Tennessee Revises Certificate of Need (CON) Requirements

The Tennessee General Assembly passed a bill last week that modifies the state’s CON requirements.

The bill makes several changes to the existing law, including exempting more healthcare providers from needing to apply, while keeping most of the current CON requirements for outpatient diagnostic centers and ambulatory surgery centers intact. The bill received the signature of the House Speaker on May 11, 2021, and requires the Governor’s signature to become law. Once signed, the revised bill will take effect on October 1, 2021.

Many of the changes are in response to the opioid crisis and COVID-19 public health emergencies, so the new bill aims to streamline the process, reduce the types of providers that must apply, and increase access to certain healthcare services in the state. However, the bill also makes some progress toward the goal of some in the General Assembly to further deregulate the CON process, following in the footsteps of some states that have eliminated CON laws. The bill creates a host of revisions and additions, so the following highlights the major changes.

Newly Exempted Healthcare Providers and Services

Among newly exempted providers are mental health hospitals, recuperation centers, and hospital-run outpatient treatment centers for opioid addiction. Additionally, home health agencies serving children and adolescents, and home health and residential hospice agencies operated by healthcare research institutions, will also be exempt. The law exempts non-pediatric Magnetic Resonance Imaging Services and Positron Emission Tomography Services in counties with populations higher than 175,000.

Existing hospitals can increase their number of beds without a new CON, but cannot add beds for new types of services not previously provided. Additionally, hospitals cannot add additional beds at satellite locations. More details regarding the exemptions for hospitals are discussed in the hospital section below.

The bill creates an exemption from all CON requirements in economically distressed counties that do not already have an existing licensed hospital. Currently, those counties are Lake, Clay, and Grundy. In counties that had a hospital close, a new buyer can come in to reopen without applying for a new CON. According to the Tennessee Hospital Association, Tennessee has experienced nine hospital closures since 2012 — the second-highest rate in the United States.

CON Fee Changes

While the new bill does exempt more providers, it also increases fees: hospitals would see the most dramatic increases in annual fees. Hospitals would have to pay up to $5,000 in annual fees, up from an annual cap of $300. Likewise, ambulatory surgery centers and outpatient diagnostic centers will have to pay $2,000, up from $100, a 1900% increase. Hospice services, home health services, and nonresidential substitution-based treatment centers for opiate addiction fees all face increases, too. However, the fees were not increased for a residential hospice, birthing center, mental health residential treatment facility, or intellectual disability institutional rehabilitation facility.

Hospitals

This bill authorizes the establishment of a hospital without a CON in certain limited circumstances, including that the hospital was previously licensed or another hospital was previously licensed at the proposed location. The hospital must be located in a county with a population of less than 49,000 and the last date of operations at the former entity must have been no more than 15 years prior to the date on which the party seeking to establish the hospital submits information. Additionally, hospitals may move small distances without restarting the CON process.

The bill did not eliminate the requirement for a free-standing emergency department to obtain a CON that was considered for elimination in 2019 but added a requirement for a hospital’s satellite inpatient facilities to obtain a CON. The new exemption for hospitals to operate a non-residential substitution-based opioid treatment center requires the program to be certified and located on the hospital’s campus.

Additional Changes

• The new bill creates an official requirement that outpatient diagnostic centers become accredited by the American College of Radiology and adds an annual reporting requirement for individuals who perform cardiac catheterization, open heart surgery, organ transplantation, operation of a burn unit, operation of a neonatal ICU, home health services, or hospice services.
• Home health agencies under the bill can relocate their primary offices to another county within their license service area without a CON. The bill provides flexibility to all CON holders to relocate short distances with a request for administrative approval.
• To oppose a CON application, providers must be within a 35-mile radius of the proposed project, and opposing institutions must provide advanced notice, as well as the grounds for opposition,to the Department of Health Services and Development Agency (“HSDA”).
• The bill directs the Executive Director of the HSDA to submit a plan by 2023 to consolidate the powers and duties of the HSDA with those of the Board of Licensing Health Care Facilities. The bill streamlines and expedites the CON application process to reduce the amount of time to process an application.
• The bill creates an emergency CON where an unforeseen event necessitates action of a type requiring a CON and the public health, safety, or welfare would be unavoidably jeopardized by compliance with the standard procedures.

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