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August 29, 2016

Massachusetts Department of Public Health Announces Major Determination of Need Regulatory Reform Initiative

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On August 23, 2016, the Department of Public Health (“DPH”) released proposed amendments to the Determination of Need (“DoN”) regulations, with the objective of eliminating antiquated, confusing and complex provisions, providing for simplification and improving the manner in which projects are reviewed. DoN approval continues to be required for substantial changes in service and capital expenditures that exceed the applicable dollar thresholds. Highlights of the significant changes made by the proposed rules include the following:

  • Public Health Objectives: The proposed regulations renew the focus of the DoN Program towards traditional public health goals for improving community health, containing cost, increasing access, and addressing the social determinants of health.
  • Systems of Care: The proposed regulations provide for a fundamental shift in the focus of DoN from an individual provider to registered provider organizations. DoN applications will be filed by the provider organization, rather than the individual clinic or hospital.
  • Ambulatory Surgery: The current moratorium on new outpatient surgical capacity will be lifted to provide for limited growth by acute care hospitals, as well as freestanding ASCs that are directly or indirectly owned or controlled by an acute care hospital. This means that hospitals will be permitted to pursue a DoN project for expanding outpatient surgical capacity on the main campus and receive hospital based reimbursement. However, expansion by hospitals in the community at satellites will not be permitted unless the site is licensed as a freestanding ASC clinic separate from the hospital license. Freestanding ASCs that are not directly or indirectly owned or controlled by a hospital may not expand capacity.
  • Mergers/Acquisitions: The change of ownership process will be overhauled to align with the timeline for Health Policy Commission (“HPC”) review of material changes. There will be a focus on how the proposed transaction will improve/impact the public health of patients served by the provider system as well as specific compliance checkpoints. DPH’s review of the applicant’s suitability for licensure will continue to be performed while the DoN application is pending. The new rules allow for DPH to issue “conditional” DoN approval pending the HPC’s completion of its material change review. The proposed rules also provide the Public Health Council and the DoN Program with the ability to review the HPC’s findings and either approve or disapprove a merger/acquisition.
  • Regulated Equipment and Services: DoN will continue to regulate certain technology and services. Specifically, MRI and linear accelerators will remain DoN regulated. In addition, DoN will develop a list of other forms of DoN-regulated equipment and services requiring approval. Such equipment and services will include those that have a low likelihood of efficacy and tend to be of significant cost. DPH will annually review the list of DoN-required equipment and services and update it as needed. Finally, projects involving DoN-required equipment and services will now be accepted any day, rather than limited to two times per year as is permitted under the current regulations.
  • Service/Facility Upgrade – Conservation Projects: The regulations will provide for an expedited review process for projects aimed at sustaining or restoring an existing facility or service to its original functionality without modernization, addition or expansion. Examples include refurbishing and deferred maintenance work. Such projects will be subject to a lower community health initiative contribution of 2.5% of the associated capital expenditure.
  • Review/Analysis of Need: Applicants will need to demonstrate innovation and ability to compete on price and will need incorporate principals of population health management. Financial feasibility will be determined through an independent CPA review of reasonableness of project costs and the applicant’s ability to carry the costs.
  • Mandatory Conditions of Approval: New conditions placed on all DoN approvals include:
    • Mandatory participation in Medicaid
    • Regular reporting and benchmarking
    • Monetary penalty for failure to comply with DoN conditions of approval
  • Community Health Initiatives: Payments of 5% or greater of the project’s maximum capital expenditure are required to support community health initiatives as set forth in new DPH guidelines. There will be a focus allocating monies to address social determinants of health.
  • Plan Review: The regulations will permit the simultaneous filing for architectural plan approval and DoN, thereby reducing the overall DPH review timeline.
  • Disaggregation: The regulations will explicitly prohibit the disaggregation of capital expenditure projects.
  • Development of Sub-Regulations: DPH will develop a number of sub-regulatory guidelines to further the objectives of the proposed regulations, the first of which will focus on the following:
    • Community Health Initiative Priorities-DPH will hold public listening sessions in October. Details to follow.
    • DoN Required Equipment/Services-DPH will hold public listening sessions in October and November. Details to follow.

Timeline for Adoption

  • Public Written Comment Period: 8/23/16 to 10/7/16
  • Boston Public Hearing: 9/21/16, 1:30 PM at 250 Washington St., Boston
  • Western MA Public Hearing: 9/26/16, 1:00 PM at 23 Service Center Rd., Northampton

Click on the following topics for additional information:

Language of the Proposed Regulations

Public Health Council Memo

DPH Quick Summary

DPH Presentation

Hearing Notice

About the Authors

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.

Crystal Bloom

Crystal Bloom is a partner and a senior healthcare regulatory attorney in Donoghue Barrett & Singal's Health Law group. She provides state and federal regulatory guidance and corporate legal services to healthcare providers. You can find her on LinkedIn.

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