Certificate-of-need laws stunt ASC growth — but change in some states may be imminent 

The growth of ASCs reflects their status as a proven model for high-quality procedures and low costs, but their development faces a considerable obstacle in many markets: certificate-of-need laws. 

These laws require healthcare providers, including ASCs in many states, to receive permission to build facilities. And while many states are beginning to repeal these restrictions, hurdles remain. 

"There are still many states that have pretty restrictive certificate-of-need laws," Philip Blair, CEO of Surgery Center Services of America, told Becker's. "It would just be a huge gold rush and avenue for lowering healthcare costs if governments could give these physicians an opportunity."

The certificate-of-need approval process is lengthy and costly, and difficult for many independent physicians and small ASC groups to tackle while also facing rising costs and reimbursement declines.

ASC development closely mirrors certificate-of-need law trends. Texas, for example, has been an ASC haven for years because it has never had any such restrictions. 

Some states in the Northeast, on the other hand, have seen limited ASC growth because of certificate-of-need regulations. 

"Most of the New England states have a certificate-of-need or determination-of-need requirement to open an ASC," Prashanth Bala, vice president of ASC operations at Quincy, Mass.-based Shields Health Care Group, told Becker's last year. "Though this is not different from some other markets nationally, the regulations have led to fewer ASCs per capita than anywhere else in the country."

Developers thus tend to target states without certificate-of-need laws to maximize growth. 

Nashville, Tenn.-based Lync Health Partners, an ASC purchasing and managing company, said in 2021 it aimed to build ASCs in states without certificate-of-need laws as part of its Midwest-focused growth plan. Last year, Doug Wisor, MD, CEO of National Spine and Pain Centers, told Becker's he is using CON laws "as a backdrop" for the company's expansion plans. 

Although the ASC industry primarily consists of independent entities, some leaders said ASCs in states with certificate-of-need laws could see more consolidation than others. 

"Overall healthcare continues to see significant consolidation, but ASCs should be somewhat less impacted related to the ability of physicians to own their own facilities — up to 100 percent of a facility," Adam Bruggeman, MD, CEO of San Antonio-based Texas Spine Care Center, told Becker's. "Certificate-of-need states will see higher consolidation while those states without certificate of need should see less consolidation when compared to the consolidation we see in the hospital market."

Some states have become certificate-of-need battlefields. 

For example, North Carolina, a state experiencing high economic and population growth, is facing the obstacle of unworking strict certificate-of-need laws. A lawsuit was filed last year challenging the state's CON law. The state's Court of Appeals dismissed the suit despite criticism from one judge. 

"While counsel for defendants clearly and correctly admitted the CON statutes are restrictive, anti-competitive and create monopolistic policies and powers to the holder, and plaintiffs correctly assert the CON process is costly and fraught with gross delays and service needs are not kept current, those challenges can also be asserted before the General Assembly, commissions, and against the agency where a factual record can be built," Judge John Tyson wrote.

More recently, the North Carolina Senate proposed its budget for the next two fiscal years with a provision that would drop certificate of need requirements for ASCs in urban areas if they meet the Medicaid and self-pay threshold — 4 percent of the ASCs' revenue. 

Certificate-of-need laws in other states are also beginning to unwind. 

Hospitals in Mississippi can now establish single-specialty ASCs without obtaining a certificate of need. Under the new rule, hospitals may establish single-specialty ASCs through the submission of an application for a determination of non-reviewability. 

Additionally, South Carolina has passed a bill that requires removes certificate-of-need requirements for new ASCs, but they must provide indigent/charity care after being in operation for two years. 

Many leaders are hopeful that other states will follow suit, allowing for ASC growth in previously untapped markets. 

"Several states are also responding to the rapidly rising costs and related employer frustrations by going even further to consider abolishing the certificate of need law that has preserved hospital-based surgery, and restricted the ability for more ASCs to be built and help reduce cost of care," Michael Boblitz, CEO and chief strategy officer of Tallahassee (Fla.) Orthopedic Clinic, told Becker's. "Some states, such as Florida, already implemented this change."

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