North Carolina Certificate of Need (CON): 2021 Year-in-Review and 2022 Forecasts

A conversation with Joy Heath & Joel Johnson

As the Certificate of Need (CON) year winds down, we look ahead to 2022 and pause to look back at some of the highlights across a robust year of 2021 CON activity.  Join in the conversation with Williams Mullen CON lawyers Joy Heath and Joel Johnson: 

“Joel, what’s new with planning for psychiatric and chemical dependency beds?”

In a significant move, the State Health Coordinating Council voted to eliminate the need determination methodologies for psychiatric and chemical dependency treatment facility beds in the 2022 Plan. Previously, providers were only able to file proposals for such beds in response to published need determinations; in 2022, providers will be free to apply anywhere in the state without such a limitation.

By way of background, in January 2021, the State afforded a few defined opportunities for providers to apply for new psychiatric capacities, including both child/adolescent and adult psychiatric beds. No Applications were submitted in response to these identified needs. In April 2021, a provider in Onslow County secured approval to develop additional psychiatric beds relying on a State policy and proposals for the relocation of beds. Just as it did in January, the State afforded additional opportunities for providers to apply for additional psychiatric bed capacity in May 2021. No Applications were filed in response to these child/adolescent psychiatric bed need determinations. In May 2021, only one Application was filed in response to the chemical dependency treatment facility bed need determination. The Applicant proposed to develop a 70-bed adult chemical dependency treatment facility in Pitt County at a proposed cost of $38.4 million. In September 2021, that project was approved. 

“Joy, what are some of the important opportunities in 2022 and notable projects and decisions from 2021?”

Well, Joel, I’d say health care project opportunities and proposals are always important. Across a given year, a range of projects are carefully considered and thoughtfully presented, and, fortunately, the vast majority receive CON approval.

In 2022, we can expect to see important opportunities for providers to seek CON approvals for psychiatric and chemical dependency treatment facilities statewide as well as for:

• New operating rooms in Wake County.
• New MRI scanners in the Pasquotank, Pitt, and Mecklenburg County service areas.
• New nursing home beds in Cabarrus County.
• New hospice inpatient beds in Cumberland County.
• New linear accelerators in Carteret County and in the Anson/Union/Mecklenburg service area. 

Other opportunities will be available for hospital beds, assisted living beds, and cardiac catheterization equipment. There is a need for a new operating room in the Pitt County multi-county service area, but Applications in response to that need would have to be submitted in February.       

While there is no ranking system for projects, some of the noteworthy proposals across the calendar in 2021 included the following: 

• In February 2021, the State issued its decision in the Wake County OR batch review.  The review involved six Applicants proposing either hospital ORs or ORs to be developed within a surgery center. Three Applicants received approvals and three proposals were denied. 

• In March 2021, the State approved the relocation and replacement of an entire hospital in Pasquotank County with 110 acute care beds, eight operating rooms and a single endoscopy room. The State also approved a proposal to relocate four operating rooms to develop a new Ambulatory Surgical Facility in Wilson County. 

• In April 2021, the State issued its decision in the Mecklenburg County batch review involving a range of proposals for acute care beds and operating rooms.

• In May 2021, a dental surgery center was approved to add ear, nose and throat (ENT) services to its offerings. That same month, the State commenced its review of five competing proposals for development of a new home health agency in Mecklenburg County. In September 2021, the State approved a single applicant among that crowded field of proposals. 

• In May 2021, the State began its review of multiple proposals involving operating room and acute care bed proposals for Durham County. Applications were filed proposing the addition of ORs as a change in scope of a prior approval, new ORs at a Surgery Center, new hospital ORs and beds, and an all-new hospital in the County which was ultimately approved.   

• In July 2021, the State approved a new separately licensed Wake County hospital with 40 beds and two operating rooms. The beds and ORs are proposed to be relocated from an existing hospital in the County. 

• In July 2021, a hospital in Buncombe County proposed to develop a new satellite emergency department under the hospital’s license at a proposed cost of $13.3 million. Also, in July, a hospital in Mecklenburg County submitted a proposal for a new satellite emergency department at a proposed cost of $16.6 million. 

• In September 2021, the State approved a non-hospital applicant for a PET scanner to serve Western North Carolina. September 2021 also marked the start of another competitive Wake County operating room review involving proposals for new hospital and surgery center operating rooms. In September 2021, the State approved a Mecklenburg County bed addition proposal and a new satellite hospital involving the relocation of existing resources. 

• In October 2021, the State began review of a proposal for a 52-bed inpatient rehabilitation hospital for Wake County. 

“Joel, tell me this: did most of the 2021 CON decisions end up in contested cases?”

No. Relatively few CON matters end up in contested case hearings at the Office of Administrative Hearings. Of the numerous CON decisions issued in the last year, not much more than a handful of cases were pending before Administrative Law Judges at the close of 2021, including the following: 

• In January 2021, the State approved a proposal for the development of a new licensed ambulatory surgical facility with two GI endoscopy rooms for Granville County. That approval is the subject of an on-going case at the Office of Administrative Hearings.  Judge Ward is presiding over the case (21 DHR 03424).   

• In February 2021, the State made its decision in the Rowan County Hospice batch review. The review attracted eight CON Applicants, each vying to establish a new hospice home care office in the County. One provider was approved, and one of the seven denied Applicants initiated a contested case hearing at the Office of Administrative Hearings. Judge Bryne is presiding over the case which may go to hearing early in 2022 (21 DHR 04288).   

• In February 2021, the State accepted three Applications for one new MRI scanner to serve the multi-county service area that includes Buncombe County, North Carolina. The State approved one Applicant and denied the others. One of the denied Applicants initiated a challenge at the Office of Administrative Hearings and litigation is on-going. Judge Sutton is presiding over the case (21 DHR 03710).   

• In September 2021, the State issued its decisions in the competitive Wake County MRI review, approving one Applicant and denying two others. Litigation over the State’s decision was commenced at the Office of Administrative Hearings by one of the two denied Applicants; the case remains pending with Judge Nelson presiding. 

• In September 2021, the State issued its decisions in the competitive Durham County operating room/acute care bed review, approving a new hospital in Durham County as well as an operating room addition for an existing surgery center. A contested case is on-going before Judge Nelson at the Office of Administrative Hearings. 

• In September 2021, the State awarded CON approval to the non-hospital applicant for a new PET scanner in Buncombe County. A contested case was initiated by the denied hospital applicant, and the litigation remains pending before Judge Dills. 

“Joy, do you see many proposals for nursing homes and assisted living facilities?”

Yes. As you know, clients often seize upon opportunities to sell or acquire and relocate beds in our State. 

In 2022, a Need Determination is identified for 36 new nursing home beds for Cabarrus County. In Swain County, the 2022 Plan shows a need for 10 additional assisted living beds. Yet, activity from 2021 proves that limited need determinations do not limit the prospect for long-term care proposals.      

In January 2021, the State approved a proposal to develop a new Wake County combination nursing home/assisted living facility with beds developed under two State policies and beds relocated from another provider location. Wake County’s new facility will include a memory care unit. In February 2021, the State approved a provider proposing development of a new Assisted Living facility to be established in New Hanover County by relocation of undeveloped beds as a change in scope of a previously approved project. In February 2021, the State approved the development of a new 100-bed replacement nursing facility in Forsyth County. Plans call for all 100 beds to be relocated from an existing facility. In May 2021, the State initiated review of a proposal for a new Assisted Living facility for Chatham County, proposed as a relocation/change of scope project. A change of scope project review began in August 2021 involving relocation of beds in Brunswick County. In Wake County, a provider proposed to add assisted living and nursing facility beds under State policies. 

“Joel, what are you seeing in regard to diagnostic center projects in North Carolina?”

Activity has been robust. In February 2021, the State approved the development of a new diagnostic center in Orange County to include mammography and ultrasound equipment. In April 2021, the State approved a new diagnostic center in Alamance County and one in Wake County. In May 2021, a new diagnostic center was approved for Durham County. In July 2021, an Applicant proposed a new diagnostic center for Union County. In September 2021, a new diagnostic center proposal involving relocation and replacement of an existing MRI scanner was approved for Guilford County. New diagnostic centers were approved in September for Orange, Union, and Wake Counties. 

Notably, the definition of a “diagnostic center” requiring a CON has been changed such that a diagnostic center proposal is only reviewable if the aggregate cost of all the medical diagnostic equipment utilized by the facility that individually cost ten thousand dollars ($10,000) or more exceeds one million five hundred thousand dollars ($1,500,000).

“Joy, what’s on the diagnostic imaging horizon and what are some of your take-aways from the 2021 MRI and PET scanner reviews?”

The 2022 Plan includes Need Determinations for Fixed MRI Scanners in Mecklenburg County and in two of the multi-county service areas: (1) Pasquotank/Camden/Currituck/ Perquimans; and (2) Pitt/Greene/Hyde/Tyrell. 

The CON Application for the Pasquotank multi-county area is due on September 15, and the Applications for Mecklenburg and the service area including Pitt County are due on October 17. 

Linear Accelerator Need Determinations are identified for Service Area 24, with the need designated for Carteret County, and for Service Area 7 (Anson/Mecklenburg/Union). The Carteret LINAC Application is due April 18, and the Area 7 LINAC Application due date is August 15. 

Looking back at 2021, it’s interesting to note that not all MRI or PET reviews attracted multiple applicants and not all ended up in OAH contested cases. For instance, only one Applicant responded to the 2020 Need Determination for a new MRI scanner for Alamance County. The lone Applicant was approved in March 2021 to acquire a new fixed MRI scanner. 

In some instances, 2021 MRI need determinations have attracted multiple Applicants. In October 2021, the State commenced a competitive review involving four proposals vying for the single available MRI approval for New Hanover County. In November 2021, the State commenced its review of three competing MRI proposals for Orange County. 

Yet several reviews have involved a single applicant or only two competing proposals. In July 2021, only one Applicant filed in response to the need determination for one new fixed PET/CT scanner for Durham County. Likewise, only one Applicant filed in response to the PET scanner need for Orange County. In September 2021, only two proposals were submitted for the acquisition of a new MRI scanner for Mecklenburg County. In November 2021, the State commenced its review of two competing proposals for a single mobile PET scanner. Also, the State received only two competing proposals for a fixed PET scanner for New Hanover. 

Not all competitive reviews ended up in contested cases. As noted above, competitive PET and MRI reviews in Buncombe County and an MRI review in Wake County are the subject of ongoing CON cases. Yet, in Guilford County, two 2021 Applicants vied for approval to acquire a new fixed MRI scanner. One of the two competing proposals was approved, and the denied Applicant did not contest the State’s decision. 

“Joel, fill me in on the dates we should all have on our 2022 CON Calendars.”

The most important dates are the Application filing dates for the Need Determinations referenced above. Other important dates are those that allow providers to have a say in the development of next year’s State Plan – these include the dates for Petition filings and for this summer’s Public Hearings.

The following are some key dates posted on the N.C. Division of Health Service Regulation’s website. 

For more information, please contact Joy Heath at jheath@williamsmullen.com or Joel Johnson at jljohnson@williamsmullen.com.