Policy & Regulation News

Florida Repeals Hospital Certificate of Need Requirements

The state’s governor recently signed into law the repeal of certificate of need requirements for tertiary services and general hospitals.

Hospital certificate of need requirements

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By Jacqueline LaPointe

- Hospitals in Florida no longer face certificate of need (CON) requirements for building facilities or launching services, such as comprehensive medical rehabilitation, neonatal intensive care, organ transplantation, pediatric cardiac catheterization, and pediatric open heart surgery.

That is according to a new law signed by Florida Governor Ron DeSantis on June 25.

The law repeals CON requirements across the state, starting with high-cost specialty services on July 1, 2019. State leaders will expand the CON requirement repeal to certain specialty hospitals, such as women’s hospitals, rehabilitation hospitals, and children’s hospitals, by July 2021.

Notably, nursing homes and hospices will still have to acquire a CON before building or expanding.

Florida now joins the ranks of a dozen states that have discontinued their CON requirements, according to data from the National Conference of State Legislatures (NSCL). The majority of states (35 states) maintain some form of CON program, with only three having some variation on a CON program as of February 2019.

Lawmakers developed CON requirements back in the 1970s to protect patients from growing healthcare prices.

Increased building of healthcare organizations can result in excess capacity, which in turn leads to higher prices because hospitals cannot fill their beds, NSCL explained. Therefore, limiting healthcare organizations to only building enough capacity to meet patient needs or demand would prevent unnecessary price increases.

However, critics of CON requirements argue that restricting new construction impedes price competition and changes to how Medicare pays hospitals (i.e., reimbursing based on Diagnostic Related Groups) make external regulatory controls like CON requirements unnecessary.

Recent research also shows states with CON laws have higher prices than states without the requirements. One such study even found total healthcare spending could fall by $270 per person in Delaware alone if the state repealed CON laws.  

Federal officials have supported the elimination of CON laws and programs. The Federal Trade Commission and the Antitrust Division of the Justice Department have both suggested that states repeal or scale back their CON laws.

The Trump Administration also recently advocated for the repeal on CON on a national scale. In a sweeping 120-page report from December 2018, administration officials urged states to retrench CON laws. They argued that the requirements have not only failed to help lower prices, but the laws have also hampered patient access to quality care.

Those opposed to CON requirements have made their voices heard, and many state lawmakers have repealed CON programs to encourage greater competition and deregulation of healthcare markets.

In Florida, the new CON repeal law represents the end of a decade long battle and supporters are looking forward to building their facilities and services to better serve their communities.

“We have a plan that we’ve developed and continue to refine, and we’re in the process of executing on that plan. The repeal of CON doesn’t change that plan in any way. We believe, however, that it will allow us to bring to market some of those assets sooner,” Erick Hawkins, senior vice president of strategic management at Orlando Health told the Orland Sentinel.

Orlando Health is planning to accelerate its building and expansion projects in light of the new law, including the construction of two new hospitals.

Leaders at AdventHealth, a 48-hospital system in over nine states including Florida, however, expressed concerns that the law’s failure to define “hospital” could make way for specialty hospitals that only take Medicare and commercial insurance.

“And if fewer places take Medicaid, those places then require improved funding, because they’re losing non-Medicaid patients, so the state finds Medicaid costs actually going up. That’s not the intent of the legislation, but it’s an unintended consequence,” Daryl Tol, president and CEO of AdventHealth’s central Florida Division, told the local news source.

Lawmakers from other states are putting CON repeals on the table hoping to accomplish what Florida has recently done. Specifically, state lawmakers from Missouri and Tennessee are actively working on legislation to repeal CON requirements in their respective states, according to The Heartland Institute.

But garnering the support needed to pass CON repeal laws can be a challenge, especially if states contain hospitals or hospital associations that wish to protect existing organizations from facing increased competition.