28 Pa. Code § 301.3 – Expenditures covered.

(a) A capital expenditure proposed by or on behalf of a health care facility or health maintenance organization, the obligation for which is incurred by or on behalf of a health care facility or health maintenance organization after March 31, 1973, shall be subject to this chapter; provided, that in the case of a health care facility providing health care services as of December 18, 1970, which on such date was committed to a formal plan of expansion or replacement, this chapter does not apply with respect to such expenditures as may be made or such obligations as may be incurred for capital items included in such plan where preliminary expenditures toward the plan of expansion or replacement including payments for studies, surveys, designs, plans, working drawings, specifications, and site acquisition essential to the acquisition, improvement, expansion or replacement of the health care facility or equipment concerned, of $100,000 or more, had been made during the 3-year period ended December 17, 1970.
(b) For purposes of this chapter, a ‘‘capital expenditure’’ is an expenditure, including a force account expenditure, that is, an expenditure for a construction project undertaken by the facility as its own contractor which under generally accepted accounting principles is not properly chargeable as an expense of operation and maintenance and which exceeds $100,000, changes the bed capacity of the facility with respect to which such expenditure is made, or substantially changes the services of the facility with respect to which such expenditure is made.
(c) For purposes of subsection (b), the cost of studies, surveys, designs, plans, working drawings, specifications and other activities essential to the acquisition, improvement, expansion or replacement of the plant and equipment with respect to which the expenditure is made shall be included in determining whether such expenditure exceeds $100,000.
(d) For purposes of subsection (b), where the estimated cost of a proposed project, including cost escalation factors appropriate to the area in which the project is located, is, within 60 days of the date on which the obligation for the expenditure is incurred, certified by a licensed architect or engineer to be $100,000 or less, the expenditure may be deemed not to exceed $100,000 regardless of the actual cost of such project; provided, that in a case where the actual cost of the project exceeds $100,000, the health care facility or health maintenance organization on whose behalf the expenditure is made shall provide written notification of the cost to the designated planning agency not more than 30 days after the date on which the expenditure is incurred. The notification shall include a copy of the certified estimate.
(e) For purposes of subsection (b), a capital expenditure which changes the bed capacity of a facility means a capital expenditure which results in any increase or decrease in licensed capacity.
(f) For purposes of subsection (b), a capital expenditure which substantially changes the services of a facility means a capital expenditure which results in the addition of a clinically related, that is, diagnostic, curative, or rehabilitative service not previously provided in the facility or in the termination of such a service which had previously been provided in the facility.
(g) A change in a proposed capital expenditure which itself meets the criteria set forth in subsection (b) shall, for purposes of this chapter, be deemed a capital expenditure; provided, that an increase or decrease in the cost of a proposed capital expenditure which increase or decrease is not related to a change in bed capacity or a substantial change in services and does not increase the cost of the project more than 20%, may, at the option of the designated planning agency, be exempt from review under this chapter.
(h) When a person obtains, under lease or comparable arrangement or through donation a facility or part thereof or equipment for a facility the expenditure for which would have been considered a capital expenditure and subject to exclusion from reimbursement under this chapter if the person had acquired it by purchase, the acquisition shall be deemed a capital expenditure by or on behalf of the facility and the designated planning agency shall recommend that the Secretary of HHS:
1. (1) In the case of a lease or comparable arrangement, in computing the person’s rental expense, in determining the Federal payments to be made under Titles V, XVIII and XIX of the act (42 U.S.C.A. § § 701—709, 1395—1395zz and 1396—1396ff) with respect to services furnished in the facility, deduct the amount which in his judgment is a reasonable equivalent of the amount that would have been excluded if the person had acquired the facility or equipment by purchase.
2. (2) In the case of a lease or comparable arrangement, in computing the person’s return on equity capital, deduct an amount deposited under the terms of the lease or comparable arrangement.
3. (3) In the case of a donation which is carried by the person as a capital asset, exclude from reimbursement for services provided under Titles V, XVIII and XIX of the act (42 U.S.C.A. § § 701—709, 1395—1395zz and 1396—1396ff) an amount claimed for depreciation on the facility or equipment, and other costs related to its acquisition.
(i) An obligation for a capital expenditure shall be deemed to have been incurred by or on behalf of a health care facility or health maintenance organization:
1. (1) When an enforceable contract is entered into by the facility or organization or by a person proposing the capital expenditure on behalf of the facility or organization for the construction, acquisition, lease or financing, of a capital asset; to be enforceable a construction contract shall obligate a party to cause the capital asset to be constructed, require the commencement of construction by a date specified in the contract but no later than 6 months after the close of the period for incurring an obligation, and provide for appropriate liquidated damages in the event of default by the facility or organization.
2. (2) Upon the formal internal commitment of funds by a facility or organization for a force account expenditure which constitutes a capital expenditure.
3. (3) In the case of donated property, as described in subsection (h) of this section the date on which the gift is completed in accordance with Commonwealth law.
4. (4) In any event, if construction when applicable has not commenced within 2 years from the date on which the applicant received a recommended approval from the Department, an obligation incurred under this subsection shall expire and shall result in a termination of the obligation and of the recommended Commonwealth approval.
(j) A determination by the designated planning agency that a proposed expenditure is not a capital expenditure within the meaning of section 1122 of the act (42 U.S.C.A. § 1320a-1) and this chapter or that it falls within the exemption described in this section or that it is otherwise not subject to review under section 1122 of the act (42 U.S.C.A. § 1320a-1) shall be binding upon the Secretary of HHS. A determination by the designated planning agency that a proposed expenditure is a capital expenditure subject to review under section 1122 of the act and this chapter may be appealed, by the applicant, to the Secretary of HHS. The appeal may be made at any time, in such form and manner as the Secretary of HHS may prescribe.
(k) During the pendency of the appeal, the running of all time periods specified in § 301.6 (relating to procedures for agency review) shall be suspended, except that nothing in this subsection shall affect the requirement that written notice of the intention to make a capital expenditure subject to this chapter shall be received by the designated planning agency not less than 60 days prior to the date on which the expenditure is incurred.