Tennessee passes legislation intended to reform hospital certificate of need law

Tennessee lawmakers passed legislation to reform the state’s hospital certificate of need law, which should facilitate some of HCA Healthcare’s planned expansion across Middle Tennessee.

Among the several reforms is the removal of restrictions on opening satellite emergency rooms in counties with an existing hospital. The new law states that if the emergency room is within 10 miles of the hospital’s main campus and not within 10 miles of another hospital, the new facility does not need to request a certificate of need.

For years, HCA, through its TriStar brand, has applied and been denied certificate of need applications for various projects in the Nashville area.

Last year, HCA applied for a certificate of need to open emergency rooms in East Nashville and Gallatin, the latter of which was blocked by the state’s board overseeing the certificate of need process.

HCA told the Nashville Business Journal earlier this year it would likely benefit from any change to the certificate of need law and advocated for its complete repeal. The Center for Individual Freedom, a group whose donors can legally remain anonymous, also spent several hundred thousand dollars on an advertising campaign pushing for a complete repeal of the state’s certificate of need statute.

The bill passed by lawmakers Wednesday doesn’t completely repeal the law, but along with emergency room changes, it also makes it easier to open a hospital in a county where one doesn’t already exist.

For years, the Tennessee Hospital Association has resisted reforms to the certificate of need law, arguing the law supports a business model benefiting the nonprofit hospitals it represents. These hospitals rely on certificates of need for high-demand services like heart and knee surgeries, which are lucrative. This model allows them to limit competition and use the revenue from these procedures to subsidize the cost of mandatory charity care.

But, the closure of 16 hospitals in Tennessee, including 13 rural facilities, since 2010, has put this model under political strain. Nonprofit hospitals in the state have either entirely closed rural hospitals or turned them into ghost facilities that only keep a small number of money-making services open and transfer almost all patients to the hospital chain’s flagship facility.

This consolidation has most notably happened with West Tennessee Healthcare and Ballad Health in the TriCities area.

The closure of several Ballad Health hospitals in recent years has been a key political driver for reform. State representatives from the area were primary supporters of the certificate of need reform. Unlike other health providers, Ballad does not operate under a certificate of need as it benefits from a different state-sanctioned agreement that allows it to function as a monopoly without competition.

The Ballad monopoly agreement has not positively affected health care in the region, according to KFF News, which reported among several other issues that emergency room wait times have nearly tripled in the five years since the agreement has been place.