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Anticipating Hospital Bed Shortages, States Suspend Certificate of Need Programs to Allow Quick Expansions

As coronavirus (COVID-19) hospitalizations and ICU bed demand surge across the country, 13 states have quickly acted to implement temporary, targeted suspensions of their certificate of need (CON) requirements for construction or expansion of new health-care facilities to remove regulatory barriers to address this critical health care need.

CON laws are state regulatory mechanisms to help determine whether building or expanding health care facilities and services in a given area is needed. Currently, 35 states have CON statutes. Generally, a health care facility submits a CON application to a state agency when it proposes to build an additional health care facility, provide a new lines of services, or increae the number and type of beds it offers. The state then reviews and determines whether to approve the proposed change.

A central assumption behind state CON legislation is that overbuilding and redundancy in health care facilities leads to higher health care costs. As a result, CON requirements can be useful tools to achieve health care cost containment. However, states are also working to ensure these cost containment tools do not inadvertently create barriers in their response to the COVID-19 crisis.

Thirteen states have taken steps to mitigate these potential barriers. Twelve state governors  (CT, GA, IN, IA, LA, MD, MI, NJ, NY, SC, TN, and VA) have issued executive orders that suspend their states’ CON requirements. These suspensions are temporary and targeted:

  • They last only for the duration of the public health emergency in their respective states; and
  • Authorize suspensions of CON requirements only to the extent needed in order to respond to COVID-19.

Vermont enacted legislation on March 30, 2020, to provide authority to the Green Mountain Care Board to waive CON requirements.

Expedited Approvals

Six states (GA, MD, MI, NY, VT, and VA) have temporarily expedited their CON approval process, but have not suspended it outright. For example, since Maryland Gov. Larry Hogan’s March 5, 2020, emergency declaration, which included a general authority allowing the Health Services Cost Commission to waive its CON statute and regulations as necessary to respond to COVID-19, the commission has granted seven expedited emergency CON applications within one to two days of their receipt. One expedited approval allows for the creation of two intensive care units, one containing 48 beds, by converting a conference room and office space, which can be re-assembled after the current state of emergency ends.

Another expedited approval allows conversion of a former nursing home and existing business center into 72 lower-acuity beds. The commission has also suspended the need for any applying facility to file a formal CON application until 30 days past the end of the emergency declaration.  These emergency CONs will remain in effect for a maximum of 165 days or until 30 days after the termination of the state of emergency.

Similarly, Vermont’s Green Mountain Care Board recently issued guidance outlining an expedited review process. Applications for an emergency CON must include a description of how the project will support or enhance the state’s ability to manage the COVID-19 emergency. The board will review applications without the typical public notice or holding a public hearing and must issue a verbal decision within 24 hours. An emergency CON will only be effective until the public health emergency has lifted, then applicants will need to re-apply for a CON under the non-emergency process.

Michigan’s temporary suspension of CON allows its Department of Health and Human Services to issue an emergency CON necessary to respond to COVID-19 without following the statutory procedural requirements. Virginia’s executive order similarly authorizes its

State Suspensions of their Certificates of Need (CON)
State Executive Order Legislation Suspension Expires when Public Health Emergency Terminates Expedited CON Approval Available Written Notice by Facilities to State – No Prior Approval Required State Has Plan to Return Capacity to Pre-Emergency Levels
Connecticut X X X X
Georgia X X X
Indiana X X
Iowa X X
Louisiana X X
Maryland X 30 days after termination of the emergency X X – Will permit retention of additional capacity for good cause.
Michigan X X X
New Jersey X X X X
New York X X X
South Carolina X X
Tennessee X X
Vermont X X
Virginia X X X

commissioner of the Department of Health to approve any increase in hospital or nursing home bed capacity needed as a result of COVID 19 – its CON regulatory requirements notwithstanding. New York’s Commissioner of Health is also authorized to approve temporary changes hospitals need to make in response to an increase in patients needing a bed without following the traditional CON procedural requirements in order to respond to COVID-19.

Georgia’s Executive Order suspends its CON statute and rules in cases where such suspensions would permit capable facilities to expand capacity, offer services, or make expenditures necessary to assist with the needs of the public health emergency. In order to implement this, Georgia’s  Department of Community Health (DCH) is requiring heath care facilities to submit written requests for suspensions of specific provisions of the CON statute and a description of the changes they seek to make. DCH is also requiring written reports confirming the actions health care facilities have taken to assist, aid, or cope with the emergency, as well as a final reporting to be provided upon the expiration of the emergency. DCH will accept these reports for 90 days following the end of the public health emergency.

No Prior Approval Required

Two states, Connecticut and New Jersey, are allowing facilities to make relevant changes that would have required CON approval without first obtaining prior approval, so long as they report the changes in writing to the regulating authority. In Connecticut, hospitals and outpatient surgical facilities that would previously have sought a CON waiver for a temporary increase in bed capacity or to temporarily suspend services now have to notify the department about the temporary increase in licensed bed capacity or suspension of services in writing.

Similarly, in New Jersey, prior department approval of temporary waivers for exceeding licensed bed capacity, bed additions, physical space requirements or changing staff qualification requirements is no longer required. New Jersey inpatient facilities that make relevant changes in response to COVID-19 are required to provide written reports to the department about which if any of the actions were taken, the duration of the implementation, and any adverse outcomes attributable to them.

In Iowa, South Carolina, Indiana, Louisiana, and Tennessee, the temporary CON suspension guidance has been more general, indicating only that these states suspend statutes and/or regulations implementing CON laws to the extent necessary to allow hospitals to temporarily increase their beds at an existing location or establish new locations, to the extent these are necessary for the treatment of COVID-19 patients. Indiana’s CON law and its emergency waiver from those requirements apply only to nursing facilities.

Similarly, Louisiana’s Facility Need Review (FNR) process applies to adult residential care facilities, home- and community-based service providers, adult day health care, hospice providers and behavioral health services. Louisiana has suspended its Department of Health’s requirement to review all FNR applications within 30 days as a means to reduce workload for LDH staff that have unprecedented other duties.

What Happens When the Crisis Abates?

CON structures that are elastic enough to permit the easy expansion and contraction of health care capacity are useful for both addressing public health emergencies and as ongoing state tools to monitor health care capacity, need, and cost. Consistent with this approach, Connecticut, Maryland, and New Jersey have indicated how or whether capacity and services will be expected to return to prior levels after the current crisis abates. Connecticut requires that any hospital wishing to retain the additional beds or suspend particular services established during the emergency will have to file a CON application consistent with the established statutory and regulatory process.

Maryland will allow extensions of the emergency CON granted beyond the end date for good cause shown, although there is no current guidance as to what criteria will be considered in that determination. New Jersey will require that once the emergency is mitigated, inpatient facilities must return to previously licensed capacity and operate within all licensure standards.  These are important considerations for states, given that unneeded capacity can contribute to high health care costs and states will likely be balancing health care costs and lower revenue streams in the coming months.

As additional states consider loosening CON requirements or extending their emergency declarations in order to respond to COVID-19, they may consider framing CON suspensions in a manner that:

  • Permits quick action;
  • Is targeted to waive only those provisions necessary to respond to COVID-19;
  • Is temporary – lasting only for the duration of the public health emergency;
  • Provides a process to reduce capacity back to pre-emergency levels; and
  • Providing an avenue for determining whether there is sufficient justification to retain the additional capacity created during the emergency.
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