10 things for ASC leaders to know about CON programs

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Before opening an ASC in many markets, owners will need to navigate a certificate of need process. Here are 10 things for ASC leaders to know about CON programs across the United States.

1. CON laws are designed as a mechanism to control healthcare costs through the regulation of new healthcare construction and services, according to the National Conference of State Legislatures.

2. In 1964, New York became the first state to enact legislation requiring state government approval of new hospital or nursing home projects, according to the NCSL. A decade later, a federal act requiring all states to have a health planning agency review and approve – or deny – any major capital projects went into effect. The program was repealed in 1987, but not all state's immediately abandoned their CON programs; just 14 repealed CON laws.  

3. The American Hospital Association was an early supporter of CON programs. In the 1970s, the AHA started a national campaign urging states to adopt CON legislation, according to the NCSL. Many hospitals remain strong supporters of the process.

4. Today, 36 states maintain some form of CON program. What CON programs actually govern depends on the state. Some states have programs governing just a few healthcare services and projects, while others are more stringent. Governed services range from the addition acute hospital beds – regulated in 28 states – to ultrasound acquisition – regulated in just four states.

5. The opening of ASCs is regulated by CON programs in 26 states, and Washington, D.C. The following have CON laws:

•    Alabama
•    Alaska
•    Connecticut
•    Delaware
•    Georgia
•    Hawaii
•    Illinois
•    Iowa
•    Kentucky
•    Maine
•    Maryland
•    Massachusetts
•    Michigan
•    Mississippi
•    Montana
•    Nevada
•    New Hampshire
•    New York
•    North Carolina
•    Rhode Island
•    South Carolina
•    Tennessee
•    Vermont
•    Virginia
•    Washington
•    West Virginia
•    Washington, D.C.

6. The cost of navigating a CON process varies from state to state, but is generally considered an expensive undertaking. There is an application fee, as well as associated consulting fees. Here is an example of what the process could cost a North Carolina hospital, according to a Civitas Institute report.

•    Consulting fees: $25,000 to $50,000
•    Base application fee: $5,000 plus 3 percent of capital costs up to $50,000
•    Public hearing consulting fees: $2,000 to $15,000
•    Expedited review: Up to $5 million
•    Appeal: Up to $300,000
•    Total costs: $32,000 to $5.42 million.

7. ASCs can open in certificate of need states, but the process is longer, particularly for purely physician-owned centers. ASCs with a management company and/or hospital partner have more resources to successfully complete the CON process. Though joint venture centers may have an advantage, competing hospitals and health systems often rally to contest the projects, regardless of ownership. In 2014, there were several examples of contested ASC projects in CON states, many of which had to wade through the appeals process.

8. CON legislation sparks contentious debate. Supporters argue the programs do what they were intended to, lower healthcare costs and control the opening or addition of unnecessary services. On the other hand, opponents of the legislation accuse CON programs of stifling competition and argue the programs' aims would be better met through free market forces.

9. Both sides of the debate have studies to turn to for support. Ascendient Healthcare Advisors recently published a study, Analyzing the Certificate of Need Debate in North Carolina, which draws a number of conclusions that lend credence to the pro-CON arguments. The study authors state:

•    The state's residents have adequate access to regulated healthcare services
•    States with CON programs demonstrate increased hospital access for uninsured patients
•    Cost comparisons between CON and non-CON states cannot be used to conclusively argue for one side or the other
•    Higher spending in CON states is driven by differences in population health
 
Released just a few months earlier, the Mercatus Center of George Mason University released the study Certificate of Need Laws: Implications of South Carolina. The study concluded that the state's CON program failed to control healthcare costs and limited the amount of charity care provided.

10. CON drama is not limited to studies; several states have recently been embroiled in questions surrounding their CON legislation. Last year, South Carolina's program was temporarily dismantled after Governor Nikki Haley vetoed the program's funding. The program was reinstated after the South Carolina Supreme Court ruled the Department of Health and Environmental Control had to continue running the program, despite the lack of funding.

A CON reform bill was introduced in North Carolina. House Bill 200 would allow for the establishment of ASCs in the state without North Carolina Department of Health and Human Resources approval. Just a few months later, Senator Tom Apodaca (R-Henderson) proposed legislation that would eliminate the CON program.

In Georgia, physician-owners of Women's Surgical Center in Cartersville, Ga., are suing the Georgia Department of Community Health. The lawsuit alleges the state's CON legislation is unconstitutional and prevents the physicians from adding a second operating room to the center, as well as allowing more physicians to perform cases at the center.

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