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VOL. 130 | NO. 131 | Wednesday, July 8, 2015

Certificate of Need Process Back in Spotlight

By Andy Meek

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The state-level approval process Methodist South Hospital recently cleared that allows it to pursue an $8.7 million emergency department expansion has been in legislative crosshairs in Nashville recently.

Some lawmakers think the process by which the Tennessee Health Services and Development Agency approves or denies so-called certificates of need – the vehicle through which health care organizations apply for permission to add new services or facilities – should be reformed. State Sen. Todd Gardenhire, R-Chattanooga, drafted legislation recently that would do away with some requirements of the application process entirely as a way of increasing competition and spending among health care organizations.

That’s a common refrain among lawmakers who regularly debate bringing the certificate of need process under greater scrutiny, says attorney Brant Phillips with Bass Berry & Sims.


“Critics of the process will say the process can be sort of counterintuitive to our market-driven economy,” Phillips said. “They’re focused on whether competition improves the cost curve. Health care, of course, is fundamentally different from selling hamburgers or building systems – especially with the way the government often steps in to pay the bill. They want to make sure the system can handle it.

“It’s a really interesting process, though I do think most administrators think it works pretty well.”

In Methodist’s case, the Memphis hospital scored an approval from the 11-member agency in recent days to pursue an expansion at what is the third-busiest ER in Memphis.

The hospital’s more than 60,000 visits is up dramatically from 25,000 in 2006, so it’s having to making some critical changes to fill its role as a primary care facility in Whitehaven.

When it's finished in late 2016, the emergency department will have expanded by about 130 percent to surpass 22,000 square feet. A groundbreaking ceremony is set for August.

By way of signaling the department’s importance, Methodist South CEO James Robinson told The Daily News that 86 percent of hospital admissions come through the emergency room, making it an important first-stop for the facility.

In general, Phillips explains, certificate of need programs in Tennessee and beyond were set up to somewhat keep a handle on health care facility costs and to coordinate spending on construction and services. The agency that hears the applications in Tennessee includes members from various departments of state government and usually meets once a month.

If all goes well, Phillips added, it can take 120 days from the time an application is filed until it’s considered by the agency.

The flow of projects has improved in recent weeks, Phillips said, a result of things like “renewed confidence in the economy giving health care providers more confidence in making large capital expenditures in their facilities.”

Such expenses can be seen in the form of applications for new facilities and services that can range from something as small as the addition of a home health care service all the way up to a capital project that runs in the hundreds of millions of dollars.

“I also think some of what you’re seeing with some of these projects is that they’re organized around making sure a provider is viewed as something consumers would want to choose,” Phillips said. “The agency (approving CONs) always looks at the same three basic criteria: whether a project is needed, whether it’s economically feasible and whether it contributes to the ordinary development of health care in the community.”

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