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March 18, 2014

Department of Public Health proposes changes to Determination of Need regulations

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The Massachusetts Department of Public Health (DPH) recently issued proposed amendments to the Determination of Need (DoN) regulation, 105 C.M.R. 100.000. The regulations are designed to implement the DoN changes that were mandated in Chapter 224 of the Acts of 2012 (“Chapter 224”). Some of the most significant changes include the following:

Hospitals may no longer expand ambulatory surgery capacity without DoN approval

Prior to passage of Chapter 224, the DPH regulations governing the DoN formula for Ambulatory Surgery Centers (ASC) provided that no freestanding ASC could be established or expanded without DoN approval, while at the same time, hospitals could expand ambulatory surgery capacity without DoN approval if the project cost was under $25 million. Consistent with the passage of Chapter 224, DPH proposes to amend the definition of “ambulatory surgery” to make it clear that wherever DoN applies to ambulatory surgery, it does so whether the facility is a clinic or a hospital. The effect of this change has been in place since Chapter 224 was enacted. Thus, this change reaffirms that the loophole allowing hospitals to expand outpatient operating room capacity without DoN approval is no longer available.

Independent Cost Analysis may be requested by DPH

DPH may require applicants to provide an independent cost analysis, at their own expense, to demonstrate that applications for a substantial change in service or substantial capital expenditure are consistent with the healthcare cost-containment goals of the Commonwealth and the Health Policy Commission (HPC). At this time, it does not appear that this proposed rule applies to applications for transfers of ownership.

The Amendments clarify the Health Policy Commission’s participation

While the proposed amendments clarify the right of the HPC to review and comment on DoN applications, it also indicates that the HPC has the right to recommend that DPH require an independent cost analysis.

The Attorney General’s right to intervene in the DoN process is reaffirmed

Chapter 224 provided the Attorney General (AG) with a formal role in the review of DoN applications. DPH is proposing to formally recognize this role by adopting regulations that recognize the participation of the AG in the review of DoN applications. Under the current DoN regulations, the AG is not a “party of record” and thus does not participate in DoN application review or proceedings. The proposed amendment clarifies the right of the AG to request a public hearing, comment on DoNs, and intervene in a hearing.

Applications may be guided by State Health Plan

DPH proposes to formally tie the DoN process with the anticipated implementation of the State Health Plan developed by the DPH through the Health Planning Council. The State Health Plan will identify the needs of the Commonwealth in healthcare services, providers, programs, and facilities. All applications submitted after the date of filing of the first State Health Plan may be guided by the State Health Plan’s identified needs, the resources available to meet those needs, and the priorities for addressing those needs.

Applications may be approved more quickly

With the passage of Chapter 224, DPH will have a four-month window, rather than the eight-month window specified by the current regulations, to approve or disapprove each DoN application. If a cost analysis study is required, then the four month review clock is stayed. In addition, the proposed regulations reaffirm a judicial remedy if DPH has not taken action on the application within the four month time limit.

Application filing fees may double

Consistent with the passage of Chapter 224 of the Acts of 2012, DPH proposes to increase the DoN application filing fee from 0.1% to 0.2% of the total capital expenditure. Until such time as DPH establishes a new fee by regulation, the current fee will remain in effect.

DPH will hold a public hearing on the proposed amendments sometime in April, 2014. The exact date is yet to be determined. In its proposal, DPH indicated it contemplated promulgating the final regulations by June or July. To view the proposed DoN amendments in their entirety please click here..

About the Author

Andrew Levine

Andrew Levine is a partner and head of the firm's regulatory practice. He provides regulatory guidance, business and corporate legal services, as well as strategic advice to healthcare clients. You can find him on Google+ and LinkedIn.

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