Left - Steven Meeks Right - Bill Werkheiser

The Wayne County delegation in the state house was split on a bill last week that sought to alter how hospitals operate and what regulations they’re subject to based on who the doctors serve.

The measure did not pass, but would have dramatically overhauled the health care system better known as ‘Certificate of Need.’ Certificate of Need (C.O.N.) programs are aimed at restraining health care facility costs and facilitating coordinated planning of new services and facility construction. Many “CON” laws initially were put into effect across the nation as part of the federal “Health Planning Resources Development Act” of 1974.

The basic assumption underlying CON regulation is that excess capacity stemming from overbuilding of health care facilities results in health care price inflation. Price inflation can occur when a hospital cannot fill its beds and fixed costs must be met through higher charges for the beds that are used. Bigger institutions generally have bigger costs, so CON supporters say it makes sense to limit facilities to building only enough capacity to meet actual need or demand.

House Bill 198, sponsored by Chairman Matt Hatchett, failed in a vote of 72-94 with State Representative Steven Meeks voting in favor of the measure and Bill Werkheiser against it.

Limited government conservatives have been trying to repeal this law for years in the name of the free market, but the previous proposals have been to repeal CON in its entirety, not through a 31-page bill that offered some changes to the current law. 

Conservatives have also said that the state doesn’t have a ‘duty’ to prop up rural hospitals, but others have said the state shouldn’t impose regulations, or pit hospitals against each other.  

Specifically, HB 198, had it passed, would have:

  • Defined “freestanding emergency department” which is a stand-alone facility that offers emergency care and has no more than one inpatient bed, or is hospital owned, operates 24-hours a day, provides Medicaid services, and operates under the ‘Emergency Medical Treatment and Labor Act’ (EMTALA).
    • If the ‘freestanding emergency department’ doesn’t meet all of these requirements, it would be prohibited
    • Falls under the second definition of ‘healthcare facility’ when it comes to CON laws
  • Allowed a destination cancer hospital to convert to a general hospital (with notice to DCH) and then they fall under CON laws for both indigent care and charity requirements  
    • This is specifically for Cancer Treatment Centers of America
  • Changed the calculation of charity care as the CON requirement
    • Based on the Medicare base allowable rate for the unpaid service times 1.5  and not the hospital’s charge
    • Charity and indigent care are part of the license agreement and will be offered at the rate based on the most recent 2-year average of the state’s net uncompensated care as a percentage of their adjusted gross revenue, but not less than two percent
    • statewide average requirement is reduced by 3% if for profit
    • This begins June 30, 2019
  • Also for indigent care…if the care is by a doctor who has ownership in an Ambulatory Surgery Center (ASC like in HB 89) the care goes toward the ASCs indigent care requirement based on the % of the ownership that doctor has in the ASC (and can’t be applied anywhere else)
    • This impacts places like Optim Medical in Tattnall County (has a small ER, but mostly does outpatient ortho surgeries. It’s privately owned and before a CON lawsuit, was owned exclusively by doctors)
  • If a facility doesn’t meet the indigent care needs, the fine is as follows:
    • 1% of the net revenue for ever ½% of care NOT provided
      • Fines goes to Indigent Care Trust Fund (ICTF) for expanding Medicaid services,  propping up rural providers and PCP for indigent
    • Also faces CON revocation for part or all
      • So the plan is to repeal a license and fine if a hospital doesn’t offer care at a reduced or free rate
    • But there are exceptions to the penalties IF:
      • Facility has 40%+ that is Medicaid and 2% or more for indigent/charity OR
      • An annual inpatient rate of catastrophic injury ( spine, brain, or other paralyzing neuromuscular) patients over 60%
      • The hospital is one of the 25 rural hospitals ranked highest in financial need by DCH
  • If someone wants to object to a CON license, that can only be done by a facility that already exists, if that facility offers the same services and is within 35 miles
  • Removed the CON exception for  continuing care retirement communities that do not take Medicaid, which means these are now included
  • Added new CON license exceptions for:
    • substance abuse and mental health facilities
    • public and private psychiatric hospitals
    • Freestanding ASCs for sports training, medical and community education programs but only if they accept Medicaid and have $25 million or more annual economic impact
  • Required nonprofits and hospital-authority owned hospitals to post federal and state docs online, including financial audits and parent company information which much include allowances, charity care, and net patient revenues for the hospital. Other state and fed docs are explicitly outlined – all of these are already subject to Open Records Requests/FOIA
    • Though there has been contention about that and this bill cleans up the language about such ORR laws
  • Non-profit hospital authority board members would be subject to state conflict of interest laws governing sale and lease transactions
  • Authorities that have not operated a hospital for seven or more years, have no outstanding debt, and have a corpus of at least $20 million would be permitted to invest up to 30 percent of those funds in mutual funds or other collective investments.
  • Extended the Rural Hospital Tax Credit through calendar year 2024
    • If operating margin no greater than 15%
    • DCH shall create a manual on how to qualify and claim this credit

House Bill 198 will not move any further this session, but the language could be added to another bill to pass out of the Senate.

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