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Navigating the RapidsCertificate of Need Issues in West Virginia
Charles M. Johnson, Esq.May 22, 2015
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Does the CON process seem like high adventure?
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Certificate of Need Issues Affecting West Virginia Hospitals
When is a CON required? Overview of the CON process Recent developments in the CON
Standards Important Decisions of the HCA Financial Impact of the CON
Program Important Issues Affecting
Financial Feasibility Financial Disclosure Requirements Sanctions for CON Violations
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HCA Mission
Certificate of Need Rate setting for hospitals Financial Disclosure Rural Health System Grants WV Health Information Network
(electronic health exchange network) Data collection and analysis State Privacy Office
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WV Hospitals
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When is a CON required?
New services not offered in the past 12 months
New ambulatory health care facility
Capital expenditures over $3,112,823
Major medical equipment over $3,112,823
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When is a CON required?
Closure of health care facility with capital a expenditure
Acquisition of a health care facility
Acquisition of a private practice
Diagnostic centers
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Overview of the CON Process
Request for Ruling Letter of intent Application submitted
Exemption for acquisitions less than $2,000,000
Regular application Standard application
Application Declared Complete
Notice—legal ad and newsletter
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Overview of the CON Process
Request for hearing Hearing process
Discovery Prehearing conference Hearing
Decision Administrative Appeal Appeal to Circuit Court Appeal to WVSCOA
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Important Decisions of the HCA
CAMC Develops Comprehensive Cancer Center
Cabell Huntington proposes to acquire St. Mary’s Hospital
ARH/Williamson Memorial Acquisition Denied
United Hospital Center to purchase St. Joseph’s Hospital
Fairmont General Hospital acquired by Alecto Hospital Services—Fairmont Regional Medical Center
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Important Decisions of the HCA
Boone Memorial constructs a new facility
WVUH and Mon General joint venture for cancer care
Mon Health Systems acquires Preston Memorial
MountainView Rehab adds 16 beds in Bridgeport
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Recent Developments in the CON standards
End Stage Renal Disease Standards Approved by Governor Tomblin 3/3/15
Increased access to ESRD services in rural WV MRT Standards Approved by Governor Tomblin
3/3/15 Hospital Ambulatory Care Facilities (WVCSR 65-
27—4/7/2010) WVHIN Rules (WVCSR 65-28—3/8/2014)
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Financial Impact of CON Program
Profits for WV hospitals down Profits margins of 3.5%
(previously 5.5%) HCA focuses on net revenues
from operations and ignores market fluctuations
18 of 31 acute care hospitals made a profit
9 of 19 CAHs made a profit 2 LT acute care hospitals
made a profit 4 Psych hospitals lost money 2 Rehab facilities made money
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Financial Impact of CON Program
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Financial Impact of CON Program
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Financial Impact of CON Program
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Financial Impact of CON Program
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Financial Impact of CON Program
NY—started CON in 1964 In 1966 the Public Health Service Act lead to
state and local planning agencies Health Planning Resources Development Act
of 1974– all states must have health planning
WV started CON program circa 1977 WVHCA currently provides health planning
and CON functions 36 States currently have some form of CON
and 14 States have repealed CON
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Financial Impact of CON Program
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Financial Impact of CON Program
1978—FTC determines tighter CON laws actually increase health care costs
1986—Health planning (CON) is ineffective in controlling costs
1995—Florida’s CON laws ineffective in controlling health care costs
2009—CON laws have limited the growth and supply of hospital beds and has lead to a slight reduction in health care expenditures
2015—Pros and Cons
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Pros
Distribute care to areas that are ignored or neglected
Avoid unecessary duplication of services Cost containment CON programs are a resource for
policymakers and planners Beneficial effect on indigent care Beneficial effect on quality of care Beneficial impact on State budget
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Cons
Controlling costs--“Regulated market” vs. “Open market” discussions
CONs drive up the cost of care CONs granted based upon economic self-
interest political influence, institutional prestige or other factors apart from the interests of the community
Community needs assessments differs from services that are approved
Costs increase anyway
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Financial Impact of CON Program
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Financial Feasibility
Not a true feasibility study under GAAP
Compilation based upon management representations and assumptions
EROE within 3 years of implementation of project
Include all reasonable expenses
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Financial Feasibility
Definition of capital expenditure Attorney’s fees Architect fees Consultants
Revenues match payors and payment streams
Conservative assumptions based upon population and health care trends
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Financial Disclosure
Audited /unaudited financial statements
Legal Advertisement Revenues and expenses Balance sheet Ownership Copy at HCA
Statement of Services Budget
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Financial Disclosure
Current rates Cost reports (Mc, Md, etc.) Statement of payments made
for services in excess of $55,000
Statements of collections in excess of $55,000 (not for health care services)
10-K
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Financial Disclosure
Income tax returns/990s-federal and state
Hospitals Trial balance HCA Financial Report UB date
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Sanctions?
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Sanctions for CON violations
Denial or revocation of license Cease and desist order Injunctive relief ( WVC 16-2D-13) Civil penalty between $500 and $25,000 per
violation Denial of CON
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The Future of CON in West Virginia
Hospital consolidation CAHs affiliate with acute care
hospitals Nursing home and home health
consolidation Nursing homes reorganize beds Hospitals acquire private physician
practices Hospital based ASCs Increasing specialization in areas of
need or in future profit centers
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Questions ?
4829-6856-8093 v2
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Thanks!!!
Charles M. Johnson, Member
Frost Brown Todd, LLC
Laidley Tower, Suite 401
500 Virginia Street East
Charleston, WV 25301
(304) 348-2420
(304)345-0115 (Fax)