United States: Massachusetts Determination Of Need Proposed Regulations

On August 23, 2016, the Massachusetts Department of Public Health ("DPH") proposed a major revision of its Determination of Need ("DoN") regulations, 105 CMR 100.00, and held the first of two public hearings on the proposed amendments on September 21, 2016. A copy of the proposed amendments and related materials may be accessed by clicking here. In its memorandum to the Public Health Council, DPH staff highlight that the proposal cuts the length of the current regulations by more than half, consolidates separate project approval processes, aligns the DoN regulations with DPH's mission and the Commonwealth's public health goals, and recalibrates DPH's review of proposed mergers and acquisitions to permit review "through a public health lens." Among many other changes, the proposed regulations establish a new enforcement regime by requiring providers to fund projects designated by DPH in the amount of 2.5% of the total Capital Expenditure of projects (or up to 5% of the Total Value of acquired facilities) if conditions in an approval are not satisfied for a period of five years. This significantly expands the enforcement provisions of the statute and existing regulations, which permit fines of no more than $500 per day or revocation of a party's license. Other proposed changes will materially affect the way in which DoNs are obtained.

Broadened DoN Factors

The proposed regulations meaningfully broaden the criteria that an applicant must satisfy to obtain a DoN. For example, applicants must make a clear and convincing demonstration that thirteen specific requirements are met, including, among others, that the project "will add measurable public health value in terms of improved health outcomes and quality of life of the Applicant's existing patient panel, while providing reasonable assurances of health equity;" "will meaningfully contribute to the Commonwealth's goals for cost containment, improved public health outcomes, and delivery system transformation;" and "will compete on the basis of price." There is no transition rule, so it is not clear how DPH will process DoN applications filed under the existing rules but not approved prior to the targeted effective date of the revised regulations, estimated in late 2016 or early 2017.

Not all of the thirteen factors will apply to every category of project. Most significantly, a "Conservation Project"—a newly defined term that captures facility restorations other than upgrades or expansions of existing services or functionalities—is exempt from nine of the thirteen criteria, including the items described above. In addition, under the current regulations, only certain renovation projects are eligible for delegated review by the Commissioner of Public Health (the "Commissioner"). The new regulations will make all Conservation Projects that exceed the applicable expenditure minimum eligible for delegated review.

Ongoing Compliance Obligations and Expanded Enforcement

The proposed regulations broaden the required compliance conditions for maintenance of a DoN, as well as DPH's ability to rescind a DoN and enforce continuing obligations. The current regulations require that DoN holders expend over a five-year period an amount "reasonably related" to the cost of the project for the provision of primary and preventive health care services for underserved populations and file reports detailing compliance with their approved DoN plan and an evaluation of health effects. In contrast, the proposed regulations bind the holder of a DoN to comply with various conditions for a period of five years following receipt of a DoN, including (a) expenditures  of at least 5% (2.5% for Conservation Projects) of the total Capital Expenditure of the project, for projects other than transfers of ownership, to fund "Health Priorities" (DPH-designated goals for cost containment, improved public health outcomes and delivery system transformation); (b) mandatory participation (if eligible) in MassHealth; and (c) at least annual reporting of measures relating to the project's achievement of the DoN factors required as part of the application. If DPH determines that the applicant has failed to comply with any of the conditions, the applicant must fund additional Health Priorities in an amount equal to 2.5% of the total value of a Capital Project, or up to 5% of the Total Value of the project of the acquired facility.

Removal of Alternate Process for Changes of Ownership

For change of ownership of hospitals and freestanding ambulatory surgery centers ("ASCs"), the regulations currently allow an alternate review process with only four, objective factors. The proposed regulations eliminate the alternate process, and expressly condition each DoN approval on completion of the Health Policy Commission's review process; require that the facility to be acquired obtain a "Significant Change" amendment for each unimplemented DoN approval it holds at the time of DoN approval for the change of control; and subject the project to periodic reporting and enforcement standards, as described above.

Ambulatory Surgery Growth Limited to Acute Care Hospitals

The proposed regulations limit DoNs for ASCs to those located on the main campus of an acute care hospital and those licensed as clinics that are either affiliated with, or constitute joint ventures with, existing acute care hospitals.  This will prohibit independent clinics and other organizations not affiliated with acute care hospitals from establishing ASCs.

Removal of Major Movable Exemption

The proposed regulations remove a number of provisions that hospitals have long relied upon in structuring projects and transactions. For example, the longstanding exemption for major movable equipment has been removed. Under the current regulations, acquisition by an acute care hospital of major movable equipment that was not defined as a new technology or an innovative service did not require a DoN and was not included in the calculation of the expenditure minimum. The proposed regulations will require such equipment acquisitions to be included in expenditure calculations and to be subject to DoN approval.

Health Policy Commission Alignment

Under the current regulations, DPH has discretion to require applicants (now defined as registered "Provider Organizations," consistent with the Health Policy Commission's regulatory terminology) to provide an independent cost analysis demonstrating that the proposed project is consistent with the health care cost containment goals of the Commonwealth and the Health Policy Commission. Further, the Health Policy Commission is already a party of record with the right to review and comment upon any pending DoN application, supporting documentation, and independent cost analyses. The proposed regulations further align the DoN process with the Health Policy Commission's priorities by broadening the DoN factors as described above, and, for changes of ownership, deferring DoN effectiveness until completion of the Health Policy Commission's review, pursuant to which the Commissioner is allowed to rescind a DoN.

Other Material Changes

Beyond these major changes, we note the following new provisions, which may be material, depending on the project: 

  • Added concepts of "Disaggregation" and "Reasonably Related Projects" (it is not clear whether this is an intent-based definition, nor is it clear whether this will effectively repeal the many years of advisory rulings on Disaggregation);
  • Shell space fit-out constitutes a "Significant Change" subject to the significant change amendment process; and
  • Addition of a "Silver Level" LEED-Healthcare, or an equivalent, nationally recognized best practice standard approved by DPH.

Public Hearings, Listening Sessions, and Comment Period

The public comment period on the proposed regulations runs through October 7, 2016, and comments may be submitted to Reg.Testimony@state.ma.us. DPH held the first public hearing on September 21, 2016 to a standing-room-only crowd. DPH will hold another public hearing on the proposed amendments on September 26, 2016 in Northampton. In addition to the public hearings, DPH expects to conduct listening sessions across the state in October and November 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.