As states respond to the need for increased hospital bed capacity due to COVID-19, governors and legislatures in 22 states have waived certificate-of-need (CON) requirements – streamlining the process for hospitals to add bed capacity. These waivers have focused attention on decades-old CON laws and their utility in a changing health care landscape. The National Academy for State Health Policy’s (NASHP) 50-state scan of CON laws shows which facilities are subject to CON, the range of activities that trigger a CON review, and the information considered during review.
Last week, states received a minimum of $1.25 billion from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, Title V) to use at their discretion to address issues related to the pandemic. These dollars may be used to fund necessary COVID-19-related expenses that have not been addressed in their most recently passed state budgets and are limited to expenses that occur between March 1 to Dec. 30, 2020.
States must be sound stewards of taxpayer dollars and the need to do so now is particularly acute as states confront financial landscapes devastated by the pandemic. Federal investments are providing relief to unemployed workers, small businesses, schools and universities, hospitals, and other health care providers. Additional funding is directed to governors to parse out in a manner that further mitigates need. Their challenge is understanding that need in light of direct grants to providers so funds – whether from federal appropriation, state general funds, or other grants – can be put to the most effective use.
Billions of federal dollars have begun to flow to the nation’s hospitals to help them treat COVID-19 patients and withstand revenue losses due to delayed elective surgeries and other procedures. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act):
- Increases Medicare payments to hospitals for COVID-19 admissions by 20 percent;
- Permits the Centers for Medicare & Medicaid Services (CMS) to begin advancing three months of Medicare payments to applicant hospitals; and
- Makes $100 billion in emergency relief funds available to hospitals and providers to compensate them for COVID-19-related costs and losses.
The federal government began dispersing $30 billion of the $100 billion earmarked for hospitals on April 9, 2020.
The first order of business in this crisis is to make sure hospitals have the capacity to respond to the crisis, but accountability for the use of these dollars is important as well. Recently, Connecticut became one of the first states to put guardrails in place to guide how hospitals will use these federal relief funds. Among the questions raised about how the relief funds will be used are:
- Will the federal government set the rate to compensate hospitals to care for uninsured COVID-19 patients at Medicare levels?
- If so, will balance billing (the difference between the provider’s charge and the allowed amount) or requiring cost sharing from uninsured COVID-19 inpatient admissions be allowed?
- What will be the impact of these policies on hospital uncompensated care?
While the Families First Coronavirus Response Act prohibits cost sharing for COVID-19 testing and testing-related services by Medicare, Medicaid, and commercial insurers, it does not outright prohibit cost sharing for the treatment and management of COVID 19 for the uninsured or those covered by Medicare or commercial insurance. The nation’s insurers have largely waived cost sharing for the treatment of COVID19, which was not prohibited by the Families First Act, but the federal relief funds do not cover any losses these insurers may incur by waiving those costs. What impact will all of these expenses have on future insurance rates?
The early April dispersement of the CARES Act’s $30 billion in emergency funding to hospitals did not address all these questions. However, the terms and conditions accompanying the emergency funds stipulate that:
- Providers can use the emergency funds to pay for health care-related expenses and lost revenue attributable to COVID-19;
- Providers cannot use emergency funds to reimburse expenses or losses reimbursed by other sources, or that other sources are obligated to pay; and
- Providers must certify that they will not charge COVID-19 patients at out-of-network medical care.
The CARES Act language does not address whether hospitals will receive Medicare rates for treating uninsured COVID-19 patients or whether recipient providers will be permitted to balance bill or apply cost sharing to uninsured COVID-19 patients. While the Department of Health and Human Services has publicly stated that emergency relief funds will compensate hospitals for uninsured COVID-19 patients at Medicare rates and prohibit balance billing those patients, those specific funds together with their terms and conditions have not yet been formally issued.
On April 5, 2020, Connecticut Gov. Ned Lamont issued an Executive Order that provides guardrails for how the federal relief funds will be used by Connecticut hospitals. The order enacts a number of financial protections for patients, including:
- Prohibiting surprise billing for any emergency services rendered to any insured patient and requiring carriers to pay out-of-network providers an in-network rate;
- Prohibiting providers from billing an uninsured COVID-19 patient for treatment and management services at more than the Medicare rate;
- Prohibiting providers from collecting facility fees from uninsured COVID-19 patients for treatment and management of COVID-19;
- Prohibiting hospitals from billing any individual not otherwise covered by any public or private health plan for COVID-19 treatment and management unless clarified by a future executive order regulating distribution of federal funding that may be made available to cover such services; and
- Requiring each hospital, health system, or hospital-based facility to maintain records to identify services provided to uninsured patients for COVID-19 treatment and management and make the records available for claiming federal reimbursement.
These actions will permit Connecticut to provide additional financial protections for the uninsured as well as to monitor use of federal emergency relief dollars received by hospitals.
The National Academy for State Health Policy will be monitoring these activities and providing additional analysis. States are benefitting from crucial federal investment in the nation’s hospitals and health care providers, but knowing how those dollars are spent in each hospital will be important to payers and policymakers as they review hospital costs and insurance rates in the future.
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.
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|
|Maryland||X||30 days after termination of the emergency||X||X – Will permit retention of additional capacity for good cause.|
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.
Highlights of States’ Nonprofit Hospital Reporting Tools
- Its certificate of need (CON) process requires hospitals to identify community benefit dollars spent on specific needs identified by the community health needs assessment (CHNA).
- Hospitals must document both actions takenand dollars spent on meeting identified needs.
- Hospital reporting is mandated in CON agreements for merging hospitals and required for duration of the CON.
- Hospitals are required to submit the above to the Office of Health Strategy during the CON process.
- Community benefit reports from hospitals include copies of the most recent CHNA and implementation plan.
- Hospitals provide self-assessment on local and regional partner engagement and success in helping to address the significant needs documented in the CHNA.
- Reports include details of community benefit expenditures and how they have addressed community needs.
- An optional supplemental report enables hospitals to document ways in which they are acting as an anchor institution in their community.
- The report is requested – not required – by Office of the Attorney General.
- Hospitals define the community area and population served by their community benefit spending.
- The report includes identification of community needs from the most recent CHNA as well as other community characteristics that led to spending decisions.
- The report includes a specific breakdown of how community benefit dollars were spent and on what activities.
- Reports include lists of the community representatives engaged in the community benefit process.
- Submission of the report is required to the Office of the Attorney General, Charitable Trusts Unit.
- Hospitals prioritize community needs identified in their CHNAs and indicate which budget resources will be used to address the needs.
- Reports describe how reported community benefit funds from the Form 990 Schedule H relate to the community assessment and implementation plan.
- Hospitals are required to submit reports to the Green Mountain Care Board.
NASHP will continue to convene its community benefit workgroup and support and report on states’ leading work in this area.
Support for this work was provided by the New England States Consortium Systems Organization (NESCSO) and the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the foundation or NESCSO.