North Carolina
CON LAW UPDATE
Southeastern Health Planning Symposium
Gary S. Qualls
March 19, 2010
2009 CON CASE
LAW
3
Total Renal Care of North Carolina, LLC v. N.C. Dep’t of
Health and Human Services, ___ N.C. App. ___, 673
S.E.2d 137 (February 17, 2009) (Tab 1 in Handouts)
Facts:
 On April 17, 2006, Bio-Medical Applications of North Carolina, Inc.
(“BMA”), a Fresenius affiliate, applied for a CON to establish a dialysis
facility in St. Pauls, NC, by transferring 10 dialysis stations.
 BMA’s application was approved.
 Total Renal Care of North Carolina, LLC (“TRC”), a DaVita affiliate,
filed a petition with OAH challenging BMA’s approval.
4
Total Renal Care (cont.)
 The ALJ found the CON Section did not err in approving the BMA
application.
 The Final Agency Decision upheld the CON Section’s initial
determination.
 A CON was issued to BMA on April 20, 2007
 The application’s timetable proposed a March 8, 2008 project
completion date.
5
Total Renal Care (cont.)
 On September 19, 2007, TRC appealed to the N.C. Court of Appeals.
 On December 14, 2007, TRC filed a petition for writ of supersedeas
with the Court seeking to stay the certification and operation of BMA’s
proposed facility until the resolution of the appeal.
 The writ of supersedeas was denied by the Court on January 7, 2008.
TRC filed a writ of supersedeas with the North Carolina Supreme
Court which was also denied.
 On August 18, 2008, BMA filed a motion with the Court of Appeals
seeking to dismiss TRC’s appeal as moot.
6
Total Renal Care (cont.)
BMA asserted the following:
1. The construction of the St. Pauls facility was complete;
2. CMS had already certified the facility; and
3. The CON Section had deemed the project and facility complete.
7
Total Renal Care (cont.)
Holding:

The Court of Appeals held that TRC’s appeal was moot.

The Court reasoned that the CON Law did not authorize DHHS to
withdraw a CON after the facility becomes operational.

The Court noted that the General Assembly must have recognized
such a possibility in enacting the CON Law.
8
Total Renal Care (cont.)

The case at bar and the prior Mooresville case (in which the
Supreme Court found an appeal of a CON decision to be moot) were
similar.

The Court concluded that Mooresville was controlling and that the
TRC appeal was moot.

This outcome resulted in a change in North Carolina’s CON statute.
See SB 804 (discussed later).
9
Carolina Digestive Care, PLLC v. N.C. Dep’t of Health
and Human Serv., __ N.C. App. __, 687 S.E.2d 318
(September 1, 2009) (Tab 2 in Handouts)
*
Unpublished Opinion
Facts:

Blue Ridge Healthcare System and Grace Hospital (“Blue Ridge”)
notified the CON Section of their intent to build a physician office
building on Grace Hospital’s campus in Morganton, Burke County.

The CON Section exempted the physician office building’s
development under N.C. Gen. Stat. § 131E-184.
.
10
Carolina Digestive (cont.)
 Carolina Digestive Care, PLLC and Gastroenterology Specialists,
P.A. (“petitioners”) appealed the exemption approval.
 The ALJ granted summary judgment in favor of Blue Ridge, holding
that neither petitioner entity was an “affected person” with standing
to challenge the exemption.
 The Final Agency Decision adopted the ALJ’s recommended
decision.
11
Carolina Digestive (cont.)
Analysis:
 The Court of Appeals affirmed, reasoning as follows:
 There was no evidence that petitioners owned or operated a physician
office building or planned to develop one.
 As a result, petitioners did not satisfy any of the six categories of
“affected persons” listed in N.C. Gen. Stat. § 131E-188.
12
Carolina Digestive (cont.)
 ALJ did not abuse his discretion in denying petitioners’ motion to
amend the petition to include the names of individual physicians.
 The Final Agency Decision was deemed to have adopted this ALJ ruling
because it did not expressly address this issue.
 The Court noted the petitioners waited until a month after filing the
summary judgment motion before seeking to amend.
13
Carolina Digestive (cont.)
 Blue Ridge also filed a motion to dismiss petitioners’ appeal based
on the Total Renal Care “mootness” ruling.
 The Court narrowly interpreted the Total Renal Care holding so as
to only prohibit such an appeal when the project at issue has
already been competed and become operational.
 There was no evidence that the physician office building was
already built and operational.
 The Court denied Blue Ridge’s “mootness” motion, but Blue Ridge
ultimately prevailed (on the grounds previously described).
14
Novant Health, Inc. and Medical Park Hospital, Inc. d/b/a
Medical Park Hospital v. NCDHHS (08 DHR 0688 and 08
DHR 0689) (Recommended Decision, Dec. 8, 2008)
(Tab 3 in Handouts)
Applications
 Davie County Emergency Health Corporation d/b/a Davie County
Hospital and North Carolina Baptist Hospital (“DCH”) filed a CON
application to replace and relocate Davie County Hospital within Davie
County from Mocksville to the Town of Bermuda Run.
 Novant filed a CON application to build a new hospital in Clemmons,
Forsyth County, including 22 acute care beds and five operating
rooms to be relocated from Medical Park Hospital in Winston-Salem
and 28 acute care beds to be relocated from Forsyth Medical Center
in Winston-Salem, resulting in a 50 bed acute care hospital.
15
Novant Health, Inc. (cont.)
Applications
 The applications were deemed competitive.
 Both applications were denied, primarily for failing to show conformity
with Criteria 3 and 3a.
 Criterion 3 is the main “need” statutory review criterion.
 Criterion 3a requires proof that patients will not be “left behind” when
services are reduced or eliminated (arises in any relocation scenario).
16
Novant Health, Inc. (cont.)
Recommended Decision
 Novant argued that the Agency’s analysis of Novant’s projections were
arbitrary and capricious because there is no objective standard in the
CON law or rules for determining the “reasonableness” of an
applicant’s methodology or projections.
 The ALJ found that it was unrealistic to expect the Agency to develop
an objective standard for every possible service which may require a
CON.
17
Novant Health, Inc. (cont.)
 Under Criterion 3a, the ALJ agreed with the Agency’s determination
that Novant made inconsistent representations in two separate
applications concerning the beds that were to be relocated.
 Novant sought to: (a) move 28 beds from one facility; and (b) in a
subsequent application, backfill by applying for 26 beds at the same
location from which beds were being moved.
 The ALJ also found Novant nonconforming with Criterion 3a for failing
to demonstrate the types of acute care beds that would be moved.
The failure to do so made it impossible to determine whether the
patients at the facility losing beds would have adequate access to
needed services.
18
Novant Health, Inc. (cont.)
 DCH proposed to eliminate skilled nursing care provided in “swing
beds.” The ALJ agreed with the Agency’s determination that DCH
failed to provide any discussion of the impact on the patients currently
receiving skilled nursing care at the hospital. DCH was thus found
nonconforming with Criterion 3a.
 The DCH application was also found nonconforming with Criterion 3a
because it did not show how the needs of existing patients would
continue to be served following the hospital’s relocation 13 miles
away.
 The ALJ and the Final Agency Decision-maker affirmed the Agency’s
decision to deny both applications.
19
Cumberland County Hospital System, Inc. d/b/a Cape
Fear Valley Health System, v. DHHS (08 DHR 3676 & 08
DHR 3680 ) (Recommended Decision, Sept. 16, 2009)
(Tab 4 in Handouts)
Facts:
 Cape Fear applied to retain an existing linear accelerator at its hospital
in Fayetteville, Cumberland County, that it otherwise was required to
dispose of pursuant to a settlement agreement.
 The Radiation Medicine Group, PLLC and The Radiation Medical
Center, LLC (“RMG”) sought to acquire a linear accelerator for an
outpatient facility in St. Pauls, Robeson County.
20
Cumberland County Hospital System, Inc. d/b/a Cape
Fear Valley Health System, v. DHHS (08 DHR 3676 & 08
DHR 3680 ) (Recommended Decision, Sept. 16, 2009)
(Tab 4 in Handouts)
Facts:
 The SMFP linear accelerator need determination resulted from a
special needs petition Cape Fear filed for a Cyberknife (a specialized
type of linac) for Service Area 18 (Cumberland, Robeson, Bladen, and
Sampson Counties).

The Agency denied both applications.
 This outcome underscores that an SMFP need determination does not
automatically result in an approval.
21
Cape Fear Valley Health System (cont.)
Cape Fear’s Application
 Cape Fear was found nonconforming with Criterion 3 for failing to
show the need for the linear accelerator it was seeking to retain. This
led to other related nonconformities.
 Cape Fear was also independently found nonconforming with Criterion
20 (the “quality of care” criterion) due to an immediate jeopardy
citation in a licensure and certification survey during the CON review.
 Cape Fear had separately appealed the survey decision to a federal
ALJ.
22
Cape Fear Valley Health System (cont.)
Cape Fear’s Application
 Criterion 20 provides that: “An applicant already involved in the
provision of health services shall provide evidence that quality care
has been provided in the past.”
 This case raised interesting questions of: (a) whether isolated survey
events should cause an applicant to be unapprovable, notwithstanding
a long history of quality care; and (b) whether licensure or certification
adverse events which occur during the review should be considered
under Criterion 20.
23
Cape Fear Valley Health System (cont.)
Cape Fear’s Application
 The ALJ made findings of fact that Cape Fear failed to conform with
Criterion 20 despite the questions raised on the prior slide.
24
Cape Fear Valley Health System (cont.)
RMG’s Application
 RMG was found nonconforming with Criterion 3 for failing to show
need for the linac it was seeking to acquire. This led to other
nonconformities.
 RMG was found nonconforming with Criterion 5 (financial feasibility)
because RMG’s financial projections failed to show a positive net
income in Project Year 3.
25
Cape Fear Valley Health System (cont.)
Recommended Decision
 Affirmed the Agency’s decision to deny both applications despite the
need determination.
 Case settled before the Final Agency Decision was due.
26
Parkway Urology, P.A. d/b/a Cary Urology, P.A. v.
NCDHHS (North Carolina Court of Appeals, No. COA091490) (The “Area 20 Linac” Case) (Tab 5 in Handouts)
Background
 The Governor added a special need determination to the 2007 SMFP
for a linear accelerator in Linear Accelerator Service Area 20 (Wake,
Harnett, and Franklin Counties).
 Eligible applicants were limited to “existing providers of radiation
oncology services in Service Area 20.”
 The Governor made this need determination even though the SMFP
need methodology did not generate a need, and instead, showed
excess linear accelerator (“linac”) capacity in Service Area 20.
27
Parkway Urology, P.A. (cont.)
Background
 Raleigh Hematology Oncology Associates, PC d/b/a Cancer Centers
of North America, AOR Management Company of Virginia, LLC
(“CCNC”) were approved by the Agency to acquire the linac.
 Competing applicants, Wake Radiology Oncology Services, PLLC
(“WROS”) and Parkway Urology, P.A., d/b/a Cary Urology, P.A. (“Cary
Urology”), were denied.
28
Parkway Urology, P.A. (cont.)
Background
 WROS, Cary Urology, and Rex Hospital, Inc. (“Rex”) each filed
contested case petitions.
 Rex was – and is – an existing provider of radiation oncology services
in Service Area 20, and is situated across the street from CCNC,
where the new linac was approved to be located.
29
Parkway Urology, P.A. (cont.)
Recommended Decision

WROS and Cary Urology contended that their respective
applications should have been approved instead of CCNC.

Rex contended that none of the applications should be approved,
because there is no need under Criterion 3, and an additional linac in
Area 20 would constitute unnecessary duplication under Criterion 6.

Rex argued that CCNC’s application did not project the impact of its
proposed second linac on Rex’s four underutilized linacs located less
than three-tenths (3/10) of a mile from CCNC’s existing facility.
30
Parkway Urology, P.A. (cont.)
Recommended Decision

The ALJ affirmed the Agency’s decision approving CCNC.

In the contested case hearing, the Agency acknowledged that the
Agency found CCNC’s application automatically conforming with
Criterion 6 (unnecessary duplication criterion) because:

There was a need in the SMFP under Criterion 1 (SMFP need limitation
criterion); and

CCNC was found conforming with Criterion 3 (main need criterion).
31
Parkway Urology, P.A. (cont.)
Recommended Decision

ALJ affirmed the Agency despite no consideration of Rex’s four linear
accelerators; the necessary or unnecessary duplication of any
existing linear accelerator; downward linear accelerator volume
trend; or the decrease in Wake County residents receiving linear
accelerator treatments.

The ALJ found that Rex was not substantially prejudiced by the
Agency’s decision despite being located across the street from
CCNC and presenting evidence that it was already underutilized and
would further lose volume as a result of the addition of another linear
accelerator at CCNC.
32
Parkway Urology, P.A. (cont.)
Final Agency Decision

Modified, but affirmed, the ALJ’s Recommended Decision.
Court of Appeals

Currently pending at the Court of Appeals.

CCNC is prohibited from proceeding with its project pursuant to
Petitions for Writ of Supersedeas filed by the appellants as well as
Session Law 2009-373 (Senate Bill 804).

Briefing is now occurring.
33
UPDATE ON CASES
REPORTED ON
LAST YEAR
34
Hope-A Women’s Cancer Center, P.A., (“Hope Case”)
(North Carolina Court of Appeals #08-1548)
Facts:

Hope filed a Declaratory Ruling Request to enter into a purported “Services
Agreement” with an unnamed out-of-state provider to provide, without a CON,
new diagnostic radiation oncology services in Asheville, on the following
regulated items of equipment: a linear accelerator; a dual use PET/CT
scanner; and an MRI scanner.

Hope’s Request argued that medical equipment owned by an out-of-state
entity, but used by an in-state entity pursuant to a “Services Agreement,” is not
subject to CON review. Hope’s Request did not include a copy of its
purported “Services Agreement”
35
Hope Case (North Carolina Court of Appeals #08-1548)
 In denying Hope’s Declaratory Ruling Request, the department
determined that:
 Hope (or the unnamed, out-of-state provider) is offering or developing
the described services in North Carolina;
 Hope’s proposal constitutes a “new institutional health service”
requiring a CON because it proposes offering and development of
equipment that requires a CON regardless of cost; and
 Hope failed to satisfy its burden that its proposal did not exceed the
$2,000,000 and $750,000 capital cost thresholds implicating the
requirement of a CON.
36
Hope Case (North Carolina Court of Appeals #08-1548)
Superior Court Opinion
 On June 26, 2008, Wake County Superior Court Judge Robert
Hobgood entered an Order affirming the Department’s denial of
Hope’s Declaratory Ruling Request.
Court of Appeals
 The case is currently pending at the NC Court of Appeals.
 Briefing has concluded.
 Oral argument occurred on August 18, 2009.
37
Hope and Raleigh Orthopaedic Clinic, P.A. v. Easley, et
al, Hope/ROC Case”) (North Carolina Court of Appeals
#09-844)
Facts:
 Hope and Raleigh Orthopaedic Clinic, P.A. (“ROC”) sued certain State
officials responsible for the health planning process in NC, seeking
declaratory and injunctive relief.
 First, Plaintiffs allege that the NC planning process constitutes an
impermissible delegation of legislative authority without adequate
guiding standards and procedural safeguards to ensure that the State
Health Coordinating Council’s decisions are not arbitrary, unreasoned
or affected by self-interest o fits members, citing Article I, Section 6
and Article II, Section I of the NC Constitution.
38
Hope/ROC Case (North Carolina Court of Appeals #09844)
 Second, Plaintiffs allege that the NC planning process violates their
procedural due process rights under Article I, Section 19 of the NC
Constitution on the theory that the State Medical Facilities Plan
(‘SMFP”) need determinations deprive Plaintiffs of a reasonable
opportunity to demonstrate need for certain services.
 Third, Plaintiffs allege that the NC planning process violates their
substantive due process rights under the same constitutional provision
on the theory that the SMFP need determinations create an
unreasonable burden on Plaintiffs’ opportunity to carry out an
otherwise lawful business.
39
Hope/ROC Case (North Carolina Court of Appeals #09844)
Superior Court Decision (See Tab 6 in Handouts)
 A special Wake County Superior Court Judge (Howard Manning, Jr.)
was designated to hear the case.
 Numerous existing providers moved to intervene to support the State
Defendants’ position.
 Judge Manning allowed the proposed intervenors to fully participate in
the case prior to formally ruling on a motion to intervene.
 On March 26, 2009, Judge Manning denied Plaintiffs’ Motion for
Judgment on the Pleadings and granted Defendants’ Motion on the
Pleadings
 Judge Manning appeared to deny, as moot, the motions to intervene in
his March 26 Order.
40
Hope/ROC Case (North Carolina Court of Appeals #09844)
The North Carolina Court of Appeals
 The case is currently pending before the North Carolina Court of
Appeals.
 The proposed intervenors were permitted to file briefs as amici curiae
over the objections of Plaintiffs.
 Briefing has concluded.
 Oral Argument occurred on January 11, 2010.
41
LEGISLATIVE
UPDATE
42
Fairness in CON, Session Law 2009-145 (HB 436) (Tab 7
in Handouts)
 Exempts from CON review expenditures over $2 million for
certain “same site” nursing home, adult care home, or
ICF/MR:
 Renovations;
 Replacements; or
 Expansions.
43
Fairness in CON, Session Law 2009-145 (HB 436)
Project must be limited to one or more of the following purposes:
 Conversion of semi-private resident rooms to private rooms.
 Providing innovative, homelike residential dining space, such as cafes,
kitchenettes, or private dining areas to accommodate residents and
their families or visitors.
 Renovating, replacing, or expanding residential living or common areas
to improve resident quality of life.
44
Defining the Term “Hospital” - Session Law 2009-487
(HB 1297) (Tab 8 in Handouts)
 Rewrites N.C. Gen. Stat. § 131-76(3) to limit what the term “Hospital”
includes, and does not include.
 The term does not include –
 any outpatient department, including a portion of a hospital operated as an
outpatient department, on or off the hospital’s main campus, that is
operated under the hospital’s control or ownership and is classified as
Business Occupancy.
 However, if the Business Occupancy outpatient location is to be operated
within 30 feet of any hospital facility, or any portion thereof, which is
classified as Health Care Occupancy or Ambulatory Health Care
Occupancy under the Life Safety Code of the National Fire Protection
Association, the hospital shall provide plans and specifications to the
Department for review and approval as required for hospital construction
or renovations in a manner described by the Department.
45
Session Law 2009-487 (cont.)
 Revises N.C. Gen. Stat. § 131E-80(a), which concerns hospital
inspections by the Department.
 After the hospital’s initial licensing, any location included or added to the
hospital’s accreditation shall be part of the hospital’s license; however, all
locations may be subject to inspections “which the Department seems
necessary to validate compliance with the requirements set forth in this
part.”
46
CON Appeals, Session Law 2009-373 (SB 804) (Tab 9 in
Handouts)
 Enacted in response to Total Renal Care (see earlier slides)
 Prevents the CON Section from issuing a CON until the applicable
contested case and any appeals are adjudicated and resolved
(amending N.C. Gen. Stat. § 131E-187).
 Increases potential CON appellate bond cap from $50,000 to
$300,000 (amending N.C. Gen. Stat. § 131E-188(b1)).
 The default bond amount is still $50,000.
 But amendment gives Court of Appeals discretion to increase bond
amount up to $300,000, upon a request by the approved CON applicant.
47
CON Appeals, Session Law 2009-373 (SB 804) (Tab 9 in
Handouts) (cont.)
 Senate Bill 804 also places a temporary moratorium on the
development of free-standing emergency departments unless they are
in the same county as, and operated under the same license as,
licensed and operational acute care beds
48
Expedited Reviews – Session Law 2007-473 (HB 1685)
(Tab 10 in Handouts)
 Allows an expedited review for holders of a CON for a nursing
home or adult care facility where the applicant proposes to:
 Move beds from one licensed facility to another;
 Within the same county; and
 Not increase the county’s bed complement.
 This 2007 bill is still law, but was never codified into the General
Statutes. It is included in this presentation to remind everyone it
is out there.
49
New NC CON Rules Adopted in 2009 - Feb. 2010
Intensive Care Services
 The Agency published proposed rules to amend the information
required for an applicant proposing new or expanded intensive care
services. See Tab 13 in Handouts, February 15, 2010 NC Register, p.
1363 (amending rules at 10A NCAC 14C.1202(b)).
 Eliminated the requirement that an applicant demonstrate the number
of patients from the proposed service area projected to require
intensive care services by each patient’s county of residence.
50
New NC CON Rules Adopted in 2009 (cont.)
Neonatal Services
 The Agency published permanent rules to amend the performance
standards for an applicant proposing neonatal services. See Tabs 11
and 12 in Handouts, February 16, 2009 and December 1, 2009 NC
Register (amending rules at 10A NCAC 14C.1403).
 The Agency published proposed rules to amend the information
required for an applicant proposing neonatal services. See Tab 13 in
Handouts, February 15, 2010 NC Register, pp. 1364-65 (amending
rules at 10A NCAC 14C.1402 and 1403).
51
New NC CON Rules Adopted in 2009 (cont.)
Neonatal Services
 Clarifies that the average annual occupancy of the total combined
number of all existing Level II, III and IV beds are to be counted to
determine the percent of occupancy in order to meet the performance
standards.
 Clarifies that applicants for Level III or IV services must document an
unmet need in the proposed service area, unless applying per an
SMFP need determination.
52
New NC CON Rules Adopted in 2009 (cont.)
Open-Heart Surgery and Heart-Lung Bypass Machines
 The Agency published proposed rules to amend the information
required for an applicant proposing open-heart surgery service and
heart-lung bypass machines. See Tab 13 in Handouts, February 15,
2010 NC Register, p. 1365-66 (amending rules at 10A NCAC
14C.1703(1)).
 Eliminated the requirement in the performance standards that an
applicant demonstrate that it shall perform at least four diagnostic
catheterizations per open heart surgical procedure each quarter.
53
New NC CON Rules Adopted in 2009 (cont.)
Radiation Therapy Equipment
 The Agency published permanent rules to add information required for
an applicant proposing to develop a multidisciplinary prostate health
center pursuant to a need determination for a demonstration project in
the SMFP. See Tabs 11 and 12 in Handouts, February 16, 2009 and
December 1, 2009 NC Register (amending rules at 10A NCAC
14C.1900)).
 The Agency published proposed rules to amend the information
required for an applicant proposing to acquire radiation therapy
equipment. See Tab 13 in Handouts, February 15, 2010 NC Register,
p. 1366-67 (amending rules at 10A NCAC 14C.1902(b)).
54
New NC CON Rules Adopted in 2009 (cont.)
Radiation Therapy Equipment
 Requires that patient treatments be projected by intensity modulated
(IMRT) and stereotactic radiosurgery along with the previously
required simple, intermediate and complex radiation treatments.
 Requires an applicant to project the number of radiation treatment
patients for palliation and for cure.
55
New NC CON Rules Adopted in 2009 (cont.)
Home Health Services
 The Agency published permanent rules to amend the information
required for an applicant. See Tabs 11 and 12 in Handouts, February
16, 2009 and December 1, 2009 NC Register (amending rules at 10A
NCAC 14C.2002).
 Added requirements for applicants proposing to establish a new home
health agency pursuant to a need in the SFMP to meet the special
needs of the non-English speaking, non-Hispanic population.
56
New NC CON Rules Adopted in 2009 (cont.)
Surgical Services and Operating Rooms
 The Agency published permanent rules to amend the information
required by an applicant. See Tabs 11 and 12 in Handouts, February
16, 2009 and December 1, 2009 NC Register (amending rule 10A
NCAC 14C.2103).
 Added language to determine the number of operating rooms needed
for different service areas based on the number of existing operating
rooms in that service area.
57
New NC CON Rules Adopted in 2009 (cont.)
Surgical Services and Operating Rooms
 The Agency published proposed rules to amend the information
required for an applicant. See Tab 13 in Handouts, February 15, 2010
NC Register, p. 1367-1372 (amending rules at 10A NCAC 14C.2100)
 Clarified when the performance standards apply.
 Requires an applicant to document contacts the applicant made with
hospitals in the service area in an effort to establish privileges.
58
New NC CON Rules Adopted in 2009 (cont,)
Surgical Services and Operating Rooms
∙
The Agency published proposed temporary rules to amend the CON
regulatory review criteria specifically applicable to operating room
review for the 2010 SMFP’s demonstration project allowing application
to be filed for development of a new single specialty separately
licensed ambulatory surgical facility. See Tabs 11 and 12 in Handouts,
February 16, 2009 and December 1, 2009 NC Register (amending
rules at 10A NCAC 14C.2100).
59
New NC CON Rules Adopted in 2009 (cont,)
End-Stage Renal Disease Services
 The Agency published proposed rules to amend the information
required for an applicant. See Tab 13 in Handouts, February 15, 2010
NC Register, p. 1373-74 (amending rules at 10A NCAC 14C.2200)
 An applicant for a new or replacement facility is required to have
documentation showing that power and water will be available at the
proposed site.
 Required copies of written policies and procedures for backup
electrical services in the event of a power outage.
60
New NC CON Rules Adopted in 2009 (cont.)
MRI Scanners
 The Agency published permanent rules to amend the definition of
mobile MRI scanner. See Tabs 11 and 12 in Handouts, February 16,
2009 and December 1, 2009 NC Register (amending rule 10A NCAC
14C.2701).
 The Agency published proposed rules to amend the information
required for an applicant. See Tab 13 in Handouts, February 15, 2010
NC Register, p. 1374-75 (amending rules at 10A NCAC 14C.2700).
 Modified some definitions.
61
Southeastern Health Planning Symposium
March 19, 2010
Ralph Barbier
Jimmy Long
1230 Main Street, Suite 700
Columbia, SC 29201
www.NexsenPruet.com
803.771.8900
Overview & Update
• Statutes / Regulations
• Litigation / Case Law
• South Carolina Health Plan
Overview
• Purpose of State Certification of Need and
Health Facility Licensure Act
– Cost containment
– Prevent unnecessary duplication of
facilities/services
– Guide establishment of facilities/services to best
serve public needs
– Ensure high quality
• Methods to achieve Act’s purpose:
– Certificate of Need Program
– Licensing of Health Care Facilities
Overview
• South Carolina Department of Health
and Environmental Control (“DHEC”) is
designated as the sole state agency for
control and administration of the CON
Program and licensure of health
facilities
Overview
• Health Plan
– Identifies health services that require
issuance of a CON prior to implementation
• Calculates need for certain services
• Establishes review criteria
– DHEC Board must adopt a New Health Plan
at least every 2 years
• Health Planning Committee (14 members)
submits recommendations to DHEC Board
Overview
• Regulations
– Establishes expenditure thresholds for
CON review
– Establishes Project Review Criteria
Overview
• DHEC may not issue CON unless
application complies with both:
– Health Plan
– Regulations
• Project review criteria
• Other regulatory requirements
Overview
• When a CON is required:
– Establish new health care facility
– Add one or more beds or changes in bed
compliment
– Capital expenditure by health care facility in
excess of $2 million
– Capital expenditure by health care facility to add
or expand a service listed in Health Plan
– Health care facility adds a new service that is
listed in Health Plan and has annual operating
cost of more than $1 million
Overview
• CON required (cont’d):
– Acquisition of medical equipment in
excess of $600,000
• Applies to all persons, not just health care
facilities
– Changes of ownership or controlling
interest of a health care facility that
increases facility’s costs
– Expenditure in excess of $4 million in
preparation of a CON application
Overview
• CON Act does not apply to:
– Health care facilities owned and operated
by federal government
– Office of a licensed private practitioner
(except equipment)
– Real estate transactions
Overview
• Projects exempt from CON Review:
– Non medical projects
• Parking garages, refinancing debt, computer systems, etc.
– Facilities owned by S.C. Departments of Mental
Health or Mental Retardation
– Any federal health care facility sponsored and
operated by State
– Independent living facilities for persons with mental
or physical disabilities
– Kidney disease treatment centers
– Replacement of like equipment
– Upgrading facility
• No additional square footage
• No additional health service
Legislative Update
• Current Law
– Act 387
• Passed into law in 2006
• Established automatic stay
– Non applicability decisions
– Exemption decisions
– CON decisions
• Significant change to appeal process
– Current process
» DHEC Staff Decision
» DHEC Board (final review conference)
» Administrative Law Court
» South Carolina Court of Appeals/Supreme Court
Legislative Update
– Act 334
• Passed into law in 2008
• Standard to lift automatic stay
– Good cause shown
OR
– No irreparable harm will occur
Legislative Update
• Pending Legislation
– S.337 (“Senator Cleary’s Bill”)
• Passed S.C. Senate during 2009 session
• Currently in S.C. House
• Focuses on review/appeals process (not scope
of CON program)
– Limits contacts by elected officials
– Time limitations for review/appeal
– Party opposing CON application must first state case
to DHEC staff
– Limit scope of discovery
– Non Applicability decisions / exemptions not
appealable
– Appeal bond
Legislative Update
– S. 27 (Senator Jackson)
• Exempts endoscopy only ASF from CON
review if located in a health manpower
shortage area
– S. 119 (Senator Knotts)
• Eliminates CON program
Legislative Update
– S.384 (“DHEC Restructuring Bill”)
• Creates position of Secretary of Health and
Environmental Control (cabinet member)
• Creates two boards
(Health & Environment)
– FY 2011 Proviso (Amendment to Budget)
• Lengthens time to implement a CON
Certificate of Need Litigation
“May you live in interesting times”
– Bobby Kennedy
Certificate of Need Litigation
Let’s review the history (or lack of it):
The Early Cases
• South Carolina Baptist Hospital,
Supreme Court 1987
• National Health Corporation, Supreme
Court 1989
• Roper Hospital, Supreme Court 1991
(Justice Toal Dissent).
Certificate of Need Litigation
• The Time in the Wilderness
1991 – 2004
–No Reported Cases
Marlboro Park, Court of Appeals 2004
• Justice Kittredge (now on Supreme Court)
writing for the court
– Famous Footnote 1
• “We are well aware that the DHEC Board’s brazen
attitude and utter disregard for the proper standard of
review created the procedural chaos that followed”
– Strong case for ALC and it’s role as the fact finder
in conducting a de novo hearing
– Parties may present evidence related to issues
presented to DHEC staff which allows the trial
court to consider more than the DHEC file (more
expansive view than proposed by DHEC)
New Era
Act 387 changes the landscape:
• Direct Appeal from ALC to Court of
Appeals / Supreme Court
• To date, our Supreme Court has
certified every CON case for Supreme
Court review after completion of
briefing schedule
The First Case:
• MRI at Belfair, Supreme Court 2008
– Strong case for CON
– Clearly states that a project must comply
with both the State Health Plan and the
project review criteria before it can be
issued a CON
– Remand to require ALC to consider project
review criteria
The cases are coming…
• Spartanburg / Gaffney Linear
Accelerator
– Focus of oral argument was on whether the
ALC made sufficient findings of fact. Could
be an important case regarding competing
applications.
• Spartanburg / CCC Linear Accelerator
discovery dispute
– Justice Toal’s comments during argument
• Fort Mill Hospital Applications
• Fort Mill Urgent Care Center
Other Hot Issues
• Does filing a contested case always
mean an automatic stay?
NO
• Does Smiley expand who can file a
contested case?
MAYBE
• Are private causes of action gone for
good?
YES
Ralph Barbier
Jimmy Long
1230 Main Street, Suite 700
Columbia, SC 29201
www.NexsenPruet.com
803.771.8900
David S. Levitt
Managing Partner
Levitt Healthcare Affiliates
Southeastern
Health Planning
Symposium
LEVITT
healthcare
affiliates
1778 Emory Ridge Drive
Atlanta, GA 30329
404-315-9011
9 River Place
Beaufort, SC 29906
843-379-9372
March 19, 2010
State Health Plan is Updated Every Two
Years
• Utilization and population data are updated.
• DHEC planning staff develop recommended
changes to the Planning Committee
– Based on experience
– Suggestions presented to DHEC by interested parties
• Planning Committee holds meetings to discuss draft
• Several (usually 4) public meetings are held
throughout the state to elicit public comments
• Planning Committee votes on final Health Plan and
send to DHEC Board
• DHEC Board approves final Health Plan
Several areas have already received
attention and discussions with DHEC
• Elective Angioplasty without on-site
OHS
– Distinct from CPORT studies
• Ambulatory Surgery
– Volume/capacity measurements
– Quantified need methodology
• Home Health Agencies
– Eliminate from CON
– Allow for more agencies to be approved
Several areas have already received
attention and discussions with DHEC
• Hospital Bed Need
– Service Area Definitions
– Expansion vs. New Hospital
– Counties without existing hospital
• Radiation Therapy
– Capacity thresholds
– Specialized machines/New technology
• Quality/Patient Safety
• Staffing
Several areas have already received
attention and discussions with DHEC
• Psychiatric Bed Need
• NICU Bassinettes
– Service area definition vs. institutional need
• Pediatric LTAC
• Medical Detoxification Beds Need
– Eliminate numerical need calculation
• Inpatient Rehabilitation
– Minimum bed size
– Convert nursing home beds to Rehab
GEORGIA CON UPDATE:
THE S.B. 433 AFTERMATH
Armando Basarrate
Tim Gutenberger
Third Southeast Health Planning Symposium
March 19, 2010
The Good,
The Bad, and
The Ugly
I.
II.
III.
IV.
V.
DCH Rules & Process
Administrative Appeal Rules & Process
Judicial Review Process
Recent Agency & Court Decisions
Questions/Follow-up
CON Rules & Process
When Georgia CON Required
• Required for “New Institutional Health Services”
• New health care facility (e.g., hospital, nursing
home, am surg center)
• Develop or expand certain services (e.g., OHS,
NICU, MVRT)
• Capital expenditures for certain medical
equipment
• Certain capital expenditures by or on behalf of a
health care facility
CON Thresholds
• New threshold: capital expenditure in excess of
$2.5 million indexed (currently $2,514,850)
• Medical equipment threshold: $1 million for
hospitals/physician groups
– Excludes build-out costs
– Includes functionally related equipment, software, and
warranty/services contract costs for 5 years
– No threshold for other provider categories
CON Exemptions
• Formal rulings now required for providers
relying on exemptions
• Administrative appeal rights for opposing
parties
– Short time for opposing parties to take initial
action
New & Amended Exemptions
• 10-bed/10% hospital bed addition
exemption
– Change from “lesser” to “greater” of 10
beds/10%
– Lower threshold from 85% to 75%
New & Amended Exemptions
• Replacement of CON-approved/
grandfathered imaging equipment
– Applies to all equipment owned/operated by
hospitals and physician groups regardless of
cost
– Other providers: $870,000 limit and only if (i)
received formal LNR before July 1, 2008 for
replaced equipment and (ii) not in a rural
county
New & Amended Exemptions
• Certain “Single Specialty” ASCs
– Single Specialty (includes gen surgeons; special
provisions for hand surgeons and physiatrists)
– Owned and used only by single group practice
physicians
– Cost threshold: indexed $2.5M (currently $2,514,850)
– Indigent/charity/Medicaid requirements
– Transfer agreements
– Annual reporting requirements to DCH
New & Amended Exemptions
• Joint Venture ASCs
– Joint ownership by hospital and single
specialty physician group (minimum 30%
each)
– Geographic restriction
– Indexed $5M (currently $5,029,700)
– Indigent/charity/Medicaid requirements
– Annual Reporting to DCH
New & Amended Exemptions
• Imaging Center Expansions
– in existence and operational on Jan. 1, 2008
– owned by hospital or radiology physiciangroup
– provides 3 or more imaging services
– indigent/charity requirement in non-rural
counties
– must show need using methodology
New & Amended Exemptions
• Diagnostic Cardiac Cath Exemption
– Applies only to hospitals
– Applies only to adult, not pediatric, services
– Overrides general capital and equipment
thresholds
New & Amended Exemptions
• Therapeutic Cardiac Catheterization
– Applies to C-PORT hospitals and other
hospitals meeting C-PORT requirements
– DCH approved first “C-PORT eligible”
hospitals in 2009
– DCH to require C-PORT eligible hospitals
show meeting C-PORT requirements annually
– How will annual renewal process work?
New & Amended Exemptions
• Non-clinical expenditures
– Parking decks
– Computer systems, software & IT
– Medical office buildings
– DCH narrowly construes thus far
New & Amended Exemptions
• Other exempt facilities
– Continuing care retirement communities
– Traumatic brain injury facilities
New & Amended Exemption
• Facility relocation exemption
– Applies to any relocation of SNF/nursing home facility
within the same county
– In rural counties, applies to relocation of any other
type of health care facility (e.g., hospital) within same
county
– In urban county, apply to any other type health care
facility within 3-mile radius of existing site
– Relocated facilities cannot offer new or expanded
health services without further CON approval
– SNF may divide CON-approved beds into two
facilities
Expanded Reporting Requirements
• Exempt ASCs and freestanding imaging
centers required to submit surveys
• New structure for fines for non-reporting or
late surveys
• Authority to revoke CONs for failure to
meet reporting requirements past 180
days
Application Review Process
• Letter of Intent
– Prerequisite for filing CON application
– Requires basic information (e.g., applicant
identity; project site; summary description of
project; estimated cost)
– For unbatched proposals, CON application
must be filed exactly 30 days after LOI
Application Review Process
• Application Time Frames
–
–
–
–
–
–
Standard review now 120 days (was 90 days)
Notices of opposition due on 60th day
Additional information due on 75th day
Opposition meeting no earlier than 90th day
100th day deadline for support letters
Applicant amendment/response to opposition
meeting, due on 110th day
– Decision due on 120th day
– DCH can extend decision to 150 days
Application Review Process
• Opposition Meeting
–
–
–
–
–
–
Material change from prior process
One person speaks on behalf of opponent
DCH sets the time for oral presentation
Opponent submits substantive written material there
Opponent attendance prerequisite for appeal standing
Substantive opposition comments pertain to one
application and one applicant
– Neither DCH nor applicant respond to comments
Review Procedures
• Batching Review Process
– DCH has chosen to broadly use batching review authority of SB
433
– Services covered: home health; SNF/nursing home; perinatal
services; inpatient rehab; am surg; PET; MBRT; pediatric
cath/OHS; adult OHS; psych/SA; and birthing centers
• 4 Batching Cycles Per Year
• Each Service has two cycles per year
• Applications deemed complete when filed
– Same deadlines for opposition; additional information; opposition
meetings; support letters; and amendments/opposition
responses
– Decision on 120th day (no extension possible)
Application Review Process
• New General Review Criteria
– Quality Standards
– Ability to obtain necessary resources
(including staffing)
– Priority for a “tied” underrepresented service
Application Review Process
• New Perinatal Services Standards
– Need exception for basic perinatal services
– Exception applies in county with one hospital or
health system providing perinatal services; but not if
contiguous to a county that has three or more
perinatal providers
– Exception does not apply to applicants in other
counties, including counties with no OB service
– Must still meet all other applicable review criteria
Application Review Process
• Destination Cancer Hospitals (Cancer
Treatment Centers of America)
– 25-mile radius of Hartsfield Jackson Airport
– Limited to 50 inpatient beds
– Must maintain annual patient base with minimum 65%
out-of-state
– Fines for failure to comply (graduated $ 2M, 4M, 6M,
8M)
– Revocation of CON possible
– Only one facility
– CTCA approved in 2009
– Facility and services not included in inventories
Administrative Appeal Rules &
Process
CON Appeal Panel
• New, independent CON appeal panel
• Currently 3 members who act as Hearing
Officers
– Proceedings are de novo
CON Appeal Panel
• New evidentiary standards
– Both applicants and opponents have the ability to
introduce evidence and arguments not presented
during initial DCH process
– Standards in effect when appeal file governed (even if
subsequently changes)
– Pre-filed direct testimony; now optional at Hearing
Officer discretion and only for primary health planning
experts
• Specific authority for Hearing Officer remand
CON Appeal Process
• After Hearing Officer’s decision, losing
parties may file objections with the DCH
Commissioner
– Commissioner must explain with particularity
reasons for rejecting/modifying legal
conclusions or interpretations
– Commissioner may not reject factual findings
absent lack of competent substantial evidence
Judicial Review Process
Judicial Review Process
• Superior Courts must schedule judicial
review hearing to occur within 120 days of
docketing
– Deadline for decision 30 days from hearing
– If court does not rule by deadline, DCH
decision affirmed by operation of law
– Losing petitioner at Superior Court to pay
attorneys’ fees (exception for constitutional
and other issues that cannot be determined at
agency level)
Administrative & Judicial
Decisions
New Hospital Facility
• Northeast Georgia Medical Center
Project No. GA 2006-140
– December 15, 2008 Barrow Superior Court
order reverses DCH final agency decision for
new hospital in Barrow County
– Pending before Court of Appeals
– Appropriate scope of application amendments
and adverse impact
Open Heart Surgery
• Gwinnett Medical Center
Project No. GA 2008-004
– May 18, 2009 Hearing Officer decision
reverses DCH initial decision
– July 17, 2009 Commissioner overturns
Hearing Officer decision
– OHS Rule atypical barrier to quality of care
need exception
PET CON Cases
• Memorial Health University Medical Center
Project No. GA 2007-062
– February 24, 2009 Hearing Officer decision upholds award of
CON
– May 24, 2009 Commissioner affirms
• Candler Hospital Project No. GA 2008-051
– August 26, 2009 hearing officer decision upholds CON approval
– October 23, 2009 Commissioner affirms
– Pending before Fayette Superior Court
• PET Rule atypical barrier to quality of care
Am Surg Centers
• MCG Medical Associates Amb. Care Ctr.
Project No. GA 2008-042
– April 7, 2009 Hearing Officer reverses initial award of
CON
– June 8, 2009 Commissioner reverses Hearing Officer
decision
– September 30, 2009 Richmond Superior Court affirms
– November 23, 2009 Court of Appeals denies
discretionary appeal application
– Petition to Georgia Supreme Court pending
– ASC Rule atypical barrier – financial access need
exception
Basic Perinatal Services
• Palmyra Medical Center
Project No. GA 2008-081
– October 18, 2009 Hearing Officer upholds
CON award
– December 18, 2009 Commissioner affirms
– Now pending before Dougherty and Sumter
Superior Courts
– Meaning and effect of Basic Perinatal
Services need exception
Home Health
• Three Rivers Home Health Services – Treutlen
Project No. GA 2008-123
SJC Home Health Services Project No. GA 2008-124
– November 5, 2009, Hearing Officer issues decision on
summary adjudication motions affirming CON award to
Three Rivers
• Interim Home Health Care Georgia
Project No. GA 2008-107
Suncrest Home Health Project No. GA 2008-116
– November 13, 2009 Hearing Officer remands to DCH
– December 10, 2009 DCH re-affirms approval of Interim
and denial of Suncrest
Radiation Therapy Cases
• Northside Hospital-Forsyth Project No. GA 2007-071
North Georgia Radiation Oncology Project No. GA 2007-083
– June 1, 2009 Hearing Officer affirms award of CON to Northside and
NGRO
– July 31, 2009 Commissioner affirms Hearing Officer decision
• Northside Hospital-Cherokee Project No. GA 2008-008
– August 11, 2009 Hearing Officer remands
– September 25, 2009 applicant withdraws
• Vidalia Regional Cancer Center Project No. GA 2008-068
– August 10, 2009 Hearing Officer upholds CON award
– October 8, 2009 Commissioner affirms
– Judicial Review actions pending before Bulloch and Fulton Superior
Courts
Determination Request Appeals
• Henry Medical Center DET-2009-060
– Therapeutic cardiac cath exemption
– October 26, 2009 Hearing Officer grants motion for summary
adjudication denying determination request
• Augusta Hospital, LLC d/b/a Trinity Hospital of Augusta
– Therapeutic cardiac cath exemption
– December 18, 2009 Hearing Officer reverses award of determination to
requestor
– February 17, 2010 DCH reverses Hearing Officer decision
• Statesboro HMA, LLC d/b/a East Georgia Regional Medical Center
DET-2009-063
– Therapeutic cardiac cath exemption
– September 2, 2009 hearing officer grants consent order and DCH
subsequently re-issues determination
Questions / Follow-Up
Florida’s Certificate of Need
Program
A Test of Whether “Less is More”
Seann M. Frazier
March 19, 2010
Overview
I. Projects Subject to Review
II. Major Changes in Projects Subject to Review
III.Application Trends
IV.Florida CON Process
V. Regulatory Successes and Failures
Projects Subject to Review
 New hospitals, nursing homes, intermediate care facilities for the
developmentally disabled, hospice programs or inpatient hospices;
including the conversion from one type of health care facility to another
 New nursing home and intermediate care facility for the developmentally
disabled beds; and new acute care beds in low growth counties
 Limited hospital-based tertiary services including organ transplant
programs, neonatal intensive care units, comprehensive medical
rehabilitation programs
 No capital expenditure thresholds of any kind
 No review of any outpatient services
 No review of new technology
Major Changes in Projects
Subject to Review
1987
Elimination of review for obstetrical and
outpatient services (including adult
cardiac catheterization services);
increase in the capital expenditure
threshold to $1 million; major medical
equipment defined as being over $1
million and having less than 3 years
FDA approval;
‘tertiary services’ defined as a separate
category subject to review (organ
transplantation programs; specialty
Major Changes in Projects
Subject to Review
1997
Elimination of review for capital
expenditures,
termination of an inpatient health
service,
delicensure of beds,
adult inpatient diagnostic cardiac
catheterization,
replacement of a health care facility at
the same site, provided no increase in
beds or services
Major Changes in Projects
Subject to Review
2000
Elimination of review for Medicare
home health agencies and cost
overruns.
An increase of up to 10 beds or 10% of
a hospital’s licensed capacity for acute
care, mental health services or hospital
based skilled nursing unit beds
becomes exempt from review; as does
an equal increase in a nursing homes
licensed bed capacity. Multiple project
types moved from full/batched review
Major Changes in Projects
Subject to Review
2004
Elimination of review for hospital bed
additions except in low growth counties.
Adult cardiology services and burn units
are to be transitioned from Certificate of
Need to licensure. Two levels of
licensure to be established: Level I
(adult percutaneous cardiac intervention
w/o open heart surgery) and Level II
(adult percutaneous cardiac intervention
with open heart surgery). Several
Major Changes in Projects
Subject to Review
2008
Chapter 2008-29, Laws of Florida changed the rules
related to the review of CON Applications for new
General Hospitals.
Instead of the broad review criteria applied to all
remaining CON reviewable projects, general
hospital applications are now only scrutinized by
using the following criteria:
• The need for the health care facilities and health
services being proposed.
• The availability, accessibility, and extent of utilization
of existing health care facilities and health services
in the service district of the applicant.
• The extent to which the proposed services will
Major Changes in Projects
Subject to Review
Notably, this means that the following
review criteria are no longer in play
for general hospitals:
• The ability of the applicant to
provide quality of care and the
applicant's record of providing
quality of care
• The immediate and long-term
financial feasibility of the proposal
• The availability of health resources,
Major Changes in Projects
Subject
to
Review
Chapter 2008-29 also changed the application content
requirements for new general hospital applications:
An application must now include the proposed project's
location, as well as its primary and secondary service areas,
must be identified by zip code. Primary service area is
defined as the zip codes from which the applicant projects
that it will draw 75 percent of its discharges. Secondary
service area is defined as the zip codes from which the
applicant projects that it will draw its remaining discharges.
If, subsequent to issuance of a final order approving
the certificate of need, the proposed location of the
general hospital changes or the primary service area
materially changes, the agency shall revoke the
certificate of need. However, if the agency determines that
such changes are deemed to enhance access to hospital
services in the service district, the agency may permit such
changes to occur. A party participating in the administrative
hearing regarding the issuance of the certificate of need for
Major Changes in Projects
Subject to Review
In addition, the application for the certificate of need for a
general hospital must include a statement of intent that, if
approved by final order of the agency, the applicant shall
within 120 days after issuance of the final order or, if there is
an appeal of the final order, within 120 days after the
issuance of the court's mandate on appeal, furnish
satisfactory proof of the applicant's financial ability to
operate. The agency shall establish documentation
requirements, to be completed by each applicant, which
show anticipated provider revenues and expenditures, the
basis for financing the anticipated cash-flow requirements of
the provider, and an applicant's access to contingency
financing. A party participating in the administrative
hearing regarding the issuance of the certificate of need
for a general hospital may provide written comments
concerning the adequacy of the financial information
provided, but such party does not have standing to
Major Changes in Projects
Subject to Review
Chapter 2008-29 also changed the law for standing
in new general hospital cases:
Except for competing applicants, in order to be
eligible to challenge the agency decision on a
general hospital application, existing hospitals must
submit a detailed written statement of opposition to
the agency and to the applicant. The detailed
written statement must be received by the agency
and the applicant within 21 days after the general
hospital application is deemed complete and made
available to the public.
In those cases where a written statement of
opposition has been timely filed regarding a
certificate of need application for a general hospital,
Florida Certificate of Need
Process
Finally, 2008-29 made appeals of hospital
CON cases a whole lot less attractive:
Judicial review.-The party appealing a final order that grants
a general hospital certificate of need shall
pay the appellee's attorney's fees and costs,
in an amount up to $1 million, from the
beginning of the original administrative
action if the appealing party loses the
appeal, subject to the following limitations
and requirements:
The party appealing a final order must post
Application Trends
24
22
20
18
16
14
12
10
8
6
4
2
0
2005
2006
2007
2008
2009
Hospice
LTCH
New/Replacement Hospital
Childrens' Hospital
Psych.
NICU
Adult OHS
Pediatric OHS
Pediatric Cath.
Pediatric Heart Transplants
Bone Marrow Transplants
Adult Heart Transplants
Adult Lung Transplants
Adult Pancreas Transplants
Adult Kidney Transplants
Adult Liver Transplants
Substance Abuse
CMR
Florida Certificate of Need
Process
• Projects are ‘batched’, ‘expedited’ or
‘exempt’. Batched projects are
subject to full competitive review, fall
into two categories and are reviewed
twice a year.
Expedited and exempt projects may
be submitted at any time.
• Steps in the batched review process:
–
–
–
Fixed Need publication
Letter of intent
Initial application
Florida Certificate of Need
Process
• Application Content:
An application for a certificate of need must contain:
a) A detailed description of the proposed project and statement of its
purpose and need.
b) A statement of the financial resources needed by and available to the
applicant to accomplish the proposed project. This statement must
include:
–A complete listing of all capital
projects, including new health
facility development projects and
health facility acquisitions applied
for, pending, approved, or
underway in any state at the time of
application, regardless of whether
Florida Certificate of Need
Process
• Application Content (continued):
–A detailed financial projection,
including a statement of the
projected revenue and expenses
for the first 2 years of operation
after completion of the projected
project. This statement must
include a detailed evaluation of the
impact of the proposed project on
the cost of other services provided
by the applicant.
Florida Certificate of Need
Process
• Review Criteria:
– The need for the health care facilities and health
services being proposed.
– The availability, quality of care, accessibility, and
extent of utilization of existing health care
facilities and health services in the service district
of the applicant.
– The ability of the applicant to provide quality of
care and the applicant's record of providing
quality of care.
– The availability of resources, including health
personnel, management personnel, and funds
for capital and operating expenditures, for project
accomplishment and operation.
Florida Certificate of Need
Process
• Review Criteria (continued):
– The extent to which the proposed services will enhance
access to health care for residents of the service district.
– The immediate and long-term financial feasibility of the
proposal.
– The extent to which the proposal will foster competition that
promotes quality and cost-effectiveness.
– The costs and methods of the proposed construction,
including the costs and methods of energy provision and the
availability of alternative, less costly, or more effective
methods of construction.
– The applicant's past and proposed provision of health care
services to Medicaid patients and the medically indigent.
– The applicant's designation as a Gold Seal Program nursing
facility pursuant to s. 400.235, when the applicant is
requesting additional nursing home beds at that facility.
Florida Certificate of Need
Process
Each application is reviewed by a
Health Services and Facilities
Consultant (HSFC), a Certified Public
Accountant, an Architect, the Health
Services & Facilities Consultant
Supervisor, the Chief of Health
Facility Regulation and the Deputy
Secretary of Health Quality
Assurance (the latter three have both
been tendered and accepted as
Florida Certificate of Need
Process
• Interested parties can submit information
(pro or con) until the omissions deadline.
• Public hearings can be requested by
interested parties.
• Agency decisions are preliminary and can
be challenged by competing applicants in
the same review cycle or existing providers
in the same district who can show they will
be substantially affected if the CON is
awarded.
• Challenges to CON decisions are heard by
Administrative Law Judges with the Division
Regulatory Successes and
Failures
Regulatory Successes and Failures
Home Health and Hospice Regulation
Regulatory Successes and
Failures
Home Health Agencies
1987
Home Health was deregulated from CON Review in 1987, along with most
other outpatient services.
So, only a licensure application was required to offer home health visits to
Medicaid patients.
2000
However, a CON was still required for Medicare-certified home health
agencies.
In 2000, this CON requirement was removed.
Regulatory Successes and
Failures
South Florida Becomes a Hotbed for
Home Health Fraud
Home health care costs charged to Medicare in the Miami area have risen 20
times the national average in the past five years, prompting a federal
investigation of suspected fraudulent billing.
The population of Medicare beneficiaries in Miami-Dade County grew only
10.2% between 2004 and 2007.
Between 2003 and 2008, Miami-Dade County cost Medicare $1.3 billion for
home health care services, up 1,300% in just five years
USA Today, Oct. 6, 2008
Regulatory Successes and
Failures
Regulatory Response
Medicare Caps
Medicare passed new rule capping how much home health agencies may charge
for patients requiring more than one visit per day.
Some complain that legitimate home health patients suffer as a result, with
some being forced into nursing homes to get the care they need, increasing the
costs of their care.
Sun-Sentinel, Feb. 15, 2010
Regulatory Successes and
Failures
Regulatory Response
New Florida Licensure Requirements in 2009
Legislature designates Miami-Dade County as a health care fraud crisis area.
Additional Licensure Requirements for Home Health
Applicant must demonstrate financial ability
Non-immigrant aliens must post $500,000 surety bond
No new licenses in counties with less than 1,200 persons over 65 per agency
Ch. 2009-193, Laws of Florida
Regulatory Successes and
Failures
Hospice Regulation
Fixed Need Pool Methodology employs a statewide average use rate as its
determinant of need.
Because that use rate rises and falls with the an ever-changing average,
providers have incentive to continually increase use rate and services to the
patients they serve.
This CON-inspired competition has resulted in improved access to hospice
services, even while few new providers enter Florida.
Regulatory Successes and
Failures
Hospice Deaths / Total Deaths
For Medicare Enrollees
US
FL
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
Tennessee Certificate of Need
Law and Practice
Kate Stephenson
Trauger & Tuke
222 Fourth Ave. N.
Nashville, TN 37219
615-256-8585
kstephenson@tntlaw.net
Who Needs a CON?
CON is required to establish health care institution,
including:
•
•
•
•
•
Hospital
Nursing Home
ASTC
Home care and hospice
ODC (physician office can do PET, MRI, CT w/o being
ODC if less than 50%)
• Rehab
• Non Residential Methadone Treatment Facility
Who Needs a CON?
CON is required to initiate certain specified services,
including:
•
•
•
•
•
•
•
•
•
NICU
Open Heart
Cardiac Cath
PET
MIR
Linac
Home Health
Psych
Rehab
Who Needs a CON?
CON is required to take certain actions, including:
• Hospital renovation in excess of $5M
• Health care institution renovation in excess of
$2M
• Increasing or redistributing beds
• Changing location
• Acquiring equipment in excess of $2M
• Discontinuing OB
Additional Service Specific
Requirements
• Nursing home beds
• Non-Residential Methadone Treatment
Staff and Agency Members
Staff:
Administrative staff
Statistical analyst
2 Health Planners
Counsel and Deputy Counsel
Executive Director and Assistant
Ten Agency Members:
Industry Representatives
Hospital CEO
Representative of Nursing Home Industry
Physician
Representative of Home Care
3 Tennessee State departmental designees
3 consumer representatives
Process – Filing the Application
• Publish Letter of Intent and file with Agency between 1st
and 10th of month
• File Application
• Submit Written Supplementals
• HSDA Meeting
• Opposition files 15 days before meeting
Process – HSDA Meeting
• Initial Presentation –
10 minutes per side
5 minutes rebuttal
• Questions
• Summation
• Discussion
• Vote
Criteria
• Need
• Economic Feasibility
• Orderly Development of
Healthcare
ALJ’s
INITIAL ORDER (“I.O.”)
(Any party can
petition for
Reconsideration
w/i 15 days of
I.O.)
(Expected on or before 11-16-07)
(I.O. becomes a F.O.
after 15 days if no
party appeals)
OR
OR
(Any party may
appeal
w/i 60 days of
becoming a
F.O.)
Reconsideration by ALJ
(Any party can appeal to full
HSDA w/i 15 days of I.O.)
ALJ may:
1. Deny w/i 20 days
2. Do nothing – deemed denied
after 20 days
3. Grant w/i 20 days and hold
further hearings (no new
evidence)
4. Grant w/i 20 days and issue
new I.O.
(Any party may appeal
to full HSDA w/i 15
days of disposition on
Reconsideration)
1. On the record – no new
evidence unless “good cause”
shown.
2. State files record in 45
days.
3. No set time for decision.
4. Estimated time from
filing : 6-12 mo.
Final Order
Tenn. Court of Appeals
Review of Initial Order by HSDA
1. Review is discretionary; HSDA
can accept or decline review.
2. If review is granted, limited to
record – no new evidence
3. Time of hearing discretionary.
4. Must render Final Order (“F.O.”)
w/i 60 days of oral argument.
5. May remand to ALJ for further
proceedings, but no new evidence.
Chancery Court of Davidson
Co.
HSDA Declines Review
OR
1. If HSDA declines review, the I.O.
immediately becomes the Final Order
(“F.O.”).
1. Must file appeal w/i 30 days
of Chancery decision
2. No set time for decision.
3. Estimated time from filing:
1 yr. +
Supreme Court of Tenn.
1. Petition for review 60 days
from Ct. of App. decision.
2. Review is discretionary;
unlikely.
3. No set time for decision.
Process – Appeal
• To Agency (Administrative Law Judge)
de novo
Full blown trail
Results: Initial Order
• Discretionary Review by Agency
• Chancery Court
• Court of Appeals
• Discretionary appeal to Supreme Court
Spring Hill Update
1. Agency: CON granted
2. ALJ: CON denied
3. Agency: CON granted
4. Chancellor: CON denied
Early 2007
HCA wants to build a $100 Million Hospital
Late 2009
HCA declines to appeal
State Health Plan
Initially adopted 2000
Annual Updates?????
Department of Health Planning created 2008
Plan adopted 2009
State Health Plan
Reported on health status of Tennesseans
Established 5 principles for establishing better health
1.
Purpose of Plan is to improve health of residents
2.
Everyone should have reasonable access
3.
Should encourage competitive markets and economic efficiencies
4.
Citizens should have confidence that quality is monitored
5.
State should support development and retention of healthcare
workforce
AND revised TWO CON guidelines for growth: PET and cardiac cath
A View from the Health Planner’s Perspective
Third Southeastern Health Planning Symposium
Charlotte, North Carolina
March 19,2010
Agenda
• Overview of Planning
– Purpose of planning
– Types and uses of planning tools
– Challenges in planning
• Planning in a Regulated Environment
– Planners’ views of regulation
– Regulation’s impact on planning
• What Planners Wish Non-Planners Knew
– What regulators and judges should look for
– Important considerations
• Final Thoughts/Questions
178
Overview of Planning
179
Overview of Planning
• Purpose of Planning
–
–
–
–
–
Distinguish needs versus wants
Help set realistic expectations
Ensure appropriate facilities and services for the future
Conduct financial planning and budgeting
Determine future resource requirements (medical staff,
manpower, capital, etc.)
180
Types of Planning Tools
Planning Methodologies
Linear
Regression
Provider Based
Use and
Incidence Rates
Compound
Annual
Growth
Population
Growth
181
Multiple
Regression
Methodology: Population Growth Rate
Service Example: Mammography
Ideal for consumer driven services with
mature/declining life cycles
Apply weighted average population
growth rate of the identified service
area to historical volume
Positives: conservative, often a baseline
Negatives: too conservative, not
realistic
182
Population Growth Rate: Mammography
Weighted
Average Growth
Population
Growth
Patient Origin
Zip 1
61%
Zip 1
2.1%
Zip 1
1.30%
Zip 2
18%
Zip 2
3.3%
Zip 2
0.60%
Zip 3
11%
Zip 3
1.8%
Zip 3
0.20%
Zip 4
6%
Zip 4
2.4%
Zip 4
0.14%
Zip 5
2%
Zip 5
2.7%
Zip 5
0.05%
Zip 6
2%
Zip 6
3.1%
Zip 6
0.06%
Total
100%
Total
100%
SUM
2.35 %
X
=
Mammography Volume
2008
2009
2010
2011
2012
2013
6,134
6,278
6,426
6,577
6,731
6,889
183
Prior Year x 1.0235 = Subsequent Year
Methodology: Compound Annual
Growth Rate
Service Example: Emergency Department
Ideal for existing service with stable
demand factors
Apply calculated CAGR to historical
volume
Positives: based on actual experience
Negatives: does not consider new
factors/ impact of changes
184
Compound Annual Growth Rate:
Emergency Department
Historical ED Visits
2006
2007
2008
2009
18,337
21,914
24,866
26,602
Compound Annual Growth Rate Calculation
[ (Recent Volume/Older Volume) 1/# of Periods ] -1
[ (26,602/18,337) 1/3 ] –1 = 13.2%
Projected ED Visits
2010
2011
2012
2013
30,115
34,091
38,592
43,688
185
Methodology: Incidence Rates
Service Example: Radiation Therapy
Ideal for evaluating new service
development
Apply incidence rate to identified service
area population; estimate current/target
market share
Positives: consensus around incidence rates
Negatives: market share/other assumptions
can be difficult to estimate
186
Incidence Rates:
Radiation Therapy
Service Area
Cancer Rate/100,000
Population
New Cancer Cases
Age 0-62
485.8
135,453
658
Age 65+
356.6
24,015
86
Total
744
Projected Treatments
Cases
744
RT Treatment %
50%
Total RT Cases
372
Treatments per Case
36
Total Treatments
13,386
Market Share
31%
Projected Treatments
187
4,150
Methodology: Provider Based
Service Example: Ambulatory Surgery
Ideal for physician (provider) driven
services
From an identified population of providers,
calculate historical average procedures per
day
Positives: based on actual experience; gains
commitment from necessary “inputs”
Negatives: may not account for all factors
affecting usage patterns
188
Provider Based:
Ambulatory Surgery
Providers
Proc/Day
Days Onsite/Yr
Projected Proc/Yr
Physician A
8.0
260
2,080
Physician B
10.5
260
2,730
Physician C
3.5
52
182
Physician D
13.0
156
2,028
Physician E
5.5
130
715
Physician F
6.0
26
156
Total Procedures per Year
7,891
Historical Proc/Day x Projected Days Onsite/Yr x =
Projected Proc/Year
189
Methodology: Linear Regression
Service Example: MRI
Ideal for expansion of an existing
service with a mature life cycle
Linear Regression analysis (Excel)
Positives: based on actual experience
Negatives: does not consider nonhistorical factors other than time
190
Linear Regression:
MRI
[ (y-intercept) + (slope)(x) ]
MRI Procedures by Type
Excel
Function
Year
Head
Body
Extremity
Total
2007
1,931
2,870
715
5,515
2008
2,389
3,551
885
6,825
2009
2,590
3,850
959
7,399
2010
2,963
4,404
1,097
8,464
2011
3,292
4,894
1,219
9,406
2012
3,622
5,384
1,341
10,348
2013
3,952
5,874
1,463
11,290
191
Methodology: Multiple Regression
Service Example: PET
Ideal for services impacted by multiple
external factors, especially for services
in introductory/growth cycles
Multiple Regression analysis (Excel)
Positives: accounts for multiple factors
Negatives: may be difficult to choose
meaningful variables
192
Multiple Regression:
PET
[ (y-intercept) + (slope)(x1) +(slope)(x2) + (slope)(x3)]
Years of Service
Physicians
Population
Volume
1
1
325,747
603
2
1
330,804
827
3
2
335,364
1,213
4
2
338,351
1,329
5
3
340,350
1,938
193
Multiple Regression:
PET
Multiple R
0.9952022
R Square
0.990434
Adjusted R Square
0.9617359
Standard Error
100.4774
Observations
5
Coefficients
Stnd Error
T Stat
P-value
Lower 95%
Upper 95%
Intercept
9568.501495
17138.13498
0.558316
0.67583
-208191.27
227328.220
X Variable 1
273.217905
254.0526924
1.075438
0.47687
-2954.8137
3501.2496
X Variable 2
302.4743677
200.2150837
1.510747
0.37223
9
-2241.4885
2846.43731
X Variable 3
-0.02918268
0.05296751
-0.55095
0.67941
4
-0.7021958
0.64383046
Observation
Predicted Y
Residuals
1
638.024626
-35.024626
2
763.6657388
63.33426122
3
1206.285009
6.714990771
4
1392.334261
-63.33426122
5
1909.690365
28.30963523
194
Multiple Regression:
PET
[ (y-intercept) + (slope)(x1) +(slope)(x2) + (slope)(x3)]
Years of Service
Physicians
Population
Volume
1
1
325,747
603
2
1
330,804
827
3
2
335,364
1,213
4
2
338,351
1,329
5
3
340,350
1,938
6
3
347,157
1,984
7
4
354,100
2,357
8
4
361,182
2,424
9
5
368,406
2,789
10
5
375,774
2,847
195
Challenges in Planning
• Choosing sources for most valid/current
data
–
–
–
–
–
–
–
–
–
Center for Health Information and Policy Analysis (FL)
Joint Annual Reports (SC)
License Renewal Applications (NC)
Internal data
Third party vendor data (e.g. Thomson, Claritas)
Service line specific data (e.g. SEER)
Dartmouth Atlas
National surveys (e.g. NCHS)
US Census
196
Challenges in Planning
• Limited Knowledge of the Future
– Competitors’ actions
– Changes in reimbursement, regulations or other
macroenvironmental forces
– Physician factors, Administration/Board turnover
– Changing priorities due to limited resources
• Regulatory hurdles
• Formal planning may create rigidity/
lessen flexibility
• Can be short sighted if it does not
include monitoring progress against
planning objectives
197
Planning in a Regulated Environment
198
Planning in a Regulated Environment
• Planners’ Views of Regulation
– Potential barrier to entry, as well as a hurdle for planning
– A critical consideration in strategic, facility and service line planning
• How does regulation impact planning?
–
–
–
–
–
–
Artificial floor
Creating “need”
Creating competition
Sometimes forces quick decisions without extensive planning
Limited timeframe for projections
Confusion over one CON methodology versus multiple planning
models
– Necessitates earlier planning to accommodate litigation/appeals
199 conservative
– Can make planning more
What Planners Wish Non-Planners Knew
200
What Planners Wish Non-Planners Knew
What Regulators
and Judges
Should Look For
Important
Considerations
•Not perfection, but consistency
•Recognize the limitations on planners
•Look for planning that acknowledges many
factors
•What the public “wants” does not always equal
what the public “needs”
•Other factors supporting the methodology
•Support letters, real payor mix, MD
recruitment, market need and demand
•Planning is an art, not a science: multiple
methodologies can be equally valid, if
appropriately supported
•One year does not make a trend
•If volume growth exceeds market growth, the
methodology is projecting market share gains
•Planning is not immune to personal bias (of
planners and regulators)
•More detail does not always lead to more
accuracy
201
Final Thoughts/Questions
Questions/Comments?
202
203