Certificate of Need
Certificate of Need (CON) is the official determination that a new or expanded health care service or facility is needed. The purpose of the CON program, which is used in Georgia, 34 other states and the District of
Columbia, is to ensure the availability of adequate health care services to meet the needs in a specified service area, while safeguarding against the unnecessary duplication of services that perpetuate the escalation of costs for health care services. The program is administered by the Georgia Department of Community Health (DCH). Health care service providers seeking to significantly expand their facilities or service lines must submit an application for a CON. The DCH reviews the application, considers any appeals or objections to the application, then determines whether to grant the CON. Organizations that expand without a CON are subject to penalties and fines levied by the state.
CONs are required for many, but not all, health care service or facility expansions.
The following projects require a CON:
- New hospitals, including general, acute-care and specialty hospitals
- New or expanding nursing homes and home health agencies
- Providers of radiation therapy, positron emission tomography (PET) scans, open heart surgery and neonatal services
- Major medical equipment purchases or leases (e.g. MRI, CT Scanners) that cost more than $1,246,165.
- Major hospital renovations or other capital activities by any health care facility that exceed the capital expenditure threshold of $2,903,930.
- Joint Venture Ambulatory Surgery Centers that cost more than $5,807,061
- Single-Specialty Physician-Owned Ambulatory Surgery Facilities that cost more than $2,903,930
- Before a health care facility can offer a health care service that was not provided on a regular basis during the previous 12-month period, or add additional beds
Obtaining a CON is a multi-step process that begins with submitting a Notice of Intent and ends with a determination from the DCH:
- The applicant submits a Letter of Intent 30 days prior to submitting the CON
- The applicant submits an original application and a copy of the application to the DCH along with a filing fee.
- DCH reviews the application, taking into account the requirements specifically related to that
- DCH either approves or denies the application.
- Following approval of a CON, the applicant has 12 months from the date of approval to implement
the proposed project, either in the form of possessing equipment or demonstrating substantial progress in beginning a project.
- Applicants of all approved CON projects must provide progress reports to document implementation and completion.
The following projects are exempt from CON requirements:
- Repairs to a facility that fall below the current CON review threshold
- Replacement of existing therapeutic or diagnostic equipment that received prior CON authorization
- Projects that bring facilities into compliance with licensing requirements, life safety codes or standards of the Joint Commission on Accreditation of Health Care Organizations
- Cost overruns that represent less than 10 percent of the previously approved capital expenditure and do not exceed the CON review threshold; all cost overruns under $300,000 are exempt from review
- A hospital that maintains an occupancy rate greater than 75 percent for the preceding 12-month period may increase its capacity by 10 beds or 10 percent of its existing inventory (whichever is greater) every two years without a CON, unless the cost associated with the increase exceeds the capital threshold. The hospital must submit a written request for determination regarding exemption under this provision, and the request must document the facility’s month-by-month occupancy
- Joint-Venture or Single-Specialty Ambulatory Surgical Center, the establishment and development of which does not exceed the statutory dollar threshold applicable to such exempt facilities
- Unless otherwise specified in the rules, all applicants seeking an exemption must provide prior notice to and receive written approval from HFR for the exempted activity
Relevance to Floyd
Floyd supports the CON process, which helps ensure that hospitals have the ability to generate the revenue necessary to compensate for the unreimbursed indigent and charity care it provides. Most recently, Floyd officials applied for and received a CON for approximately $19 million in construction projects that included the renovation and expansion of Floyd Medical Center’s Intensive Care Unit, renovations to the cafeteria and several other projects. Past CON applications have been granted for the new Polk Medical Center facility, completed in 2015, expansion of Floyd Medical Center, the hospital’s Emergency Care Center expansion, renovations to the hospital’s fourth floor and other projects. In addition, Floyd monitors CON requests for northwest Georgia and has, when merited, opposed CON applications that could affect the organization’s economic health or the quality of care provided to patients.
Without CON rules, any one could build a new facility or offer a new service without addressing the operational constraints and financial concerns that not-for-profit, community hospitals face. Without these rules, it would be possible for a health care provider to build a new facility or offer a service, but only accept patients with commercial insurance. This practice would be detrimental to not-for-profit hospitals like Floyd Medical Center, which, as part of their mission and by legal requirement, must provide health care services to every individual, regardless of his or her ability to pay. In 2017, Floyd provided more than $32.9 million in care to patients who could not afford to pay for the services they received. If insured patients receive care at exclusive, health care providers who do not have this social obligation, not-for-profit community hospitals could lose a significant portion of the revenue that helps offset the costs of providing indigent and charity care. Without that obligation, exclusive providers gain a significant competitive advantage, leaving not-for-profit community hospitals as charity health care service providers, dependent on taxes, government reimbursement and philanthropy to meet the needs of the communities they serve.
Eliminating or relaxing CON rules would, as a secondary effect, compromise the economies of the counties with community hospitals. In Floyd County, Floyd Medical Center is the largest employer, with more than 3,000 employees. Floyd also has the area’s largest payroll, at over $215 million, including compensation and benefits. If unencumbered, for-profit health care providers are permitted to open surgery centers or free-standing imaging centers that do not accept indigent or charity patients in northwest Georgia, Floyd would face lower patient volume and, therefore, produce less revenue. The result could be loss of jobs and a decline in income in the community. This would directly affect the businesses where employees spend and the local tax base of which they are a vital part.
Source: Georgia Department of Community Health, An Overview of Certificate of Need, January 2012.
Source: Georgia Department of Community Health, CON Thresholds