What Is “Past Quality of Care” in a CON Review?

A recent decision in the Wake County nursing facility certificate of need (CON) case includes a new take on quality of care in the CON context that might well impact future applications and reviews.  The case arose from appeals of the CON section decision in the 2011 Wake County nursing facility review.  That review involved competitive applications seeking to develop part of the 240 new nursing facility beds allocated for Wake County in the 2011 State Medical Facilities Plan (Wake Review). One of the key issues in the case was whether certain applicants conformed with the statutory CON review criterion relating to quality of care, commonly known as Criterion 20.  That criterion requires a CON applicant already engaged in the provision of health services to “provide evidence that quality care has been provided in the past.”

Key terms in the criterion, such as “quality of care” and “the past” (i.e., how far back the agency should look) are not defined in the CON statute. Historically, the CON section typically has focused on whether an applicant had any immediate jeopardy level deficiencies within the 18 months preceding the application date at any facility in the county where the new beds being applied for are located.

In a decision issued June 20, 2013, the presiding administrative law judge (ALJ) ultimately concluded that Criterion 20 requires a CON applicant that is an existing provider to demonstrate a history of providing quality care at its existing facilities across the state in order to be awarded a CON. The ALJ’s expansive interpretation of Criterion 20 was based in part on his finding that quality care is an especially important issue with regard to nursing facilities that serve residents with serious health issues who are completely dependent upon them for their care.

In this case, the CON section came under fire for limiting the geographic scope of its Criterion 20 analysis to applicants’ quality care history in existing facilities operated in Wake County.  The ALJ rejected this approach and concluded the agency thwarted the purpose of Criterion 20 by limiting its geographic scope to Wake County.  The ALJ concluded that in order to conduct a meaningful analysis of an applicant’s quality care history, the Agency was required to review each applicant’s quality of care at its facilities statewide.  His decision emphasized that in limiting its Criterion 20 review to Wake County facilities, the agency had ignored information that the agency’s own nursing facility CON application required applicants to provide — quality information for the 18 months preceding the application for all the facilities the applicant owns or operates in North Carolina.

While requiring a statewide quality care review, the ALJ declined to adopt a “zero tolerance” policy proposed by two of the applicants in the case, in which a single substandard quality of care citation would result in nonconformity with Criterion 20.  He concluded that a statewide zero-tolerance interpretation is unreasonable, unfair,  would not effectively achieve the purpose of the CON law, and would prevent good providers from serving the state.  He noted that such a policy would result in a much higher standard for larger nursing facility providers that operate numerous facilities throughout the state than for smaller providers that operate only a few facilities.

Turning to the applications at issue, the ALJ determined that one of the applicants that had been disapproved by the CON section for nonconformity on the quality of care issue should have been found conforming with Criterion 20 and approved.  He specifically found that the applicant had identified and addressed issues of substandard quality of care at its facilities and taken steps to prevent similar problems in the future. He also concluded that the substandard quality of care events at the applicant’s facilities were isolated and unrelated.

On the other side of the coin, the ALJ concluded that one of the approved applicants had failed to completely and truthfully fill out the table in the CON application form requiring the quality of care information for the applicant’s facilities across the state.  In doing so, he concluded that applicant failed to prove it provided quality care in the past and therefore could not be approved due to its nonconformity with Criterion 20.  That applicant’s witnesses testified at hearing that it responded only about its Wake County quality history because, historically, that was what the agency considered in reviewing Criterion 20.

It remains to be seen how the CON section might adjust its Criterion 20 analysis or nursing facility application form in response to the ALJ’s decision regarding the Wake Review.  This decision will no doubt be appealed. But pending appeal,  this decision stands as precedent for a statewide quality of care analysis to determine an applicant’s conformance with Criterion 20, especially in nursing facility reviews. However, the decision also appears to call for a reasonable approach in which isolated quality of care incidents that a provider has effectively addressed would not preclude the applicant from being found conforming with Criterion 20 and approved. In that respect, the decision might help deflect extreme zero tolerance theories of quality care raised by a competitor to challenge an applicant’s approvability based upon isolated quality of care events that the applicant has effectively addressed. 

In the wake of this recent decision, nursing facility providers and other long term care companies submitting CON applications would be wise to clearly and specifically address their history of providing quality care at other facilities in the state.  Where applicable, this would include providing information to demonstrate that any isolated substandard care events were outliers and have been effectively addressed. Given the extensive Criterion 20 analysis set forth for the first time in this recent decision, applicants should also consult their legal counsel before submitting CON applications to ensure that they are putting their best foot forward in terms of quality care.