Illinois Hospital Association

search:

July 1, 2009

UPDATE: SB1905 - Certificate of Need Reform

Senate Bill 1905 (PA96-0031), legislation that reforms the Certificate of Need (CON) Program, and extends the program for ten years, is now law. On June 30, both the Senate and House voted overwhelmingly to accept Governor Quinn’s amendatory veto, which removed a provision that would have established salaries for members of the CON Board. The Senate vote was 57 to 0; the House vote was 110 to 4.

Background:
SB1905, legislation to reform and extend the Certificate of Need (CON) program, which was to sunset July 1, 2009, passed both houses of the General Assembly on May 29. It was sent to the Governor who, early on June 30, amendatorily vetoed the bill. Later that day, and just hours before the CON program would have expired, both legislative chambers accepted the Governor’s changes and passed the bill again. This memorandum summarizes the major provisions of the new CON law. The full text of the Public Act can be viewed by clicking here.

BOARD COMPOSITION AND ORGANIZATIONAL STRUCTURE
As recommended by IHA and others, the size of the Board is increased to nine members. The new Board is renamed the Health Facilities and Services Review Board. Members will be appointed by the Governor and are subject to Senate confirmation. The Governor will designate one of the members as chairman. The increase in the size of the Board from five to nine members is intended to facilitate having a quorum at Board meetings.

Current Board members will retain their authority during the transition period. They are required to establish a plan to transition their powers and duties to the new Health Facilities and Services Review Board.

Under PA 96-0031, the Governor is to appoint a new Board by March 1, 2010. Members of the current Board may choose to submit their names for consideration to be named to the new Board. Other than for the initial terms, which will be staggered, terms are for three years and members may not serve more than three terms.

All members of the Board must be Illinois residents and four of the nine members must reside outside of the Chicago area. Consideration will be given to potential appointees who reflect the ethnic and cultural diversity of the state. No more than five of the members can be of the same political party at the time of appointment.

Board members should have a reasonable knowledge of the health care delivery system in Illinois. At least five of them should be knowledgeable about health care delivery systems, health systems planning, finance, or the management of regulated health care facilities. One member will be a representative of a non-profit health care consumer advocacy organization.

Spouses, or other members of the immediate family of Board members, cannot be an employee, agent, or under contract with services or facilities subject to the Act. Board members must disclose the financial interests of other family members, if they are known, and must declare a conflict of interest and recuse themselves from voting when a conflict is declared. Existing language remains in the Act, which excludes Board members from service if they, or an immediate family member, serves on the board of, has a financial interest in, or has a business relationship with a health care facility. The chairman will review Board member performance annually and will report the attendance record of Board members to the General Assembly.

The Board will prepare a budget for General Assembly approval. While removing explicit references to the Executive Secretary position, PA 96-0031 does authorize the Board to hire and supervise its own professional staff responsible for carrying out Board responsibilities. The Board may contract with experts and create technical advisory panels to assist in rules development and the development of other criteria and standards used by the Board to evaluate applications. While the new Board will be organizationally separate from the Illinois Department of Public Health, the Department will provide operational support.

The Board will be required to meet at least every 45 days. At least one Board member will be required to participate in any public hearing, after nine members are appointed.

REGULATION BASED ON FACILITY OR SERVICE, NOT PROVIDER TYPE
Currently, health care facilities subject to the Act include hospitals, ambulatory surgical treatment centers, long term care facilities, dialysis facilities, and facilities for the performance of outpatient surgical procedures that are leased, owned or operated by or in behalf of out of state facilities.

SB1905 amends the definition of "health care facility" to include:

"An institution, place, building, or room used for provision of a health care category of service as defined by the Board, including, but not limited to, cardiac catheterization and open heart surgery;" and
"An institution, place, building, or room used for provision of major medical equipment used in the direct clinical diagnosis or treatment of patients, and whose project cost is in excess of the capital expenditure minimum."

As a result, a person offering a category of service, as defined under the Board’s rules, will be required to get a permit for offering that service, regardless of the type of provider. For example, a cardiac catheterization laboratory that is not in a hospital or ambulatory surgical treatment center will be required to obtain a permit. In addition, large capital expenditures for major medical equipment, such as proton therapy equipment, will require a permit, regardless of the type of provider who will be offering the service.

REFORMS TO STREAMLINE AND SIMPLIFY THE CON PROCESS
PA 96-0031 includes many recommendations supported by IHA to simplify and streamline the Certificate of Need process. These begin with an increase in the capital expenditure threshold and extend through post permit requirements.

For hospitals, the capital expenditure threshold is increased from $8.85 million to $11.5 million. The capital expenditure threshold for skilled and intermediate long term care facilities licensed under the Nursing Home Care Act is reduced from $8.85 million to $6.5 million. The capital expenditure threshold for all other applicants is $3 million. All capital expenditure thresholds will be adjusted annually for inflation.

In addition, components of construction, or modification undertaken under a single construction contract, or financed under a single debt instrument, will no longer be considered a single project, unless the components are otherwise interdependent or the applicant chooses to submit the components under a single permit application. As a result, the cost of components of distinct projects will no longer be added together to determine if the total exceeds the capital expenditure threshold.

The universe of projects that will be subject to Board review has also been narrowed by allowing greater flexibility to increase, or re-distribute, beds among categories of service. Health care facilities will now be able to increase their total number of beds, or re-distribute beds, by 20 beds or 10 percent of the total bed capacity, whichever is less, every two years. This is a change from 10 beds, or 10 percent, every two years.

Letters of intent will no longer be required and communications regarding the substance of applications will now be considered ex parte after the application has been formally filed. Once an application is filed and deemed complete, the staff will prepare a written record of any communication with the applicant. This documentation will be made part of the public record. Technical assistance and staff clarification of provisions in the application are explicitly authorized.

In order to shorten the review period for most projects, six months after the effective date of the Act, substantive projects that are subject to the full 120 day review cycle are limited to the following:

A new or replacement facility on a new site or a replacement facility on the same site with a cost exceeding the capital expenditure minimum;

A new service or discontinuation (discontinuations must be reviewed by the Board within 60 days);

Changes in bed capacity by more than 20 beds or 10 percent of total facility capacity, whichever is less, over a two year period.

Responses to staff reports on project applications must now be filed at least 10 days before the Board meeting and must address the facts set forth in the report. This is an improvement from the current requirements that allow responses up until two days prior, and can be in support of, or in opposition, to the findings. This is intended to reduce the need for last-minute deferrals to review new information.

Post permit requirements are streamlined so that only annual progress and final cost reports will be required. While the duty to obligate projects on time continues, hospitals will no longer have to report on project obligation. In addition, projects may deviate from line item costs in the approved project, as long as they do not exceed the approved permit amount.

PA 96-0031 also allows the Board to approve a transfer of some permits when a change of ownership application is approved, regardless of whether the permit has been obligated or not. Without this change, the Board had to review a project that it had previously approved simply because of a change of ownership. This flexibility does not extend to projects to establish new facilities or categories of service.

Finally, the Board may delegate the authority to the chairman to grant permits or exemptions when applications meet all of the review criteria and are unopposed. This provision is subject to Board rulemaking to give this additional authority to the chairman.

REFORMS TO ADDRESS CONCERNS ABOUT THE SAFETY NET
To address concerns about protecting safety net providers and services, applicants proposing substantive projects, or projects for discontinuation, will now have to file safety net impact statements. Long term care projects are excluded. The process was designed to coordinate with existing public notice processes of the Board.

The Safety Net Impact statement will have to describe the project’s material impact, if any, on essential safety net services in the community, the project’s impact on the ability of another provider to cross-subsidize safety net services, and how the discontinuation of a facility or service might impact other community safety net providers. In addition, the following must be included:

Certification describing the amount of charity care provided for the prior three fiscal years;

Certification describing the amount of care provided to Medicaid patients for the prior three fiscal years; and

Any information the applicant believes is directly relevant to safety net services including information regarding teaching, research, and any other service.

The Board’s public notice of the project will also notify the public that a safety net impact statement was filed. The public is offered an opportunity to file a Safety Net Impact Statement Response. The applicant then has an opportunity to reply to the response.

The Board’s staff report on the project will include a statement regarding whether the Safety Net Impact Statement was filed and whether it included the information on charity care, care to Medicaid patients, and other safety net services. The report will also provide the names of the parties submitting responses and the number of responses and replies that were filed.

The Safety Net Impact Statement provisions in PA 96-0031 do not call for the Board to establish standards for the appropriate amount of charity care or care provided to Medicaid patients. This was one of IHA’s main concerns as the amount of care provided to the uninsured and to Medicaid patients was debated during the deliberations of the Illinois Task Force on Health Planning Reform. Despite the fact that there are no set standards in the Safety Net Impact Statement provisions of PA 96-0031, one can presume that the Board will consider this information as it evaluates applications.

REFORMS TO INCREASE PREDICTABILITY AND ACCOUNTABILITY
PA 96-0031 explicitly requires the chairman, board members, and board staff to comply with the Illinois Governmental Ethics Act. Among other provisions, this Act requires disclosure of contracts with the state and filing of statements of economic interests.

PA 96-0031 also includes reforms to make the Certificate of Need process more transparent by requiring the following to be posted on the Board’s web site:

An annual accounting by category of fees, fines and other revenue collected as well as expenses incurred;

An annual report that summarizes all settlement agreements;

A monthly report that includes the status of applications and recommendations regarding updates to the rules or the comprehensive health plan; and

Staff reports on applications that show the degree to which the application conforms to the standards, a summation of relevant public testimony, and any additional information that the staff wants to communicate.

If an applicant, or adversely affected party, requests one, the Board is required to issue written decisions within 30 days of the meeting at which a final decision is made. The staff prepares the written decision, subject to Board approval, for inclusion in the formal record.

The Board is required to implement public information campaigns to inform the general public about the opportunities for public hearings and public hearing procedures. This will be in addition to the information that is already provided in the Board’s public notices.

Finally, to monitor the Board’s progress, 24 months after the last member of the nine member Board is appointed, and 36 months thereafter, the Auditor General is to conduct a performance audit of the Center for Comprehensive Health Planning, the State Board, and the Certificate of Need processes to assess:

Whether progress is being made on the development of a Comprehensive Health Plan and whether resources are sufficient to meet the goals of the Center for Comprehensive Health Planning;

Whether changes to the Certificate of Need processes are being implemented effectively, as well as their impact, if any, on access to safety net services; and

Whether fines and settlements are fair, consistent, and in proportion to the degree of the violation.

THE CENTER FOR COMPREHENSIVE HEALTH PLANNING
The Center for Comprehensive Health Planning is created within IDPH. It is intended to promote the appropriate distribution of health care services in Illinois and improve the health care delivery system.

The Center is charged with developing a Comprehensive Health Plan for Illinois. The plan would assess community health and mental health resources, determine statewide and regional needs, respond to changes in community needs, identify health disparities, support safety net services, and promote adequate financing. The plan will be developed with a five to 10 year range and should be updated at least every two years. The public can request more frequent updates to address emerging population and demographic trends.

The plan will incorporate a biennial assessment of health resources and service needs including at least facilities, clinical services, and workforce. Elements of the plan will include:

A regional and statewide inventory to map the state for growth, population shifts, and utilization of health care resources;

An evaluation of health service needs with consideration given to population health status and addressing gaps, over-supply, continuity of care, and an assessment of safety net services;

An inventory of health care facility infrastructure which will include both regulated and unregulated facilities and services;

An integration with the planning that is done under the Illinois Health Facilities Planning Act and other health planning that is done in the state.

The findings of the Plan will be used to inform the decision-making of the Health Facilities and Services Review Board. The Plan may include recommendations that will be integrated into any relevant Certificate of Need review criteria, standards, and procedures.

The first Comprehensive Health Plan is to be submitted to the State Board of Health within one year of the appointment of the Comprehensive Health Planner. The State Board of Health is charged with the responsibility of reviewing and commenting on the Comprehensive Health Plan within 60 days of receiving it. Public hearings will be held on the Plan and its updates. The Plan will then be submitted to the General Assembly.

Among the other responsibilities of the Center are to:

Provide technical support to the Health Facilities and Services Review Board so the Board can apply relevant components of the Comprehensive Health Plan in its deliberations;

Assist in any inter-agency planning for health resource development;

Establish priorities and make short-term, mid-term and long-range recommendations for meeting unmet needs;

Analyze long term care resources and adjust bed need criteria and standards accordingly, with consideration given to the availability of the least restrictive options in accordance with the needs and preferences of persons requiring long term care;

Recognize health resource development projects that are consistent with needs identified by the Comprehensive Health Plan;

Make findings that identify the impact of market forces on access to high quality services for the un- and under-insured;

Identify issues relating to financing such as revenue streams, federal opportunities, better utilization of existing resources, development of resources and incentives for resource development;

Recommend ways to ensure access to care especially for safety net services including rural and medically underserved communities;

Make determinations of potential benefits to changes in the health care delivery system;

Collect and analyze data, including health care utilization data, and post current health planning data on its website; and

Post its budget.

The budget of the Center for Comprehensive Health Planning will be subject to approval by the General Assembly. The Center will be supervised by a Comprehensive Health Planner who will be appointed by the Governor. The appointment requires Senate confirmation. The term of appointment is three years and the appointee can be re-appointed. The salary for this position is $120,000 per year, or an amount set by the Compensation Review Board.

MISCELLANEOUS PROVISIONS
Miscellaneous provisions relate to rulemaking and fees. There are also changes as to what Alternative Health Care Delivery Act projects are reviewable by the Board.

Application fees for continuing care retirement communities (CCRCs), and other health care models that include regulated and unregulated components, will apply only to those components subject to regulation. CCRCs pushed for language that would explicitly limit fees to the long term care components of their projects since assisted living and residential housing are not regulated by the Board. The law was drafted to apply this same principle to other projects that have components that are regulated by the Board and components that are unregulated.

The Board will be required to provide a mechanism for the public to comment on draft rules and standards. Temporary advisory committees can be appointed to assist with rules development. Updates will be required every two years and will use the inventory and Comprehensive Health Plan for guidance. In addition to considerations that are currently described in the Illinois Health Facilities Planning Act, rules analysis should include whether categories of service subject to review should be re-evaluated, the differences between acute and long term care, and how routine changes of ownership, and closure requests, can be processed more timely.

The Board will be required to establish separate rules for long term care that considers how skilled nursing fits into the continuum of care, modernization of nursing homes, establishment of more private rooms, the development of alternative services and other long term care trends. A permanent subcommittee will be appointed. Proposed new rules are required to be filed by September 1, 2010.

Children’s Respite Care Centers and Alzheimer’s Disease Management Centers, under the Alternative Health Care Delivery Act, will no longer be subject to the Illinois Health Facilities Planning Act. Currently there are only two Children’s Respite Care Centers in Illinois, one in Chicago and the other in DuPage County. To date, no Alzheimer’s Disease Management Center has ever applied to the IHFPB for a permit. PA 96-0031 also eliminates the requirement that the Community-Based Residential Rehabilitation Center be located south of I-70. It is currently located in Carbondale.

Note that some provisions of the bill took effect on June 30, 2009, the day the Governor signed it. Other provisions have delayed effective dates within the legislation itself. Finally, some provisions will require rules changes prior to becoming effective. IHA will be providing more information about the transition plan, as it becomes available.

If you have questions about PA 96-0031, please feel free to contact Ann Guild at 630-276-5496 or via e-mail at aguild@ihastaff.org.