Kentucky has one of the toughest certificate-of-need laws in the nation, stringent regulations that have thwarted significant expansion of acute-care beds for almost 25 years. But that may change under new guidelines from the state's Office of Health Policy, which wants to relax those laws as a way to spur construction to meet the anticipated health needs of Kentucky's fast-growing elderly population.
Although new-hospital construction has been at a standstill for decades, the healthcare industry-concerned about the prospect of unchecked building and unnecessary new beds-has positioned itself as the principal foe of the proposed changes.
After receiving more than 200 responses during a two-week public-comment period last month, wary state officials temporarily halted the proposed guidelines. Pending additional comment on the new rules, the state extended an existing 3-year-old construction moratorium while it sorts through the controversy and develops a new state health plan, which could take several months.
Under the proposed guidelines, new hospitals could win approval if they show that an existing hospital has either a documented history of uncorrected quality-control problems or a pattern of higher negotiated rates for providing identical services than a similarly licensed hospital. Hospital administrators believe these guidelines are too vague, making it easy to manipulate statistics and justify unneeded construction. The state currently has 104 acute-care hospitals.
"How, for example, do you define what `normal' rates are?" asked Carol Ormay, spokeswoman for the Kentucky Hospital Association. "If average is normal, you could look at CMS indicators and see that half the hospitals in the state are below (that level). That would potentially lead to a lot of new hospitals, which brings up issues such as who is going to staff all these new hospitals."
Mark Carter, senior vice president and chief financial officer of three-hospital Jewish Hospital & St. Mary's HealthCare in Louisville, said his system is opposed to the "controversial" criteria, saying he wants any adjustments to be connected to community needs. "It's actually kind of surprising," he said of the draft proposal. "I would imagine there would be some substantial modifications."
Steve Williams, president and chief executive officer of Norton Healthcare, a five-hospital Louisville system, suggested that this "liberalizing" of the CON regulations goes too far. Like Carter, he suggested that the rules governing new-hospital construction should be "more specifically directed toward proving community need."
"I think it certainly provides hospitals with more flexibility," he said. "But we would hope that the flexibility would be accompanied" by the responsibility of addressing community need.
The proposed regulations modify and lower strict occupancy levels that have made it almost impossible to get new beds approved. Hospitals now seeking CON approval must show that the entire geographic area-not just the single facility-is at an 80% occupancy rate.
The state has identified 15 areas for this purpose. Under the proposed guidelines, hospitals would need to address only their own occupancy levels, and the benchmark approval for new construction would drop slightly to anywhere from 60% to 75%, depending on the facility's size. That change, tied directly to community need, is supported by the hospital industry.
For now, the rules' fate remains uncertain even as state officials maintain that the plan is a step in the right direction.
"What we've tried to do," said Jeff Barnett, deputy executive director of the state's Office of Health Policy, "is try to create more access for patients and alleviate areas of unmet needs, both in geographic terms and the types of services provided. This is an effort to do some productive health planning to identify not only those in current need ... but anticipating where there will be a need in the future."