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Provider Reporting and New Certificate of Need Laws for 2015
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POLICY UPDATE: New CON and reporting laws will bring impacts for physician practices, hospitals and health systems. In this article, Cristine A. Vogel, MPH, details the key highlights of the 2015 legislation, as well as some of the laws that became effective in 2014, to give a broad picture of provider responsibilities.
In Connecticut, providers continue working on approaches to coordinate patient care, improve and measure the quality of care, and reduce overall cost of care. Implementing systems to coordinate healthcare services has led to hospital and physician group practice consolidation in Connecticut and throughout the nation. Responding to market consolidation, Connecticut lawmakers enacted additional reporting requirements for provider organizations and introduced new Certificate of Need ("CON") requirements related to the transfer of ownership of a hospital. Most of the new laws aim to assist state government and the public by locating more provider information into the public domain; however, concerns about market power and price increases are the primary driver.
Physician Group Practice Requirements
The 2015 legislation contained the following key impacts that pertain to physician group practices:
- When a hospital or hospital system is planning to acquire or affiliate with a physician group practice, the physician practice(s) involved in the transaction is required to submit written notification to the Attorney General ("AG") and also to the Office of Health Care Access ("OHCA"). The notification will be posted on the OHCA website. A group practice under this section of the law is defined as having at least two physicians legally organized in a partnership, limited liability company, or some other entity that provides services and bills patients under the group entity. The written notification must be submitted to the AG and OHCA at least 30 days prior to the effective date of the transaction.
- While the 2014 CON statutes defined a group practice as a group consisting of 8 or more full-time equivalent physicians, the 2015 legislation defines this group size as being a "large" group practice.
- The 2015 laws further state that when a large group considers transferring ownership to a hospital, CON approval will be required by OHCA. However, new language in 2015 clarifies that a CON is not required when a large group (8 or more) is transferring ownership to a single physician or to a practice of two or more physicians providing the physicians are not employed by or an affiliate of any hospital, medical foundation, insurance company or similar entity. This became effective July 1, 2015.
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REPORTING TO THE AG AND OHCA:
The first annual report to the AG and OHCA describing each affiliation with another hospital or hospital system is due on December 31, 2015, and annually thereafter. This annual report is general in nature and the contents of the report are referenced in Table 1, below.
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Hospital and Health System Requirements
The AG and OHCA now require more reporting from hospitals and health systems regarding potential and existing mergers and affiliations with other hospitals and physician group practices. This information will provide state government access to all hospital affiliations each year to track organizational growth. Currently, the state may have such information only through the CON process.
Table 1 shows the content of the two reports from 2014 and 2015 legislation that are due to both the AG and OHCA. Both reports are due annually in December.
Table 1
Hospitals Reporting on Hospital or Hospital System Affiliations must include:
- The name and address of each party to the affiliation
- A description of the nature of the relationship among the parties to the affiliation
- The names of the business entities that provide services as part of the affiliation and the address for each location where such services are provided
- The description of the services provided at each location
- The primary service area served by each location (the smallest number of zip codes from which the group practice draws at least 75 percent of its patients)
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Hospitals Reporting on Affiliations with Physician Group Practices must include:
- A description of the nature of the relationship between the hospital or hospital system and the group practice(s)
- The names and specialties of each physician practicing medicine within the group practice(s)
- The names of the business entities that provide services as part of the group practice(s) and the address for each location where such services are provided
- A description of the services provided at each location
- The primary service area served by each location (the smallest number of zip codes from which the group practice draws at least 75 percent of its patients)
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Also, notification related to specific affiliation transactions need to be submitted to the AG. This law became effective October 1, 2015, and requires submission at least 30 days prior to the effective date of any transaction that results in an affiliation between one hospital or hospital system and another hospital or hospital system. The written notice needs to include all items listed at left in the sidebar:
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AFFILIATION TRANSACTION NOTIFICATION REQUIREMENTS:
- The identity of each party to the affiliation and describe the affiliation as of the date of the notice
- A description of the nature of the proposed relationship among the parties to the affiliation
- The names of the business entities that are to provide services following the effective date of the affiliation
- The address of each location where such services are to be provided
- A description of the services provided at each location
- The primary service area to be served by each location
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2015 Changes to Certificate of Need
Connecticut lawmakers have re-evaluated and re-adjusted the CON process for the past few years to be more responsive to market consolidation. The new 2015 laws bring changes to transfer of ownership CON requirements for both non-profit and for-profit hospitals.
Transfer of ownership of a hospital has been newly defined as meaning a transfer that impacts or changes the governance or controlling body of a hospital, including transactions such as mergers, affiliations or any sale or transfer of net assets of a hospital. This definition applies to all CON applications or determination letters filed with OHCA on or after December 1, 2015.
During OHCA deliberations involving CON applications, several guidelines and principles are taken into consideration. And through the years, different criteria have been added to reflect the changes in the marketplace. In 2015 one criterion regarding the impact upon the cost effectiveness of providing access to services provided under the Medicaid program was removed while a few more were added related to hospital acquisitions.
Effective December 1, 2015, regarding any CON application for a transfer of ownership of a hospital, OHCA must take into consideration additional guidelines and principles, including:
- Whether the CON applicant has considered alternative proposals to transferring ownership or describes in the application how the approach maintains (1) provider diversity, (2) consumer choice and (3) access to affordable quality health care services. These three elements are CON application requirements.
- Whether the plan demonstrates how the new hospital will provide health care services for the first three years following the transfer of ownership. The plan should include any consolidation, reduction, elimination or expansion of existing services or introduction of new services.
- Assurances that the new hospital will continue access to high quality and affordable care. This should also include any projected changes in staffing.
OHCA may place any conditions on the approval of a CON application involving a transfer of ownership of a hospital; however, OHCA needs to include a concise statement of the legal and factual basis for each condition. Furthermore, each condition needs to be reasonably tailored in time and scope. The transacting parties have the right to make a request for an amendment or relief from any condition based on good cause.
Existing laws require OHCA to request any additional information related to a filed CON application within 30 days. For transfer of ownership of a hospital application, the new law requires a plan to be submitted demonstrating how health care services will be provided by the new hospital for the first three years following the transfer. The plan needs to include any consolidation, reduction, elimination or expansion of existing services or introduction of new services. OHCA will also require that this plan include the names of the persons currently holding a position as an officer, director, board member or senior manager and whether or not this person is expected to hold a position after the transfer. The plan must also describe the salary, severance, stock offering or financial gain (current or deferred) attributable to each of these positions listed. This provision became effective July 1, 2015. This section also requires OHCA to hold a public hearing for all transfers of ownership of a hospital when the application is filed after December 1, 2015.
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Plan submissions to OHCA, now required along with applications for transfer of hospital ownership, must detail anticipated changes in services and information about officers and management personnel.
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Cost and Market Impact Review and Compliance Reporter
The 2015 legislation added a market study and oversight as part of the transfer of ownership of a hospital CON process. The key elements include:
- A cost and market impact review
- An independent compliance reporter
Regarding CON applications for the transfer of ownership of a hospital received after December 1, 2015, OHCA will be initiating a cost and market impact review. This impact review occurs when the purchaser is a hospital or health system that had net patient revenue for fiscal year 2013 greater than $1.5 billion, or that is a for-profit organization. Within twenty days of OHCA receiving a properly submitted application, OHCA will alert the applicants that a market and cost impact review has been initiated and request the information and documents needed for the study to proceed. This information must then be submitted to OHCA within 30 days.
OHCA will retain an independent consultant with expertise on the economic analysis of the health care market. The market and cost impact review will be kept confidential and all nonpublic information will not be disclosed. OHCA may deny any application involving a transfer in ownership of a hospital if the cost and market impact review finds a lack of assurances in access to quality and affordable health care services and any likely increase in prices or total healthcare spending in the state that may impact the affordability of care.
In addition, when OHCA approves a CON application involving a transfer of ownership of a large hospital or health system (same definition as in the above paragraph) or is a for-profit organization, OHCA will hire an independent consultant to serve as a post-transfer compliance reporter for a period of three years. Also, the purchaser will be required to hold a public hearing at least annually during the reporting period to provide a public review and perspective on the reporter's report and findings. This provision applies for those transfers when the CON application or determination letter occurs after December 1. 2015.
Legislative sessions of 2014 and 2015 enacted several new laws that impact provider organizations. It is recommended that all the reporting requirements be carefully reviewed and streamlined to reduce duplication. In the event that a transfer of ownership of a hospital CON needs to be considered, review the new requirements thoroughly.
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