Effects of Tennessee’s Revised Healthcare Laws

Certificate of Need (CON) programs, aimed at restricting healthcare facility costs and improve planning of new construction, date back to 1964, when New York became the first state to pass such legislation. Fueled by concern that over-investment by providers would raise healthcare costs, the state government was empowered to determine need for any new hospital or nursing home before it could be established. A decade later, Congress passed the Health Planning and Resources Development Act of 1974, which provided federal funds for state CON review programs, and by 1982, virtually every state had enacted some type of a CON program.

Despite decades of change in the health care system, CON laws have remained virtually untouched.

Changes in Tennessee

Tennessee, home to some of the nation’s leading healthcare providers, has traditionally been among the more regulated environments. It first enacted its CON law in 1973 under the direction of the Health Facilities Commission, which administrated the program until 2002. However, in 2015, a movement began in the Tennessee General Assembly calling for officials to update the law, and efforts culminated in April 2016 when Gov. Bill Haslam signed the most significant changes to the law since its inception. The laws, which launched July 1, 2016, modify current CON requirements by adding, deleting or changing services.

Tennessee Sen. Todd Gardenhire (R-Chattanooga) and Rep. Cameron Sexton (R-Crossville) introduced SB1842/HB1730 as they believed that CON reform was “imperative to address healthcare costs, and the development of the system, and the State.” Their original proposal received feedback from interested parties in the Tennessee healthcare community, and a revised version emerged in the 2016 legislative session.

Specific Revisions

Changes include:

  • Eliminates the requirement of a CON to: modify, renovate or add to a hospital or health care facility; acquire major medical equipment; discontinue obstetrics or maternity services; close or eliminate regulated services in critical access hospitals.
  • Eliminates coverage of birthing centers, extracorporeal lithotripsy, swing beds, and rehabilitation or hospital-based alcohol and drug treatments for 28-plus day programs for adolescents.
  • Eliminates coverage of the initiation of magnetic resonance imaging (MRI) services, except in lightly populated counties and for pediatric patients.
  • Increases the number of MRI machines in lightly populated counties (except when replacing or decommissioning existing machines).
  • Adds the initiation of organ transplantation; the establishment of freestanding emergency departments; new reporting requirements for MRI providers; and new accreditation standards for outpatient diagnostics centers.
  • Permits hospitals and other health care facilities to increase their bed count by 10 percent over a three-year period.
  • Calls for the establishment of new quality standards and measures by HSDA, in connection with the Division of Health Planning and the Department of Mental Health and Substance Abuse, the violation of which may result in civil penalties, CON revocation or licensure discipline.

The CON reforms apply to all CON applications filed on or after that date. Voices from all sides of the debate are in unison that the most important concern is the enhancement of high quality health care for Tennesseans.

According to the sponsors, these reforms are intended to be a step in furtherance of that goal, while also better controlling healthcare costs and improving the orderly development of the healthcare system.

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