As discussed in our April 12, 2021 blog post, North Carolina’s General Assembly continues its bid to chip away at North Carolina’s certificate of need (“CON”) law. Along with the previous five bills filed since March, legislators filed another CON modifier bill, House Bill 660, on April 22, 2021. House Bill 660 proposes to eliminate certain services from the CON law and is sponsored by Representatives Kidwell (R-Beaufort, Craven), Goodwin (R- Bertie, Camden, Chowan, Perquimans, Tyrrell, Washington), Hanig (R-Currituck, Dare, Hyde, Pamlico), Sasser (R-Cabarrus, Rowan, Stanly), and Riddell (R-Alamance). Each of these Representatives, with the exception of Representative Riddell, is also a sponsor of House Bill 410, discussed previously, which proposes to repeal the CON law entirely.

Proposed to take effect on October 1, 2021, House Bill 660 eliminates CON regulation for dialysis services, chemical dependency beds and facilities, kidney disease treatment centers and psychiatric beds and facilities, by removing such facilities from the definition of health service facilities requiring prior approval. The bill also proposes to exempt from CON review several types of projects for which a CON is currently required, including:

  1. Projects to develop, acquire, construct, expand, or replace a health service facility or service that obtained CON approval as a chemical dependency treatment center, kidney disease treatment center, or psychiatric facility prior to October 1, 2021; and
  2. On a limited basis, applications from North Carolina-licensed ophthalmologists to license ocular surgical procedure rooms as ambulatory surgical facilities (“ASFs”).

The second proposed exemption would be available only for a limited period of time to North Carolina-licensed ophthalmologists and only as long as specific conditions are met. The conditions include: (1) that the license application is postmarked for delivery to the North Carolina Division of Health Service Regulation by December 31, 2021; (2) verification by affidavit that the facility is in operation as of the date of the applicable subsection of the proposed bill or that the completed application for the building permit for the facility was submitted by the effective date of the subsection; (3) the facility is accredited by one of three primary accreditation bodies by the time the application is postmarked for delivery; and (4) the license application includes a commitment and plan for serving indigent and medically underserved populations. All other persons who propose to license ocular surgical procedure rooms as ASFs would be required to obtain a CON. The ocular surgical procedure room exemption is modeled after a similar exemption in 2006 for gastrointestinal endoscopy procedure rooms.

The implications of these proposed changes could be far-reaching. Currently, CON regulation of kidney disease treatment facilities, and specifically dialysis services, make up a large percentage of the decisions and findings issued by the North Carolina Division of Health Service Regulation, Healthcare Planning and Certificate of Need Section (the “CON Section”) each year. For example, in January 2021, the CON Section announced a total of eighteen CON decisions and findings on its website. Of those, thirteen were related to the addition of dialysis stations at various facilities throughout the state. The April 1, 2021 CON application log lists sixteen dialysis applications for review. Eliminating CON regulation of these projects could significantly change the competitive landscape for dialysis providers in North Carolina. Barriers to new providers seeking to enter the market will be significantly reduced, and existing providers would be able to expand and replace their existing centers freely, without CON oversight.

The proposed changes to the CON regulation of chemical dependency treatment centers and psychiatric facilities are also noteworthy. As CON approval would no longer be required for either of these services, it is foreseeable that more of these facilities would be established throughout the state. While supporters of the Bill may opine that this is good for the promotion of public health, opponents may question whether CON de-regulation potentially harms vulnerable patients suffering from mental illness or substance abuse, pointing out that CON addresses issues such as service to medically indigent patients and quality of care.

Since the date of our initial blog post, the CON repeal bills, Senate Bill 309 and House Bill 410, remain in Committee. Senate Bill 462 (proposing to increase cost thresholds and providing for a “shot clock” on the expiration of certain CONs) has been moving between the Committee on Rules and Operations and the Health Care Committee, most recently being re-referred to the Committee on Rules and Operations on April 28, 2021. Senate Bill 506 (incorporating the proposed changes from Senate Bill 462 and proposing additional exemptions to CON review) remains in Committee. In addition, Senate Bill 641, which proposes to remove from CON requirements psychiatric facilities, intermediate care facilities for individuals with intellectual disabilities and opioid treatment facilities in Tier 1 and 2 counties[1], effective October 1, 2021, has been referred to the Committee on Rules and Operations of the Senate.

The North Carolina CON Team at Nelson Mullins continues to closely monitor developments related to North Carolina’s CON program. For further information, please contact any member of the North Carolina CON Team or the Nelson Mullins professional with whom you work.