older, and Not related to the provider by blood or marriage; Services are offered for: The life of the subscriber, or A period in excess of 1 year; and Services are offered under a written agreement that may require periodic charges and shall require: A transfer of assets from the subscriber to the provider, An entrance fee, or Both a transfer of assets and an entrance fee. Control. “Control” means the power to direct, or cause the direction of, the management and policies of a provider through the ownership of voting securities, by contract, or otherwise. “Control” includes a parent or sole corporate member of a corporation directly participating in the initiation or approval of policies directly affecting the operations, including approval of budgets or approval of the chief executive officer of the provider. “Department” means the Maryland Department of Aging. “Deposit” means a portion of the entrance fee. Deposit Agreement. “Deposit agreement” means the preliminary agreement between the subscriber and the provider by which the provider reserves for the subscriber the right to contract for continuing care in return for payment by the subscriber of a deposit. “Deposit agreement” includes any agreement of similar form and use, regardless of title, including priority agreement and reservation agreement. Entrance Fee. “Entrance fee” means a sum of money or other consideration, other than a surcharge, paid initially or in deferred payments, that: Assures a subscriber continuing care for a term of more than 1 year or for life; and Is at least three times the weighted average of the monthly cost of the periodic fees charged for independent living and assisted living units. “Entrance fee” includes a fee of similar form and application, regardless of title. “Escrow agreement” means an agreement between the provider and a financial institution by which deposits and entrance fees are held in Maryland by the financial institution until release is permitted by law or regulation. “Expansion” means any single new capital addition, excluding renovation and normal repair and maintenance, that meets either of the following criteria: If independent living or assisted living units are to be constructed, then the number of units to be constructed is less than or equal to 25 percent of the number of existing independent living units and assisted living units; or If independent living or assisted living units are not to be constructed, then the total projected cost is an amount that is more than the sum of: 10 percent of the total operating expenses of the facility, less depreciation, amortization, and interest expense, as shown on the certified financial statement for the most recent fiscal year for which a certified financial statement is available, and The amount of the existing reserves properly allocable to, and so allocated for, the expansion. “Facility” means a physical plant and related grounds used to provide continuing care in accordance with this chapter. “Financial difficulty” means the current or impending financial condition of a provider which currently impairs or may impair the ability of the provider to meet existing or future obligations to subscribers or other creditors. “Fiscal year” means the fiscal year of the provider. “Generally accepted accounting principles” means those accounting principles and practices adopted by the Financial Accounting Standards Board and the American Institute of Certified Public Accountants, which include the principles expressed in the American Institute of Certified Public Accountants' “Audit and Accounting Guide for Health Care Organizations”. “Governing body” means a board of directors, board of trustees, or similar group that ultimately directs the affairs of a provider, but whose members are not required to have an equity interest in the provider. “MDH” means the Maryland Department of Health. “MHCC” means the Maryland Health Care Commission. “New units” means independent living or assisted living units that are: Part of a new facility; or Additions to an existing facility that are greater than 25 percent of the number of existing independent and assisted living units at the existing facility. “Person” means an individual, firm, association, corporation, company, trust, partnership, limited liability company, public body, or other business or nonprofit entity. “Processing fee” means a one-time fee charged by the provider to determine the financial, mental, and physical eligibility of an individual seeking admission into a facility. “Provider” means a person who undertakes to provide continuing care and who is an: Owner or operator of a facility; or Applicant for, or the holder of, a certificate of registration. “Qualified actuary” means a member in good standing of the American Academy of Actuaries. “Records” means the information, books, and data maintained for the operation of the facility or the provider in accordance with this chapter. “Renewal” means the renewal of a certificate of registration required annually to permit the provider to continue to offer continuing care to the public. Renovation. “Renovation” means any single capital improvement to, or replacement of, all or part of the existing facility that does not increase the number of independent living or assisted living units and for which the total projected cost is an amount that is more than the sum of: 20 percent of the total operating expenses of the facility, less depreciation, amortization, and interest expense, as shown on the certified financial statement for the most recent fiscal year for which a certified financial statement is available; and The amount of the existing reserves properly allocable to, and so allocated for, the renovation. “Renovation” does not include normal repair and maintenance. “Secretary” means Secretary of Aging. “Subscriber” means an individual for whom continuing care is purchased under an agreement. “Surcharge” means a separate and additional charge, other than a second-person entrance fee, imposed simultaneously with the entrance fee, that may be required of some, but not all, subscribers because of a condition or circumstance that applies only to those subscribers. Unit. “Unit” means a suite, room, cottage, apartment, or any other type of quarters that is located at a facility and in which a subscriber is to reside while receiving the benefits of a continuing care agreement, including quarters for independent living, assisted living, and comprehensive care. “Unit” includes individual beds licensed for domiciliary care, assisted living, and comprehensive care so that each assisted living bed, domiciliary care bed, and comprehensive care bed constitutes a unit. A provider may not offer continuing care, enter into or renew an agreement for continuing care, begin construction for a new facility, or collect deposits for continuing care without having secured the necessary feasibility study approval or certificate of registration from the Department. Submissions. The submissions described in this section shall be filed with and approved by the Department. Statement of Intent. Any person that intends to offer continuing care agreements for new units or to file a feasibility study under Regulation .05 of this chapter shall file a statement of intent with the Department at least 30 days before submission of the feasibility study. Application for Approval of Feasibility Study. A provider shall obtain approval by the Department of a feasibility study before a provider may collect deposits or enter into deposit agreements for new units. Deposits for new units collected after the feasibility study has been approved shall be maintained in an escrow account held in Maryland in a federally insured depository under an escrow agreement approved by the Department. Application for Preliminary Certificate. A preliminary certificate of registration is required before a provider may offer or enter into continuing care agreements for any new units. Application for Initial Certificate. An initial certificate of registration is required before a provider may operate a facility offering continuing care. Request for Approval to Use Deposits. A provider may not use deposits collected from subscribers for new units until: The Department has issued the provider an initial certificate of registration for any new units; Construction of the new units has been completed; A certificate of occupancy or equivalent has been obtained from the appropriate local jurisdiction; and Appropriate licenses or certificates required by MHCC, MDH, and the Department have been issued. Application for Renewal of Certificate of Registration. A current certificate of registration is required to continue to operate or maintain a facility offering continuing care. All approvals and certificates of registration issued by the Department shall approve or certify a specific number of units designated by type as: Independent living; Assisted living; Comprehensive care; or Other type approved by the Department. A provider who operates or plans to operate more than one facility shall file separately for each facility the submissions and applications set forth in §B of this regulation. A provider may not begin construction of an expansion or renovation unless the provider has complied with the applicable provisions of Regulations .15 and .17 of this chapter. Any new capital addition that in a 2-year period will result in the construction of a number of independent living and assisted living units that is greater than 25 percent of the number of existing independent living and assisted living units is considered new development, is subject to §B of this regulation and Regulations .03—.09 of this chapter, and requires an initial certificate of registration to include the new units. Any new capital addition that is not an expansion and that does not involve the construction of independent living or assisted living units is not subject to review under Regulation .15 or .17 of this chapter. Any capital improvement or replacement that is not a renovation is not subject to Department review under Regulation .15 or .17 of this chapter. An expansion of comprehensive care beds, regardless of number, requires a certificate of need or a certificate of need exemption from MHCC. A provider may not offer or enter into a deposit agreement or an agreement, unless the terms have been approved by the Department. A provider may not disseminate advertising or circulars which are deceptive, misleading, or likely to mislead. Special Conditions. A provider applying for a certificate of registration whose past or current performance in the operation of a continuing care facility, whether that facility is located within or outside of Maryland, causes the Secretary to question the provider's financial or administrative ability to maintain a continuing care facility in compliance with this chapter, shall submit to the Department evidence demonstrating financial or administrative soundness, or both, as the Secretary considers appropriate. This information is sought only in special circumstances and is not required as a matter of course. The Secretary shall: Approve the application unconditionally; Require the provider to use the services of a management firm; or Deny the application. A management firm required by §H(2)(b) of this regulation shall be selected by the provider subject to the approval of the Department. Approval of a management firm that currently does business in Maryland, has projects in good standing under the Act, and which has not had a fiduciary or consultant relationship with the Department may not be denied without cause. The management firm shall assume full operational and financial responsibilities. The Secretary may not require utilization of a management firm for a period that exceeds 24 months. A party aggrieved by a decision of the Secretary under this regulation has the right to appeal under Regulation .36 of this chapter. A provider who is denied approval of submissions required by §B(3), B(4), or E of this regulation may reapply 1 year after the date of denial. Process to Obtain a Preliminary Certificate of Registration. A person shall file a: Statement of intent under Regulation .04 of this chapter; A feasibility study under Regulation .05 of this chapter; and An application under Regulation .06 of this chapter. Forms and Fees for Feasibility Study and Application. A feasibility study and an application for a preliminary certificate of registration shall be submitted with forms provided by the Department. When new units are to be created and the project is neither an expansion nor a renovation, the following fees shall accompany the feasibility study: $14,000 for 1—99 new units; $20,000 for 100—199 new units; $30,000 for 200—499 new units; $40,000 for 500—999 new units; and $50,000 for 1,000 or more new units. The Department may charge an additional fee, not to exceed the original fee, if resubmission of a feasibility study to the Department is required due to: Significant changes in the assumptions upon which the feasibility study was based; Correction of significant errors in the feasibility study; or A significant omission in the original feasibility study submission. Statement of Intent. Any person that intends to offer continuing care agreements for new units or to file a feasibility study under Regulation .05 of this chapter shall file a statement of intent with the Department at least 30 days before submission of a feasibility study. If a feasibility study is not filed by the provider within 60 days after the statement of intent is filed, a new statement of intent shall be filed with the Department at least 30 days before submission of a feasibility study. Contents. A statement of intent shall contain, at a minimum, the following information: The name of both the provider and the proposed facility; Whether entrance fees will be refundable or nonrefundable; The types of agreements proposed, such as extensive, modified, or fee-for-service; The number of proposed units by type, such as independent living, assisted living, and comprehensive care; Whether the provider is proposed to be for-profit or nonprofit; The name of the management company, if any, that will operate the facility; If applicable, the name of the: Development company proposing to develop the facility; Marketing consultant; Provider's attorney; and Preparer of the feasibility study, along with the preparer's qualifications; A statement indicating whether any proposed comprehensive care beds will need a new certificate of need or a new exemption from the certificate of need requirements of MHCC; and Any further information the Department requires. The feasibility study shall be prepared in a form satisfactory to the Department, by an authority recognized by the Department, and shall include at least the following information: A statement of the purpose for the proposed project or construction; A summary of the proposed project, which shall include the following information: A description of the proposed project; A statement regarding any affiliation of the provider with a religious, charitable, or other nonprofit organization, and the extent to which the organization will be responsible for the financial and contractual obligations of the provider; The location, address, city, county, size, and description of the site; The number of proposed independent living units, assisted living units, and comprehensive care units; and A description of any common areas and community spaces to be provided such as lobbies, dining rooms, doctor's Departments, convenience stores, craft rooms, meeting rooms, and exercise rooms; A summary of the organizational structure of the proposed provider and development team, which shall include the following information: The ownership of the provider, including whether it is for-profit; The owner of the facility if other than the provider; A description of the qualifications of the proposed manager or management company if the facility is, or will be, managed on a day-to-day basis by a person other than an individual directly employed by the provider, including the business experience the manager or management company has operating or managing similar facilities; and A description of the qualifications of any other person who is significantly involved in the development of the facility; A summary description of the location of the proposed project, which shall include the following information: A map indicating the location of the proposed community; A general description of the surrounding land use and the access to public transportation and highways; and The availability and attractiveness of proximate services such as shopping, cultural, recreational, and educational facilities, health services, churches, theaters, and libraries; A full description of the site of the proposed project which shall include the following information: The size; A general description of its boundaries; Any access roads; From whom the site was acquired and the former usage of the site; Any unique characteristics of the site such as water, ponds, or woods; Any current buildings, services, or facilities at the site and their intended use; A site development plan indicating existing features and structures, if any, and the proposed new facilities; Any planned post-application development; The availability of utilities and proximity to site; The zoning status and any required changes; and The type of site control or ownership, including such information as: The date the site was acquired, The date it was optioned, The terms of any rights of first refusal, or Any other significant terms of the acquisition; A summary of any independent living component of the facility, which shall include the following: A broad description of the type and number of independent living units, such as cottages, clustered duplexes, or apartments; A description of the type of construction that may be used, such as new construction or rehabilitation of existing structures; The square footage of the independent living area that corresponds to each type of independent living unit offered; A summary of the access to the independent living units; and The schematics of each different type of independent living unit; A summary of the common and service areas of the facility, which shall include the following: A listing of the square footage of the common, service, administrative, and any other non-health-related areas and their location in relation to the independent living units; and The schematics of the common, service, administrative, and any other non-health-related areas; A summary of any plans for assisted living or comprehensive care units, which shall include the following: A general description of the square footage of each type of unit and the location of each type in relation to the independent living units and the common areas; The number of assisted living and comprehensive care units categorized as: Private, Semiprivate, and Suites; The total number of assisted living and comprehensive care units; A description of the types of any doctors' Departments that will be in the facility; and The schematics of any space for assisted living, comprehensive care, or doctors' Departments; A summary of the services that will be included in the monthly service fee; A summary of the ancillary services that will not be included in the monthly service fee; A statement describing any plans the provider has to require a subscriber to have long-term care insurance or supplement health insurance coverage; A statement describing any plans the provider has to become Medicare or Medicaid certified; A statement describing any plans the provider has to offer priority access to health-related services at an offsite location; A statement describing any plans to delay the refund of any entrance fees until the resale of a subscriber's unit; A study that demonstrates a market exists for the proposed project, which study shall include: A description of the primary and secondary market area as defined by the provider; A table of population information including age, sex, number, income distribution, and trends of the total population and individuals 60 years old and older within the primary and secondary market area; A calculation of the potential impact on the proposed project of existing facilities, facilities for which letters of intent have been filed with the Department, and other projects that offer similar services in the primary and secondary market area, which calculation shall include the following information for each facility in the primary and secondary markets: The number of independent living units, assisted living units, and comprehensive care units, The opening date or proposed opening date of the facility, The area marketed to, The utilization experience, The amount and type of entrance fees and monthly service fees, and The services offered; A calculation of the market penetration rate for the proposed facility for both the primary and secondary markets; A table of home values in the primary and secondary market area; A description of the minimum age, income, and net worth eligibility requirements for the anticipated subscribers of the proposed project; A description of new entrant assumptions by age, sex, and couple ratio; A description of the results of testing the potential demand and acceptance of the proposed project's location, services, and concept characteristics; If the area in which the facility is to be built has limited continuing care experience, a comparison with a demographically similar area that has experience with continuing care communities that shows the: Similarities and dissimilarities of the two markets, and Experiences of one or more continuing care retirement communities in the comparable market, including their initial utilization experience and the penetration rates of their continuing care units into the eligible population; and A statement describing the estimated presales period, including when the provider projects it will have executed agreements and collected at least 10 percent of the entrance fee for at least 65 percent of the independent living units; A plan demonstrating the financial feasibility of the proposed project including the following: The anticipated costs of constructing or acquiring the proposed project, including all related costs such as land costs, construction costs, architectural and engineering fees, financing expenses, marketing costs, legal and administrative costs, furnishings and equipment costs, fees and permits, and other costs; The anticipated sources and uses of funds to finance the proposed project, including documentation of the financial resources of the provider; A description of the proposed financing, including anticipated terms and costs of financing the proposed project; Projected financial statements that are based on the information required in §(A)(17)(b) of this regulation and prepared in accordance with both §C of this regulation and generally accepted accounting principles; A schedule of anticipated fees for a 10-year period, including any proposed escalator or other automatic adjustment provisions; For each type of unit proposed to be offered, a schedule of the anticipated monthly move-ins until full occupancy is reached; A description of the terms of the lease, if the provider is planning to lease the facility; The estimated start and completion dates for the construction of the proposed project; The initial proposed occupancy date; and A statement indicating compliance with the requirements of Regulation .20 of this chapter; Except as provided in §B of this regulation, an actuarial study, prepared or reviewed by a qualified actuary, which includes: A cohort pricing analysis which demonstrates that for a typical cohort of new subscribers the sum of the entrance fees paid at occupancy plus the actuarial present value at occupancy of periodic fees exceeds the actuarial present value at occupancy of the costs of performing all obligations assumed by the provider, with appropriate provision for surplus; Supporting detailed documentation for the cohort pricing analysis required in §A(17)(a) of this regulation, including: A projection of future population flows and health care bed needs, for the first 20 years, using appropriate inflation factors, mortality, morbidity, withdrawal, and other demographic assumptions, and A description of the actuarial data, assumptions, and methods used to create the projection; Cash flow projections for a 20-year period, which project positive cash balances; and The opinion of the actuary that the data and assumptions used are appropriate, the methods employed are consistent with sound actuarial principles and practices, and provision has been made for all actuarial liabilities and related statement items; A copy of the proposed deposit agreement between the provider and prospective subscribers governing the disposition of the escrowed funds and the interest earned on them; A copy of the proposed escrow agreement between the provider and the depository; Proposed payment arrangements under the agreement for both the shelter and health-related benefits; A copy of a certificate of need, or a letter or exemption from the certificate of need requirement, issued by MHCC for any proposed comprehensive care beds; The form and substance of any advertising campaign or proposed advertisement for the proposed project that is available at the time of filing; and Any further information that the Department requires. Facilities which offer only domiciliary care or comprehensive care and do not offer independent living units, and facilities which offer, as the only health care, priority admission to a nursing facility, are not subject to §A(17) of this regulation, and shall submit the projection of future population flows and health care bed needs for the first 20 years, using appropriate mortality, morbidity, withdrawal, and other demographic assumptions. In §A(16)(d) of this regulation, the provider shall submit projected financial statements for a minimum of the first 10 years of operation that include: Balance sheets; Income statements, including separate supplemental income statements for each of the following: Independent living, Assisted living, and Comprehensive care; Statements of cash flow; and The key assumptions used in preparing the projected financial statements, including assumptions related to utilization, turnover of units, inflation, debt service, personnel staffing and related salaries, interest rates, depreciation and amortization, amortization of entrance fees, raw food, insurance, and real estate taxes. Application. An application for a preliminary certificate of registration shall include the information described in this regulation. The names and addresses of the following shall be included: The facility; The provider; Any affiliate, parent, or subsidiary person or business entity; and The chief executive officer of the provider, the facility, and each affiliate, parent, or subsidiary person or business entity. The application shall describe the organizational structure and management of the provider, including: If the provider is a corporation or limited liability company, the: Name of the corporation or limited liability company, and State in which the corporation is incorporated or the limited liability company is formed; If the provider is a partnership, the: Names of the general partners, State governing the formation of the partnership, and Name of the primary individual responsible for managing the partnership; If the provider is an unincorporated association, the: Names of the members, State governing the association's activities, and Name of the primary individual responsible for managing the association; If the provider is a partnership having a corporation or limited liability company as one or more of its general partners, the: Names of each corporation or limited liability company, State in which each corporation is incorporated or the limited liability company is formed, and Name of the chief executive officer of each; If the provider is a trust, the: Name of each trustee, Names of the owners of beneficial interests in the trust, State whose laws govern the trust, and Name of the primary individual responsible for overseeing the trust's activities; The names and occupations of: The provider's officers, directors, trustees, managing or general partners, and non-stock corporation members, and An individual having a 10 percent or greater equity or beneficial interest in the provider; A description of each financial interest in, or occupation with, the provider of each individual identified under §C(6) of this regulation. Contracts with Related Entities. If it is anticipated that a business entity will provide to either the facility or the provider goods, premises, or services with a value of $10,000 or more within any fiscal year, and if a person identified in §C(6) of this regulation has a financial interest of 10 percent or more in the business entity, the application shall include: The name and address of the business entities; A description of the goods, premises, or services; and The anticipated yearly costs the facility or provider will incur for the goods, premises, or services. Section D(1) of this regulation does not require the disclosure of salary, age, or benefit information of employees of the provider. The application shall include a copy of all current documentation concerning the legal organization of the provider, including the corporate charter, bylaws, partnership agreement, articles of association, membership agreement, trust agreement, or similar instruments or agreements. The application shall include certified financial statements of the provider for the three most recent fiscal years for which certified financial statements are obtainable under generally accepted accounting principles. If the provider's fiscal year ended more than 90 days before the date of the filing, then the application shall also include an income statement, which does not need to be certified, that covers a period that begins on the date the fiscal year ended and ends on a date that is within 90 days of the date of the filing. The application shall include a statement of any current or prior affiliation with a religious, charitable, or other nonprofit organization, and the extent, if any, to which the affiliate organization will be responsible for the financial and contractual obligations of the provider. The application shall include a copy of any proposed: Agreements to be entered into between the provider and subscribers for continuing care; and Priority admission agreements between the provider and any health care providers. A table of the most current fee structure, including escalator or other automatic adjustment provisions, shall accompany the application. A statement describing the current or proposed use of any insurance program or publicly funded benefit program in the financing of care shall accompany the application. A description of the physical facility shall accompany the application. The form and substance of any advertising campaign, advertisement, or other promotional material for the facility that has not been previously filed with the Department shall be submitted with the application. Any other reasonable and pertinent information that the Department requests in writing shall be submitted with the application. The Department shall approve a feasibility study when it determines that: Either a certificate of need or an exemption from a certificate of need has been issued by MHCC for the number of comprehensive care beds proposed for the facility for which licenses are required by MDH; The number of licensed assisted living units proposed for the facility is not inconsistent with the State Health Plan; A reasonable financial plan has been submitted for developing and operating the proposed project, which: Includes in the projected financial statements all obligations and liabilities to be undertaken by the provider pursuant to the terms of the proposed continuing care agreement; Demonstrates that the anticipated sources of funds to finance the proposed project are equal to or greater than the anticipated uses of funds to construct or acquire the proposed project; and Demonstrates that the facility is financially feasible; A market for the continuing care facility appears to exist, based on reliable data, which: Is community specific; Takes into account competing shelter and health-related providers; Relates the existence of a market to the age, health, sex, marital status, number, population trends, net worth, home values, and income of the potential subscribers; and Demonstrates that the rate of penetration in the proposed market area is within acceptable industry ranges; The actuarial study as required in Regulation .05 of this chapter has been submitted and includes: A cohort pricing analysis that demonstrates that, for a typical cohort of new subscribers, the sum of the entrance fees paid at occupancy plus the actuarial present value at occupancy of periodic fees exceeds the actuarial present value at occupancy of the costs of performing all obligations assumed by the provider, with appropriate provision for surplus; Cash flow projections for a 20-year period, which project positive cash balances; Supporting detailed documentation for the cohort pricing analysis which includes a: Projection of future population flows for a 20-year period, which uses appropriate morbidity, mortality, withdrawal, and other demographic assumptions, Projection of future health care bed needs for a 20-year period, which uses appropriate morbidity, mortality, withdrawal, and other demographic assumptions, and Descriptions of the actuarial data, assumptions, and methods; and An opinion of a qualified actuary, which states that: The data and assumptions used are appropriate, The methods employed are consistent with sound actuarial principles and practices, and Provision has been made for all actuarial liabilities and related statement items; The projection of future population flows and health care bed needs, for the first 20 years, uses appropriate mortality, morbidity, withdrawal, and other demographic assumptions as required in Regulation .05 of this chapter; The feasibility study was prepared by an authority recognized by the Department; The approved escrow agreement and deposit agreement state that all deposits and entrance fees shall be held in escrow in Maryland in a financial institution until: The issuance of an initial certificate of registration; Completion of construction; The issuance of a certificate of occupancy or the equivalent by the appropriate local jurisdiction; and The issuance of appropriate licenses or certificates by MDH, MHCC, and the Department; and A copy of the escrow agreement, executed by the provider and the financial institution, is on file with the Department. The Department shall issue a preliminary certificate of registration when it determines that the following conditions have been met: The feasibility study has been approved by the Department; The agreement between the provider and the subscriber meets the requirements of Human Services Article, §§10-444—10-449, Annotated Code of Maryland, and Regulations .27—.29 of this chapter; The required financial and organizational materials have been submitted to the Department; and The Department has determined that the form and substance of all advertising and other promotional materials filed are not deceptive, misleading, or likely to mislead. Until the initial certificate of registration has been issued, the provider shall inform the Department of any changes or additions to the information provided in the feasibility study and in the application for a preliminary certificate of registration. If a provider that has submitted a feasibility study desires to advertise a continuing care community before an initial certificate of registration has been issued, the provider shall submit that advertising so it is received by the Department at least 3 working days before the advertising is to be aired, distributed, or otherwise used. The envelope or package in which the submission is delivered shall indicate in prominent type that the contents are proposed advertising materials for a community that does not have an initial certificate of registration. The Department shall determine within 3 working days of the receipt of the advertising whether it is deceptive, misleading, or likely to mislead. If the Department determines that the advertising is deceptive, misleading, or likely to mislead and should not be used, then the Department shall notify the provider that submitted the advertising materials of its determination. This notice shall be in writing, include the rationale for the determination, and be delivered before the close of business of the third working day after the day upon which the advertising was received for review. The notice may be delivered by facsimile. If the provider has not received the notice by 5 p.m. on the third working day following receipt of the advertising by the Department, the provider may use the advertising. The lack of notification by the Department does not mean the Department has determined that the advertising is not deceptive, misleading, or likely to mislead. If a provider is notified that the Department has determined that the advertising, or some part of the advertising, is deceptive, misleading, or likely to mislead, the provider may appeal that determination under Regulation .36 of this chapter. An appeal shall be processed on an accelerated basis if the provider so desires. A provider shall file an application for an initial certificate of registration on a form provided by the Department. The application shall include verification that: All licenses and certificates required as of the date of the application from MDH, MHCC, and the Department for the new units have been issued; Agreements have been executed for at least 65 percent of the independent living units and at least 10 percent of the total entrance fees for each contracted unit has been collected; The provider has received a written commitment for permanent long-term financing; and Closing on construction financing has taken place. A provider may, when the requirements in §B(1)—(3) of this regulation have been met, request the Department to verify to its construction lender that these requirements have been met to the Department's satisfaction, and that an initial certificate of registration for the new units will be issued when closing on the construction loan has taken place. The Department shall issue an initial certificate of registration when it determines that all of the following conditions have been met: The provider has been issued a preliminary certificate of registration; The provider has received all licenses and certifications and letters of exemption required as of that date from MDH, MHCC, and the Department; The provider has submitted documentation which demonstrates to the satisfaction of the Department that: Agreements have been executed for at least 65 percent of the independent living units, and At least 10 percent of the total entrance fee has been paid as a deposit for each unit for which an agreement has been executed; The provider has submitted documentation to the satisfaction of the Department that there is a commitment for permanent long-term financing; The provider has submitted documentation which demonstrates to the satisfaction of the Department that closing on construction financing has taken place; and The form and substance of all advertising and other promotional materials filed are not deceptive, misleading, or likely to mislead. If requested, a verification letter may be issued to the construction lender by the Department when it is determined that the conditions stated in §A(1)—(4), and (6) of this regulation have been met and that an initial certificate of registration will be issued for the new units when closing on the construction loan has taken place. If the conditions in §A of this regulation are not met, the Department shall issue a denial of an initial certificate of registration, in writing, which includes the reasons for the denial. The provider may resubmit an amended application within the time limits set forth in §D of this regulation. If an initial certificate of registration is not issued within 24 months of the issuance of the preliminary certificate of registration, or a longer time allowed by the Department for good cause shown, as defined in §E of this regulation, the Department shall require the provider to refund all deposits and to cease in its attempts to offer continuing care under that application. A further intent to provide continuing care shall require a new application, including a feasibility study. The Department may not deny a request for an extension of time if the provider demonstrates reasonable progress toward acquiring an initial certificate of registration. After the issuance of an initial certificate of registration for any new units, the provider may submit to the Department a request for permission to use deposits. The request shall include verification that: Construction of the proposed project has been completed as evidenced by a certificate of substantial completion; and The provider has been issued: A certificate of occupancy, or the equivalent, by the appropriate local jurisdiction, and The appropriate licenses or certificates required by MDH, MHCC, and the Department. The Department shall issue a written approval to the provider permitting withdrawal of deposits from escrow for use by the provider when the Department determines that the provider has met the following requirements: Construction of the proposed project has been completed as evidenced by a certificate of substantial completion; A certificate of occupancy, or its equivalent, has been issued by the appropriate local jurisdiction; An initial certificate of registration has been issued for any new units; and Appropriate licenses or certificates required by MDH, MHCC, and the Department have been issued. The provider shall file an application for a renewal certificate of registration within 120 days of the end of the provider's fiscal year on a form provided by the Department. A renewal certificate of registration shall be issued for 1 year, which is in effect from 6 months after the end of the provider's most recent fiscal year to 6 months after the close of the provider's current fiscal year. The application for a renewal certificate of registration shall include the following information and attachments: Any changes or additions to the information submitted on the most recent application; An original certified financial statement for the preceding fiscal year prepared in accordance with generally accepted accounting principles, which include the principles expressed in the American Institute of Certified Public Accounts' “Audit and Accounting Guide for Health Care Organizations”; All exhibits or attachments to the certified financial statements, including: A balance sheet, An income statement, A statement of cash flows, The related notes to the financial statements, and The opinion of an independent certified public accountant; An operating budget for the current fiscal year prepared in accordance with generally accepted accounting principles; A projection of the number of subscribers who will require nursing home care and an estimate of the life expectancy of future subscribers; A projected operating budget for the next succeeding fiscal year prepared in accordance with generally accepted accounting principals; An actuarial study which meets the requirements of §E of this regulation; A report specifying: The total current number of units, Whether each unit is occupied or unoccupied, and Changes in unit configurations proposed for the succeeding year; A copy of each current license and certificate required to be issued by MDH or the Department; A copy of the provider's most recent certificate of need or exemption letter from MHCC; The form and substance of any advertising campaign or proposed advertisement and other promotional materials not previously filed with the Department; A renewal fee of $29 per unit; A cash flow projection for the current fiscal year and the next 2 fiscal years prepared in accordance with generally accepted accounting principles; A statement that provides the dates of the meetings held the previous year to comply with Regulation .19 of this chapter; A copy of the disclosure statement prepared in accordance with Regulation .21 of this chapter; and A statement that indicates compliance with the operating reserve requirement in Regulation .20 of this chapter. Actuarial Study Exceptions. Until January 1, 1999, §E of this regulation does not apply to facilities which offer only domiciliary care or comprehensive care and do not offer independent living units. Section E of this regulation does not apply to a facility: Where the only health care provided to subscribers is either priority admission to an independent nursing facility or paid for on a fee-for-service basis; Where: The provider is in the process of decertifying as a provider; and Fewer than five of the facility's subscribers have continuing care agreements that promise the provider will provide more than 90 days of nursing care on a basis other than fee-for-service; or Where: The comprehensive care facility is Medicaid certified; The continuing care agreements presently offered new subscribers only provide nursing care on a fee-for-service basis, and 5 percent or less of the facility's subscribers have continuing care agreements that promise the provider will provide nursing care on a basis other than fee-for-service. Actuarial Study. Unless exempted by §D of this regulation, every 3 years after occupancy of the facility has begun, a provider shall submit to the Department with its renewal application an actuarial study, prepared or reviewed by a qualified actuary. The actuarial study shall include: An actuarial balance sheet for current subscribers; A cohort pricing analysis for a cohort of new subscribers; and Projected cash and investment balances for a period of 20 years. The actuarial study required by §E(1) of this regulation shall be performed in accordance with generally accepted actuarial principles and the standards of practice adopted by the Actuarial Standards Board of the American Academy of Actuaries. The actuarial study shall include or be accompanied by a statement of the opinion of a qualified actuary as to whether: The data and assumptions used are appropriate; The methods employed are consistent with sound actuarial principles and practices; Provision has been made for all actuarial liabilities and related statement items; and The provider is in satisfactory actuarial balance. The actuarial study shall include supporting detailed documentation, including a projection of future population flows and health care bed needs for 20 years using appropriate inflation factors, mortality, morbidity, withdrawal, and other demographic assumptions. The Department may request the information required in §E(1)—(3) of this regulation more frequently to assist in the determination of possible financial difficulty as provided in Regulation .26 of this chapter. If the materials required in §C of this regulation are not received in the Department within 120 days after the end of the provider's fiscal year, the Department may charge a late fee of $10 per unit in addition to the renewal fee per unit, unless a written request for an extension is submitted to and approved by the Department within the 120-day period. Failure to file the annual renewal application or obtain an extension within 120 days after the end of a fiscal year is a violation of the Act and this chapter. The Department shall approve an application for a renewal certificate of registration when it determines that: The required documents have been filed; Any revised agreements meet the applicable requirements of the Act and this chapter; The provider has not been found to be in financial difficulty; The necessary facilities for providing continuing care are in existence; The provider has received all required licenses and certificates from MDH, MHCC, and the Department; The form and substance of all advertising and other promotional materials filed are not deceptive, misleading, or likely to mislead; If required under Regulation .13 of this chapter, an actuarial study, prepared or reviewed by a qualified actuary, has been submitted which meets the requirements of Regulation .13E of this chapter; The disclosure statement submitted complies with Regulation .21 of this chapter; The operating reserves comply with the requirements of Regulation .20 of this chapter; and All renewal fees and any late fees have been paid. Upon review of a provider's application for a renewal certificate of registration, the Department may make a finding of possible financial difficulty. The Department may refer the application of a provider found to be in possible financial difficulty to the Financial Review Committee. Applications that are referred to the Committee are subject to Regulations .25 and .26 of this chapter. If the conditions in §A of this regulation and, if applicable, Regulation .26 of this chapter are not met, the Department may issue in writing a denial of an application for a renewal certificate of registration. The Department shall include the reasons for denying an application in the written denial. If the actuary responsible for an actuarial study required by Regulation .13E of this chapter does not opine that the provider is in satisfactory actuarial balance, the provider shall submit to the Department with its renewal application a detailed plan that specifies how and when the provider plans to attain satisfactory actuarial balance. Statement of Intent. A provider that intends to undertake a renovation of its facility shall file a statement of intent with the Department at least 30 days before submitting a renovation approval request. If a renovation approval request is not filed by the provider within 60 days after the statement of intent is filed, a new statement of intent shall be filed with the Department at least 30 days before submission of a financial plan described in §B of this regulation. The statement of intent shall describe at a minimum the nature of the renovation. Renovation Approval Request. A request for renovation approval shall: Be prepared in a form satisfactory to the Department; and Include at least the following information: A statement of the purpose and need for the renovation; A financial plan, prepared by an authority recognized by the Department, that: Meets the requirements of §C of this regulation, and Demonstrates to the satisfaction of the Department that the renovation will not have an unreasonably adverse effect on the financial ability of the provider to furnish continuing care in accordance with the provider's agreements and the Act at each facility of the provider in the State; and Any further information the Department requires. Financial Plan. A financial plan shall include: The anticipated costs of the proposed renovation, including: Construction costs, Architect and engineering fees, Financing costs, Legal and administrative costs, and Any other related costs; The anticipated sources and uses of funds to finance the proposed renovation; A description of any proposed financing, including anticipated terms and costs of financing; Projected 5-year cash flow statements prepared in accordance with generally accepted accounting principles; and The key assumptions underlying the cash flow statements. Approval Standards. The Department shall approve a renovation approval request when it determines that a reasonable financial plan, prepared by an authority recognized by the Department, has been submitted for the proposed renovation, and the plan demonstrates that: The anticipated sources of funds to finance the proposed renovation are equal to or greater than the anticipated uses of funds for the proposed renovation; and The proposed renovation will not have an unreasonably adverse effect on the financial ability of the provider to furnish continuing care in accordance with the provider's agreements and the Act at each facility of the provider in the State. No Construction Before Approval. A provider may not begin construction of a renovation until the provider receives written approval of the renovation approval request from the Department for the proposed renovation. Statement of Intent. A provider that intends to undertake an expansion of its facility shall file a statement of intent with the Department at least 30 days before submission of an expansion approval request. If the expansion approval request is not filed by the provider within 60 days after the statement of intent is filed, a new statement of intent shall be filed with the Department at least 30 days before submission of the financial plan described in §B(3) of this regulation. A statement of intent shall describe at a minimum: The proposed expansion; The types of agreements proposed, such as extensive, modified, or fee-for-service, and whether entrance fees will be refundable or nonrefundable; The number of proposed additional units, if any, by unit type; and Any further information the Department requires. Expansion Approval Request. An expansion approval request shall be prepared in a form satisfactory to the Department. A provider's expansion approval request shall include the following information: A statement of the purpose and need for the expansion; A demonstration that a market exists for any proposed additional independent living or assisted living units, which meets the requirements of §C of this regulation; and A financial plan that: Is prepared by an authority recognized by the Department, Demonstrates to the satisfaction of the Department that the expansion will not have an unreasonably adverse effect on the financial ability of the provider to furnish continuing care in accordance with the provider's agreements and the Act at each facility of the provider in the State, and Meets the requirements of §D of this regulation. Demonstration of a Market. For expansions of ten or fewer units, a provider's expansion approval request shall include the following to demonstrate that a market exists for the proposed additional units: The existing wait lists and existing occupancy lists for the facility's independent living and assisted living units, by unit type; or Other documentation of market demand for the proposed additional units that is acceptable to the Department. For expansions of more than ten units, a provider's expansion approval request shall include the following to demonstrate that a market exists for the proposed additional units: A description of the primary and secondary market areas as defined by the provider; A table of population information, including the age, sex, number, income distribution, and trends of the total population and of the population of individuals 60 years old and older within the primary and secondary market areas; A calculation of the market penetration rate for the proposed additional units for both the primary and secondary markets; A table of home values in the primary and secondary market areas; and A statement of the minimum age, income, and net worth eligibility standards for a subscriber to the proposed additional living units. Financial Plan. A financial plan required in §B(2)(c) of this regulation shall include: The anticipated costs of the proposed expansion, including all related costs such as: Financing costs, Marketing costs, Construction costs, Architect and engineering fees, Legal and administrative costs, and Any other costs; The anticipated sources and uses of funds to finance the proposed expansion and costs of financing; A description of any proposed financing, including anticipated terms; Projected 5-year balance sheets, income statements, cash flow statements, including key assumptions for each, prepared in accordance with generally accepted accounting principles; A schedule of anticipated periodic fees and entrance fees for any additional independent living and assisted living units; A schedule of monthly move-ins, by unit type, for any additional units; and Any further information the Department requires. Filing Fee. A filing fee of $50 per additional unit shall accompany the expansion approval request. The Department may charge an additional fee, not to exceed the original fee, for resubmission of a financial plan to the Department due to: Significant changes in assumptions in the financial plan; Correction of significant errors in the plan; or An incomplete financial plan submission. The Department shall approve an expansion approval request and, if applicable, issue a revised certificate of registration that includes the additional units when it determines that: A market for the additional independent living and assisted living units appears to exist, based on reliable data; and A reasonable financial plan, prepared by an authority recognized by the Department, has been submitted for the proposed expansion that demonstrates that the: Anticipated sources of funds to finance the proposed expansion are equal to or greater than the anticipated uses of funds for the proposed expansion, and Proposed expansion will not have an unreasonably adverse effect on the financial ability of the provider to furnish continuing care in accordance with the provider's agreements and the Act at each facility of the provider in the State. A provider may not begin construction of the expansion until the provider receives written approval from the Department for the proposed expansion. In General. At least annually, each provider shall conduct a meeting, open to all of the provider's subscribers, at which an authorized officer of the provider shall present a summary of the provider's operations, significant changes from the previous year, and goals and objectives for the next year. The provider shall make provisions to have an authorized officer receive and answer questions from subscribers at the meeting. Provider that has a Governing Body. A provider that has a governing body shall include at least one of the provider's subscribers as a full and regular member of the governing body. If a provider that has a governing body owns or operates more than three facilities in the State, there shall be at least one of the provider's subscribers as a full and regular member of the governing body for every three facilities in the State. Subscriber Member Selection Requirements. Subject to the provisions of §B(3)(b) of this regulation, a governing body member selected to meet the requirements of §B(1) and (2) of this regulation shall be a subscriber at a facility in the State and be selected according to the same general written standards and criteria used to select other members of the governing body. The governing body shall confer with the subscriber association at each facility of the provider before the subscriber officially joins the governing body. Provider Without a Governing Body. A provider that does not have a governing body shall appoint a select committee of its officers or partners to meet at least twice annually with the subscriber association at each of its facilities to address concerns of the subscribers and to ensure that the opinions of subscribers are relayed to all officers or partners of the provider. If a facility does not have an association of subscribers, the committee shall meet with a reasonable number of representatives, not required to exceed 15, elected by the subscribers. Materials to be Made Available. Copies of all materials that a provider submits to the Department that are required to be disclosed under the Public Information Act shall be made readily available by the provider for its subscribers to review at the facility. Definitions. In this regulation, the following terms have the meanings indicated. Terms Defined. “Binding agreement” means an unconditional, irrevocable letter of credit or line of credit agreement entered into by a provider and a financial institution. “Debt service fund” means one or more special loan funds, established under requirements imposed by a financial institution or under applicable financing documents, into which the provider is required to deposit moneys during the provider's fiscal year to pay the current portion of the principal due and the interest accruing in that year on the provider's debt. “Debt service reserve fund” means moneys required by a financial institution or under applicable financing documents to be deposited in a special loan fund, which are to be used to pay principal and interest payments due on the provider's debt if the provider is unable to pay when due the principal and interest from operating income or other sources. “Market value” means readily determinable fair value. Net Operating Expenses. “Net operating expenses” means a provider's total operating expenses at each facility of the provider, less depreciation, amortization, unusual and infrequent expenses, and changes in the obligation to provide future services. “Net operating expenses” does not include interest expense if the provider has funded a debt service fund or other interest reserve under requirements imposed by a financial institution or under applicable financing documents, to the extent and in the amount the fund or reserve includes amounts to cover interest for the year in question. “Other interest reserve” means one or more special loan funds other than debt service funds or debt service reserve funds: Established under requirements imposed by a financial institution or under applicable financing documents; and Into which the provider is required to deposit moneys during the provider's fiscal year to pay interest accruing in that year on the provider's debt. Computation of Operating Reserve Requirement. Except as otherwise provided in this regulation, a provider shall set aside for each facility subject to this chapter operating reserves equal to 15 percent of the facility's net operating expenses for the most recent fiscal year for which a certified financial statement is available. The reserves shall be maintained in reasonably liquid form in the judgment of the provider and in accordance with the provider's investment policies. A provider shall compute operating reserves for each facility as of the end of the facility's most recent fiscal year and shall indicate compliance by setting forth the amount actually set aside in a letter to the Department from the provider's certified public accountant or by disclosing the amount in the provider's most recent certified financial statement. The letter or certified financial statements shall be submitted with the provider's application for a renewal certificate. A provider may apply toward the reserve required by this regulation any reserves, other than debt service reserve funds, maintained under applicable financing document requirements if the reserves are available to the provider to meet the facility's operating expenses. For the purpose of calculating the provider's operating reserves, investments held to the credit of the reserves shall be calculated at their market value as of the end of the provider's most recent fiscal year for which a certified financial statement is available. A provider at a community that has not been the subject of a conversion and in which some residents are not parties to continuing care agreements shall set aside as its operating reserves an amount equal to at least 15 percent of the pro rata proportion of the net operating expenses for the community. The pro rata proportion of the net operating expenses shall equal the number of units in the community certified by the Department divided by the total number of accommodations in the community, with the resulting figure multiplied by the net operating expenses for the community for the most recent fiscal year for which a certified financial statement is available. In calculating the community's operating expenses, the provider may deduct depreciation, amortization, unusual and infrequent expenses, and changes in the obligation to provide future services. Interest expense may also be excluded from the calculation of operating expenses if the provider has funded a debt service fund or other interest reserve under requirements imposed by a financial institution or under applicable financing documents, to the extent and in the amount the fund or reserve includes amounts to cover interest for the year in question. Use of Operating Reserves. A provider shall notify the Department in writing simultaneously with drawing any amount from the funds available to satisfy the operating reserve that is required by §B of this regulation. Within 30 days of any draw, the provider shall submit to the Department a written plan for restoring the funds in the reserve to the level required by §B of this regulation. Phase-In Period of Operating Reserve Requirement. A provider shall have up to 10 full fiscal years after the later of October 1, 1996, or the date of its first initial certificate of registration for the community, to meet the requirement of §B of this regulation. A provider shall meet the requirement of §B of this regulation at a minimum rate of 10 percent per year as of the end of each fiscal year after the later of October 1, 1996, or the date of its first initial certificate of registration for the community, up to a total of 100 percent as of the end of the tenth fiscal year. The Department may allow a provider to modify the minimum rate or authorize an additional amount of time to meet the requirement of §B of this regulation if the modification is necessary to maintain the financial viability of the facility. General. A provider shall furnish, without cost, a disclosure statement for each facility of the provider holding either a preliminary certificate of registration or a certificate of registration to all prospective subscribers and, upon request, annually to all subscribers. A disclosure statement shall be provided to a prospective subscriber before payment of any part of the entrance fee or, if earlier, the execution of a continuing care agreement. The provider shall submit its initial disclosure statement to the Department for review at least 45 days before distributing the statement to any prospective or existing subscribers. Disclosure Statement Revisions. A provider shall revise its disclosure statement annually. A provider shall file a revised disclosure statement with the Department within 120 days after the end of the provider's fiscal year and notify current subscribers that the revised disclosure statement is available for review. The Department shall review the disclosure statement solely to ensure compliance with this regulation. Disclosure Statement Contents. The disclosure statement shall include: The name and address of the facility; A description of the facility; The name and address of any parent or subsidiary person; The organizational structure and management of the provider, including: If the provider is a corporation or limited liability company, the: Name of the corporation or limited liability company, State in which the corporation is incorporated or the limited liability company is formed, and Name of the chief executive officer; If the provider is a partnership, the: Names of the general partners, State governing the formation of the partnership, and Name of the primary individual responsible for managing the partnership; If the provider is an unincorporated association, the: Names of the members, State governing the association's activities, and Name of the primary individual responsible for managing the association; If the provider is a partnership having a corporation or limited liability company as one or more of its general partners, the: Name of each corporation or limited liability company, State in which the corporation is incorporated or the limited liability company is formed, and Name of the chief executive officer; If the provider is a trust, the: Name of each trustee, Names of the owners of beneficial interests in the trust, State whose law governs the trust, and Name of the primary individual responsible for overseeing the trust's activities; and A statement regarding whether the provider is qualified, or intends to qualify, as a tax-exempt organization under the Internal Revenue Code; A statement regarding any affiliation of the provider with a religious, charitable, or other nonprofit organization, and the extent to which that organization is responsible for the financial and contractual obligations of the provider; A description of all fees collected by the provider that are not optional, including: Entrance fees; Fees for health-related services; Parking fees; and Periodic fees; The date and the amount of any changes in the fees that are not optional imposed in any of the past 5 years during which the facility was in operation; A statement describing provisions that have been, or will be, made to comply with the operating reserve requirements in Regulation .20 of this chapter; A general statement regarding the provider's investment policy related to the required reserves, including how often the reserve fund investment is reviewed and by whom; A copy of the most recent certified financial statement available under generally accepted accounting principles; A description of the long-term financing for the facility; If operations have not begun at the facility, a summary of the most recent feasibility study approved by the Department, which shall include: A description of the anticipated sources and uses of funds for the purchase or construction of the facility, including related costs such as: Land costs, Construction costs, Architect and engineering fees, Financing expenses, Marketing costs, Legal and administrative costs, and Furnishing and equipment costs; A description of any short-term or long-term financing used in acquiring or constructing the facility, including the terms and costs of the financing or, if the provider leases the facility, a description of the anticipated or actual terms of the lease; The projected balance sheets, income statements, and cash flow statements of the provider contained in the feasibility study approved by the Department or, if there have been revisions to these financial projections since approval was received, then: Include the most current projections, and Specify that the financial projections have been revised since the feasibility study was approved by the Department; A projected presales schedule for the independent living units; A projected move-in schedule for all of the units of the facility; A statement indicating when the provider expects to have executed agreements for 65 percent of the provider's independent living units; A statement indicating when the provider expects to achieve 95 percent occupancy of the facility's independent living units; and Any further information the Department requires; If operations have begun at the facility and the provider has not reached 85 percent occupancy in the independent living units, a summary of the most recent feasibility study approved by the Department, which shall include: A description of the sources and uses of funds for the purchase or construction of the facility, including related costs such as: Land costs, Construction costs, Architect and engineering fees, Financing expenses, Marketing costs, Legal and administrative costs, and Furnishing and equipment costs; A description of any short-term or long-term financing used in acquiring or constructing the facility, including the terms and costs of financing, or, if the provider leases the facility, a description of the terms of the lease; The projected balance sheets, income statements and cash flow statements of the provider shown in the feasibility study approved by the Department or, if there have been revisions to these financial projections since approval was received, then: Include the most current projections, and Specify that the financial projections have been revised since the feasibility study was approved by the Department; A projected presales schedule for the independent living units; A projected move-in schedule for all of the units of the facility; A semiannual schedule which shows actual move-ins for all of the units of the facility since opening; A statement indicating when the provider expects to achieve 95 percent occupancy of the facility's independent living units; and Any further information the Department requires; A cash flow forecast statement for the current and the next 2 fiscal years; The names and occupations of: The provider's officers, directors, trustees, and managing or general partners; and Any person with a 10 percent or greater equity or beneficial interest in the provider; A description of the financial interest in or occupation with the provider of each person identified under §C(15) of this regulation; If it is anticipated that a business entity will provide to either the facility or the provider goods, premises, or services with a value of $10,000 or more within any fiscal year, and if a person identified in §C(15) of this regulation has a financial interest of 10 percent or more in the business entity, then include: The name and address of the business entities; A description of the goods, premises, or services; and The anticipated yearly costs the facility or provider will incur for the goods, premises, or services; If the facility is, or will be, managed on a day-to-day basis by a person other than an individual directly employed by the provider, then include a description of the proposed manager or management company, including the business experience the manager or company has operating or managing similar facilities; A description of any matter in which an individual identified under §C(15) of this regulation has: Been convicted of, or pleaded nolo contendere to, a felony charge involving fraud, embezzlement, fraudulent conversion, or misappropriation of property; Been held liable, or enjoined by a final judgment, in a civil action involving fraud, embezzlement, fraudulent conversion, or misappropriation as a fiduciary; Been subject to an effective injunctive or restrictive order of a court of record arising out of or relating to business activity or health care, including actions affecting a license to operate any facility or service for aging, impaired, or dependent persons; or Had any state or federal license or permit suspended or revoked within the past 10 years, as a result of an action brought by a governmental agency arising out of or relating to business activity or health care, including actions affecting a license to operate any facility or service for aging, impaired, or dependent persons; A description of the form of governance of the provider, including the composition of the governing body; A statement that the provider shall hold the periodic meetings with residents as required under Regulation .19 of this chapter; If applicable, a description of the conditions under which the provider may: Be issued an initial certificate of registration for any new units; and Use escrowed deposits; If applicable, a statement of the amount of a subscriber's deposit that may be used upon issuance of an initial certificate of registration; A summary of the basic services provided, or proposed to be provided, under the continuing care agreements that clearly states which services are to be included in the basic fee or fees and which services are to be made available at an extra charge; A statement that explains: The extent to which health-related services are to be furnished; and Which health-related services are to be included in the basic fee or fees and which are to be made available at an extra charge; A statement that the provider will promptly amend its disclosure statement if, in the opinion of the provider or the Department, an amendment is necessary to prevent the disclosure statement from containing any material misstatement of fact required by this regulation to be stated in the disclosure statement or omission of a material fact required by this regulation to be stated in the disclosure statement; A description of any activity involving a renovation or an expansion, whether or not subject to Department review under Regulation .15 or .17 of this chapter, during the preceding fiscal year or proposed for the current fiscal year; If it is the provider's policy to impose a surcharge on some, but not all, subscribers because of some condition or circumstance, a statement that describes the types of conditions or circumstances that would warrant a surcharge and that a surcharge is not considered part of the entrance fee when calculating a statutory refund under Regulation .31 of this chapter; A description of the existence and role of the resident association; A description of the internal grievance procedure that provides for: The opportunity for a subscriber to submit a written grievance to the provider; and A response from the provider within 45 days after receipt of the written grievance as to the investigation and resolution of the subscriber's grievance; and Any other material information concerning the facility or the provider that the Department requires or that the provider wishes to include. The disclosure statement shall contain a cover page that states in a prominent location and type face, the following: The date of the disclosure statement; That the issuance of a certificate of registration does not constitute approval, recommendation, or endorsement of the facility by the Department; and That the issuance of a certificate of registration is neither evidence of, nor does it attest to, the accuracy or completeness of the information set out in the disclosure statement. Any amended disclosure statement shall be: Filed with the Department at the same time that it is delivered to a subscriber or prospective subscriber; and Subject to all the requirements of this chapter. Sale or Transfer of Ownership or Control. Except as provided in §B of this regulation, a provider that holds an initial or renewal certificate of registration or a person with an ownership interest in or right to control that provider through governing body appointments or contractual or similar arrangements may not sell or otherwise transfer, directly or indirectly, more than 50 percent of the provider's ownership of a facility or more than 50 percent of the ownership of, or right to control, a person that owns or controls a facility, unless the provider or person obtains the approval of the Department to the sale or other transfer in accordance with §§C—F of this regulation. Any series of sales or other transfers within a 12-month period shall be aggregated for purposes of this regulation. Exception for Business Reorganizations. This regulation does not apply if: A transfer of ownership of a facility, or a transfer of ownership or control of a person owning or controlling a facility, is part of a business reorganization; and The same party or parties holding a majority of ownership of, or right to control, the provider before the business reorganization will retain, directly or indirectly, a majority of the ownership of, or right to control, the provider after the business reorganization. If a sale or transfer of ownership satisfies the exception of §B(1) of this regulation, the provider shall give written notice to the Department and to the facility's subscribers 30 days before the business reorganization. The written notice to the Department required by §B(2) of this regulation shall include: A statement describing the reorganization in ownership including the new organizational structure; A copy of each corporate charter, articles of incorporation, bylaws, partnership agreements, articles of association, membership agreement, or trust agreement that will govern the legal organization of the provider after the sale or other transfer; A copy of the notice given to, or to be given to, the facility's subscribers; and Any further information the Department requires regarding the structure of the legal entities involved in the reorganization. Request for Approval of a Sale or Transfer of Ownership or Control. A provider subject to §A of this regulation shall: At least 90 days before the proposed effective date of the sale or other transfer, file with the Department a statement of intent to transfer ownership or control; and At least 65 days before the proposed effective date of the sale or other transfer, give written notice of the proposed sale or other transfer to the subscribers of the affected facility and to the Department. Along with the written notice to the Department required by §C(1)(b) of this regulation, the provider shall submit a payment to the Department of $20,000. The written notice required by §C(1)(b) of this regulation shall specify the following information, which also shall be provided to any subscriber of the affected facility upon request: The place and time for the meeting specified in §C(4) of this regulation; The address of the provider and the Department to which any comments may be sent; The name and address of the affected facility and the name and address of the new provider; The organizational structure and management of the provider and the facility after the proposed sale or other transfer is completed, including: If the provider is to be a corporation or limited liability company, then the name of the corporation or limited liability company, the state in which the corporation is incorporated or the limited liability company is formed, and the name of the chief executive officer of the provider, If the provider is to be a partnership, then the names of the general partners, the state governing the formation of the partnership, and the name of the primary individual responsible for managing the partnership, If the provider is to be an unincorporated association, then the names of the members, the state governing the unincorporated association's activities, and the name of the primary individual responsible for managing the association, If the provider is to be a trust, then the name of each trustee, the names of the owners of the beneficial interests in the trust, the state whose law governs the trust, and the name of the primary individual responsible for overseeing the trust's activities, If the provider is to be a partnership having a corporation or limited liability company as one or more of its general partners, then the name of each corporation or limited liability company, the state in which the corporation is incorporated or the limited liability company is formed, and the name of the provider's chief executive officer, and The names and occupations of each person who will be an officer, director, trustee, general partner, principal, or person with a 10 percent or greater equity or beneficial interest in the provider after the sale or other transfer; A copy of each corporate charter, articles of incorporation, bylaws, partnership agreement, articles of association, membership agreement, or trust agreement as it will pertain to the legal organization of the provider after the sale or other transfer; A statement as to: Any affiliation with a religious, charitable, or other nonprofit organization that will exist after the proposed sale or other transfer, and The extent, if any, to which the affiliate organization will be responsible for the financial and contractual obligations of the provider; The name and address of each person that is likely to provide goods, premises, or services to the facility or provider after the sale or other transfer, which goods, premises, or services will have a value of $10,000 or more within any fiscal year; If a person identified in §C(2)(d)(vi) of this regulation has a 10 percent or greater financial interest in a person identified in §C(2)(g) of this regulation, then describe the goods, premises, or services to be provided to the facility or provider; A description of any proposed manager or management company that will manage the day-to-day operations of the facility after the sale or other transfer, including the business experience the manager or company has in operating or managing similar facilities; A description of each matter in which a person identified in §C(2)(d)(vi) of this regulation has: Been convicted of, or pleaded nolo contendere to, a felony charge involving fraud, embezzlement, fraudulent conversion, or misappropriation of property, Been held liable, or enjoined by a final judgment, in a civil action involving fraud, embezzlement, fraudulent conversion, or misappropriation as a fiduciary, Been subject to an effective injunctive or restrictive order of a court of record arising out of or relating to business activity or health care, including, actions affecting a license to operate a facility or service for aging, impaired, or dependent persons, or Had any state or federal license or permit suspended or revoked within the past 10 years, as a result of an action brought by a governmental agency arising out of or relating to business activity or health care, including actions affecting a license to operate a facility or service for aging, impaired, or dependent persons; A financial plan, prepared by an authority recognized by the Department, in a form reasonably acceptable to the Department that: Demonstrates the projected effects of the sale or other transfer on the financial operations of the provider and facility, Includes any obligations of the provider to make payments in connection with the sale or other transfer from the financial resources of the provider, Includes projected 10-year balance sheets, income statements, and cash flow statements each prepared in accordance with generally accepted accounting principles, and Includes the key assumptions underlying the projected 10-year balance sheets, income statements, and cash flow statements; A statement from an authority recognized by the Department that is based on the financial plan and that concludes that the proposed change in ownership is not likely to have an unreasonably adverse effect on the provider's ability to perform its obligations under its agreements; and Any further information the Department requires. For the first 15 days after the provider gives the notice specified in §C(1)(b) of this regulation, subscribers may submit to the provider and to the Department written questions and comments on the proposed sale or other transfer. At least 18 days, but not later than the 25th day, after the notice specified in §C(1)(b) of this regulation is given, representatives of the provider shall hold a meeting with representatives of the subscribers of the affected facility to discuss the proposed sale or other transfer. Representatives of the subscribers may not exceed 15 in number. If a community has a resident association, the 15 representatives shall be chosen by the association. If the community does not have a resident association, the representatives shall be elected by the subscribers. The names and addresses of the subscriber representatives shall be given by those representatives to the provider and to the Department. Representatives of the Department may attend the meeting. For 10 days after the meeting specified in §C(4) of this regulation, subscribers may submit to the provider and to the Department additional written comments on the proposed sale or other transfer. Approval of Sale or Transfer of Ownership or Control. By the 50th day after the date of the notice required by §C(1)(b) of this regulation, the Department shall issue an approval of the sale or other transfer, unless it determines that the sale or transfer is likely to have an unreasonably adverse impact on the financial stability of the provider or is likely to have an unreasonably adverse effect on a provider's capacity to perform its obligations under the continuing care agreements to which it is a party. The Department may extend the date for approval past the 50th day after the date of the notice required by §C(1)(b) of this regulation for good cause. The Department shall notify the provider and subscriber representatives in writing of its determination and rationale. Appeal of Department Decision. The decision by the Department with respect to the proposed sale or other transfer is subject to appeal only by the provider in accordance with Regulation .36 of this chapter, and no other person shall be deemed to be a party in interest to the proceedings. If an appeal is taken by the provider, the Department shall give prompt notice of the appeal to the subscriber representatives. The Department shall give the subscriber representatives prompt notice of any decision rendered in the appeal. Effective Date of Sale or Transfer of Ownership or Control. A sale or other transfer of ownership or control may not be completed until after the 15th day following the later of: The date the Department issues an approval specified in §D of this regulation; or If an appeal is taken under §E of this regulation, the day a hearing officer or administrative law judge renders a final decision permitting the sale or other transfer. Definitions. In this regulation, the following terms have the meanings indicated. Terms Defined. “Days cash on hand ratio” means the ratio created by the following calculation: [Unrestricted current cash and investments + Unrestricted noncurrent cash and investments] divided by [(Total operating expenses—Depreciation and amortization) divided by 365]. “Debt service coverage ratio” means the ratio created by the following calculation: [Total excess of revenues over expenses + Interest, depreciation and amortization expenses—Amortization of deferred revenue + Net proceeds from the collection of entrance fees] divided by [Maximum annual debt service or annual lease payments]. “Future service obligation” means a financial obligation of a provider that equals any positive number resulting from the calculation to determine the amount by which the present value of the net costs of future services and the use of facilities to be provided to the current subscribers exceeds the balance of deferred revenue from entrance fees, which calculation is required to be performed annually by generally accepted accounting principles. “Liquid resources” means an asset that is easily converted to cash. “Maximum annual debt service” means the greatest amount required to pay the debt service requirements of any long-term indebtedness for any fiscal year, excluding any year in which the amount due is defined in the applicable financing documents as a balloon payment. “Operating ratio” means the ratio created by the following calculation: [Total operating expenses—Depreciation and amortization expenses] divided by [Total revenues—Amortization of deferred revenue]. “Ordinary course of business” means transactions that occur on a routine basis without the involvement of the board of directors, or other governing body, such as paying employees and vendors, collecting fees, and selling and purchasing investments. “Transfer” means a sale, disposition, donation, lease, or other transaction that diminishes the ownership rights that the provider has in any assets. Transactions Not Included. The following transactions are not considered sales, transfers, or other dispositions of assets for purposes of §§C and D of this regulation: Those undertaken under contractual obligations in effect on October 1, 1996; Those made in the ordinary course of business of operating the facility; Refunds of amounts under contracts entered into in the ordinary course of business; Transfers of cash, securities, or other investment properties in connection with ordinary investment transactions; Grants of mortgages, deeds of trust, or security interests to unrelated third parties; Those involving easements, rights-of-way, road widening, and similar conveyances for the benefit of public bodies or utilities; and Those made for an expansion or renovation. Transfers of 10 Percent or Less of Assets. A provider that holds an initial or renewal certificate of registration may not transfer assets that are equal to or less than 10 percent of the provider's total assets, based on the certified financial statements for the most recent fiscal year for which a certified financial statement is available at the time of the transfer, if the transfer is likely to have an unreasonably adverse: Impact on the financial stability of the provider; or Effect on the provider's capacity to perform its obligations under continuing care agreements to which it is a party. Unlike a transfer of assets greater than 10 percent of total assets, a transfer of assets equal to or less than 10 percent of total assets does not have to be approved in advance by the Department unless one or more of the following circumstances exists: The transfer would result in insufficient liquid resources to cover the provider's future service obligation after the proposed transfer; or The provider believes that the transfer may have an unreasonably adverse: Impact on its financial stability, or Effect on its capacity to perform its obligations under its agreements. In order to have a transfer subject to §C(2) of this regulation approved in advance by the Department, the provider shall submit to the Department the following: Identification of the assets or assets to be sold, transferred, or otherwise disposed of; Documentation as to why the proposed transfer is needed to maintain the financial viability of the provider; A 10-year financial plan, prepared in accordance with generally accepted accounting principles by an independent consultant, that demonstrates the effects of the proposed transfer and includes projected balance sheets, income statements, statements of cash flows, and the key assumptions of the plan; and Any further information the Department requires. Within 60 days of receipt of the information required by §D(3) of this regulation, the Department shall issue a written determination that either: Approves the transfer; Denies the transfer; or Seeks more information to evaluate the transfer. If the determination of the Department is not to approve the proposed sale, transfer, or other disposition, the Department shall set forth the reasoning supporting its determination in a written communication to the provider. Transfer of More than 10 Percent of Assets. A provider that holds an initial or renewal certificate of registration may not transfer, in any 12-month period, assets in excess of 10 percent of its total assets, based on its certified financial statements for the most recent fiscal year for which a certified financial statement is available at the time of the transfer, unless the provider obtains the approval of the Department for the transfer in accordance with this regulation. A provider subject to §D(1) of this regulation shall, at least 60 days before the proposed transfer, file with the Department a statement of intent to transfer assets and, at least 30 days before the proposed transfer, give written notice to the Department. A statement of intent required to be filed with the Department under §D(2) of this regulation shall include the following information: Identification of the asset or assets to be sold, transferred, or otherwise disposed of; If the provider is subject to §E(1) of this regulation by reason of a series of transfers that have cumulatively exceeded the 10 percent amount, the provider shall identify all of the assets that resulted in exceeding the 10 percent amount; and The reason for the transfer. Along with the written notice to the Department required by §D(2) of this regulation, the provider shall submit a payment to the Department of $10,000. A notice required to be filed with the Department by §D(2) of this regulation shall include the following information: A statement that demonstrates that the proposed transfer is not likely to have an unreasonably adverse: Impact on the financial stability of the provider, or Effect on the provider's capacity to perform its obligations under the agreements to which it is a party; Computations, prepared by an authority recognized by the Department, of the following financial ratios for the 3 fiscal years before and after the proposed transfer: Operating ratio, Days cash on hand ratio, and Debt service coverage ratio; If the provider is required by generally accepted accounting principles to perform a future service obligation calculation, a statement from an independent consultant that explains why: The provider will have sufficient liquid resources to cover the provider's future service obligation, if one exists, after the proposed transfer, or The proposed transfer will have a positive impact on the provider's ability to perform its obligations in accordance with the terms of its continuing care agreements; and Any other information the Department requires. If the provider cannot meet the financial standards set forth in §E(2) of this regulation, the notice required by §D(2) of this regulation shall include the following additional information: A 10-year financial plan, prepared in accordance with generally accepted accounting principles by an independent consultant, that demonstrates the effects of the proposed transfer and includes: Projected balance sheets, Income statements, Statements of cash flows, and The key assumptions of the plan; A statement from the independent consultant that after taking into account the provider's historic performance and future assumptions, which future assumptions the independent consultant concludes are not unreasonable, the provider will have the financial ability after the transfer to perform its obligations under the provider's agreements; and Any further information that the Department requires. Approval of Transfer of More than 10 Percent of Assets. The Department shall approve the sale, transfer, or other disposition of assets in excess of 10 percent unless it determines that the sale, transfer, or other disposition is likely to have an unreasonably adverse: Impact on the financial stability of the provider; or Effect on the provider's capacity to perform its obligations under the continuing care agreements to which it is a party. The Department shall approve a proposed transfer of assets in excess of 10 percent if the information required by §D(4) of this regulation adequately demonstrates that the provider: Will be able to achieve at least one of the following financial ratios by the end of the third fiscal year after the transfer: An operating ratio less than or equal to 0.95, A days cash on hand ratio of greater than 90 days, or A debt service coverage ratio greater than or equal to 1.25; and Meets one of the following standards if the provider is required by generally accepted accounting principles to perform a future service obligation calculation: Will have sufficient liquid resources to cover the provider's future service obligation after the proposed transfer, or The proposed transfer will have a positive impact on the provider's ability to perform its obligations in accordance with the terms of its agreements. The Department shall communicate its determination in writing to the provider by the 25th day after the date the Department receives the written notice required by §D(2) of this regulation, unless extended by the Department for good cause. If the determination of the Department is not to approve the proposed sale, transfer, or other disposition, the Department shall set forth the reasons supporting its determination in the written communication to the provider. Appeal of an Department Decision. The determination by the Department with respect to a proposed transfer of assets is subject to appeal only by the provider in accordance with Regulation .36 of this chapter. No other person may be deemed to be a party in interest to the proceedings. Effective Date of a Transfer of Assets. A transfer of assets subject to review by the Department under this regulation may not be completed until after the fifth day following the later of: The day on which the Department issues a determination approving the transfer; or If an appeal is taken under §F of this regulation, the day a hearing officer or administrative law judge renders a final decision permitting the transfer of assets. The Financial Review Committee shall review providers' financial matters referred to it by the Department. The Secretary shall appoint seven members to the Committee from qualified applicants. The seven members shall consist of: Two persons knowledgeable in the field of continuing care; Two certified public accountants; One member of the financial community; and Two consumer members, preferably subscribers of continuing care facilities. The term of a member is 3 years. The terms of members are staggered as required by the terms provided for members of the Committee on July 1, 1985. A member may serve consecutive terms. The Committee shall elect its chairperson. Committee members do not receive compensation, but are entitled to reimbursement for expenses incurred in the performance of their official duties as provided for in the State budget. A Committee member, acting in good faith and within the scope of the duties of a Committee member, is immune from civil liability as a result of those acts. A Committee member may not participate in a review of a continuing care provider's financial condition if that member has an interest in the provider as defined by the Maryland Public Ethics Law, State Government Article, Title 15, Annotated Code of Maryland. The deliberations of the Committee and communications between the Department and the Committee, including but not limited to recommendations of the Committee, are confidential. The Department may refer to the Committee for its consideration: A provider's application for a renewal certificate after review by the Department; or A finding of possible financial difficulty, at any time. Upon receipt of a referral from the Department, the Committee shall: Request from the Department any additional material which the Committee may require; Review the material to determine: Whether or not it recommends finding the provider in financial difficulty; and Whether or not it recommends identifying the financial difficulty as including a significant risk of financial failure in accordance with Human Services Article, §10-469, Annotated Code of Maryland; Notify the Department in writing of its recommendations and the reason or reasons for its recommendations, within 45 days of receipt of the referral; and Provide consultation to the Department regarding corrective financial plans for providers in financial difficulty when requested by the Department. The Committee may request one 30-day extension under §B(3) of this regulation. The Secretary may grant or deny the extension. Upon notification of the recommendations of the Committee, the Department shall consider the recommendations of the Committee and, within 25 days of receipt of the Committee's recommendations, make a final determination of whether financial difficulty exists, including whether the Department finds a significant risk of financial failure in accordance with Human Services Article, §10-469, Annotated Code of Maryland. Upon a final determination by the Department that a provider is in financial difficulty, the Department shall notify the provider, by certified mail, return receipt requested, of the determination, including whether the Department has determined that there is a significant risk of financial failure. The Department may: Consult with the Financial Review Committee to review the findings and possible corrective financial plans; and Assist the provider to develop an adequate corrective financial plan. A provider notified of a determination of financial difficulty shall: Advise its subscribers of the Department's determination in a meeting to be held by the provider with representatives of the subscribers within 10 days of the provider's receipt of notice from the Department; Notify the Department in advance of the date, time, and location of the meeting; Cooperate with the Department to develop a corrective financial plan; Prepare a 5-year financial plan to correct the causes of the financial difficulty; Submit the corrective plan to the Department for approval within 60 days of receipt of notification from the Department; Make available to its subscribers copies of its approved 5-year plan; Amend the financial plan as the Department may advise to enable a finding of no financial difficulty; Implement the corrective financial plan; Submit to the Department within 60 days of the close of each fiscal year an annual progress report on the implementation of its approved financial plan; and At the direction of the Department, revise and update its corrective financial plan if the Department finds that revisions are necessary based on review of the annual progress report or other investigation. The provider may request from the Secretary a 30-day extension of the 60-day time period specified in §C(5) of this regulation. The Secretary may grant the extension. After a provider has been found to be in financial difficulty, the Department may withhold a renewal certificate of registration or withdraw a current certificate of registration if the Department determines that the provider: Did not prepare a corrective financial plan within 60 days of notification (or 90 days, if the Secretary granted an extension); Is unwilling or unable to prepare a corrective financial plan; Prepared a financial plan which is found by the Department to be inadequate to correct the current or impending financial difficulty; or Failed to implement the approved corrective plan, which is demonstrated by the annual progress report or an interim investigation by the Department. A deposit agreement used for a deposit on a unit for which the provider has not received written approval to withdraw deposits under Regulation .12 of this chapter shall: State that all deposits and entrance fees shall be held in escrow until: The issuance of an initial certificate of registration for the unit, Construction is completed, A certificate of occupancy, or its equivalent, has been issued by the local jurisdiction, and The provider has been issued appropriate licenses or certificates by MDH, MHCC, and the Department; Describe the disposition of any interest earned on deposits and entrance fees; State the amount of any processing fee and whether it will be refunded if the deposit agreement is canceled; and State that the deposit will be refunded within not more than 60 days of the cancellation, if the deposit agreement is canceled before the continuing care agreement is executed. A deposit agreement that is used for a deposit on a unit for which the provider has received written approval to withdraw deposits under Regulation .12 of this chapter shall: State that the provider may use all deposits and entrance fees at any time; or Describe any applicable limitations on the use of deposits and entrance fees. A processing fee may only be assessed against a subscriber one time and may not exceed $300 per individual. If a deposit agreement does not precede a continuing care agreement, the provider shall ensure that the continuing care agreement referred to in Regulation .28 of this chapter meets the requirements of §A of this regulation. Each continuing care agreement shall, in a form acceptable to the Department: List the total consideration paid, or to be paid, by the subscriber for continuing care, including a schedule or inventory that sets forth in one place the value of all entrance fees, subscription fees, property transferred, surcharges, periodic fees, donations, and other fees; Describe in detail all items of service to be provided to the subscriber, such as food, shelter, medical or nursing care, and other health-related services; State whether the items described for §A(2) of this regulation are to be provided for a designated time period or for life; If a subscriber is offered a priority for nursing home admission, state: The name of the nursing home or homes with which the provider has a formal priority arrangement; What provisions for care will be made if a nursing home bed is not available at a facility identified in §A(4)(a) of this regulation at the time the bed is needed; What the payment provisions will be for care at a facility identified in §A(4)(a) of this regulation; and That the provider shall promptly notify the subscriber and the Department of any change in the formal priority arrangement between the provider and the nursing home; Designate the categories of subscribers at the facility according to the types of entrance fee plans offered; State that a subscriber may not be relocated from the subscriber's unit except to protect the health or safety of the subscriber or for the general and economic welfare of other subscribers of the facility; While recognizing the constraints of §A(6) of this regulation, describe the procedures the parties to the agreement are to follow in order to temporarily transfer a subscriber: From the unit in which the subscriber resides to another unit within the facility; or To an accommodation outside of the facility; Describe the procedures the parties to the agreement are to follow in order to return a subscriber to the unit in which the subscriber resided before a temporary change; While recognizing the constraints of §A(6) of this regulation, describe the procedures the parties to the agreement are to follow in order to permanently transfer a subscriber: From the unit in which the subscriber resides to another unit within the facility; or To an accommodation outside of the facility; If the agreement is an extensive contract or modified contract, as defined in Human Services Article, §10-447, Annotated Code of Maryland, include provisions in accordance with the applicable requirements of Human Services Article, §10-447, Annotated Code of Maryland; Describe how the procedures for changes, transfers, and returns, whether temporary or permanent, will operate if a unit is occupied by more than one subscriber; State whether there will be a partial refund of an entrance fee, an additional fee, or any increase or decrease in a periodic fee in the event of an increase or decrease in the number of people occupying a unit; Describe the policies of the facility regarding subscribers unable to meet the periodic charges; State in clear and understandable language, and in boldface type of the largest font used in the body of the agreement, the terms governing the refund of any portion of the entrance fee in the event of: Discharge by the provider; or Termination by the subscriber; Include provisions governing contractual entrance fee refunds in accordance with the applicable requirements of Human Services Article, §10-449, Annotated Code of Maryland; State the terms under which an agreement is canceled by the death of a subscriber; State in clear and understandable language, and in boldface type of the largest font used in the body of the agreement, whether or not periodic fees, if charged, will be subject to periodic increases; If periodic fees are subject to increase, state in clear and understandable language, and in all capital, underlined, and bold letters of the largest type used in the body of the agreement, the number of days of notice that will be given by the provider before an increase becomes effective; State that the charges for prepaid care may not be increased, if the agreement provides that care is paid for in advance, in one lump sum; State whether funeral and burial services are furnished by the provider; Identify the specific living unit initially assigned to the subscriber; State whether the subscriber may assign the use of a unit to another and, if so, under what conditions; If any additional costs or charges will be incurred by the subscriber for any modifications to the unit requested by the subscriber, provide a separate, written addendum to the agreement that: Describes the costs or charges; Is signed by the subscriber; States whether the additional costs or charges will be refunded in the event of cancellation or termination; and States whether there will be charges or costs assessed against the subscriber or the subscriber's estate for restoration when the subscriber permanently releases the unit; Describe any religious or charitable affiliations of the provider; Describe the extent to which an affiliate organization will be responsible for the financial and contractual obligations of the provider; State the subscriber's and provider's respective rights and obligations as to any real and personal property of the subscriber transferred to or placed in the custody of the provider; State the rights and obligations a subscriber has regarding the use of the facility, including common areas; State the rights and obligations a provider has regarding its use of the facility, including what, if any, rights the provider has to enter a subscriber's unit; State that subscribers have the right to: Organize and operate a subscriber's association at the facility; and Meet privately at the facility to conduct business; State that there is an internal grievance procedure to investigate the grievances of subscribers; State what fee adjustments, if any, will be made by the provider in the event of a subscriber's voluntary absence from the facility for an extended period of time; Specify the circumstances, if any, under which a subscriber will be required to apply for Medicaid, Medicare, public assistance, or any public benefit program; State whether the facility is or plans to be a participant in Medicare or Medicaid; In a separate paragraph, signed by each subscriber, state: “I have received a copy of the provider's latest certified financial statement at least 2 weeks before signing this agreement, and I have reviewed the certified financial statement provided.”; State that the provider will make available to each subscriber, upon request, any certified financial statement or disclosure statement submitted to the Department; If an agreement is executed before the provider has received an initial certificate for the unit identified in the agreement, state: The conditions that the provider must meet to be issued an initial certificate of registration by the Department; and That all deposits and entrance fees shall be held in an escrow account in Maryland in a financial institution until: An initial certificate of registration is issued, A certificate of occupancy is received, Construction is complete, and The provider has been issued appropriate licenses or certificates by MDH, MHCC, and the Department; State that fees collected by a provider under the terms of a continuing care agreement may not be used for purposes other than those set forth in the agreement; Allow a subscriber to designate a beneficiary for receipt of any refundable portion of the entrance fee, if: The designation is in writing; The designation is witnessed by two or more competent witnesses; The designation is noncontingent; and The designation is specified in percentages and accounts for 100 percent of the refund due; State in boldface type of the largest font used in the body of the contract: “A preliminary certificate of registration or certificate of registration is not an endorsement or guarantee of this facility by the State of Maryland. The Maryland Department of Aging urges you to consult with an attorney and a suitable financial advisor before signing any documents.”; State the legal remedies available to a subscriber in the event of injury caused by a provider's violation of the Act; In a separate paragraph, signed by each subscriber, state: “I have received a copy of the provider's latest disclosure statement, and I have reviewed the disclosure statement provided.”; and State that if there are differences between the requirements for continuing care certification and the licensure requirements for assisted living and comprehensive care facilities, the applicable requirements most favorable to the subscriber will prevail while the subscriber is residing in an assisted living or comprehensive care unit. Each continuing care agreement may contain any other provisions which are: Agreed upon by the provider and the subscriber to effectuate the purpose of the contract; and Not in conflict with the Act or this chapter, as determined by the Department. A preliminary certificate of registration may not be issued by the Department if the agreement submitted with the application does not contain all of the provisions of §A of this regulation. The Department shall return to the provider for revision any agreement which it finds in violation of the applicable requirements of the Act or this chapter. The provider shall submit the agreement to an attorney for legal sufficiency as to content and form before resubmission to the Department. The provider shall request approval from the Department for any modification, addition, or deletion to the terms of a continuing care agreement, before the agreement is offered to or used with subscribers. Except as provided in §A(38) of this regulation, agreements are governed by the version of this regulation that was in effect at the time the agreement was executed by the parties. If changes to the form of any continuing care agreement currently in use are proposed for implementation, the provider or its attorney shall submit a separate cover letter to the Department with the following: Two clean copies of the entire proposed continuing care agreement or such portion of the proposed continuing care agreement as is acceptable to the Department under the circumstances; Two redlined copies that highlight all proposed additions, deletions, and other changes, by underlining, italic type, blacklining, or such other method or symbols that indicate clearly any changes, to: If applicable, the last version of the document in question that was approved by the Department; If requested by the Department, the provider's prior draft of the document in question; and If requested by the Department, the provider's other similar version of the document in question; and If the continuing care agreement is being substantially revised, a completed copy of a contract worksheet form issued by the Department. Withdrawal of Application. A person seeking admission to a continuing care facility may withdraw an application at any time before execution of the continuing care agreement. A provider shall refund within not more than 60 days of the withdrawal all money paid, less any nonrefundable processing fee that was specified in the deposit agreement, to a prospective subscriber who withdraws an application before signing a continuing care agreement. Rescission of Agreement Before the Occupancy Date. If the subscriber rescinds the agreement before the date of occupancy, and the rescission either occurs within 90 days after entering into the agreement or because of a substantial change in the subscriber's physical, mental, or financial condition, the provider shall, within 30 days of rescission, refund all moneys paid by the subscriber except: Any processing fee previously specified as nonrefundable; and Special additional costs incurred by the provider due to modifications in the structure or furnishings of the unit specifically requested by the subscriber, but only if the: Costs do not exceed the costs of modification or the reasonable costs of restoration actually incurred by the provider, and Modification was described in writing in a separate addendum to the agreement as required by Regulation .28A(23) of this chapter. If the subscriber rescinds the agreement before the date of occupancy, but more than 90 days after entering into the agreement, for any reason other than a substantial change in the subscriber's physical, mental, or financial condition, the provider shall refund the same amount specified in §B(1) of this regulation, except that the provider may require that the subscriber forfeit part of the refund. The forfeiture amount may not exceed 25 percent of any deposit paid by the subscriber. If a subscriber rescinds an agreement before the date of occupancy because of a substantial change in the subscriber's physical, mental, or financial condition, the provider shall refund the same amount specified in §B(1) of this regulation. If a provider rescinds an agreement before occupancy because it determines that the subscriber is not eligible for entrance into the facility, the provider shall refund the same amount specified in §B(1) of this regulation. If a subscriber dies before the date of occupancy, the agreement is automatically canceled, and the provider shall refund to the subscriber's legal representative the same amount specified in §B(1) of this regulation, except that the cancellation is not automatic and is at the option of the surviving subscriber if the agreement is in the name of two subscribers. If the terms of an agreement are in violation of the terms of the Act and a subscriber is injured by the violation, the subscriber may rescind the agreement at any time. The subscriber is entitled to treble damages for extensive injuries arising from a violation. Termination by a Subscriber. If the subscriber elects to terminate the agreement after the date of occupancy, refund of the entrance fee is governed by the terms of the agreement. Dismissal or Discharge by the Provider. An agreement may not permit dismissal or discharge of a subscriber from a facility, including by involuntary transfer to an accommodation outside the facility, before expiration of the agreement for any reason, unless the: Dismissal or discharge is for just cause; and Subscriber is given advance notice of at least 60 days. Just cause can exist only when there is: Nonpayment; Material breach of: The agreement, or Written reasonable rules of the provider that contractually bind the subscriber; or Health status or behavior that constitutes a substantial threat to the health or safety of the subscriber or other subscribers. A notice of dismissal or discharge shall include at least the following: A statement of the intent to dismiss or discharge; A statement of each reason for dismissing or discharging, which shall include at least one of the reasons stated in §B(2) of this regulation; The facts that serve as the basis for the provider's decision to dismiss or discharge; and The effective date of dismissal or discharge, which shall be at least 60 days from the date the subscriber receives the notice. An agreement may recognize that a subscriber may have to be moved in the event of an emergency. A move or transfer of a subscriber to an accommodation outside the facility because of an emergency may not, in and of itself, establish just cause for a dismissal or discharge. Permissible Dismissal or Discharge. In the event of a permissible dismissal or discharge, the provider shall pay to the discharged subscriber a refund equal to the subscriber's total entrance fee divided by the subscriber's years of expected life at admission multiplied by the subscriber's years of expected life at discharge or dismissal. Years of expected life at admission and at dismissal or discharge shall be computed at the time of discharge or dismissal. The computations shall be based upon the appropriate life tables in the most recently published version of the United States Decennial Life Tables published by the U.S. Department of Health and Human Services. A refund paid after a permissible dismissal or discharge shall be paid within 60 days of the later of the: Effective date of the discharge or dismissal; or Subscriber's vacating the unit. In the event of a discharge or dismissal of one subscriber from a unit occupied by two or more subscribers, the subscriber not discharged from the unit has the option to terminate the agreement and receive a refund based on the formula described in §C of this regulation. In the event of a discharge of two subscribers who contracted for a single two-subscriber unit, or in cases where the option in §D of this regulation is selected, the refund shall be calculated based on the assumption that the entrance fee is attributable in equal shares to each subscriber. One half of the entrance fee is multiplied and divided by the appropriate life expectancy of each subscriber, and the results added to determine the total refund. The Department shall: Make the information required to be provided under this chapter available to all interested persons; and Publicize the availability of this information. Information will be made available for review to all interested persons under COMAR 32.01.02. The Department may: Inspect any facility offering continuing care; Examine the records of a provider or person that controls a provider; and Audit or observe any service rendered under a continuing care agreement. A provider shall cooperate with the Department in all reasonable requests to inspect, examine, audit, or observe the provider, the facility, the services, and the records of the provider. If a continuing care facility or a portion of a facility is subject to licensure by MDH, the Department shall coordinate any inspection of the facility or portion of the facility with MDH to avoid duplication. Failure of the provider to permit reasonable requests for inspection, examination, or audit is a violation of this chapter. A provider may not remove from the State records or assets of the provider related to the operation of the facility or the provision of services under continuing care agreements without the written consent of the Department. A provider may request from the Department approval to remove records or assets from the State by submitting the verification that the Department requires to establish that removal of records or assets will: Facilitate the operations of the provider and make the operations more economical; and Not diminish the service or protection given to the provider's subscribers. The Department may not consent to the removal until the Secretary determines that the removal of records and assets meets the conditions of §B of this regulation. The Secretary may deny, suspend, or revoke a preliminary, initial, or renewal certificate of registration for cause. Cause for denial, suspension, or revocation includes, but is not limited to the following: Violations of the provisions of the Act; Violations of regulations in this chapter; Misrepresentations of fact to the Department or to subscribers; Submission of false financial information to the Department; Failure to prepare or implement an adequate corrective financial plan when found to be in financial difficulty; or Agreement terms or provisions that: Violate the Act, Violate regulations in this chapter, or Are not approved by the Department. The denial, suspension, or revocation of a certificate of registration is an action of the Secretary that may be appealed in accordance with Regulation .36 of this chapter. An applicant for, or a holder of, a feasibility study approval, preliminary certificate, initial certificate, or renewal certificate that is aggrieved by a denial of a certificate of registration, by a revocation of a certificate of registration, or by any other action of the Department or Secretary under this chapter, may file a written appeal. An appeal of any action taken by the Department or Secretary under this chapter shall be conducted in accordance with the Maryland Administrative Procedure Act, State Government Article, Title 10, Subtitles 2 and 3, Annotated Code of Maryland, and COMAR 32.01.01. Human Services Article, §10-403, Annotated Code of Maryland Effective date: December 26, 1980 (7:26 Md. R. 2423) Regulations .02B, .04A, .08, .10, and .14 amended effective March 28, 1983 (10:6 Md. R. 559) Regulations .04A, .05A, .06, and .09 amended effective December 31, 1984 (11:26 Md. R. 2280) Regulation .07 repealed and new Regulation .07 adopted effective December 31, 1984 (11:26 Md. R. 2280) Regulations .01—.22 repealed and new Regulations .01—.22 adopted effective June 2, 1986 (13:11 Md. R. 1274) Regulation .01B amended effective December 1, 1989 (16:23 Md. R. 2506); November 25, 1991 (18:23 Md. R. 2491) Regulation .03A amended effective December 1, 1989 (16:23 Md. R. 2506); September 23, 1996 (23:19 Md. R. 1377) Regulation .03B and C amended effective November 25, 1991 (18:23 Md. R. 2491) Regulation .04A amended effective November 25, 1991 (18:23 Md. R. 2491) Regulation .09 amended effective November 25, 1991 (18:23 Md. R. 2491) Regulation .09C amended effective December 1, 1989 (16:23 Md. R. 2506); June 22, 1992 (19:12 Md. R. 1136); September 23, 1996 (23:19 Md. R. 1377) Regulation .09E amended effective December 1, 1989 (16:23 Md. R. 2506) Regulation .09G amended effective June 22, 1992 (19:12 Md. R. 1136) Regulation .10A amended effective November 25, 1991 (18:23 Md. R. 2491) Regulations .01—.22 repealed and new Regulations .01—.36 adopted effective July 27, 1998 (25:15 Md. R. 1192) Chapter recodified from COMAR 14.11.02 to COMAR 32.02.01, October 2000 Regulation .01B amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .02B amended effective October 6, 2008 (35:20 Md. R. 1777) Regulation .02B, E amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .03B amended effective March 1, 2004 (31:4 Md. R. 318) Regulation .04 amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .05A amended effective November 6, 2006 (33:22 Md. R. 1734); March 22, 2010 (37:6 Md. R. 481) Regulation .06L, M amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .07A amended effective March 22, 2010 (37:6 Md. R. 481) Regulation .07A, B amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .09B amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .10A amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .11B amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .12D amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .13 amended effective October 6, 2008 (35:20 Md. R. 1777); March 22, 2010 (37:6 Md. R. 481) Regulation .13C amended effective March 1, 2004 (31:4 Md. R. 318); March 4, 2013 (40:4 Md. R. 348); August 29, 2016 (43:17 Md. R. 959) Regulation .13C, F amended effective March 17, 2025 (52:5 Md. R. 239) Regulation .13D amended effective December 25, 2000 (27:25 Md. R. 2283) Regulation .14 amended effective March 22, 2010 (37:6 Md. R. 481) Regulation .17E amended effective March 1, 2004 (31:4 Md. R. 318); June 20, 2016 (43:12 Md. R. 668) Regulation .19 amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .20 amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .21C amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .22C amended effective March 17, 2025 (52:5 Md. R. 239) Regulation .23D amended effective March 17, 2025 (52:5 Md. R. 239) Regulation .23G amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .24B, H amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .25 amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .26 amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .27A, C amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .28C amended effective March 22, 2010 (37:6 Md. R. 481) Regulation .28A, E amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .28F adopted effective March 22, 2010 (37:6 Md. R. 481) Regulation .29 amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .32B amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .34C amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .35B amended effective November 6, 2006 (33:22 Md. R. 1734) Regulation .36 amended effective March 17, 2025 (52:5 Md. R. 239)