A Look at the State’s CON Program

Last year, members of the 108th Regular Session of the Tennessee Legislature voted unanimously to extend the life of the Health Services and Development Agency through June 30, 2017. This action ensured the state’s certificate of need (CON) program would continue, uninterrupted, into its 44th year.

History of Tennessee’s Program

Melanie M. Hill, executive director for the Tennessee HSDA, noted the state has relied on a CON program to drive the orderly creation and expansion of health facilities and services since 1973, a year prior to a federal mandate for such programs. In Tennessee, the Health Facilities Commission administered the CON program until 2002 and was the predecessor to the current agency. Hill joined the Health Facilities Commission in 1998 and was named to the director’s post in 2001. The following year, the Tennessee Legislature passed the Health Services and Planning Act of 2002, which created HSDA.

“Our sole responsibility is the certificate of need program and related activities,” Hill said, adding that includes providing technical assistance and collecting data on certain medical equipment including MRIs, PET scanners, CT scanners and linear accelerators, among others. “There is a requirement in the statute that the equipment be registered with the agency and that owners report usage data annually.”

After establishing CON programs nationwide through the 1974 National Health Planning and Resources Development Act, the law was repealed in 1987, eliminating federal funding assistance for state planning offices. However, CON programs remain in place across much of the country. “There are 36 states plus the District of Columbia that have certificate of need programs,” Hill stated. She added each state is different with some having more stringent requirements than others.

According to the American Health Planning Association’s website, there are 30 coverage areas for which state programs might choose to require a CON. On one end of the spectrum, Vermont requires an application be made for all 30 of those options from acute hospital beds and air ambulances to medical office buildings and ultrasound. On the opposite end of the spectrum, Ohio requires an approved CON only when adding skilled nursing/long-term care beds for projects exceeding $2 million in cost. With 20 service and equipment areas covered by CON regulations, Tennessee falls a little right of the middle.

Application Trends

The economy and uncertainty over the Affordable Care Act have impacted the number of CON applications being filed in the state. Hill said, “We used to average 100-120 applications annually.” Now, she continued, “We’re probably looking more in the range of five full applications a month.”

She added, “In 2008, we dropped from 121 applications to 56 in 2009.”

After rebounding slightly to 62 CON applications in 2012, the number dipped down to 51 last year.

Gaining Approval for a CON

At the heart of the approval process is the need to meet three criteria:

Answering a healthcare need,

Proving a plan is economically feasible, and

Showing how the plan contributes to the orderly development of adequate and effective healthcare facilities and services.

Actually, Hill noted, “Most applications are approved. It’s a fairly strenuous process so you really have to have your information together by the time you file.”

Prior to filing an application, Hill said her agency could provide technical assistance to help navigate the process, important background information regarding utilization for those considering adding equipment or services, and insight into needs outlined in the state health plan.

Although applications are assessed against the state health plan, which outlines the numbers that would indicate a community might need to add a facility or service line, Hill was quick to add there are valid reasons to override those numbers … or lack thereof. “That’s why it is guidance and not set in stone,” she said of the health plan. Hill added, “I hope we’re never strictly ‘just numbers.’ There are certainly circumstances in each community that are unique to that community.”

For example, she said population figures alone might not warrant the addition of a second MRI in a community. However, she continued, if the owner of the current MRI doesn’t accept many insurance plans, or doesn’t participate in TennCare, or has excessive wait times for appointments, then circumstances could demonstrate a need for a second MRI operator in that area.

Hill added the monthly CON meetings are open and transparent … and highly participatory. She said those for and against an application are welcome to come to the meeting and are given an opportunity to speak. She added that when an application is controversial, her team has even held town hall meetings to allow residents to voice concerns. She noted this extra step isn’t requested very often, though.

Ultimately, an 11-member board decides the fate of a CON application. There are three consumer appointees — one each from the speaker of the house, governor and lieutenant governor. Three more board members are state officials with the comptroller, commissioner for Commerce and Insurance and the director of TennCare each designating an appointee. The remaining five board members are chosen by the governor with one each being selected to represent home health, surgery centers, nursing homes, hospitals and physicians. While the related associations often provide a list of possible appointees, the selection is at the governor’s discretion.

The Big Picture

Although various groups have looked to limit or abolish the CON process, particularly during years when HSDA is under sunset review, there are many staunch supporters of the system. The Tennessee Hospital Association listed keeping the CON program running in its current format among its top legislative priorities last year.

“In Tennessee, we’ve had a CON program for 40 years. It’s a very stable process, and it’s one the healthcare industry understands,” Hill said. “I think it’s a growth management tool, and also it’s a cost savings tool.”

Hill said perhaps one of the most important functions of her agency is to help ensure quality programming is available in Tennessee. The impact of the CON process on cardiovascular surgery outcomes has been the focus of a number of studies. Hill said, “A 2002 report from the University of Iowa College of Medicine showed states without CON programs for open heart surgery had a 21 percent higher mortality rate.”

Similarly, she continued, when the Pennsylvania CON law expired, the state saw an influx of open heart surgery programs … quickly growing from 35 to 62. “They saw morbidity and mortality increase,” Hill said. “Any time you see that dramatic growth, you are decreasing volume for surgeons.” Less volume … less experience, she pointed out.

Hill concluded, “You still have people who say the CON process is anti-competitive, but it’s really not … it provides a level playing field.”

What Requires a CON?

As outlined by Tennessee code, certain facilities, services and actions trigger the need for an approved certificate of need before proceeding. Visit Tennessee.gov/hsda for more information.

Facilities

Threshold: A modification, expansion or renovation in excess of $5 million for a hospital or $2 million for other healthcare facilities.

Hospital

Nursing Home

Recuperation Center

Ambulatory Surgery Center

Mental Health Hospital

Intellectual Disability Institutional Habilitation Facility

Home Care Organization (Home Health & Hospice)

Outpatient Diagnostic Center

Rehabilitation Facility

Residential Hospice

Nonresidential Substitution-based Treatment Center for Opiate Addiction

Birthing Center

Addition of Services

Burn Unit

NICU

Open Heart Surgery

Positron Emission Tomography

Swing Beds

Home Health

Psychiatric (Inpatient)

Rehabilitation (Inpatient)

Hospital-based Alcohol & Drug Treatment (for adolescents under a program of care exceeding 28 days)

Extracorporeal Lithotripsy

MRI

Cardiac Catheterization

Linear Accelerator

Hospice

Opiate Addiction Treatment (provided through a facility licensed as a nonresidential substitution-based treatment center)

Actions

In addition to the cost triggers listed under facilities, the following actions also require CON approval. Go online for details.

Change to the bed makeup of a healthcare institution.

Change in location or replacement of existing or certified facilities providing healthcare services, major medical equipment, or healthcare institutions.

Change of parent office of a home health or hospice agency from one county to another county.

Acquisition of major medical equipment with a cost in excess of $2 million.

Discontinuation of obstetrics.

Closure of any hospital that has been designated a critical access hospital or the elimination of any services for which a certificate of need is required in those hospitals.

Prior Approval or Notification

Additionally, there are some actions that require individuals to notify or seek prior approval from the Tennessee HSDA even though a formal CON is not required. Details are available on the HSDA website