Proposed Bills Spell Big Changes for CON Law in Connecticut
Proposed Bills Spell Big Changes for CON Law in Connecticut

UPDATED May 14, 2024

NOTE: The legislative session of the Connecticut General Assembly ended on May 8, 2024. The bills discussed in this blog did not pass. We will be monitoring new developments in the law regarding Certificates of Need and provide updates in future posts.

Both institutional health care providers and group practices should take note of three bills that are making their way through the Connecticut General Assembly. If signed into law, these bills would, among other things: (1) add to the transactions that require a certificate of need (CON), while eliminating other transactions from the CON process, on a temporary or permanent basis; (2) modify the criteria the Health Systems Planning Unit (HSPU) must use when reviewing CON applications; and (3) shorten the review periods for CON applications.

Public hearings have been held on each of these bills. The legislative session adjourns on May 8, 2024 so we should know within the next month if these bills become law.

Except as noted, all changes would be effective October 1, 2024. We have adhered to the bill numbers throughout. Changes to bill numbers as bills proceed may be found at the various links.

SB 440: An Act Concerning Certificates of Need

SB 440 would add the following to the list of transactions that require a CON under CGS §19a-638(a):

  • The relocation of outpatient, behavioral health care, substance use disorder, women's health care or emergency medical services outside of the municipality in which such services are currently provided. Note, however, that with respect to outpatient services only, the bill also adds a provision eliminating the requirement for a CON for a relocation within the same municipality or not more than 20 miles from the current location. (Section 1(a)(16)).
  • Certain investments in health care facilities by a private equity company in which the private equity company acquires a controlling interest or otherwise obtains the ability to exercise control or decision-making authority over the facility. (Section 1(a)(17)).
  • A transaction in which a private equity company acquires a controlling interest in a large group practice of 10 or more full-time equivalent physicians, or otherwise obtains the ability to exercise control or decision-making authority over the large group practice. (Section 1(a)(18)).
  • A transaction involving a private equity company in which a health care facility's assets would be increased or reduced. (Section 1(a)(19)).

SB 440 would add the following transactions to CGS §19a-638(1)(b), for which a CON would not be required:

  • On or before June 30, 2030: (A) the establishment or expansion of diagnostic or therapeutic cardiac catheterization or cardiac surgery units, psychiatric units, substance use disorder units or rural health services; (B) upgrades to radiologic technology; (C) an increase of behavioral health beds for children; (D) an increase in capacity for existing services offered by a health care facility; and (E) an increase in the number of operating rooms at a health care facility existing on or before October 1, 2024. (Section 1(b)(26)).
  • In light of Section 1(a)(16), a CON would no longer be required for the relocation of outpatient services within the municipality in which such services are currently provided, or not more than 20 miles from the current location at which such services are provided. (Section 1(b)(27)).
  • An increase or reduction in the licensed bed capacity of a health care facility of not more than 12 beds within any two-year period. (Section 1(b)(28)).

SB 440 would also enact the following noteworthy provisions related to the CON process:

  • The bill would allow an applicant, prior to submitting the CON application, to request an informational meeting with the HSPU to discuss the requirements of the application process, to be held not later than one week after the date the HSPU receives the applicant's request. (Section 2(b)).
  • The bill would implement shorter time periods within which the HSPU must review an application, implementing 20 and 30 days deadlines, and would deem an application approved if the HSPU did not issue a decision prior to the expiration of the applicable period. The bill would permit a short extension (20 days) of the review period upon request or for good cause shown, and would also permit an applicant to request an expedited timeline (14 days after submission of a completed application) for determination on a CON application. (Sections 2(d) and 2(g)).
  • Shorter timeframes for requests for a public hearing and a shorter timeframe within which the HSPU must notify the applicant and the public of the hearing would be implemented. (Sections 2(e) and 2(f)(2)).
  • The bill would allow the HSPU to contract with independent consultants or other persons to assist in reviewing and issuing decisions on CON applications. The executive director of the Office of Health Strategy (OHS) would be required to post the costs incurred as a result of these contracts on its web site not later than July 1, 2025 and quarterly thereafter. (Section 2(h)(2)).
  • The bill would transfer responsibility for conducting cost and market impact reviews for certain hospital ownership transfers from the HSPU to the Attorney General. (Section 4).
  • A new provision, which would be effective from passage, would require OHS to conduct a study regarding the CON process in Connecticut and to report to the General Assembly on the results of the study not later than January 1, 2025. (Section 3).
  • An insurance company that invests in any institution, as defined in CGS §19a-490, would be prohibited from exercising operational control, managerial control or decision-making authority relating to the institution's delivery of health care services. (Section 5).

SB 9: An Act Promoting Hospital Financial Stability

SB 9, introduced to the General Assembly at the request of the Governor, would, among other things, increase the State’s oversight of transfers of ownership involving hospital systems, large group health care practices and health care facilities. SB 9 would also make significant revisions to the CON process, which we’ve outlined below.

  • Changes to Transactions Requiring a CON

The bill would add three new transactions that would require a CON: (1) the transfer of 10% or more of the assets owned by a hospital, which would include a transfer of real estate; (2) the issuance of dividends (something a not for profit hospital does not do) over a three-year period in excess of 20% of the net worth of a hospital; and (3) transfers of a controlling interest in any entity with at least a 20% interest of a health care facility, institution, or large group practice (i.e., eight or more full-time equivalent physicians). (Sections 3(16) and 4(a)(16)-(17)).

The acquisition of computed tomography scanners would no longer require a CON. (Section 4(a)(10)).

  • Changes Involving a Transfer of Ownership of Certain Health Care Facilities

If passed, SB 9 would add a new subsection (C) to the definition of “transfer of ownership” in CGS §19a-630, which would refer to “a transfer of a controlling interest in any entity, as defined in [CGS] section 33-602, that possesses or controls, directly or indirectly, an interest of twenty per cent or more of a health care facility, institution, as defined in section 19a-490, or large group practice.” This provision would be effective on passage. (Section 3(16)).

Proposed subsection (C) would seem to eliminate what has been a fairly common practice of avoiding full CON review by changing ownership of a health care facility at the parent level. OHS routinely found such parent level transactions did not require full CON approval. “Controlling interest” is not defined in the bill, so it is unclear if the HSPU would interpret this to mean more than a 50% transfer, or whether there could be other measures to determine whether an interest is “controlling.” It is also unclear whether this new provision would apply to a series of change of ownership transactions that add, in the aggregate, to more than a 20% interest in a health care facility, but where no single purchase exceeds 20%. 

The bill also includes a provision that requires the HSPU to issue a CON for a transfer of ownership meeting the requirements of the new subsection (C) to a large group practice or health care facility (other than a hospital) that submits a CON request for a determination to the HSPU. This provision would be in effect through December 31, 2025. The wording of the amendment is curious because, as written, there would appear to be no deliberation on the transfer of ownership pursuant to the standards and guidelines used by OHS under CGS §19a-639 to determine whether a CON in such a case would be issued. Instead, the CON would be issued automatically. (Section 4(f)).

  • Changes to the Considerations the HSPU Must Evaluate When Reviewing a CON

The bill revises some of the considerations that the HSPU must evaluate when deliberating on a CON application, adds new considerations and removes others. Among the new considerations are: (1) whether the applicant has satisfactorily demonstrated how the proposal will increase cost effectiveness of health care delivery in the region; (2) whether the applicant has satisfactorily demonstrated that the proposal will not negatively impact the finances of the health care facility so as to jeopardize or substantially impair the facility's future operations; and (3) if the application is for the termination of services, whether and to what extent the applicant's actions or inactions caused or contributed to the conditions that resulted in the filing of the application. (Section 5(a)).

SB 9 would remove from the list of considerations: (1) whether the applicant has satisfactorily identified the population to be served by the proposed project and satisfactorily demonstrated that the identified population has a need for the proposed services; and (2) the utilization of existing health care facilities and health care services in the service area of the applicant. (Section 5(a)).

Under current law, the HSPU must conduct a cost and market impact review (CMIR) for certain hospital ownership transfers. The bill authorizes the HSPU, when reviewing CON applications for these transfers, to consider the CMIR preliminary report and the response to it, the final report, and the parties’ written comments if it has determined that disclosing the reports is appropriate and each party in the CON proceeding was given at least 14 days after the final CMIR report was issued to submit written comments on these reports. (Section 5(d)(6)).

The bill includes some provisions unrelated to CONs. They concern civil penalties for noncompliance by health care institutions, emergency department diversion requirements, hospital financial reporting requirements and OHS quarterly reports to  the Office of Policy and Management.

Finally, current law allows the HSPU to modify the CON considerations by regulation. The bill would allow the OHS executive director to implement policies and procedures to update the considerations while in the process of adopting regulations. A public hearing would be required to be held at least 30 days prior to implementing any such policies and procedures. (Section 5(c)).

HB 5316: An Act Concerning the Office of Health Strategy's Recommendations Regarding the Certificate of Need Program

 If signed into law, HB 5316 would implement the following key changes to the CON process:

  • The definition of “large group practice” in CGS 19a-630 would be expanded to include, among other things, a group owned or controlled by a public company, and an entity in which both the payer and provider share the financial risk of managed care or the provider entity serves as both a payer and provider. Furthermore, current law defines “large group practice” to include an entity in which each physician who is a member of the group provides substantially the full range of services that the physician routinely provides. With respect to this part of the definition of “large group practice,” physicians working under a professional service agreement would be included. These changes would be effective on enactment. (Section 1).
  • Current law exempts from the CON process transfers of ownership of large group practices to a physician or certain other group practices. If enacted, HB 5316 would eliminate this exemption. (Section 4(a)(3)).
  • The bill would require a CON for a proton radiotherapy machine, unless it is a replacement for a machine that had been acquired through the CON process. (Section 4(a)(11)).
  • HB 5316 contains a provision similar, though not identical, to Section 4(f) of SB 9 (see above) referring to “automatic” approvals of CONs for large group practices on or before December 31, 2025. (Section 4(f)).
  • The bill would delete subsection (b) of CGS §19a-639, which states that in the deliberations pursuant to CGS §19a-639(a), “there shall be a presumption in favor of approving the certificate of need application for a transfer of ownership of a large group practice… when an offer was made in response to a request for proposal or similar voluntary offer for sale.” (Section 5). (We note that SB 9 would keep this provision in the statute.)

We will be tracking the progress of these bills. Please contact one of our health care law attorneys for additional information.

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