On March 23, 2023, the North Carolina General Assembly passed legislation that would expand Medicaid for an estimated 600,000 North Carolinians who currently lack health care coverage but do not actively qualify for Medicaid. There are significant Certificate of Need (CON) reforms included in the Medicaid Expansion bill. These reforms to the CON law primarily affect urban Ambulatory Surgical Centers (ASCs), urban MRI providers, behavioral health and chemical dependency providers, and providers that own or plan to acquire Diagnostic Centers or replacement equipment. The legislation also contains a provision that will make it easier for home care providers to provide home health-type services to individuals who are 21 and younger.
Removal of CON Regulation for Urban Ambulatory Surgical Centers
The most notable change to the CON law is that beginning two years from the date of the first Healthcare Access and Stabilization Program (HASP) payment to hospitals, both single and multispecialty ASCs in counties with a population over 125,000 will no longer be subject to the CON statute. These changes affect ASCs in more than 20 counties. Notably, ASCs in urban counties exempt from review will be subject to a 4% charity care requirement, which they must report to the Acute and Home Care Licensure Section.
North Carolina hospitals are expected to receive their first HASP payments sometime in 2023, so this provision will likely take effect in 2025. At that time, surgical providers will only need to seek a CON to develop an ASC if the county's population is below 125,000.
Removal of CON Regulation for MRI
In another significant change for entities that provide imaging services, CON review will no longer be required to acquire MRI scanners in urban counties with populations greater than 125,000. MRI acquisition is considered a "new institutional health service" subject to need determination. A need must be determined to acquire MRI scanners, and a CON must be issued. The changes to the CON statute specifically exempt MRI scanners in urban counties from being considered a new institutional health service, including exempting them from being considered major medical equipment or part of a diagnostic center, regardless of cost. This provision is effective three years after hospitals receive their first HASP payments, meaning it will likely take effect in 2026.
CON Changes for Diagnostic Centers, Major Medical Equipment, and Replacement Equipment
The CON reforms in the Medicaid Expansion law also relax the threshold for establishing Diagnostic Centers and acquiring Replacement Equipment.
Effective immediately, the capital cost threshold for Diagnostic Centers will require CONs only if the diagnostic equipment acquired or operated by the center, counting only equipment valued at $10,000 or more, exceeds $3 million. This amount will increase yearly based on inflation using the Medical Care Index. The previous threshold increased in 2021 to $1.5 million, and for over a decade previous to that was only $500,000. Therefore, from a practical standpoint, this reform effectively removes diagnostic centers from CON review unless the center is acquiring a large amount of equipment.
Under the CON reforms, a provider will now only be required to seek a CON to replace equipment in use outside of a hospital's main campus if the equipment costs more than $3 million effective immediately. This threshold is also pegged to inflation. The threshold for the acquisition of major medical equipment, which is $2 million with inflationary increases, has not changed.
Psychiatric Beds and Chemical Dependency Treatment Beds No Longer Regulated by CON
Effective immediately, psychiatric beds and chemical dependency treatment beds are no longer considered "health service facility beds" and will no longer require a CON. Therefore, providers that wish to establish new facilities, or in the case of hospitals, psychiatric or chemical dependency units within the hospital, or providers that want to add beds to existing facilities or units can do so without seeking a CON.
Exemption of CON Review for Services Provided to Children Up to 21 Years of Age
The Medicaid Expansion Law also creates a CON exemption for providers of licensed home care agencies. Under the exemption, licensed home care agencies can provide early and periodic screening, diagnosis, and treatment services (EPSTD) to children up to 21 years of age without CON review, as long as prior notice is given to the licensure section explaining why these services are needed. This change allows home care agencies to expand the scope of their services to pediatric patients beyond the services that home care providers have traditionally been allowed to provide.
The CON reforms included in North Carolina’s Medicaid Expansion law are sweeping and create significant concerns and opportunities for ASC, imaging, mental health, chemical dependency, and home care providers. Even with the curtailment of these CON requirements, CON regulations remain complex. Providers considering acting on these changes should consult counsel to ensure any planned changes in operations or acquisitions comply with the law.