The North Carolina Senate adopted its budget for the next fiscal year on May 31, 2019. The budget proposes a number of changes to the certificate of need (CON) law. These changes were not included in the House’s budget, nor has the House approved any other changes to the CON law this year. Significant changes proposed by the Senate include the following:

• G.S. § 131E-176 – Eliminates the need for a CON for the following health services and facilities:
  • ambulatory surgical centers (ASCs);
  • operating rooms;
  • gastrointestinal endoscopy facilities and rooms;
  • diagnostic centers and equipment (which would include most diagnostic medical equipment other than MRIs and PET Scanners);
  • dialysis facilities and stations;
  • psychiatric facilities and beds;
  • intermediate care facilities and beds for individuals with intellectual disabilities; and
  • chemical dependency treatment facilities and beds.

• G.S. § 131E-181(d) – Requires that all approved CON projects be completed with two years after the decision to issue the CON becomes final. If a project is not completed in that time frame, the CON would expire. This provision would significantly limit the ability of hospitals, nursing homes, and assisted living facilities to replace or relocate facilities, as those construction projects typically take more than two years. It also is inconsistent with G.S. § 131E-176 (14f) and § 131E-184(h), which allows an exemption from CON review for the reopening of a Legacy Medical Care Facility. That statute was enacted to allow hospitals and other facilities which close for several years to reopen without a new CON if they meet certain conditions. Finally, this provision would effectively eliminate the Department’s discretion under G.S. § 131E-189(a) to withdraw a CON if it determines that a project’s development has been unreasonably delayed.
• G.S. § 131E-181(e) – Withdraws a CON issued to any recipient that ceases to operate the health service or health service facility included in that CON for more than one year. The NC Supreme Court has previously held that a CON may not be withdrawn once a project is completed, so there is a question as to whether this provision would survive court scrutiny. Further, this change could prevent persons from purchasing and relocating existing health service facilities which have closed, as it typically takes longer than a year to obtain a CON to relocate the facility and to construct it. However, it would eliminate providers from stockpiling beds, equipment, etc., which they don’t use and which potentially suppress the need for those services in a service area.
• G.S. § 131E-184(i) – Exempts from CON review the establishment of a home health agency developed solely to provide services to residents of a Continuing Care Retirement Community (CCRC) pursuant to their contracts with the CCRC.
• G.S. § 131E-188(a) – Substantially changes who may appeal a CON decision. Under the current statute, applicants and persons requesting exemptions from CON review, competitors and several other individuals and groups are defined as “affected persons” who may file a Petition for Contested Case Hearing with the Office of Administrative Hearings (OAH), challenging a decision to approve or disapprove a CON application or exemption request. The proposed changes would eliminate the definition of affected persons and limit appellants to the “proponent of an application that was reviewed with the application for that certificate of need.” Thus, it appears that only the applicants in the same competitive review as a successful applicant would be able to appeal that approval and their denials. The statute does not provide that an applicant in a non-competitive review would be able to appeal its own denial, nor does it contain any provision allowing anyone to appeal the grant or denial of an exemption.
• In addition, the proposed change to G.S. § 131E-188(a) eliminates the statutory right for anyone to intervene in a pending CON contested case. Therefore, a successful applicant would not have the automatic right under the CON law to intervene in a contested case challenging the approval of its CON application.
• G.S. § 131E-188(b) and (b1) – Amends provisions related to appeals from OAH to the NC Court of Appeals, by increasing the maximum bond amount to be filed with the Court of Appeals from $300,000 to $500,000, and by providing that the successful party in an appeal will be entitled to reasonable attorney’s fees, including fees incurred during the contested case in OAH. The second change is particularly significant, because (1) the Department is not exempted from the attorney’s fees provision, and (2) attorney’s fees in contested case appeals can total hundreds of thousands of dollars. Unless the statute were amended to exempt the Department from this provision or to provide additional funds for the Department if it loses an appeal, those attorney’s fees likely would come out of its operating budget.
• G.S. § 131E-147(f) – Provides that the Department shall not issue or renew a license for an ASC acquired or developed after October 1, 2019, unless it commits each year that 4% of its total surgical case revenue will be from serving certain Medicare and Medicaid patients. It must also report to the Department certain cases by payor source each year. However, there is no provision in the law requiring the ASC to demonstrate that it has ever met the 4% threshold, nor is there any sanction for failing to do so.

Senate and House leaders will next appoint conferees from their respective houses to negotiate a budget over the next several weeks. Assuming an agreement is reached, a final proposed budget will be submitted to members of both houses for a vote and eventually presented to Governor Cooper for consideration.