SB 440 — AN ACT CONCERNING CERTIFICATES OF NEED.

An applicant shall file the certificate of need application with the unit not later than ninety days after publishing notice of the application in a newspapersSB440 in/ accordanceFile withNo. the provisions of this subsection.

The314 unit shall not accept the applicant's certificate of need application for filing unless the application is accompanied by the application fee prescribed in subsection (a) of this section and proof of compliance with LCO 9 ofsSB440 20File Substitute Bill No.

440314 thenewspaper publicationin requirementsaccordance prescribedwith inthe provisions of this subsection.

The unit shall not accept the applicant's certificate of need application for filing unless the application is accompanied by the application fee prescribed in subsection (a) of this section and proof of compliance with the publication requirements prescribed in this subsection.

If an applicant fails to submit such information to the unit within the sixty-day period, the unit shall considersSB440 the/ applicationFile toNo. have been withdrawn.

(3)314 The unit shall make reasonable efforts to limit the requests for additional information to two such requests and, in all cases, cease all LCO 10 ofsSB440 20File Substitute Bill No.

440314 requestsconsider forthe additionalapplication informationto nothave laterbeen thanwithdrawn. six months after receiving the application.

(3) The unit shall make reasonable efforts to limit the requests for additional information to two such requests and, in all cases, cease all requests for additional information not later than six months after receiving the application.

If the unit does not issue a decision on the completed application,sSB440 not/ laterFile thanNo. twenty days after such date, the application shall be deemed approved.

(e)314 Except as provided in this subsection, the unit shall hold a public LCO 11 ofsSB440 20File Substitute Bill No.

440314 hearingapplication, onanot properlylater filedandcompletedcertificatethan ofneedapplicationtwenty ifdays threeafter orsuch moredate, individualsthe or an individual representing an entity with five or more people submits a request, in writing, that a public hearing beheldonthe application.For aproperly filedandcompletedcertificate of need application involving a transfer of ownership of a large group practice, as described in subdivision (3) of subsection (a) of section 19a- 638, when an offer was made in response to a request for proposal or similar voluntary offer for sale, a public hearing shall be helddeemed ifapproved. twenty- five or more individuals or an individual representing twenty-five or more people submits a request, in writing, that a public hearing be held on the application.

(e) Except as provided in this subsection, the unit shall hold a public hearing ona properly filedandcompletedcertificate ofneedapplication if three or more individuals or an individual representing an entity with five or more people submits a request, in writing, that a public hearing beheldonthe application.For aproperly filedandcompletedcertificate of need application involving a transfer of ownership of a large group practice, as described in subdivision (3) of subsection (a) of section 19a- 638, when an offer was made in response to a request for proposal or similar voluntary offer for sale, a public hearing shall be held if twenty- five or more individuals or an individual representing twenty-five or more people submits a request, in writing, that a public hearing be held on the application.

Such applicant shall request the publication of notice in at least two sites within the affected communitysSB440 that/ areFile commonlyNo. accessed by the public, such as a town hall or library, as well as on any existing Internet web site of the municipality or local health department.

The314 unit shall not invalidate any notice due to changes or removal of the notice from a community LCO 12 ofsSB440 20File Substitute Bill No.

440314 community that are commonly accessed by the public, such as a town hall or library, as well as on any existing Internet web site of which the applicantmunicipality hasor nolocal control.health department.

The unit shall not invalidate any notice due to changes or removal of the notice from a community Internet web site of which the applicant has no control.

[(h)] (i) The executive director of the Office of Health Strategy may implementsSB440 policies/ andFile procedures necessary to administer the provisions of this section while in the process of adopting such policies and procedures as regulation, provided the executive director holds a LCO 13 of 20 Substitute Bill No.

440314 public13 hearingsSB440 priorFile toNo. implementing the policies and procedures and posts notice of intent to adopt regulations on the office's Internet web site and the eRegulations System not later than twenty days after the date ofimplementation.Policies andproceduresimplementedpursuant to this section shall be valid until the time final regulations are adopted.

314 implement policies and procedures necessary to administer the provisions of this section while in the process of adopting such policies and procedures as regulation, provided the executive director holds a public hearing prior to implementing the policies and procedures and posts notice of intent to adopt regulations on the office's Internet web site and the eRegulations System not later than twenty days after the date ofimplementation.Policies andproceduresimplementedpursuant to this section shall be valid until the time final regulations are adopted.

(a) The [Health Systems Planning Unit of the Office of Health Strategy] office of the Attorney General shall conduct a cost and market impact review in each case where (1) an application for a certificate of need filed pursuant to section 19a-638, as amended by this act, involves thetransferofownershipofahospital,asdefinedinsection19a-639, and (2) the purchaser is a hospital, as defined in section 19a-490, whether located withinor outsidethestate, that hadnet patient revenue for fiscal year 2013 in an amount greater than one billion five hundred million dollars,sSB440 or/ aFile hospital system, as defined in section 19a-486i, whether located withinor outsidethestate, that hadnet patient revenue for fiscal year 2013 in an amount greater than one billion five hundred million LCO 14 of 20 Substitute Bill No.

440314 dollars14 orsSB440 anyFile personNo. that is organized or operated for profit.

314 dollars, or a hospital system, as defined in section 19a-486i, whether located withinor outsidethestate, that hadnet patient revenue for fiscal year 2013 in an amount greater than one billion five hundred million dollars or any person that is organized or operated for profit.

(1) The transactingsSB440 parties'/ sizeFile andNo. market share within its primary service area, by major service category and within its dispersed service areas;

(2)314 the transacting parties' prices for services, including the transacting LCO 15 ofsSB440 20File Substitute Bill No.

440314 transacting parties' relativesize pricesand comparedmarket toshare otherwithin healthits careprimary providersservice forarea, theby samemajor servicesservice incategory theand samewithin market;its dispersed service areas;

(2) the transacting parties' prices for services, including the transacting parties' relative prices compared to other health care providers for the same services in the same market;

(e) Not later than ninety days after the [unit] Attorney General determines that there is substantial compliance with any request for documents or information issued by the [unit] Attorney General in accordance with this section, or a later date set by mutual agreement of thesSB440 unit/ andFile the transacting parties, the [unit] Attorney General shall make factual findings and issue a preliminary report on the cost and LCO 16 of 20 Substitute Bill No.

440314 market16 impactsSB440 review.File No.

314 the unit and the transacting parties, the [unit] Attorney General shall make factual findings and issue a preliminary report on the cost and market impact review.

(h) After the [unit refers a final report on a transfer of ownership of a hospital to the Attorney General under subsection (f) of this section] AttorneyGeneralhasissuedafinalreportonthecostandmarketsSB440 impact/ review,File theNo. Attorney General may:

(1)314 Conduct an investigation to LCO 17 ofsSB440 20File Substitute Bill No.

440314 determineAttorneyGeneralhasissuedafinalreportonthecostandmarketimpact whetherreview, the transactingAttorney partiesGeneral engaged,may: or, as a result of completing the transfer of ownership of the hospital, are expected to engage in unfair methods of competition, anti-competitive behavior or other conduct in violation of chapter 624 or 735a or any other state or federal law;

(1) Conduct an investigation to determine whether the transacting parties engaged, or, as a result of completing the transfer of ownership of the hospital, are expected to engage in unfair methods of competition, anti-competitive behavior or other conduct in violation of chapter 624 or 735a or any other state or federal law;

(k) Any employee of the unit who [directly oversees or] assists in conductingacostandmarketimpactreviewshallnottakepartinfactual deliberationssSB440 or/ theFile issuance of a preliminary or final decision on the certificate of need application concerning the transfer of ownership of a LCO 18 of 20 Substitute Bill No.

440314 hospital18 thatsSB440 isFile theNo. subject of such cost and market impact review.

314 deliberations or the issuance of a preliminary or final decision on the certificate of need application concerning the transfer of ownership of a hospital that is the subject of such cost and market impact review.

5 October 1, 2024 New section StatementsSB440 of/ LegislativeFile Commissioners:No.

In314 Section19 1(a)(16),sSB440 ",File exceptNo. as provided in subdivision (27) of subsection(b)ofthissection"wasaddedfor clarity andconsistencywith other provisions of the section.

LCO314 19Statement of 20Legislative SubstituteCommissioners: Bill No.

440In PHSection Joint1(a)(16), Favorable", Subst.except as provided in subdivision (27) of subsection(b)ofthissection"wasaddedfor clarity and consistencywith other provisions of the section.

-LCOPH LCOJoint 20Favorable ofSubst. 20

-LCO sSB440 / File No.

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314 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 25 $ FY 26 $ Resources of the General Fund GF - Revenue 745,000 440,000 Loss Office of Health Strategy See Below - See See Below See Below Below State Comptroller - Fringe See Below - See See Below See Below Benefits1 Below Attorney General GF - Cost Significant Significant Note:

GF=General Fund Municipal Impact:

None Explanation The bill modifies the state’s Certificate of Need (CON) program for health care entities, administered by the Office of Health Strategy’s (OHS) Health Systems Planning Unit (HSPU), increasing the total expenditure of HSPU by $745,000 in FY 25, and $440,000 annually beginning in FY 26.

Costs related to HSPU are deducted from an assessment on the various state hospitals' revenue before any remaining funds are deposited in the General Fund, ultimately resulting in a revenue loss to the General Fund beginning in FY 25.

Section 1 of the bill makes changes to what transactions require CON approval, and Section 2 affects various deadlines related to the CON process.

The bill may result in a fiscal impact to the state associated with The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller.

The estimated active employee fringe benefit cost associated with most personnel changes is 41.25% of payroll in FY 25.

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314 eliminating the CON process for certain service categories, until 6/30/30.

The extent of the impact depends on the increased utilization and associated Medicaid payments where new exclusions are granted.

OHS will incur costs of approximately $440,000 in salary and fringe benefits beginning in FY 25 for two full-time positions and two consultants with external medical expertise.

The staff will be needed to conduct CON application reviews on an annual basis.

Additionally, OHS will incur a one-time cost of $100,000 in FY 25 to hire a consultant to assist the department in developing the expedited review process.

Section 3 requires OHS to conduct a study on the state's CON process and report to the Public Health Committee by January 1, 2025.

OHS will incur a one-time cost of $200,000 in FY 25 to contract with an outside consultant because the department does not have the existing staff or resources to complete the study within the timeframe established under the bill.

Section 4 moves the responsibility of conducting Cost and Market Impact Reviews (CMIRs) to the Attorney General's Office from HSPU.

OHS is still required to adopt regulations regarding the CMIR and administer certain provisions.

There is no fiscal impact to OHS fromthis section.

The bill's provision transferring responsibility for conducting cost and market impact reviews for certain hospital ownership transfers would result in a significant cost to the Office of the Attorney General (OAG), as it is outside the usual scope of its expertise.

It is anticipated that contracted services as well as potentially additional personnel would be required in the OAG to conduct the mandatory reviews as ownership transfers are proposed.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

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314 OLR Bill Analysis SB 440 AN ACT CONCERNING CERTIFICATES OF NEED.

SUMMARY This bill modifies the state’s Certificate of Need (CON) program for health care entities, administered by the Office of Health Strategy’s (OHS) Health Systems Planning Unit (HSPU).

Under the program, health care entities must generally receive CON approval when establishing new facilities or services, changing ownership, acquiring certain equipment, or terminating certain services.

It adds to the transactions that require CON approval (1) investments in health care facilities or large group practices of 10 or more physicians by private equity companies that acquire a direct or indirect controlling interest, (2) relocationof certain services outside the municipality where they are currently provided, and (3) those involving private equity companies that result in an increase or decrease in health care facilities’ assets.

The bill eliminates CON requirements, temporarily until June 30, 2030, for (1) cardiac catheterization or cardiac surgery units, psychiatric units, substance use disorder units, and rural health services;

(2) upgrades to radiology technology;

and (3) increases in children’s behavioral health beds, among other things.

It also permanently eliminates CON requirements for, among others, the (1) relocation of outpatient services within the same municipality or within 20 miles from where they are currently located and (2) increase or reduction in health care facilities’ licensed bed capacity of up to 12 beds within a two-year period starting October 1, 2024.

Additionally, the bill does the following:

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314 1.

shortens the deadlines for several CON processes, including application reviews and determinations, public hearings, and related notifications (§ 2);

2.

allows applicants to request HSPU to (a) meet with them before they submit an application or (b) expedite the timeline for an application review (§ 2);

3.

transfers, from HSPU to the attorney general (AG), responsibility for conducting cost and market impact reviews for certain hospital ownership transfers (§ 4);

4.

requires OHS to study the state’s CON process and report the study results to the Public Health Committee by January 1, 2025 (§ 3);

and 5.

starting October 1, 2024, prohibits an insurance company that invests in any health care institution from exercising operational or managerial controlor decision-making authority related to the institution’s health care service delivery (§ 5).

Lastly, the bill makes various technical and conforming changes.

EFFECTIVE DATE:

October 1, 2024, except the CON study provision takes effect upon passage.

§ 1 — CON TRANSACTIONS Transactions Requiring a CON The bill adds the following to the transactions requiring CON approval:

1.

therelocationofoutpatient, behavioralhealthcare, substance use disorder, women’s health care, or emergency medical services outside of the municipality where they are currently provided (for outpatient services, this applies only to those relocated more than 20 miles from their current location);

2.

investments in a health care facility by a private equity company sSB440 / File No.

314 24 sSB440 File No.

314 that (a)acquiresa direct or indirect controllinginterest ina health care facility or (b) has decision making authority over the facility or the ability to control its operations or management;

3.

transactions in which a private equity company (a) acquires a direct or indirect controlling interest in a large group practice of or more full-time equivalent physicians or (b) has decision making authority over the practice or the ability to control its operations or management;

and 4.

transactions involving a private equity company in which a health care facility’s assets would be increased or reduced (the bill does not specify by how much).

Transactions Exempt From CON Requirements The bill temporarily exempts the following transactions from CON requirements until June 30, 2030:

1.

the establishment or expansion of diagnostic or therapeutic cardiaccatheterizationor cardiacsurgery units,psychiatricunits, substance use disorder units, or rural health services (the bill does not define this term);

2.

upgrades to radiologic technology (the bill does not define this term);

3.

increases in children’s behavioral health beds (the bill does not specify by how much);

4.

increases in capacity for existing services offered by health care facilities (the bill does not define this);

and 5.

increases in the number of operating rooms at health care facilities existing on or before October 1, 2024 (the bill does not specify by how much).

The bill also permanently eliminates CON requirements for the following:

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314 1.

the relocation of outpatient services (a) within the municipality where they are currently provided or (b) no more than 20 miles from the current location where they are provided and 2.

increases or reductions in a health care facility’s licensed bed capacity of up to 12 beds within any two-year period, starting October 1, 2024.

§ 2 — CON APPLICATION REVIEWS AND DETERMINATIONS Pre-Application Informational Meeting The bill permits applicants, before submitting a CON application, to request an informational meeting with HSPU to discuss application process requirements.

The unit must hold the informational meeting within one week after the date it receives the applicant’s request.

CON Deadlines Existing law establishes a process for HSPU to review and make determinations on CON applications.

The bill shortens deadlines for certain steps in this process as described below.

Application Review Period.

By law, when HSPU determines it received a completed CON application, it must notify the applicant and post the notice on its website to begin the review process.

For applications that do not have a public hearing (see below), the bill reduces the time within which HSPU must review and issue a decision after posting the notice as follows:

1.

from 60 to 20 days, for applications to transfer ownership of a large group practice in response to a request for proposal (RFP) or other voluntary offer for sale, and 2.

from 90 to 30 days, for all other applications.

Under the bill, if HSPU does not issue a decision within these deadlines, the application is deemed approved.

The bill also reduces, from 60 to 20 days, the time by which HSPU may extend the review period for a completed application when the sSB440 / File No.

314 26 sSB440 File No.

314 applicant requests it or shows good cause.

Expedited Review Period.

The bill permits an applicant to request an expedited timeline for a CON determination as HSPU prescribes.

It requiresHSPUto(1)developaprocessforapprovingtheserequestsand (2) after accepting a request, make a determination on the application no more than 14 days after the date the completed application is submitted.

Public Hearings.

By law, HSPU may hold a public hearing on any CON application, and must do so for the following completed applications:

1.

hospital ownership transfers;

2.

voluntary large group practice ownership transfers, if 25 or more people, or a person representing 25 or more people, requests it in writing;

and 3.

any other applications, if three or more people, or someone representing an entity of five or more people, requests it in writing.

The bill reduces, from 30 to 10 days after HSPU deems an application complete, the time within which a public hearing request must be made.

It also requires HSPU to provide at least five days’ advanced notice of the hearing to the applicant and the public, instead of two weeks, as under current law.

After HSPU closes the public hearing record, the bill requires the unit to issue a decision on the application within 20 days, instead of 60 days as under current law.

Under the bill, if HSPU does not issue a decision within 20 days, the application is deemed approved.

Independent Consultants The bill authorizes HSPU to contract with independent consultants or others the OHS executive director deems necessary to help review and issue decisions on applications submitted starting October 1, 2024.

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314 Starting by July 1, 2025, the bill requires the executive director to begin posting quarterly on the OHS website all costs incurred from contracting with the independent consultants.

§ 3 — CON STUDY The bill requires the OHS executive director to study the state’s CON process, including the following:

1.

examining the health care systems costs resulting from delays or inefficiencies in the CON process;

2.

holding at least three public hearings that allow providers, insurers, the public, and other stakeholders to give testimony on the CON process;

and 3.

developing recommendations to improve the CON process by reducing delays;

streamlining administrative processes;

and hiring trained, experienced staff instead of contracting with third-party experts.

Under the bill, the executive director must report the study results to the Public Health Committee by January 1, 2025.

§ 4 — COST AND MARKET IMPACT REVIEWS Existing law requires the state to conduct a cost and market impact review (CMIR) of CONapplications that propose to transfer a hospital’s ownership if the purchaser is (1) an in- or out-of-state hospital or a hospital system that had net patient revenue exceeding $1.5 billion for fiscal year 2013 or (2) organized or operated for profit.

The bill transfers, from HSPU to the AG, responsibility for conducting the CMIR and requires the unit to notify the AG of the need for a review within 21 days after it receives a properly filed application for a hospital ownership transfer.

To effectuate the transfer, the bill requires the AG to do the following:

1.

initiateaCMIRbysendingthetransactingpartiesawrittennotice thatincludesadescriptionofthebasisfortheCMIRandarequest sSB440 / File No.

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314 for information and documents;

2.

conduct any inquiry, investigation, or hearing needed to complete the CMIR (e.g., issue subpoenas, take testimony under oath, or require the production of records or documents);

3.

keep any nonpublic informationanddocumentsheobtains while conducting the CMIR confidential and only disclose them (a) with the consent of the person who produced them or (b) in a preliminary or final report if it is in the public interest, after taking into account privacy, trade secret, or anti-competitive considerations;

4.

make factual findings and issue a preliminary CMIR report within 90 days after determining the transacting parties substantially complied with any request for information or documents, or on a later date mutually agreed to with the transacting parties;

5.

issue a final CMIR report within 60 days after issuing the preliminary report;

6.

hire an independent consultant to conduct the CMIR, which he must select from a pool of three applicants proposed by the transacting parties;

and 7.

submit the bills for the consultant’s services to the hospital purchaser, who must pay thebills,upto $200,000 per application, within 30 days after receiving them.

Under existing law, after the final CMIR report is issued, the AG may then investigate whether the transacting parties engaged in or, after the proposed ownership transfer, are expected to engage in (1) unfair methods of competition, (2) anti-competitive behavior, or (3) other conduct that violates the Connecticut Unfair Trade Practices Act or any other state or federal law.

By law, the attorney general may take appropriate legal action to sSB440 / File No.

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314 protect consumers in the health care market and the final report may be evidence in any such action.

A hospital ownership transfer cannot be completed until at least 30 days after the AG issues the final CMIR report or while any of the above actions brought by the AG are pending.

BACKGROUND Related Bills sSB 9, favorably reported by the Public Health Committee, makes various changes to the CON program, such as adding to the types of transactions requiring CON approval and modifying criteria HSPU must use when reviewing CON applications.

HB 5316, favorably reported by the Public Health Committee, makes various changes to CON program requirements for large group practices.

COMMITTEE ACTION Public Health Committee Joint Favorable Yea 36 Nay 1 (03/21/2024) sSB440 / File No.

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