Are CON State Regulators Behind the Times on their Decision Criteria?

Many states still have Certificate of Need (CON) regulations that determine if a healthcare facility can be launched. With the effect of COVID-19 on availability of surgical facilities and operating suites and recovery facilities, while the "number" of facilities may be plentiful or otherwise adequate, if they are closed to elective, scheduled, outpatient surgeries - they aren't "real". The number can be illusory if you cannot have your surgery in them.

Such was the case in North Carolina. North Carolina officials rejected Pinehurst (N.C.) Surgical Center's petition to build a $6 million to $12 million ASC in the communicy of Sanford, NC. The ASC planned to provide orthopedic surgery (e.g., knee, hip and shoulder procedures and replacements and would offer 23- hour /overnight stays. In denying the petition, North Carolina Department of Health and Human Services cited a surplus of operating rooms in Lee County.

According to the applicant for the CON, there is a measured "outmigration" from Lee County for patients seeking seek surgical care. The applicant plans to petition North Carolina Gov. Roy Cooper, seeking a reversal of the decision.?

Currently, 36 states and the District of Columbia prohibit entry or expansion of healthcare facilities through “certificate-of-need” (CON) programs.?These laws, which require government permission before a facility can expand, offer a new service, or purchase certain pieces of equipment, were enacted in the belief that restricting entry would lower health care costs and increase availability of these services to the poor. These regulations were initially enacted under the theory that unregulated market competition would drive medical providers to overinvest in facilities and equipment, raising the cost of medical care.

The first state to institute a CON program was New York in 1964, followed by Rhode Island, Maryland, California, and 20 other states over the next 10 years. In 1974, Congress passed the National Health Planning and Resources Development Act, requiring states to implement CON requirements in order to receive funding through certain federal programs. Louisiana was the only state not to implement a CON program during this time. In 1987, the federal government repealed the CON mandate, and throughout the 1980s, states began retiring their CON programs.

By 1990, Arizona, California, Colorado, Idaho, Kansas, Minnesota, New Mexico, South Dakota, Texas, Utah, Wisconsin, and Wyoming (a total of 12 states) repealed their CON programs. This left 38 states and the District of Columbia with these laws, although Wisconsin reinstated their program in 1993. Are these outdated in the face of COVID and hospital closures and cessations or pauses of elective outpatient surgeries?

By 2000, Indiana, North Dakota, and Pennsylvania had repealed their programs. This brought the number of states with CON programs to 36 (and DC). Since 2000, Wisconsin is the only state to repeal its program.

Managed care and other payors are also wondering how to set their benefits policies because if CMS moves cases to the ASC setting and won't pay (extra) to have cases performed in hospital settings where procedures and treatments are often charged at premium rates, where will plan beneficiaries have surgery? Are the networks adequate?