PHHPC Discusses Certificate of Need and Regulatory Reforms

(May 17, 2024) At a two-day meeting on health planning and certificate of need (CON) policy, the State's Public Health and Health Planning Council (PHHPC) engaged in a wide-ranging discussion that included need methodologies for nursing homes, home care, and hospice; character and competence issues; innovative models of emergency care; and the use of public health data to inform the PHHPC's work. Council members recommended the convening of additional educational sessions focusing on specific issues and the creation of an ad hoc committee to examine regulatory reforms beyond CON. The meeting materials are here, and the meeting webcast is here.

The Council discussed at length the character and competence review of proposed operators of nursing homes. Council members expressed an interest in adopting standards that enable the approval of high-quality operators without unduly limiting the pool of eligible candidates. They expressed concerns regarding applicants with little or no nursing home experience and with experienced applicants who have ownership interests in poor-performing facilities. Council members also questioned whether proposed operators with a controlling interest should be subject to more rigorous review than those with a minority interest. Department of Health (DOH) staff asked the Council to consider the proper approach to applications by relatives of owners who are disqualified due to their ownership interests in poor-performing facilities.

The Council also discussed updating public need methodologies for nursing homes, hospice programs, and certified home health agencies (CHHAs). DOH staff noted that the hospice methodology was last updated 15 years ago. The CHHA methodology is also out of date, although minor revisions were adopted to enable projects under the Delivery System Reform Incentive Payment (DSRIP) Program Medicaid waiver. The nursing home need methodology was last updated in 2016 and was supposed to be re-examined in the wake of DSRIP and updated to reflect the innovations stimulated by DSRIP.

DOH staff asked Council members for input into whether need methodologies remain necessary or whether market forces should determine development. They also asked whether counties continue to be the proper planning areas and whether the current occupancy floor of 97 percent for nursing home need determinations should remain in place. These questions did not generate substantive discussion.

Peter Robinson, Chair of the PHHPC's Establishment and Project Review Committee, noted that in the Rochester area, nearly 1,000 certified nursing home beds have been taken offline due to the staffing shortage. He pointed out the irrelevance of the public need methodology in a market where there are certified beds and demand for them, but the certified beds cannot be staffed. Public Health Committee Chair Jo Ivey Boufford reminded the Council that most older adults prefer to age at home, rather than in residential settings, and urged the PHHPC to focus on home care agencies. Council member Scott LaRue agreed that most people would prefer to receive long-term care at home and supported the expansion of home and community-based services. However, he highlighted the "silver tsunami" and the growing numbers in need of residential care. He predicted that nursing homes will increasingly be focused on two populations: medically complex individuals who would once have been served in hospitals and individuals with dementia.

The Council also discussed various ownership models for nursing homes. In NYS, nursing homes must be owned by entities that are directly owned by natural persons. Nursing home operators cannot be owned by a trust, or through a multi-level limited liability company, or by a publicly traded entity or a private equity investment fund. Some Council members noted that nursing homes need access to capital that could potentially be offered by public companies and private equity investors. Others pointed out that entities that purchase nursing homes on behalf of investors are seeking to maximize their return, and they typically generate that return by taking resources out of the nursing home. LaRue explained that private equity and public company owners will cultivate the Medicare and private pay markets and discourage Medicaid admissions, creating a two-tiered system and barriers to care for Medicaid beneficiaries. These Council members suggested that there are other ways to direct funds to nursing homes and that State investment would be more efficient and effective than private sector investment.

Shelly Glock, Director of the DOH Center for Health Care Facility Licensure, Planning, and Finance, facilitated a discussion of several proposals to streamline the CON process by raising the project cost thresholds for construction projects subject to full, administrative, and limited review. Glock noted that between 2017 and 2022, construction costs increased by 25 percent. The proposals under discussion include the following:

• Non-Clinical Projects: Projects with a total cost of less than $12 million would not require any notice or review. Those with a cost greater than $12 million would require submission of a notice. The current threshold is $6 million.
• Limited Review: Hospital projects with a cost of up to $30 million would be eligible for limited review, up from $15 million. Projects by all other types of facilities would be eligible for limited review with a project cost of up to $8 million, up from $6 million.
• Administrative Review: Hospital projects with a cost between $30 million and $60 million would be eligible for administrative review, and other facility projects would be eligible for administrative review with a project cost between $8 million and $20 million.
• Full Review: Hospital projects with a cost greater than $60 million and other facility projects with a cost greater than $20 million would be subject to full review.

Glock asked for Council feedback on these proposals and on a proposal to eliminate CON review of projects funded with Statewide Health Care Facility Transformation Program grants.

Council Chair Jeffrey Kraut suggested that the cost thresholds be increased for inflation periodically. He also noted that the PHHPC rarely, if ever, disapproves changes in bed counts or categories. During the COVID pandemic, PHHPC approval of these types of projects was waived with no adverse effects. Several Council members voiced the view that applications to decertify beds or services or to close facilities should be brought to the PHHPC. Council member Ann Monroe recommended that any application that spurs community controversy be brought to the PHHPC.

The PHHPC agreed that it would follow up on the CON streamlining proposals by forming a work group of PHHPC members that would receive feedback from stakeholders. It will also convene additional educational sessions in the coming months to focus on discrete topics.

Chair Kraut recommended that the PHHPC consider regulatory reforms beyond CON regulations. He said that the PHHPC would create an ad hoc committee to review regulatory reform proposals that would include stakeholders and content experts who are not PHHPC members.

LeadingAge NY will keep members informed of the various reform efforts as they progress.

Contact: Karen Lipson, klipson@leadingageny.org