As Part of CON Reform, New York State DOH Seeks Stakeholder Input On Regulation of Physician “Mega Groups”

March 8, 2013 | Health Services

Significant changes to New York’s Certificate of Need (“CON”) process are underway.  The Public Health and Health Planning Council (“PHHPC”) was charged last year by Governor Cuomo and Health Commissioner Shah with redesigning the CON system in light of the recommendations and requirements of both the Affordable Care Act and the Medicaid Redesign Team.  PHHPC’s goal is to advance the “Triple Aim” of better care, better health, and lower costs.  They have put forth 23 proposals (outlined below) which will likely change the delivery of care in New York.  

In recognition of the consolidation of physician practices and the increased market presence of large single- and multi-specialty “mega groups,” one of PHHPC’s proposals includes updating the criteria that trigger facility licensure requirements to equalize treatment of physician practices and facilities with respect to CON requirements.  Just last week, the New York State Department of Health (“DOH”) issued a letter to stakeholders seeking input on whether such physician groups should be regulated as part of the CON process.  DOH refers to such practices as “enhanced physician practices.”  According to DOH, enhanced physician practices include large medical groups that may employ hundreds of physicians, operate surgery, advanced diagnostic imaging, urgent care and/or radiation therapy centers, as well as faculty practice plans, “captive” medical practices of hospitals, and medical groups established by insurance companies.  

Advocates for expanding the CON process to include enhanced physician practices contend that increased regulation is required to level the playing field because such practices operate with less regulatory oversight, including oversight of quality and patient safety, than facilities which must comply with the CON process.  Advocates also express concern regarding the exercise by enhanced physician practices of market power which destabilizes safety net providers by attracting commercially insured patients, while declining to serve Medicaid beneficiaries and the uninsured.  Advocates further contend that because enhanced physician practices have been playing an increasingly important role in healthcare delivery in New York State, coupled with the fact that New York State desires to renew its focus on regional planning and quality improvement, enhanced physician practices should be subject to additional oversight.  Advocates have also expressed concern about the cost and quality of care provided by enhanced physician practices. 

Opponents to expanded regulation argue that enhanced physician practices are at the forefront of promoting payment and delivery system reform initiatives designed to keep patients healthy and out of acute care facilities. For example, in New York State, most of the Accountable Care Organizations participating in the Medicare Shared Savings Program would likely be considered enhanced physician practices.  In addition, opponents argue that many enhanced physician practices have the most robust patient-centered models of care and sophisticated reporting systems designed to promote population health and implement evidence-based practices in the State.  Further, enhanced physician practices provide needed competition to acute care facilities which promotes patient choice. 

Comments to DOH are due no later than March 25, 2013 (  To assist stakeholders in developing their comments to DOH, it is important to consider PHHPC’s 22 other proposals.  Accordingly, set forth below is a brief outline of the other 22 proposals currently being considered by PHHPC in connection with CON reform. 

The proposals are grouped into several categories as follows:  

Regional Planning:  Given the acknowledged regional variation in health system performance, it is believed that regional health planning is needed in order to advance the Triple Aim because variation in health system performance and health issues vary by region and locality.  As such, PHHPC recommended the following:  

  1. Health planning should be reinvigorated on a regional basis through multi-stakeholder collaboratives, to promote better care for individuals, better health for populations and lower per capita costs.
  2. The creation of multi-stakeholder Regional Health Improvement Collaboratives (“RHICs”) to conduct regional planning activities.
  3. The creation of 11 geographic planning regions across the state.
  4. Each RHIC should advance each dimension of the Triple Aim in its region.
  5. PHHPC should consult with the RHICs concerning regional health and health care environments, unmet needs, and effective planning strategies and interventions that could be disseminated statewide to advance the Triple Aim and eliminate health and health care disparities. 

Certificate of Need and Licensure Changes:  The following recommendations, according to PHHPC, would help to promote the Triple Aim by reducing restraints on primary care development, facilitating the creation of integrated systems, and strengthening DOH oversight over governance:

  1. Eliminating CON for primary care facilities, whether diagnostic and treatment centers or hospital extension clinics. 
  2. Projects funded with DOH grants should be exempt from public need review and subject to limited financial review. 
  3. DOH should enter into a contract with a research institute to advise DOH and PHHPC concerning emerging medical technologies and services that might be appropriate for CON oversight.
  4. CON for hospital beds should be retained at least in the short term and reconsidered in the next three to five years. 
  5. Consider the use of Accountability Care Organization certification, in lieu of CON for certain facilities, to promote appropriate distribution of facilities and services and State Health Improvement Plan (“SHIP”) goals. 
  6. Update the CON process for hospice care.
  7. Update the CON process for approved pipeline projects.  DOH should take steps to ensure that public need is accurately evaluated when approved projects are in the pipeline.  Specifically, providers should not be permitted to retain CONs for extended periods without bringing the approved project to completion and providing the approved services. 

Promoting Improvements in Quality and Efficiency through Governance:  Recognizing that PHHPC’s character and competence evaluation process is outdated in light of the increasing integration of health care facilities into systems, interstate expansion of health systems, and the growth of publicly-traded home care and dialysis providers, PHHPC recommended the following changes: 

  1. Rationalize “taint” to eliminate barriers to integration and recruitment of experienced governing body members.
  2. Streamline character and competence reviews of established not-for-profit corporations.
  3. Streamline character and competence reviews of complex proprietary organizations (e.g., publicly traded, private-equity-owned) and new, complex not-for-profit systems.
  4. Align “passive parent” oversight with powers exerted by parents and promote integrated models of care.
  5. Improve transparency of major changes in board membership.
  6. Strengthen DOH authority to respond to failures in governance.

Incorporating Quality and Population Health into CON Reviews; Streamlining Financial Feasibility Reviews; and Relaxing the Revenue Sharing Prohibition: According to PHHPC, CON reform can advance health care quality and population health.  Thus, PHHPC recommended the following:

  1. Consider performance on quality benchmarks and relationship to SHIP when reviewing applications to expand services or sites.
  2. DOH should pursue a more calibrated approach to financial feasibility reviews.
  3. Relax the prohibition on revenue sharing among providers that are not established as co-operators.
  4. DOH should work with stakeholders to review, and update as necessary, the construction and environmental standards and other requirements for health care facilities and agencies to improve the resiliency and sustainability of health care facilities and ensure that patients/residents, staff and facilities are protected in the event of severe weather events, flooding, and other natural disasters.

PHHPC noted in its last report that its recommendations are “not intended to be the final word on regulatory reform in the context of an evolving health care delivery system.”  Moving forward, legislative and further regulatory action will be required to implement the recommendations. 

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