News: CJ Exclusives

DHHS seeks repeal of several certificate-of-need rules

Barriers preventing purchase of medical equipment removed as part of NCGA's regulatory review process

The Department of Health and Human Services is seeking repeal of six unnecessary certificate-of-need rules to reduce the regulatory burden on medical diagnostic centers and purchase of major medical equipment. Some health care experts welcome the reduced red tape, but say the changes don’t go far enough.

The proposal, which would be effective Dec. 1, is the latest example of the impact of regulatory reforms put in place by the Republican-led General Assembly. About 6,225 administrative rules have been reviewed throughout state government, and 690 are slated to be eliminated, while others are still under review for possible sunsetting.

“North Carolina’s Administrative Procedure Act mandates periodic review of all rules. The repeal of the CON rules is, in part, a response to that mandate,” said DHHS spokeswoman Kate Murphy. The agency has repealed 86 CON rules effective Feb. 1.

“It is noteworthy that Division of Health Service Regulation is proposing CON rule repeal. Even though this is an isolated instance of CON rule repeal, it is a breath of fresh air,” said Dr. Richard Bruch, board chairman of the North Carolina Specialty Hospital and a member of the North Carolina Orthopaedic Association executive committee.

“And for most of us it is educational. The law is the law. And the administrative rule making that implements the law can be a huge impediment to complying with the law,” Bruch said.

Nadine Pfeiffer, DHHS rule review manager, announced the intent to repeal the six administrative rules in a memorandum issued Aug. 15 and were published the same day in the North Carolina Register.

A public hearing is scheduled Oct. 6 at 10 a.m. in the Edgerton Building on the Dorothea Dix campus. Public comments will be accepted until Oct. 14.

“The rules proposed to be repealed place a burden on applicants establishing diagnostic centers as they require applicants to demonstrate that every other provider of the same service has and will continue to operate at 80 percent of capacity,” Pfeiffer wrote in the memo.

That rule erected a huge barrier because the data applicants are required to use are not publicly available, do not specify “the type of major medical equipment the applicant is seeking,” and does not tell the applicant what information it is required to submit, Pfeiffer wrote.

The rules “place an unnecessary burden and cost on applicants and to the department,” Pfeiffer wrote.

“The rules to be repealed were meant to supplement the statutory criteria,” Murphy said. “However, in the case of the major medical equipment rules, they did not add anything not already addressed by the statutory review criteria. In the case of the diagnostic center rules, they imposed an unrealistic obstacle on the applicant.”

North Carolina Hospital Association spokeswoman Julie Henry said it was too early to comment specifically on the proposed rules changes, as her organization was still reviewing them.

“In general, as an association NCHA supports improvement to the process, the way the law’s administered, to make it more effective and efficient,” Henry said.

“But we don’t support changing what the law covers, the basic intent of the law, so our goal is certainly to work with DHHS and with our lawmakers to get improvement in how the law is administered,” she said. “But we don’t want to see any reduction in the services that are covered by certificate of need at this time.”

“A CON is still required in order to develop a new diagnostic center or to acquire major medical equipment,” Murphy said. “Applicants must still demonstrate the need for their proposals. The repeal of these rules is not likely to have any impact on the number of applications received for diagnostic centers or major medical equipment.”

Opening a diagnostic center or acquiring major medical equipment both are defined in North Carolina Administrative Code, and require issuance of a certificate of need.

“The relief will be with the administrative rules, which have the effect of law,” Bruch said. And the law only applies to physicians, not hospitals.

“My hope is that the next North Carolina legislative session will enact CON reform legislation,” said Bruch, who believes the state could save $250 million a year in State Health Plan costs alone if CON laws were repealed in their entirety.

“Likely, North Carolina urology practices seeking to upgrade CT scanners will see the most benefit” from the proposed repeals, Bruch said. The “need” for a CT scanner is not covered by CON, but the diagnostic center limitations “do impede upgrading CT equipment in many urology practices.”

But MRI growth continues to be prevented by the CON “need” restrictions.

“A physician practice, a hospital, and an Accountable Care Organization can not spend one dollar to acquire an MRI scanner due to the current CON restrictions unless ‘need’ is identified in the North Carolina State Medical Facilities Plan,” Bruch said.

“This is somewhat of a positive change that is consistent with previous changes to streamline the administrative rules,” David French, a consultant representing the North Carolina Orthopaedic Association, said of the proposed repeals.

“One major problem with CON regulation of diagnostic center and major medical equipment is that the dollar thresholds ($500,000 and $750,000, respectively) included in the CON law have not been changed for many years,” French said. And there are no exemptions from CON to replace obsolete equipment if the capital cost exceeds the CON thresholds.

The diagnostic center and major medical equipment rules do not make sense from a health planning perspective, French said.

That is because the State Medical Facilities Plan “includes no policies, methodologies, or inventories” for equipment that could fall under these CON categories including CT scanners, X-ray, mammography, ultrasound, echocardiography, nuclear medicine, stress test, and Holter monitoring, he said.