Tennessee’s Legislature on Friday passed a sweeping bill that exempts more health providers from certificate-of-need requirements.
Under the bill, mental health hospitals, and hospital-run outpatient treatment centers for opioid addiction would no longer need to apply for CONs to open. Existing hospitals could also increase their number of beds, but not add new types of bed capacity for services not already performed. Hospitals also would be prohibited from adding additional beds at satellite locations.
CON laws require a formal approval for health providers to demonstrate community need before adding certain services or beds, with the goal of increasing competition and limiting unnecessary services. But hospitals and other critics say the laws just protect regional monopolies and stifle innovation. Thirty-five states and the District of Columbia have certificate-of-need regulations.
Many states suspended CONs during the pandemic, and the Tennessee bill aims to streamline the application process and decrease the number of services and types of providers that must apply to open or expand.
For instance, HB 948 creates an exemption from all CON requirements in counties deemed economically distressed that don’t already have an existing hospital. In counties that had a hospital close, a new buyer can come in to reopen without applying for a new CON. Home health agencies serving children and adolescents will also be exempt, as well as agencies operated by healthcare research institutions.
The bill, however, increases existing fees and establishes new fees for healthcare providers. Hospitals, depending on size, will have fees increased from up to $300 to up to $5,000, and ambulatory surgical centers will have to pay $2,000, up from $100. In 2020, the Tennessee Legislature proposed removing CON requirements from ASCs and outpatient diagnostic centers, but this bill keeps them in place. The higher fees are expected to bring the state up to $1.3 million in net revenue per year. The bill would also expedite the CON application process from 135 days to 60 days.
Nursing homes would be particularly hard hit by the changes. The bills would extend the prohibition on new beds through 2025, though 125 Medicare skilled nursing facility beds per year can be added. SNF CONs will be valid for three years, instead of two, and the bill makes it easier for these facilities to relocate beds and services to nearby locations.
“This is not a simple deregulation of CON, instead they’re making a lot of changes, some of which loosen restrictions up and some that do the opposite,” said James Bailey, a health economics researcher at Providence College in Rhode Island.
There is some movement nationwide to do away with CON laws. New Hampshire fully repealed its CON program in 2016 and now solely uses a licensure process. In Florida, the legislature exempted some facilities and services after a full repeal attempt failed. Hospitals and other providers generally see CON laws as stifling, and a wave of lawsuits over the past year were filed in courts that point to states that waived CON laws in preparation for adding or converting beds to prepare for COVID-19 cases. Meanwhile, there’s mixed research on whether CON laws actually help deal with competition and impact quality.