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N.C. Bill Would End Certificate of Need Regulation of Some Healthcare Facilities

N.C. Bill Would End Certificate of Need Regulation of Some Healthcare Facilities


Health Care Law Note
(March 13, 2015)

House Bill 200, introduced in the North Carolina Legislature on March 10, proposes to repeal provisions of the Certificate of Need law (N.C. Gen. Stat. Chapter 131E, Article 9) relating to:

  • Ambulatory surgery centers (ASC)
  • Operating rooms
  • Gastrointestinal (GI) endoscopy rooms
  • Diagnostic centers
  • Psychiatric facilities

If the bill passed, the development or establishment of the facilities listed above would no longer automatically require a certificate of need (CON). A certificate of need may still be required under other provisions of the CON law (e.g., a CON would be required if the development of a new ambulatory surgery center cost more than $2M, or for major medical equipment as part of a new diagnostic center). However, none of the services above would be limited by need determinations in the annual State Medical Facilities Plan. Therefore, in some cases a CON may not be required, and if a CON were necessary, providers could apply without waiting for a need determination. Also, applications for new operating rooms and/or psychiatric beds would no longer have to compete with other applications.

The bill also proposes amendments to the Ambulatory Surgical Facility Licensure law (Chapter 131E, Article 6, Part 4). The issuance or renewal of a license for ASCs developed, acquired or replaced after the law takes effect would require the following:

  • ASCs must report total cases by payor annually, and must report payment data for each case to the Department of Health and Human Services (DHHS).
  • ASCs must commit to maintain a specific ratio of self-pay and Medicaid relative to all collected revenues.
  • ASCs in counties with a population below 100,000 must have "written documentation of support from each hospital located within that county."

The proposed ASC licensure changes appear to be an effort to balance the interest of providers such as surgeons in establishing independent ambulatory surgery centers with the concerns of (primarily rural) hospitals that depend on Medicare and privately-insured patients to subsidize care for medically indigent and Medicaid patients. However, the proposed language regarding the required payor ratio is unclear, and the bill is silent as to the consequences for failing to meet the ratio.

In addition, in the case of an ASC in a county with a population under 100,000, the bill requires the support of the local hospital(s) for the ASC to be licensed, but would apparently allow DHHS to decline to renew the license of the ASC in future years if, for example, the hospital were no longer willing to provide documentation of support for the ASC.

The bill passed its first reading in the House and was referred to committee on March 11. It remains pending. Additional bills to amend or repeal the CON Act are expected, but no others have yet been filed.

Marc Hewitt is a partner at Smith Moore Leatherwood. He practices from our Raleigh office and can be reached at (919) 755-8776.

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