APPROACHES TO MANAGING HOSPITAL
CAPITAL SPENDING UNDER THE NEW
HOSPITAL PAYMENT MODEL
November 1, 2013
Where has CON been?
 Proactive in setting expectations for hospitals:
capacity limitations, program standards, viability
standards, and impact standards – State Health Plan
 Not proactive in using spending targets or systems
level analysis of spending impact or value
 Largely reactive in addressing the pace of capital
spending – isolated capital project review
 The process does not provide a path for formal
consideration and use of prioritization of project need
or urgency as a decision-making tool
2
Where is the new payment model going?
 Budgeted spending limits replacing charge per case
 Bending the demand curve and disincentivizing
increased production as a means for boosting revenue
 Sustainable growth in spending (pegged to growth in
state economy in application to CMS)
 Paying for value (high performance/efficient use of
hospital resources) instead of volume
3
Where should CON go?
 Proactive use of capital spending limits to establish a
sustainable pace of development and redevelopment
of hospital resources
 This will require incorporation of longer range facility
needs assessment and a fair process for prioritizing
facility needs to achieve effectiveness and equity –
historic individual capital project review will not serve
 MHCC may need to proactively work to achieve
systems contraction and rationalization
4
Where should CON go in the short-term?
 Five hospital projects in review today – two are docketed but
stymied by the new payment model- three are in completeness
review – over $1 billion in proposed spending
 The new applicants have been asked to respond directly to the
new payment model – utilization and volume assumptions
supporting their project viability and volume/revenue
assumptions – do they fit the new model?
 Can MHCC use its lawful collaboration with HSCRC in reviewing
these projects and reaching an outcome that supports success
of the new model? Can the process be adjusted short-term to
achieve this result?
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Where should CON go in the mid-term?
 Comprehensive assessment of hospital physical plant needs and
routine capital spending needs statewide – use in developing
capital spending targets consistent with new payment model
 Statutory and regulatory changes to create CON regulation
within capital spending limits
 Phase 1 – identify priorities among planned projects – five year
plan
 Phase 2 – review and approve planned projects endorsed in
Phase 1
 Phase 3 – revisit five year plan and priorities – adjust as
necessary
 Repeat
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Where should CON go in the mid-term?
 Update SHP to reflect CON regulation within spending
limits environment
 less focus on need, impact and cost-effectiveness
(should be addressed in Phase 1 review)
 more focus on performance criteria (HAC, ARRA,
etc.) consistent with new payment model and
viability
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Where should CON go long-term?
 Can scope of hospital CON regulation be reduced in a
spending limits environment?
 Can most individual hospital changes (bed and service
capacity) be left to discretion of hospital management
under the budget cap imposed by HSCRC? Would some
Phase 1-like process be needed to set system priorities
but then hospitals could proceed to succeed or fail with
the money allocated?
 Hospital CON regulation could be limited to establishing
new hospitals, relocating hospitals, introducing selected
services (e.g., cardiac surgery) and maintaining
performance (e.g., the new regulatory model for PCI)
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QUESTIONS & DISCUSSION