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Massachusetts Determination of Need Program Proposes Regulatory Revisions

The Massachusetts Department of Public Health (DPH) Determination of Need (DoN) Program has proposed a number of changes to the DoN Regulations (105 CMR 100.000, et. seq.). Program Director Nora Mann presented the proposed revisions, together with an informational briefing memorandum, to the Massachusetts Public Health Council at its September 12, 2018 meeting. The proposal reflects administrative lessons learned in implementing the regulations, which, as reported in a previous post, DPH redrafted and promulgated in January 2017. The memorandum provides a useful summary of the changes, and this post will highlight several that will be of particular interest to providers as they engage in project planning efforts.  DPH will hold a public hearing on the proposed revisions on Tuesday, October 16, 2018, at 4:00 p.m. in the Public Health Council Room, Second Floor, Department of Public Health, 250 Washington Street, Boston, MA, 20108. The deadline for submitting written testimony is 5:00 p.m. on Friday, October 19, 2018. The proposed revisions, Ms. Mann’s memorandum, and the public hearing notice are available on DPH’s website.

Project Planning and Consolidation. DPH proposes to amend the definition of “proposed project” to clarify that it includes (i) substantial capital expenditures and substantial changes in service, or any combination thereof, or any original license or transfer of ownership subject to DoN review.  The Program replaces the concept of “disaggregation” (predicated on an applicant’s intentional division of project elements). In its place is a requirement that health care facilities whose planned capital expenditures, when totaled over a single federal fiscal year (FFY) exceed the expenditure minimum, submit a single, consolidated DoN application for all such capital expenditures and all proposed substantial changes in services consolidated over the same FFY.  Hospitals or comprehensive cancer centers may separately submit an application for approval of a Substantial Capital Expenditures concerned solely with outpatient services other than Ambulatory Surgery and not otherwise defined as DoN-Required Equipment or DoN-Required Services. 

While the proposed revisions include the concept of reasonable foreseeability, it is clear that the Program expects facilities to engage in proactive planning and consolidation. To address a transitional period of consolidation, the revisions include a time frame for applications submitted during FFY 2019. 

Substantial Capital Expenditures and Substantial Changes in Service. In corresponding changes, DPH proposes to define “substantial capital expenditure” as the total of all capital expenditures by a health care facility (including satellite locations) that, when added over a single FFY, exceed the expenditure minimum.  As noted above, the proposed revisions include a separate mechanism for hospitals or comprehensive cancer centers to submit a single, consolidated DoN application that aggregates all outpatient-specific substantial capital expenditures and substantial changes in service.

Patient Panel.  Currently, “patient panel” means those patients seen by an applicant or DoN holder over the last 36 months. DPH proposes revising the definition to address situations where the applicant or DoN holder itself (such as a parent entity), may not have a patient panel. The proposed regulations add that health system applicants must use the aggregate patient panel from each of its affiliated facilities, and applications for new facilities with no existing patient panel must use the anticipated patient panel. For transfers of ownership, the patient panel includes that of both the applicant and the facility/entity being acquired.

Transfers of Ownership – Factor 2.  DPH proposes that transfers of ownership will no longer be exempt from Factor 2, which requires the applicant to “sufficiently demonstrate that the Proposed Project will meaningfully contribute to the Commonwealth’s goals for cost containment, improved public health outcomes, and delivery system transformation.” 

Start the Clock.  Noting that there can sometimes be a significant period between the time a DoN application is filed and the time the application is deemed substantially complete, the revisions would define “filing date” as the date the application is deemed substantially complete.  This starts the clock on DPH’s four-month period from the filing date to take action on the application (with one two-month delay).

Health Policy Commission (HPC) Performance Improvement Plan (PIP).  Because DoN holders must maintain compliance with all applicable regulations and laws, DPH proposes that if a holder is required by the HPC to develop and file a PIP (required for entities whose increase in health status adjusted total medical expense is considered excessive and threatens the ability of the Commonwealth to meet the health care cost growth benchmark established under M.G.L. c. 6D, § 9, then the holder must notify DPH that it has filed the PIP and timely provide all information necessary for the Center for Health Information and Analysis (CHIA) to perform its analysis and for the HPC to determine if the holder has complied with the requirements of the PIP implementation process.  If the HPC finds that holder is not fully compliant, the holder must report to DPH on why DPH should find that the holder is still in compliance with the conditions of the DoN.  While no providers are currently subject to a PIP, this provision is noteworthy and evidences the efforts to coordinate the activities of the DoN Program and the HPC.

Amendments to Approved Projects. DPH proposes to consolidate the definition of Minor Change into the definition of Immaterial Change, and exclude Immaterial Changes from DPH review and approval because they do not increase the approved maximum capital expenditure or alter the scope of a project.  Significant changes would still require DPH review and Commissioner or Public Health Council approval. 

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M. Daria Niewenhous is a Mintz Member whose health care practice serves the full range of provider entities. She has extensive mergers and acquisitions experience, and she can advise clients on risk management. Daria also served for eight years as director of Mintz’s Domestic Violence Project.