Major changes are coming to regulations that dictate where and when hospitals can build new facilities in Florida, and the implications for the competitive landscape are huge.
Last week, Florida Governor Ron DeSantis signed a bill that would repeal the state’s certificate-of-need (CON) law. Doing so will get rid of current restrictions and regulatory reviews on acquisitions, expansions or creations of hospitals – with some exceptions. Under the changes, new hospitals, many specialty hospitals, and specialty hospitals converting to general hospitals are exempt from CON review. However, those that will still be subject to CON review include hospices and nursing homes. CON will also be phased out in 2021 for specialty hospitals including women’s, children’s, orthopedic, and psychiatric hospitals.
Repealing this legislation has been a hot topic in the Sunshine State for over a decade, but backed by Florida House Speaker Jose Oliva, the change is now being formalized in a monumental move by the state government.
What is the CON legislation?
Under CON law, nearly all construction, either of new sites or expansions of existing hospitals, was subject to review by the Florida state government. Hospitals needed to prove that their plans to build were required to fulfill the specific healthcare needs of the surrounding communities they served. If regulators deemed the construction to be unnecessary, the project was killed. And even if they did eventually approve a project, the process could take years and cost healthcare providers sometimes hundreds of thousands of dollars.
Those fighting for the law’s repeal argue that CON limits competition and provides an advantage to existing hospitals. They say it prevents patients from being able to seek better care if they so choose and limits overall access to healthcare. Florida’s existing CON law even requires that providers obtain state approval before opening certain medical practices, adding new technologies, or expanding their facilities to allow for more patients. Without the subjective review of regulators telling hospitals where and when they can build, the market will be free to dictate its own winners and losers.
Supporters of Florida’s CON program feel that a third-party government review of hospital construction reduces excessive duplication of certain healthcare services. Supporters also believe limiting the number of empty hospital beds keeps hospital bills down for consumers.
CON laws aren’t only under scrutiny in Florida. The Trump Administration recently brought the debate to the national stage in December 2018 by issuing a 120-page report that urges states to scale back these rules. When Gov. DeSantis signs the proposal, Florida will join 15 other states across the U.S. without CON laws.
What does this repeal mean for Florida hospitals?
With the law’s repeal, private and not-for-profit hospitals will be free to build facilities at any time and in any geographic area of Florida they choose. Supporters of the repeal will certainly get their wish, as the competitive landscape will open up dramatically as new hospitals spring up across the state.
Private hospitals will likely see the most benefits from the clear pathway to expansion that the removal of CON rules provides. Many will look to accelerate plans to break ground right away, likely in areas with an affluent and privately insured demographic.
However, public and not-for-profit hospital groups face a different future. The operating landscape is set to change dramatically. Privately-owned hospitals will begin to pop up nearby their existing facilities, and nonprofit hospitals must think long and hard about which areas they wish to double down on in order to secure their foothold.
With the rules of engagement now changing, hospitals and other providers need to be aware of how the repeal of CON affects their businesses specifically. As always, there are exceptions and stipulations that make the need for experts who understand the impact of CON changes vital. At Buchanan, we’ve been working alongside lawmakers in Florida for decades, so that healthcare providers have all the knowledge they need to stay competitive in what’s become a constantly evolving market.