Could Changes Be Coming to Kentucky's Certificate of Need Program?

Certificate of Need (“CON”) laws are often hot button issues for state lawmakers – and for Kentucky lawmakers there is no exception. During the 2023 regular session of the Kentucky General Assembly, House and Senate Concurrent Resolutions were introduced calling for the establishment of a Certificate of Need Task Force (“CON Task Force”). In a memorandum dated April 26, 2023, the Legislative Research Commission (“LRC”) established the CON Task Force and directed it to:

1. Review Kentucky’s certificate of need program including the state health plan and related statutes.
2. Review the need for maintaining or modifying certificate of need for each health service currently covered.
3. Submit findings and recommendations regarding certificate of need to the LRC for referral to appropriate committee of jurisdiction.

According to the National Conference of State Legislatures (“NCSL”), the “primary objective of state CON laws is to control health care costs by avoiding unnecessary expansion or duplicative services within an area.” Additionally, “CON laws aim to ensure access to services for historically underserved communities, such as rural areas, and meet the health care needs of indigent patients.”¹

On December 14, 2023, the CON Task Force issued its Findings and Recommendations, essentially recommending further study before statutory or regulatory changes are made to the CON laws.

During the 2023 Interim Session of the Kentucky General Assembly, the CON Task Force held seven meetings and heard testimony from 26 individuals or organizations, which included the National Conference of State Legislatures, health care associations, government officials, health care providers, Americans for Prosperity, attorneys, and academics.²

The testimony illustrated sharp divisions in the healthcare and business communities concerning the efficacy of the current CON framework. Some urged the General Assembly to repeal CON laws root and branch, others advocated for less drastic modifications to the current framework, while others vigorously supported the status quo. The only clear conclusion to be drawn from the disparate views presented is that there is no consensus and no obvious way to harmonize the conflicting interests.

The stakes in this are enormous. Substantial changes in or the outright repeal of the current CON regime would dramatically alter the healthcare landscape in Kentucky, creating a different set of winners and losers. Some would prosper, while others may well disappear. The ultimate stakeholders in this debate are Kentucky consumers of healthcare—every Kentuckian. This is a debate that anyone interested in Kentucky healthcare should follow with interest.

Currently, only 12 states do not have any CON laws. In their Findings and Recommendations memorandum, the CON Task Force stated the positions on CON as follows:

• One position is that certificate of need laws limit competition by protecting incumbent providers and creating a burdensome approval process for establishing new or expanding health services and facilities, and that there is little evidence that certificate of need laws control costs, improve quality, or ensure access to healthcare.
• A second position is that healthcare service delivery does not operate in a free market, thus certificate of need laws are necessary to control costs, improve quality, and ensure access to healthcare for all people in all geographic areas. The existing certificate of need program may be improved with modifications for some healthcare facilities and services.

The last time Kentucky’s CON program was broadly reviewed, including accepting stakeholder input, was in the second term of Governor Steve Beshear’s administration. In May 2015, the Cabinet for Health and Family Services revised the State Health Plan to include certain CON reforms such as exemption of certain services from the State Health Plan and preferential treatment for health care providers who meet certain quality metrics or participate in value-based payment programs. These changes notwithstanding, the basic CON structure was retained.

During the testimony before the CON Task Force, NCSL did an excellent job providing a national perspective of CON laws and what these laws are intended to accomplish. NCSL staff highlighted recent state legislation impacting CON laws.³

Other presenters proposed specific changes to the CON laws, without advocating for repeal. For example, the Kentucky Hospital Association (“KHA”) submitted a CON Modernization plan, which the KHA described as “common-sense proposals.” The KHA plan includes the following:

• Reform the CON application and appeal process.
  • Allow providers to file applications at any time (rather than only during certain “batching cycles").
  • Reduce length of hearings by simplifying the hearing requirements (some CON hearings can last weeks and are more like “mini trials”).
  • Make non-substantive CON decisions final with limitations on appeal rights.
  • Streamline administrative process by shortening the time between filing an application and final decision.
• Provide flexibility for existing Kentucky hospitals to improve patient service.
  • Allow for expedited non-substantive CON review for adult, medical, and geriatric psychiatric beds under certain conditions.
  • Allow for expedited non-substantive review for Kentucky hospitals with accredited cancer centers to acquire megavoltage radiation therapy and PET equipment.
  • Allow hospitals that operate emergency departments (and are therefore subject to EMTALA requirements) to qualify for expedited review to acquire MRI equipment. Allow existing Kentucky hospitals to replace worn equipment without requiring a CON.
  • Allow rural emergency hospitals to convert back to an acute care hospital without the need for a new CON.
  • Eliminate the sunset provision for new ambulance services that was established in HB 777 (2021), which would allow for continued flexibilities to add new services.
• Retain formal review for the following:
  • Building new hospitals/adding new hospital beds
  • Neo-natal Intensive Care Units (NICUs)
  • Ambulatory Surgical Centers (ASCs)
  • Open Heart Surgery and Cardiac Catheterization
  • Organ Transplantation
  • Megavoltage Radiation Therapy and Positron Emission Tomography
• Establish Formal Review for free-standing birthing centers.

One of the loudest voices for repeal of CON laws is Americans for Prosperity (“AFP”). In their testimony before the CON Task Force, AFP called CON laws “anti-competitive” and maintained that in states that have repealed or reformed CON laws, “the sky hasn’t fallen” and those states have “seen more capital investment, especially in suburban areas.”⁴

The CON Task Force also accepted public comments until September 1, 2023. A total of 163 comments were submitted for the CON Task Force’s consideration. Similar to the testimony at the task force meetings, the comments included both supporters and detractors of Kentucky’s CON laws.

So, what can we expect from the 2024 Kentucky General Assembly regarding changes to Kentucky's CON laws? LRC no longer publishes pre-filed bills—so we will not know until after the session starts and bills are filed if there will be an attempt to reform or repeal Kentucky’s CON laws. Based on the discussions during the Interim Session and previously filed legislation, there is interest among some legislators to repeal Kentucky’s CON program. However, it is more likely that any successful legislation will target geographic need, which includes supporting rural providers, and focusing on certain services such as birthing centers.

Given the sharp division of opinion, the result is unpredictable and the debate will likely continue across a number of future legislative sessions. The outcome—whether repeal, modification, or retention of the current CON framework—will have enormous ramifications for the delivery of healthcare for Kentuckians.

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¹Brief: “Certificate of Need State Laws,” found at Intent and Structure of CON.
²The CON Task Force meeting materials are available on the LRC website at Committee Details - Legislative Research Commission (ky.gov).
³NCSL’s Certificate of Need State Laws (ncsl.org) page is an excellent resource for a state-by-state comparison of CON laws.
⁴August 21, 2023, AFP-KY Testimony, found at here.