As many states move to encourage healthcare companies to develop properties by relaxing or repealing certificate-of-need laws, New York is taking a bold move in the opposite direction.
The Empire State began carrying out a law in June that requires healthcare providers to commission health equity impact assessments as part of the certificate-of-need review process. Hospitals, nursing homes, diagnostic and treatment centers, birthing centers, and ambulatory surgery centers that want to expand must hire third-party analysts to gauge the impacts that expansions may have on health disparities and on communities.
Related: New payment models test ability to identify underserved communities
Proponents of the New York law say it will help to ensure that healthcare development is distributed more evenly, not concentrated in affluent areas already well-served by the healthcare system, and to address health disparities and inequities in poorer areas and those home to underserved populations. The healthcare sector and other skeptics decry the introduction of even more bureaucratic red tape and even higher regulatory compliance costs, especially for safety-net providers.
Either way, requiring providers to conduct health equity assessments will nudge them and regulators to rethink expansion strategies, said Duane Reynolds, chief health equity officer at the Chartis, a consulting company that prepares such reports for health systems.
"If they're looking at a market, they're normally going to look at the growth rate. They may look at the age distribution, payer types and all those things," Reynolds said. "But they should also be looking at race. They should be looking at households who don't speak English as a primary language. And the disparities that might exist. Because all that matters to how an organization should be responding strategically."
The certificate-of-need process was already designed to require healthcare providers to demonstrate community need before expanding, but its effectiveness overall is up for debate, said James Bailey, an economist at Providence College.
Research is mixed on whether certificate-of-need laws boost competition or quality, and critics argue the process is too burdensome, protects regional monopolies and can delay or prevent the construction of needed facilities. In response, states such as Florida, New Hampshire and Tennessee have relaxed oversight to encourage development.
In New York, providers submitted a flood of applications prior to the new requirements kicking in on June 22, according to the state Department of Health.
Among those was an application by New York-Presbyterian Healthcare System to undertake a $120 million ambulatory care expansion in suburban Westchester County. This plan is one front in a multi-billion-dollar market battle playing out among the metropolitan area's largest health systems while the lowest-income neighborhoods remain overburdened.
"The proposed center is being designed to grow and adapt to the ever-changing needs of healthcare practices and will provide cutting-edge technology in a patient-centered ambulatory environment," New York City-based New York-Presbyterian wrote in its application. "Internal volume and market data trends support a shift to surgical services in an ambulatory setting. This project seeks to create an enhanced patient experience by providing a convenient and accessible modernized ambulatory surgery facility conveniently located in Westchester County."
Because New York-Presbyterian submitted its application before the new law was in force, it was not required to include a health equity assessment, but this is the type of project that could fall under scrutiny in the future.
Only one request subject to the new rules has been submitted since the law took effect, according to the health department. It did not include an impact assessment and is considered incomplete, a spokesperson said. The department would not share the application, which includes the provider's name, and directed Modern Healthcare to submit a Freedom of Information Law request for the information.
The new certificate-of-need provisions will provide the state with additional context to consider how a project may impact communities and where services may be more urgently needed. However, it does not incentivize healthcare organizations to expand to low-income areas, which may be more effective, Bailey said.
"The new system attempts to promote equity by making it harder to build healthcare facilities in wealthy areas. A helpful reform would instead make it easier to build in underserved areas," Bailey said.
New York state Sen. Gustavo Rivera (D), who represents parts of the Bronx and chairs the Health Committee, sponsored the legislation to require health equity impact assessments as part of the certificate-of-need process. He hopes the new process will refocus state oversight on ensuring equitable healthcare development.
However, the tension between profitability and the need to serve underserved communities remains a conundrum. Hospitals have historically developed in regions with higher reimbursement rates, leaving areas home to high proportions of Medicaid enrollees with limited resources, Rivera said.
"I hope it will steer development. It's a challenge because at the core of it, you still have those perverse incentives," Rivera said. "You have institutions that feel that they have to invest in facilities that serve more private payer populations because that is going to make sure they're in the black. Until we move away from a system that profits off of sickness, then we will continue to have people making decisions that will be about the bottom line of their institution."
The New York hospital industry has proposed alternatives, said Karen Roach, vice president of regulatory affairs and rural health at the Healthcare Association of New York State, which represents hospitals. Specifically, New York hospitals—all nonprofit by law—could use their community impact assessments rather than paying consultants for another report, she said.
"The concern that we've heard, especially for some of the smaller providers, is that it does add an additional cost because they have to hire the independent entities to conduct these assessments," Roach said.
The new law may delay development over the next year as health systems and consultants adapt to the new regulations, Roach said. Yet she doesn't predict expansion will be disrupted over the longer term. "I don't think that it's going to dramatically change how hospitals develop their services because health equity is already baked into all the work they do," she said.
