North Carolina CON LAW UPDATE Southeastern Health Planning Symposium

North Carolina CON LAW UPDATESoutheastern Health Planning Symposium

Gary S. Qualls

March 19, 2010

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2009 CON CASE LAW

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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.

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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.

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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.

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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.

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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.

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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).

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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.

.

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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.

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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.

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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.

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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).

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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.

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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).

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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The ALJ made findings of fact that Cape Fear failed to conform with Criterion 20 despite the questions raised on the prior slide.

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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.

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Affirmed the Agency’s decision to deny both applications despite the need determination.

Case settled before the Final Agency Decision was due.

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Parkway Urology, P.A. d/b/a Cary Urology, P.A. v. NCDHHS (North Carolina Court of Appeals, No. COA09-1490) (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.

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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.

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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.

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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.

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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).

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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.

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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.

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UPDATE ON CASES REPORTED ON

LAST YEAR

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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”

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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.

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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.

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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.

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Hope/ROC Case (North Carolina Court of Appeals #09-844)

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.

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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.

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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.

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LEGISLATIVE UPDATE

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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.

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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.

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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.

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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.”

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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.

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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

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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.

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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.

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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).

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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.

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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.

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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)).

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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.

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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.

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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.

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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.

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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).

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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.

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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.

Southeastern Health Planning SymposiumMarch 19, 2010

Ralph BarbierJimmy Long 1230 Main Street, Suite 700Columbia, SC 29201www.NexsenPruet.com803.771.8900

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


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).


• 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

SoutheasternHealth Planning

Symposium

March 19, 2010L E V I T Th e a l t h c a r ea f f i l i a t e s

L E V I T Th e a l t h c a r ea f f i l i a t e s

1778 Emory Ridge DriveAtlanta, GA 30329404-315-9011

9 River PlaceBeaufort, SC 29906843-379-9372

David S. LevittManaging Partner

Levitt Healthcare Affiliates

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


• 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

• 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. DCH Rules & Process

II. Administrative Appeal Rules & Process

III. Judicial Review Process

IV. Recent Agency & Court Decisions

V. 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%


• 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


• 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


• 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


• Imaging Center Expansions– in existence and operational on Jan. 1, 2008– owned by hospital or radiology physician-

group– provides 3 or more imaging services– indigent/charity requirement in non-rural

counties– must show need using methodology


• Diagnostic Cardiac Cath Exemption– Applies only to hospitals– Applies only to adult, not pediatric, services– Overrides general capital and equipment

thresholds


• 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?


• Non-clinical expenditures– Parking decks– Computer systems, software & IT– Medical office buildings– DCH narrowly construes thus far


• 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 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


• 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)


• New General Review Criteria– Quality Standards– Ability to obtain necessary resources

(including staffing)– Priority for a “tied” underrepresented service


• 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


• 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 CenterProject 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 CenterProject 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 CenterProject 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 2008-123SJC 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 GeorgiaProject No. GA 2008-107Suncrest 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. FrazierMarch 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 burn units; neonatal intensive care units (Level II and Level III); comprehensive medical rehabilitation; adult open heart surgery; pediatric and adult open heart surgery; and pediatric oncology and hematology).

Fixed Need Pools established.


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


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 to expedited review or exemption.

2001

A moratorium is placed on additional community nursing home beds; it does not apply to hospital based skilled nursing unit beds or sheltered nursing home beds. The moratorium has been extended until July 2011.


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 specific exemptions added for the establishment of adult cardiology programs.

Local Health Councils removed from the certificate of need review process.Hospitals which primarily or exclusively provide cardiac, orthopedic, surgical or oncology specialties are prohibited.


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 enhance access to health care for residents of the service district

• The extent to which the proposal will foster competition that promotes quality and cost-effectiveness

• The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent


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, staffing

• The costs and methods of the proposed construction


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 a general hospital has standing to participate in any subsequent proceeding regarding the revocation of the certificate of need for a hospital for which the location has changed or for which the primary service area has materially changed.


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 participate in an administrative proceeding regarding proof of the applicant's financial ability to operate. The agency may require a licensee to provide proof of financial ability to operate at any time if there is evidence of financial instability, including, but not limited to, unpaid expenses necessary for the basic operations of the provider.


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, the applicant for the general hospital may submit a written response to the agency. Such response must be received by the agency within 10 days of the written statement due date.

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 a bond in the amount of $1 million in order to maintain the appeal.

02468

1012141618202224

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

Application Trends


• 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– Omissions deadline – Initial decision after staff analysis


• 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 or not that state has a certificate-of-need program or a capital expenditure review program pursuant to s. 1122 of the Social Security Act. The agency may, by rule, require less-detailed information from major health care providers. This listing must include the applicant's actual or proposed financial commitment to those projects and an assessment of their impact on the applicant's ability to provide the proposed project.

–A detailed listing of the needed capital expenditures, including sources of funds.


• 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.

c) An audited financial statement of the applicant. In an application submitted by an existing health care facility, health maintenance organization, or hospice, financial condition documentation must include, but need not be limited to, a balance sheet and a profit-and-loss statement of the 2 previous fiscal years’ operation.

The applicant must certify that it will license and operate the health care facility. For an existing health care facility, the applicant must be the licenseholder of the facility.


• 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.


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 expert health planners). Statutory and rule review criteria are considered and a site visit conducted when appropriate. A recommendation is made after briefing the Secretary of the Agency.


• 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 of Administrative Hearings. The Agency renders the Final Order upon review of the Recommended Order of the Administrative Law Judge and exceptions filed by parties.

• Final orders may be challenged to the District Court of Appeals.

Regulatory Successes and Failures


Home Health and Hospice Regulation


Home Health Agencies1987

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.


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 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 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


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.


Hospice Deaths / Total DeathsFor Medicare Enrollees

0%

10%

20%

30%

40%

50%

60%

2000 2001 2002 2003 2004 2005 2006 2007 2008

US FL

Tennessee Certificate of Need

Law and Practice

Tennessee Certificate of Need

Law and Practice

Kate StephensonTrauger & Tuke

222 Fourth Ave. N.Nashville, TN 37219

[email protected]

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

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 MembersStaff:

Administrative staffStatistical analyst2 Health PlannersCounsel and Deputy CounselExecutive Director and Assistant

Ten Agency Members:

Industry RepresentativesHospital CEORepresentative of Nursing Home IndustryPhysicianRepresentative 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 side5 minutes rebuttal

• Questions

• Summation

• Discussion

• Vote

Criteria

• Need

• Economic Feasibility

• Orderly Development of Healthcare

(Any party can petition for Reconsideration w/i 15 days of I.O.)

(Any party may appeal to full HSDA w/i 15 days of disposition on Reconsideration)

(Any party can appeal to full HSDA w/i 15 days of I.O.)

(I.O. becomes a F.O. after 15 days if no party appeals)

ALJ’sINITIAL ORDER (“I.O.”)

(Expected on or before 11-16-07)

HSDA Declines Review

1. If HSDA declines review, the I.O. immediately becomes the Final Order (“F.O.”).

Chancery Court of Davidson Co.

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.

Reconsideration by ALJ

ALJ may:1. Deny w/i 20 days2. Do nothing – deemed denied after 20 days3. Grant w/i 20 days and hold further hearings (no new evidence)4. Grant w/i 20 days and issue new I.O.

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 evidence3. 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.

Tenn. Court of Appeals

1. Must file appeal w/i 30 days of Chancery decision2. 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.

Final Order

(Any party may appeal w/i 60 days of becoming a F.O.)

OR

OROR

Process – Appeal

• To Agency (Administrative Law Judge)

de novoFull blown trailResults: 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 PlanReported 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

Multiple Regression

181

Methodology: Population Growth Rate

Service Example: Mammography

182

Population Growth Rate: Mammography

Zip 1 61%

Zip 2 18%

Zip 3 11%

Zip 4 6%

Zip 5 2%

Zip 6 2%

Total 100%

Patient OriginZip 1 2.1%

Zip 2 3.3%

Zip 3 1.8%

Zip 4 2.4%

Zip 5 2.7%

Zip 6 3.1%

Total 100%

Population Growth

Zip 1 1.30%

Zip 2 0.60%

Zip 3 0.20%

Zip 4 0.14%

Zip 5 0.05%

Zip 6 0.06%

SUM 2.35 %

Weighted Average Growth

XX ==

Mammography Volume2008 2009 2010 2011 2012 2013

6,134 6,278 6,426 6,577 6,731 6,889

Prior Year x 1.0235 = Subsequent Year183

Methodology: Compound Annual Growth Rate

Service Example: Emergency Department

184

Compound Annual Growth Rate: Emergency Department

2006 2007 2008 2009

18,337 21,914 24,866 26,602

Historical ED Visits

Compound Annual Growth Rate Calculation

[ (26,602/18,337) 1/3 ] –1 = 13.2%

[ (Recent Volume/Older Volume) 1/# of Periods ] -1

2010 2011 2012 2013

30,115 34,091 38,592 43,688

Projected ED Visits

185

Methodology: Incidence Rates

Service Example: Radiation Therapy

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

Cases 744

RT Treatment % 50%

Total RT Cases 372

Treatments per Case 36

Total Treatments 13,386

Market Share 31%

Projected Treatments 4,150

Projected Treatments

187

Methodology: Provider Based

Service Example: Ambulatory Surgery

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 7,891Historical Proc/Day x Projected Days Onsite/Yr x =

Projected Proc/Year

189

Methodology: Linear Regression

Service Example: MRI

190

Linear Regression: MRI

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

MRI Procedures by Type

[ (y-intercept) + (slope)(x) ]

ExcelFunction

191

Methodology: Multiple Regression

Service Example: PET

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

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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

0.372239

-2241.4885

2846.43731

X Variable 3

-0.02918268

0.05296751

-0.55095

0.679414

-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


[ (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

• 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– Can make planning more conservative

Planning in a Regulated Environment

199

What Planners Wish Non-Planners Knew

200

What Planners Wish Non-Planners Knew

201

Final Thoughts/Questions

Questions/Comments?

202

North Carolina CON LAW UPDATE Southeastern Health Planning Symposium

Documents

Transcript of North Carolina CON LAW UPDATE Southeastern Health Planning Symposium