Except as otherwise exempted by any other provision of law, projects requiring a certificate of need issued by the office are the following:

(a)  Construction of a new health facility, relocation of a health facility or specialty clinic on a site that is not the same site or adjacent thereto, the increase of bed capacity in an existing health facility, the conversion of an entire existing health facility from one license category to another, or the conversion of a health facility’s existing beds from any bed classification set forth in Section 1250.1 to skilled nursing beds, psychiatric beds, or intermediate care beds, and the conversion of skilled nursing beds, psychiatric beds, or intermediate care beds to any other bed classification set forth in Section 1250.1, except for skilled nursing beds or intermediate care beds licensed as of March 1, 1983, as part of a general acute care hospital. The conversion may not exceed during any three-year period 5 percent of the existing beds of the bed classification to which the conversion is made.

A health facility may use beds in one bed classification that, pursuant to the facility’s license, have been designated in another bed classification, if all of these bed classification changes do not at any time exceed 5 percent of the total number of the facility’s beds as set forth by the facility’s license and if this use meets the requirements of Chapter 2 (commencing with Section 1250) of Division 2. In addition, a facility may use an additional 5 percent of its beds in this manner if the director finds that seasonal fluctuations justify it.

For purposes of this subdivision, “adjacent,” means real property within a 400-yard radius of the site where a health facility or specialty clinic currently exists.

(b)  Establishment of a new specialty clinic, as defined in paragraphs (1) and (3) of subdivision (b) of Section 1204, a project by a health facility for expanded outpatient surgical capacity, the conversion of an existing primary care clinic to a specialty clinic, or the conversion of an existing specialty clinic to a different category of specialty-clinic licensure. It does not constitute a project and no certificate of need is required for the establishment of a primary care clinic, as defined in subdivision (a) of Section 1204, the conversion of an existing specialty clinic to a primary care clinic, or the conversion of an existing primary care clinic to a different category of primary-care-clinic licensure. Any capital expenditure involved in the establishment of a primary care clinic also does not constitute a project, except as provided in subdivision (d).

(c)  The establishment of a new special service delineated in subdivision (a), (b), (c), (e), (f), (g), or (h) of Section 1255, or the establishment by a specialty clinic, as defined in paragraphs (1) and (3) of subdivision (b) of Section 1204, of a new special service identified by or pursuant to Section 1203.

(d)  The initial purchase or lease by a clinic subject to licensure under Chapter 1 (commencing with Section 1200) of Division 2, of diagnostic or therapeutic equipment with a value in excess of one million dollars ($1,000,000) in a single fiscal year, or where the cumulative cost exceeds this amount in more than one fiscal year. For purposes of this subdivision, the purchase or lease of one or more articles of functionally related diagnostic or therapeutic equipment, as determined by the office, shall be considered together.

(e)  (1)  Any project requiring a capital expenditure for a specialty clinic, as defined in paragraphs (1) and (3) of subdivision (b) of Section 1204, or for the services, equipment or modernization of a specialty clinic in excess of one million dollars ($1,000,000) in the current fiscal year or cumulation to an expenditure of one million dollars ($1,000,000) in the same fiscal year or subsequent fiscal years for a single project.

(2)  The threshold exemptions from certificate-of-need requirements provided for in this subdivision do not apply to projects for expanded outpatient surgical capacity.

(3)  For the purposes of this subdivision, “capital expenditure” means any of the following:

(A)  An expenditure, including an expenditure for a construction project undertaken by the specialty clinic as its own contractor, that under generally accepted accounting principles is not properly chargeable as an expense of operation and maintenance and that exceeds one million dollars ($1,000,000). The cost of studies, surveys, legal fees, land, offsite improvements, designs, plans, working drawings, specifications, and other activities essential to the acquisition, improvement, expansion, or replacement of the physical plant and equipment for which the expenditure is made shall be included in determining whether the cost exceeds one million dollars ($1,000,000). Where the estimated cost of a proposed project, including cost escalation factors appropriate to the area where the project is located, is, within 60 days of the date that the obligation for the expenditure is incurred, certified by a licensed architect or engineer to be one million dollars ($1,000,000) or less, that expenditure shall be deemed not to exceed one million dollars ($1,000,000) regardless of the actual cost of the project. However, in any case where the actual cost of the project exceeds one million dollars ($1,000,000) the specialty clinic on whose behalf the expenditure is made shall provide written notification of the cost to the office not more than 30 days after the date that the expenditure is incurred. The notification shall include a copy of the certified estimate.

(B)  The acquisition, under lease or comparable arrangement, or through donation, of equipment for a specialty clinic, the expenditure for which would have been considered a capital expenditure if the person had acquired it by purchase. For the purposes of this paragraph, “donation” does not include a bequest.

(C)  Any change in a proposed capital expenditure that meets the criteria set forth in this subdivision.

(4)  “Capital expenditure” includes the total cost of the proposed project as certified by a licensed architect or engineer based on preliminary plans or specifications and concurred in by the state department.

(5)  For the purposes of this subdivision, “project” does not include the purchase of real property for future use or the transfer of ownership, in whole or part, of an existing specialty clinic or the acquisition of all or substantially all of the assets or stock thereof, or the construction, modernization, purchase, lease, or other acquisition of parking lots or parking structures, telephone systems, and nonclinical data-processing systems.

(6)  For the purposes of this subdivision, “modernization” means the alteration, expansion, repair, remodeling, replacement, or renovation of existing buildings, including initial equipment thereof, and the replacement of equipment of existing buildings.

(f)  Except as provided in subdivision (g), only those projects where 25 percent or less of the patients are covered by prepaid health care.

(g)  Projects otherwise subject to review under subdivision (a) that are for the addition of new licensed skilled nursing beds by construction or conversion, regardless of the percentage of patients served who are covered by prepaid health care.

(h)  (1)  Except as provided in paragraph (2), the office shall annually adjust the dollar thresholds set forth in subdivisions (d) and (e) to reflect changes in the cost of living, as determined by the Department of Finance, using 1981 as the base year.

(2)  Notwithstanding the amount of the dollar thresholds specified in paragraph (1), in the event Congress increases or repeals the amount or amounts of the thresholds, the dollar thresholds set forth in subdivisions (d) and (e) shall be the highest amount or amounts permitted by Public Law 93-641, as amended, or one million dollars ($1,000,000), whichever is less, on the date congressional action is effective.

(i)  This section is not applicable to an intermediate care facility/developmentally disabled habilitative or an intermediate care facility/developmentally disabled—nursing.

(Added by Stats. 1995, Ch. 415, Sec. 9. Effective January 1, 1996.)