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April 8, 2024

Fix or nix? CT’s ‘certificate of need’ law under scrutiny

SHAHRZAD RASEKH / CT MIRROR Manchester Memorial Hospital is one of three hospitals owned by Prospect Medical Holdings in Connecticut. Yale New Haven Health has made a bid to buy the three facilities, but is still negotiating a price with Prospect. A certificate of need for the deal took 16 months to approve.

For more than a year, health care workers, patients and lawmakers called on Connecticut officials to approve the sale of three hospitals to Yale New Haven Health — a deal considered crucial to the survival of the Manchester, Waterbury and Vernon facilities.

The hospitals were struggling financially and in danger of closing, many argued, leaving health care workers without jobs and patients with longer drives for emergency care.

In March, 16 months after Yale filed for a “certificate of need” that would allow the deal to go forward, the state’s Office of Health Strategy approved the sale. 

But the long wait time put a spotlight on Connecticut’s decades-old certificate of need program, with lawmakers now mulling how to improve it — and questioning whether it’s even needed.

“This should be a cautionary tale,” Rep. Jason Doucette, D-Manchester, said of the Yale acquisition of three hospitals owned by Prospect Medical Holdings, including one — Manchester Memorial — in his district. “We should reopen the whole certificate of need process and take a look at completely overhauling it.”

“The CON process is, I don’t want to say despicable, but it is terrible,” Rep. Lezlye Zupkus, a Republican whose district includes Waterbury, said at a recent Public Health Committee meeting. She later added: “Let’s fix the process or do away with it.”

Advocates and lawmakers point to prolonged waits for certificate of need authorization. Some say the process limits competition by denying applications for new services. Others say it creates unnecessary delays in patient care. And for those who curtail services without state approval, there is little penalty.

Legislators are considering at least four bills that would make varying degrees of change to the process, from tightening approval timeframes to eliminating certificate of need authorization for the purchase of certain medical equipment.

In interviews, some have suggested wiping out the program, either wholesale or for certain transactions.

Deidre Gifford, head of the state’s Office of Health Strategy, which runs the CON program, conceded the process takes too long, but she defended its merit.

“We should make sure the system is transparent, efficient and effective,” she told lawmakers at a public hearing. “But I don’t think we agree that eliminating CON altogether for some of these services is the right step.”

How the certificate of need process works in CT

The certificate of need is a regulatory program that requires providers to obtain state approval before making substantial changes in the health care sector, such as mergers, large purchases of equipment or facilities, or shuttering services.

The process works like this: Health care providers submit an application, and the agency eventually issues a final decision about whether the proposal can move forward. In between, OHS reviews the application to ensure it’s complete and may hold a public hearing to give residents the opportunity to comment.

Proponents of the program say it protects access to services, ensures continuity of care, prevents expensive duplication and gives residents a voice in their care options.

Connecticut implemented its CON in 1973, becoming one of 15 states at the time to impose this type of oversight.

Today, 35 states and the District of Columbia run certificate of need initiatives, with conditions varying broadly by state. A handful operate programs that are similar without officially being designated as certificate of need laws, according to the National Conference of State Legislatures.

The Connecticut Mirror compiled and analyzed all CON applications that resulted in a decision since 2018, excluding any that were withdrawn or still in review. In that time, the state has ruled on 115 applications in total. The median number of days from application submission to decision was 234, or roughly seven and a half months.

The CT Mirror’s analysis found that applications for the establishment of a new facility or service take the longest, with a median of 378 days from the time a provider submits an application to the day the agency issues its decision. In comparison, terminating a service took a median of 211 days. Applications to acquire new equipment, such as a CT or MRI scanner, took a median of 251 days.

Health officials have raised concerns about extended timelines impacting patient care. If there is a demand for additional services to treat substance abuse or mental health issues, for example, they argue approvals should be swift.

“It takes too long to get a certificate of need, and I think it’s an issue that is widely accepted,” said Jim Iacobellis, senior vice president of government and regulatory affairs for the Connecticut Hospital Association. “We need more access. We need more capability to serve the patients.”

Gifford acknowledged the timelines are long and said the agency is ready to work with legislators to improve them. But, especially for complex applications, it can take time to conduct a thorough review. There has been a “steep decline” in the timelines in recent years as the agency increased staffing and worked through a backlog of applications brought on by COVID, she said.

An analysis OHS conducted of its own timelines shows a 60% decline in the median number of days to process an application between 2021 and 2023. The office had vacancies in more than half of its CON positions during the height of the pandemic and immediately after but has since filled many of the jobs and added new positions.

“We’re certainly open to thinking about ways to streamline the process, but we don’t want to give short shrift to the information we need to make a good decision,” Gifford said in an interview.

Some of the other factors that prolong the process are beyond the agency’s control, she said.

For example, OHS receives incomplete applications, requiring staff to go back and forth with providers and request additional materials before the review can begin. The CT Mirror’s analysis showed that it took a median of 111 days from an application’s submission to when it was deemed complete and a median of 107 days from the completion of the application to OHS’ final decision.

Additionally, public hearings, which allow residents to comment on CON proposals, also contribute to the timelines. It’s not uncommon for applicants to request hearing date changes, which can cause delays, Gifford said in emailed comments. The agency also has to give the applicant time to submit additional materials that hearing officers request. Though cumbersome, it would be “contrary to the public interest” to eliminate this part of the process, she said.

OHS can fine entities that fail to obtain a certificate of need before taking actions that would require one, such as terminating services or opening a new facility. But it’s rarely done so. Since 2018, it has only used this enforcement mechanism once, when it levied a $20,000 fine against a clinic for acquiring a PET scanner without permission.

The agency considered issuing fines on three more occasions to hospitals that terminated services without seeking approval. Windham Hospital and Johnson Memorial had been cited for shuttering birthing units and Johnson Memorial for halting surgical services. In each case, OHS sent a notice of civil penalty, which the hospital then appealed and the agency ultimately decided to waive.

When asked why the agency issued a penalty for acquiring a scanner but not for terminating services, Gifford explained that, until last year, OHS had to prove that a company “willfully” failed to seek a certificate of need.

“Whether someone has acquired a piece of equipment is much faster and easier to discern than if a facility has willfully failed to seek CON approval to terminate a service,” Gifford said in emailed comments.

But a law enacted last year expands OHS’ ability to levy civil penalties in more situations and lowered the burden of proof required to impose them from “willful” to “negligent.”

OHS leaders have proposed their own series of reforms, including changes that would give the agency more oversight over physician practices.

“We have generally heard support for the idea of the CON program,” Gifford said. “Listening to people, they may start with a gripe about the program, but they often circle back to, ‘I wish you did more of this,’ or, ‘I wish we were also reviewing this type of transaction.’”

Changes proposed

Several states have passed certificate of need legislation in recent years, with some rolling back oversight to focus only on long-term care facilities.

Twelve states have fully repealed their CON programs. New Hampshire was the most recent, in 2016, according to the National Conference of State Legislatures.

For now, Connecticut legislators have not floated bills that would dismantle the program. But the measures pending before the General Assembly would make sweeping changes.

A proposal raised by the Public Health Committee would reduce timeframes for certificate of need decisions and amend the types of transactions that require CON approval.

The bill would shorten the timeframe for review and decision on a CON application once it is deemed complete to 30 days, down from 90. It would also reduce the timeframe that an intervener or member of the public has to request a hearing to 10 days, down from 30, and the time for issuing a decision after a hearing is closed to 20 days, down from 60.

It would require a certificate of need for certain investments in health care facilities by private equity companies, such as when a private equity firm acquires a controlling interest in a hospital or large group practice, and for the relocation of outpatient, behavioral health or women’s health care services outside of the municipality they’re currently located in.

It would also waive CON approval for certain services, such as the establishment or expansion of cardiac surgery, psychiatric units, substance use disorder units and rural health services.

A measure proposed by OHS would give the agency greater oversight over the physician practice landscape by establishing annual reporting requirements for certain physician offices and removing exemptions for CON review of large group practices.

Two other bills deal with private equity investment and transfer of ownership. Advocates have expressed concerns about the proliferation of private equity and for-profit involvement in the health care market, including Prospect Medical’s takeover of three Connecticut hospitals and subsequent cuts to facilities.

One proposal would require a CON for transfer of ownership in any entity that controls a 20% interest in a health care facility or group practice. It would also remove CT scanners from CON review. The other would require OHS to develop a plan for private equity firms buying or holding an ownership interest in facilities licensed by the state Department of Public Health.

Officials with Prospect Medical did not respond to a request for comment.

Sen. Saud Anwar, a South Windsor Democrat and co-chair of the Public Health Committee, said part of the issue with the current process is it’s too cumbersome in cases where providers want to add services and too lenient when they want to cut them. 

He has suggested tightening the timeframe to 30 days from the time an application is deemed complete — when all materials are in and approved — to a decision being issued. For a fast-tracked application, that timeframe could be as quick as two weeks, he said.

“This is a bipartisan issue. I’ve heard my Democratic colleagues and Republican colleagues both speak passionately about the fact that this isn’t working,” he said. “More or less, every town has had some negative situation develop for the citizens because of the CON process.”

Rep. Tammy Nuccio, R-Tolland, said a key improvement she hopes to see is enhanced enforcement over health care companies that have come to dominate the state.

“There are problems for me in the CON process, but it’s more around enforcement — making sure people follow through with what they’re supposed to do and that we are actually using it to increase affordability and access,” she said. “I don’t feel like we are.”

Nuccio represents the town that includes Rockville General Hospital, which has seen severe service cuts since its acquisition by the for-profit Prospect Medical Holdings. She said hospitals claim that consolidation will improve accessibility and affordability, but that hasn’t been the case for her constituents.

“We’ve never seen that. The only thing we’re seeing is less services that cost more money,” she said. “I really challenge you to find a rural hospital that is better off after being purchased.”

Rep. Tom Delnicki, R-South Windsor, said CON decisions should not exceed 90 days.

“We need to come up with changes,” he said. “Manchester Memorial Hospital is the closest hospital to the people I represent. Manchester Memorial is sitting in the lurch.”

Though a CON approval was recently issued for the sale of Manchester Memorial and two other Prospect Medical-owned hospitals to Yale New Haven Health, Yale and Prospect have not yet agreed on a final purchase price.

Delnicki said the CON decision took too long.

“It’s not right,” he said. “There has to be a hard and fast timeline on certificates of need.”

Should there be a certificate of need program in Connecticut?

Several legislators have questioned whether the program should continue in Connecticut.

Rep. Mark Anderson, R-Granby, sent a letter to leaders of the Public Health Committee in February requesting legislation that would eliminate CON approval for the expansion of health care services.

In an interview, he said he envisioned that as a first step in wiping out the certificate of need program.

“I think it should go away completely,” he said. “This was a proposed incremental step.

“People are afraid to commit because it’s a double-edged sword. Sometimes [CON] helps them, sometimes it hurts them. But looking at it from the patient, medical consumer standpoint, it drives up costs.”

Sen. Ryan Fazio, R-Greenwich, pointed to research showing that, across the country, certificate of need programs have mostly failed to limit spending or improve quality and access. From his perspective, certificate of need and other “red tape” increases consolidation.

“The Yale New Havens of the world are going to have the administrative, the legal, the lobbying capacity to manage that, whereas a smaller or medium-sized provider is not,” said Fazio, who said he spoke with a substance abuse treatment facility in his district that had to delay its opening by at least a year because of technical issues with obtaining a certificate of need.

Jaimie Cavanagh, legal policy counsel with the Pacific Legal Foundation in Sacramento, Calif., has reviewed certificate of need laws across the country and said many reduce access to care by limiting facilities, technology and investment.

“What the data shows us is certificate of need laws decrease access to care,” she said. “We also know they increase costs. This is true … whether you’re looking at per-procedure costs or overall per capita health care spending in states. It’s true for certain Medicare and Medicaid reimbursement rates — they actually go up in states that have certificate of need laws. It’s true for hospital fees.

“You can break it down different ways, but costs are worse and higher in states with certificate of need laws.”

Deb Grabowski served on the now-defunct certificate of need board in New Hampshire, which repealed its CON program in 2016. By that point, the board approved projects so long as applicants submitted all the required materials, and the process was not serving any purpose of controlling competition or cost, she said.

For the most part, Grabowski said, she doesn’t believe the program’s repeal had a detrimental impact on the state’s health care landscape, except perhaps in one area.

“From my point of view, the value for the CON was primarily related to preserving services in rural areas,” she said. New Hampshire experienced cuts to rural health care services, particularly labor and delivery.

A man in a suit stands at a podium speaking into a microphone. Doctors in white coats stand behind him.

But Grabowski said the board had little guidance on the state’s goals for health care delivery, such as how many labor and delivery units or intensive care units were needed within a certain geographic area.

“That would have been very helpful to us, because we would have been able to use it as a benchmark,” she said. “We would have had more teeth.”

Connecticut has a state facilities and inventory plan, and OHS analyzes each certificate of need application for compliance with the plan. However, it hasn’t been broadly updated in over a decade. It also focuses more on how to control the proliferation of services, rather than how to prevent cuts.

An updated plan, set for release in June of this year, will include an assessment of geographic areas and groups of people that may have reduced access to certain types of services, Gifford has said.

During a public hearing in March, Gifford said abolishing the CON altogether is not the answer.

“The reason most states continue to have a CON program is because [they] agree in order to balance the market with the needs of the population, some degree of oversight is appropriate,” she said. “I see many states looking to understand and catch up with what’s been happening in the market, not retreating.”

What’s next?

The four bills that would impose certificate of need changes were passed recently by the Public Health Committee and are headed to the House or Senate.

Anwar said legislators have been meeting with OHS officials to negotiate amendments to the proposals. With budget constraints this year, rather than adding positions to help speed up decisions, Anwar said more transactions may need to be exempted from certificate of need approval.

“Some of the efficiencies and process improvements may require more personnel,” he said. “If we do not have the resources to increase personnel, then we would have to try to increase exemptions.”

Lawmakers are also considering adding language that would allow applicants to have conversations with OHS before seeking CON approval. 

“There could be a navigator or somebody to guide them in advance on what the process looks like and how they can make it efficient,” Anwar said.

Lawmakers have five weeks to vote on the bills. The legislative session ends May 8.

But given the lofty changes advocates and elected officials have suggested, lawmakers say reform of the certificate of need program will probably continue for years.

“With such a large issue that looks at balancing the needs of how we assure safety, access, transparency and equity for our residents … we will likely be continuing these conversations in future sessions,” said Rep. Cristin McCarthy Vahey, D-Fairfield, co-chair of the Public Health Committee. “This is very much an ongoing conversation.”

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