Illinois CON Reform Bill Heading to Governor’s Desk

June 10, 2009

The legislation intended to overhaul the operations of the Illinois Health Facilities Planning Board, Illinois Senate Bill 1905, has been approved by the Illinois House and Senate and will be sent to the governor for signature. SB 1905, which renames the state board overseeing health care capital expenditures to the Health Care Facilities and Services Review Board, will take effect upon signing. In order to avoid the repeal of the current health planning statute, SB 1905 must be signed into law by July 1, 2009.

It is generally understood that one of the primary goals of SB 1905 is to address the long-standing concern over the Illinois Health Facilities Planning Board, which became exceedingly controversial after multiple criminal indictments were issued surrounding activities of the Illinois Health Facilities Planning Board and other state agencies.

The amendments to the Illinois Health Facilities Planning Act (IHFPA) created by SB 1905 are the result of the Legislative Task Force on Health Planning Reform’s findings and recommendations. The task force conducted a yearlong study of Illinois Certificate of Need (CON) processes, with the end goal of promoting access to affordable health care for Illinois residents.

Several modifications to the Illinois CON process will result from enactment of SB 1905. SB 1905 reforms Illinois’ CON program and changes the name of the Illinois Health Facilities Planning Board to be called the Illinois Health Facilities and Services Review Board. The key changes, discussed in detail below, can be categorized as follows: (i) procedural; (ii) substantive; and (iii) ethics and membership.

I. Substantive Changes

SB 1905 adds a “Safety Net Impact Statement” requirement to the general review criteria for substantive projects. Skilled and intermediate long-term care facilities licensed under the Nursing Home Care Act are exempt from this requirement. The Safety Net Impact Statement must describe the impact of the given project on items such as the availability of essential safety net services within the community and charity care within the community.

The capital expenditure minimum (CEM) thresholds have also been adjusted. The hospital CEM is increased, but the CEM for other health care facilities is decreased. For hospitals, the CEM will be $11,500,000. For projects related to skilled and intermediate care long-term care facilities licensed under the Nursing Home Care Act, the CEM will be $6,500,000. For projects by all other applicants, the CEM will be $3,000,000. Such thresholds will continue to be adjusted on an annual basis as provided under the current version of the IHFPA.

SB 1905 also addresses the current non-reviewability of proton therapy projects under the IHFPA as it exists today. Under SB 1905 facilities which house major medical equipment that is used on an outpatient basis must apply for a CON permit if the project will exceed the CEM.

The rules restricting bed increases have also been altered. Under SB 1905, hospitals and SNFs will be permitted to increase the existing bed capacity over a two-year period by either adding 20 new beds or an additional 10% of the facility’s capacity, whichever results in the lesser increase, and as long as the project does not exceed the CEM for the type of facility in question.

Under SB 1905, the board is required to develop a separate set of rules and review existing criteria for long-term care projects. As discussed below, the board has a history of significant delays when it has been required to promulgate new rules. Consequently it is unclear when a separate set of CON rules applicable to long-term care projects will be promulgated. Changes in the agency’s support of the board discussed below may exacerbate delays in the rulemaking process.

The circumstances under which multiple projects will be considered interdependent have also been altered by SB 1905. The current version of the board’s rules state in part that, when determining whether to include a given expenditure as part of a single project or transaction, “components of construction or modification that are to be undertaken by means of a single construction contract or are to be financed through the issuance of a single debt instrument must be grouped together.”

SB 1905 includes language stating that “unless otherwise interdependent, or submitted as one project by the applicant, components of construction or modification undertaken by means of a single construction contract or financed through issuance of a single debt instrument shall not be grouped together as one project.” Consequently, it appears that projects relying upon a single construction contract or financing instrument will no longer be automatically considered to be interdependent.

II. Ethics and Membership Changes

Several significant changes have been made to the board’s composition, permissible activities of board members and board support functions. For example, the board position of executive secretary is eliminated by SB 1905. The composition and size of the board has also been altered. Under SB 1905, beginning March 1, 2010, the board will be composed of nine salaried members.

Currently, board members are only compensated for their expenses. Current board members, as of enactment of SB 1905, will continue to serve until they are replaced by a new member or resign their membership. The board’s composition must be consistent with the following requirements: (i) it must include at least five members knowledgeable about health care delivery systems, health systems planning, finance, or the management of health care facilities; (ii) one member must represent a nonprofit health care consumer advocacy organization; and (iii) four members must be Illinois residents living outside of the Chicago metropolitan area.

While significant changes have been made to the membership of the board, SB 1905 did not remove certain restrictions on memberships that are currently in place. Most notably, SB 1905 continues to impose the requirement that no person may serve on the board if that person has a financial or business relationship with a health care facility, either directly or indirectly through certain family members.

Historically, since this restriction was imposed, it has seemed to have impeded the ability of the state to identify and appoint qualified members to serve as board members, as vacancies have almost continuously existed with just a five-member board. The usual solution, in large part, has been to recruit retired health care professionals. It is possible that the creation of salaries for board members will attract a larger group of qualified candidates.

Finally, SB 1905 alters the period and scope during which ex-parte communications with board members and staff are permissible. Under SB 1905, board staff members are permitted to provide technical assistance to applicants and verify or clarify the contents of any application, so long as such staff member memorializes any such communication. Further, the ex-parte period is shortened by SB 1905, and now begins upon filing of a CON application rather than 30 to 60 days prior to filing.

III. Procedural Changes

As mentioned earlier, in the spirit of the change in focus of the board, SB 1905 renamed the board which will be called the Illinois Health Facilities and Services Review Board. SB 1905 adds a mandate regarding the development of a statewide comprehensive health plan (state health plan) which includes a five- to 10-year planning horizon. The plan must be updated no less than every two years.

Perhaps the most significant procedural change to the CON law is the elimination of the Letter of Intent requirement. Currently, CON applicants are required to file a Letter of Intent with the board prior to filing a CON permit application. Applicants are also required to comply with certain notification of obligation requirements. SB 1905 eliminates the Letter of Intent and obligation notification requirements from the IHFPA.

SB 1905 also permits members of the public to provide written commentary to factual findings contained in a State Agency Report (SAR) up to 10 days prior to the application’s hearing before the board. Board staff members may, based upon such public commentary, make revisions to the SAR. Finally, SB 1905 requires at least one board member to attend every public hearing.
Unless otherwise indicated above, the changes made by SB 1905 will go into effect once signed. The current IHFPA is set to expire on July 1, 2009.

As discussed, the board is required to develop a set of CON rules that are distinctly applicable to long-term care projects. Further, not all existing board rules that are currently in force are consistent with SB 1905. For example, the Part 1130 Letter of Intent requirement has been eliminated. Consequently, it is expected that there will be a number of future rulemakings to conform the existing board rules to SB 1905. It is unclear when any such rules will be promulgated by the board.

The board was required to conduct a complete assessment and revision to its rules no later than Dec. 31, 2004. As of May 2009, the board accomplished approximately 1/3 of this mandate, and the majority of board rules remained unchanged. SB 1905 requires the board to review, revise and update its rules every two years. The board is required to “update” the rules rather than promulgate new rules.