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Certificate Of Need Program

HEALTH SERVICES AND DEVELOPMENT AGENCY
CON BASICS

The Tennessee Health Services and Development Agency is responsible for regulating the health care industry in Tennessee through the Certificate of Need Program. A Certificate of Need ("CON") is a permit for the establishment or modification of a health care institution, facility or service, purchase of major medical equipment, or establishment of certain services at a designated location. The CON program serves as a growth management and cost savings tool since it requires certain health providers to establish the need for new services and facilities before the providers will be allowed to build facilities, becomes licensed, or conduct certain business. The CON program assures that health care projects are accomplished in an orderly, economical manner, consistent with the development of adequate and effective healthcare for the people of Tennessee. These duties were previously performed by the Health Facilities Commission.

I. CON History

  • The Health Services and Development Agency is the successor to the Health Facilities Commission, which administered the certificate of need process from 1973 through 2002.
  • In the 1970s the federal government urged states to control rising health care costs by managing the growth of health care services and facilities through health planning. In 1973 the Tennessee General Assembly created the Health Facilities Commission to administer the certificate of need program.
  • In 1974, the federal government enacted the National Health Planning and Resources Development Act, which among other things, provided federal funds to assist with state health planning. The Act was repealed in 1987, resulting in the loss of federal funds and a reduction of the state's planning staff.
  • The Health Services and Planning Act of 2002 created the Health Planning and Advisory Board, which was to draft and review annually the state's health plan. The Act also created the Health Services and Development Agency, which administers the certificate of need program and provided administrative staff for the Health Planning and Advisory Board.  In 2004, the Legislature terminated the Health Planning and Advisory Board, and transferred its functions to the Department of Finance and Administration.

II. Organization

The Tennessee Health Services and Development Agency is an independent agency:

  • The agency consists of eleven (11) members
  • Comptroller of the Treasury or his/her designee
  • Director of TennCare or his/her designee
  • Commissioner of the Department of Commerce and Insurance or his/her designee
  • One (1) consumer appointed by the Speaker of the Senate
  • One (1) consumer appointed by the Speaker of the House of Representatives
  • One (1) consumer appointed by the Governor
  • One (1) person who has recent experience as an executive officer of a hospital or hospital system by the Governor from a list of three (3) nominees submitted by the Tennessee Hospital Association
  • One (1) representative of the nursing home industry appointed by the Governor from a list of three (3) nominees submitted by the Tennessee Health Care Association
  • One (1) duly licensed physician appointed by the Governor from a list of three (3) nominees submitted by the Tennessee Medical Association
  • One (1) representative of the home care industry appointed by the Governor from a list of three (3) nominees submitted by the Tennessee Association for Home Care; and
  • One (1) representative of the ambulatory surgical treatment center industry appointed by the Governor

III. Legislative Policy

It is the policy of the state that “the establishment and modification of health care institutions, facilities and services, shall be accomplished in a manner that is orderly, economical and consistent with the effective development of necessary and adequate means of providing for the health care of the people of Tennessee.”

IV. The following institutions require a Certificate of Need prior to establishment, licensure, or certification:

  • Hospital
  • Nursing home
  • Recuperation center
  • Ambulatory surgical treatment center (“ASTC”)
  • Mental health hospital
  • Intellectual disability institutional habilitation facility
  • Home care organization (home health and hospice)
  • Outpatient diagnostic center
  • Rehabilitation facility
  • Residential hospice
  • Nonresidential substitution-based treatment center for opiate addiction
  • Birthing Center

V. The following services require a Certificate of Need before any person initiates them:

  • Burn unit
  • Neonatal intensive care unit
  • Open heart surgery
  • Positron emission tomography
  • Swing beds
  • Home health
  • Psychiatric (inpatient)
  • Rehabilitation (inpatient)
  • Hospital-based alcohol and drug treatment for adolescents provided under a program of care longer than 28 days
  • Extracorporeal lithotripsy
  • Magnetic resonance imaging
  • Cardiac catheterization
  • Linear accelerator
  • Hospice
  • Opiate addiction treatment provided through a facility licensed as a nonresidential substitution-based treatment center for opiate addiction

VI. The following actions require a Certificate of Need:

  • Modification, renovation, or addition to a hospital in excess of $5 million and other health care institutions in excess of $2 million.
  • Any change in the bed complement of a health care institution which:
    a)   Increases by one or more the total number of licensed beds;
    b)   Redistributes beds from acute to long-term care;
    c)   Redistributes from any category to acute, rehabilitation, child and adolescent psychiatric, or adult psychiatric; and/or
    d)   Relocates beds to another facility or site.
  • Change in location or replacement of existing or certified facilities providing health care services, major medical equipment, or health care institutions.
  • Change of parent office of a home health or hospice agency from one county to another county.
  • Acquisition of major medical equipment in which the cost exceeds $2.0 million.
  • Discontinuation of obstetrics.
  • The closing of any hospital that has been designated as a critical access hospital under the Medicare rural flexibility program or the elimination in such hospital of any services for which a certificate of need is required.

VII. The following require a notice or prior approval by the Tennessee Health Services   and Development Agency (but not a CON) before additional state action can be taken:

  1. Persons replacing existing major medical equipment with the same or similar major medical equipment or upgrading such equipment.
  2. Hospitals with fewer than 100 beds increasing by 10 beds over a one-year period.
  3. Newly licensed health care institutions changing ownership within two years of obtaining the initial license.
  4. Any health care facility proposing to change conditions that were placed on its Certificate of Need when approved and subsequently made a condition of the license.

VIII. The Process

  1. Preliminary filing for a CON is commenced by the filing and publication of the Letter of Intent between the first (1st) through the tenth (10th) of the month. Followed by the filing of the application and filing fee within five (5) days of the publication of the Letter of Intent. Upon being deemed complete the application will enter the next review cycle.
  2. A review cycle starts on the first day of each month, as specified in Agency Rules.
  3. A review cycle is sixty (60) days.
  4. An application can be considered for a thirty (30) day review cycle if there is no opposition and it appears to meet the three criteria which are:
    1. Need;
    2. Economic feasibility; and
    3. Contribution to the orderly development of health care.

      This is referenced to as the “Consent Calendar.”
  1. Any person wishing to oppose a CON application may either file written opposition before the regularly scheduled Health Services and Development Agency meeting at which the application will be heard or appear before the Agency to express opposition to the application. Any health care institution that initiates a contested case challenging the issuance of a CON pursuant to T.C.A. § 68-11-1610 without having filed a written objection no later than fifteen (15) days before the regularly scheduled Health Services and Development Agency meeting at which the application was heard shall be solely responsible for the Agency’s costs of the contested case proceeding and shall reimburse to the applicant the filing fee paid by the applicant.
  2. Upon written request by interested parties, a local fact-finding public hearing shall be conducted.
  3. During the sixty (60) day review cycle the application is reviewed by the Department of Health or Department of Mental Health & Substance Abuse Services. The application is considered by the Agency at the next regularly scheduled meeting.
  4. The Agency typically meets on the fourth (4th) Wednesday of each month to consider CON applications and to conduct other business.
  5. Within fifteen (15) days of the approval or denial of a Certificate of Need application, any applicant or any person, or health care institution who objected to the application in accordance with T.C.A. § 68-11-1609(g)(1) and (2) may petition the Agency in writing for a hearing, as provided for and described more fully in T.C.A. § 68-11-1610.

IX. Criteria Used for Review

  1. Need.
  2. The health care needed in the area to be served may be evaluated upon the following factors:


    a)  The relationship of the proposal to any existing applicable plans (e.g., the                            
         State Health Plan);
    b)  The population served by the proposal;
    c)  The existing or certified services or institutions in the area;
    d)  The reasonableness of the service area;
    e)  The special needs of the service area population, including the accessibility to
         consumers, particularly women, racial and ethnic minorities and low-income
         groups;
    f)  Comparison of utilization/occupancy trends and services offered by other area
        providers;
    g) The extent to which Medicare, Medicaid (TennCare), and medically indigent
         patients will be served by the project.

  3. Economic Feasibility.
  4. The probability that the proposal can be economically accomplished and maintained may be evaluated upon the following factors: 
    1. Whether adequate funds are available to the applicant to complete the project;
    2. The reasonableness of the proposed project costs;
    3. Anticipated revenue from the proposed project and the impact on existing patient charges;
    4. Participation in state/federal revenue programs;
    5. Alternatives considered; and
    6. The availability of less costly or more effective alternative methods of providing the     b   benefits intended by the proposal.
  5. Contribution to the Orderly Development of Adequate and Effective Health Care Facilities and/or Services.
  6. The contribution which the proposed project will make to the orderly development of an adequate and effective health care system may be evaluated upon the following factors:

    a)  The relationship of the proposal to the existing health care system (for example: trantransfer agreements, contractual agreements for health services, affiliation of the projproject with health professional schools);
    b)  The positive or negative effects attributed to duplication or competition;
    c)  The availability and accessibility of human resources required by the proposal, inclincluding consumers and related providers;
    d)  The quality of the proposed project in relation to applicable governmental or proprofessional standards.

X. Contact Information
Health Services and Development Agency
Andrew Jackson Building, 9th Floor
502 Deaderick Street
Nashville, TN 37243
Phone: 615/741-2364
Fax: 615/741-9884
Website: www.tn.gov/HSDA

Agency Staff
Melanie Hill, Executive Director
Mark Farber, Deputy Director
Jim Christoffersen, General Counsel
Phillip Earhart, HSD Examiner
Jeff Grimm, HSD Examiner
Alecia Craighead, Statistical Analyst III
Rhonda Finchum, Administrative Officer
Melissa Bobbitt, Administrative Services Assistant III
Annie Sykes, Administrative Assistant I
Mark Ausbrooks, Administrative Assistant I


History / Summary