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Originally designed to discourage big spending and unnecessary care, the federal government required states to adopt Certificate of Need (CON) programs in 1974. Before the federal mandate was repealed in 1987, all states but Louisiana had enacted some type of CON law. Some states have since repealed their CON laws but most states, and the District of Columbia, still have a form of CON law in effect.
CON law has a history of heavy discord. Supporters of CON argue the regulatory oversight helps control healthcare spending and ensures a healthy market for consumers to access care. They argue by limiting excess capacity CON programs reduce health care price inflation and protect patients from unnecessary price increases. Opponents of CON claim it is franchise protection for existing providers that stifles competition, leaving consumers with less choice and higher costs.
While the efficacy of CON laws is debatable, conversations about repealing or reducing the scope of CON laws have recently gained momentum. The U.S. Department of Health and Human Services, the Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice and the Trump Administration have encouraged states to repeal or scale back CON laws. In 2019, several state legislatures considered legislation to revise CON laws. Seven states passed bills that affected their CON programs: Florida, Georgia, Maryland, Ohio, Vermont, Virginia, and Washington.
Florida
Florida made dramatic changes to its CON law in 2019. Florida legislature passed HB 21, which repealed CON requirements for general hospitals, complex rehabilitation facilities and tertiary hospital services. CON requirements for “Specialty Hospitals[1]” will be repealed on July 1, 2021. Only nursing homes and hospices are subject to CON requirements. The deregulated categories of facilities are now only subject to Florida’s Agency for Health Care Administration’s licensure requirements. The Office of Program Policy Analysis and Government Accountability is required to study and make recommendations to the legislature for licensure standards regarding tertiary hospital services. It remains unclear which CON requirements will be incorporated into licensure standards.
Georgia
After a bill with extensive changes failed to pass the House, legislators passed HB 186 with smaller, but significant changes to CON law. The approved bill allows entities only within a 35-mile radius of a proposed project the ability to oppose a CON application. The bill also increased the capital expenditure threshold from $2.5 million to $10 million and increased the diagnostic equipment threshold from $1 million to $3 million. Expanding CON regulation, freestanding emergency departments and other facilities not located on a hospital’s primary campus are now subject to CON requirements. Other changes include allowing a “destination cancer hospital to convert to a “general cancer hospital” through a CON application. Hospitals can no longer purchase, renew, extend leasing, or maintain medical use rights of properties. The bill also indicates the state plans a closer scrutiny of indigent and charity care commitments in CON applications. The bill directs the Department of Community Health to develop standard reporting requirements to track indigent and charity care.
Maryland
Senate Bill 940 made several changes to the CON law. Previously, ambulatory surgery centers with one operating room were exempt from CON law. Now a facility with one or two operating rooms is exempt. The bill also eliminated the capital threshold for non-hospital facilities proposing to acquire, renovate or expand a facility. A CON will only be required if the applicant offers new services or increases bed capacity substantially. Finally, any uncontested CON application will be deemed approved if the Maryland Health Care Commission does not act within 120 days of the application being docketed.
An emergency bill, House Bill 626, deregulated changes in bed capacity at intermediate care facilities that offer residential or intensive substance-related disorder treatment services and at hospice residential facilities.
Senate Bill 597 raised the capital expenditure threshold for hospitals to make specified capital expenditures. This bill also requires the MHCC to adopt the State Health Plan annually by October 1.
Ohio
Substantive changes in Ohio’s 2020-2021 general operating budget affect the CON program. A moratorium was placed on many CON applications. The Ohio Department of Health (ODH) will not accept applications through July 1, 2021, with the exception of the applications applicable to: comparative review process, contiguous county bed relocations, replacement of existing long-term care facility[2] or renovation of or addition to an existing long-term care facility[3]. The bill also changes Ohio’s comparative review process. Beginning in 2023, ODH is required to annually determine each county’s bed supply and publish the bed deficit or excess by October 1. After 2023, they are instructed to publish the need every four years. For 2020, the comparative review period will begin January 2020 and run through December 31, 2023, using the 2016 bed supply and bed need for each. Five counties are excluded from the 2020 review and are limited to county-specific increases in beds. Another significant change prohibits interested third parties from appealing a CON decision. Only the applicant can appeal a CON denial. An affected person can only submit a written comment in opposition. Finally, a CON application must be deemed complete within 180 days of its filing.
Virginia
Several bills passed in the 2019 legislative session that impacted Virginia’s Certificate of Public Need (COPN) statutes (Va. Code § 32.1-102.1 et seq.). Chapter 136 adds a thirty-day exemption from COPN laws to increase beds at a hospital or hospice due to a public health emergency. The exemption applies only if nursing homes or hospitals are evacuated, and the State Health Commissioner declares a natural or man-made disaster. The threshold for the percentage of nursing beds in continuing care retirement communities seeking certification that can be occupied by individuals receiving Medicaid benefits increased from ten to twenty five percent in Chapter 299. Legislation created a uniform charity care definition and method of calculation and required annual reporting by all COPN holders that provide charity care in Chapter 839.
Washington
The legislature passed HB 1394, which eliminated CON requirements to construct new psychiatric hospitals, conversion of beds to psychiatric uses, or addition of new psychiatric beds in certain hospitals.
Other States
Although not a significant change, Vermont extended their current moratorium on CON applications for home health agencies to 2025. Legislators in six other states introduced bills that died or are pending action in 2020. It will be important to monitor legislative changes in these states, and others as the dialogue of CON repeal continues.
[1] Fla. Stat. § 395.002 defines “specialty hospitals” as any “hospital” (as defined under Fla Stat. § 395.002 (12)) that “regularly makes
available either: The range of medical services offered by general hospitals, but restricted to a defined age or gender group of
the population; A restricted range of services appropriate to the diagnosis, case, and treatment of patients with specific
categories of medical or psychiatric illnesses or disorders; or Intensive residential treatment programs for children and adolescents as defined in [Fla. Stat. § 395.002 (15)].”
[2] The new facility must maintain the same owner and operator and be in a county where the bed need is under the 2016 bed need determination.
[3] Facility must be in a county with a bed need under the 2016 bed need determination.
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