Illinois Certificate of Need: A New Majority of Five

June 2, 2010

As the national economy continues to improve following the collapse of the financial markets in 2008, healthcare providers are beginning new construction and development projects, while others are increasing efforts to acquire struggling facilities. Many states, including Illinois, require pre-approval for certain projects and transactions related to healthcare facilities. The Illinois Health Facilities Planning Act (Act) provides that no person shall construct, modify or establish a healthcare facility or acquire major medical equipment without first obtaining a Certificate of need (CON) or exemption from the Health Facilities and Services Review Board (Board). However, any provider that is considering new projects in Illinois should be aware that the Illinois legislature has made several recent revisions to the Act (see S.B. 1905, Public Act 93-41).

On March 1, 2010, an important provision in the Act became effective. The provision relates to the legislature’s decision to alter, yet again, the number of members on the Board (increasing its size from five to nine members). The change represents the third time since 2003 that the state legislature has altered the number of members on the Board. The change is important because the addition of four Board members could create new opportunities or lead to unforeseen challenges for future CON applicants. The viability of potential projects may be shaped by the individuals Gov. Quinn appoints to fill the new Board vacancies.

Generally, Board members review every CON application and vote for or against a CON project based on findings included in a state agency report. However, Board members often approve projects even though the applicants fail to fully satisfy the CON review criteria. This outcome occurs when enough Board members make a subjective analysis of a project, and for reasons independent of the CON review criteria, decide that a project is necessary. Therefore, it is imperative to understand how new Board members view certain projects and identify issues that may prevent or encourage a Board member’s favorable vote. For example, even though a proposed project may not be necessary based on the rigid CON review criteria, a majority of Board members could determine that a project has merit because the applicant presents a cogent argument that demonstrates a need for a specialty hospital in a specific health service area or that the project will create new jobs and significantly bolster economic development. Board members are allowed to depart from the Board’s rules and support a project despite an applicant’s failure to meet the CON review criteria set forth in the state agency report.

Alternatively, a CON applicant’s ability to identify certain trends might reveal new challenges for obtaining permit approval. For example, even though prior Boards were not directed to police non-profit providers’ charity care policies, members routinely questioned applicants about the amount and types of charity care provided by the applicant. Charity care was important to certain Board members but eventually became so prominent that an applicant’s project could pass or fail on the charity care issue alone. Almost all CON permit applicants are now required to comment on charity care and how the proposed project will impact charity care and safety net services in the applicant’s service area.

Nevertheless, a nine-member Board appears to benefit CON applicants by enhancing an applicant’s chance for project approval. In the past, Board vacancies led to significant problems with meeting quorum requirements and project approval often required a unanimous vote. Nine members should make it easier to achieve a quorum sufficient to conduct business. Moreover, a handful of “no” votes will no longer be able to defeat a project. New Board members also have certain experiences in health care that should enhance the CON review process. John Hayes, appointed on Dec. 12, 2009, specializes in the valuation of hospitals, nursing homes, and medical practices. Dale Galassie, appointed on Dec. 16, 2009, who recently retired from his position as executive director of the Lake County Health Department, has experience operating and constructing healthcare facilities. Justice Alan Greiman, appointed on March 1, 2010, is a former member of the Illinois legislature and a retired appellate court justice. He brings extensive government experience to the Board.

Gov. Quinn has three more vacancies to fill on the Board and is reportedly considering nominees for the three remaining Board positions. Although it is too early to determine whether an expanded Board will provide opportunities or create challenges for future applicants, one fact remains—many proposed construction and acquisition projects will continue to require a CON permit. Healthcare providers may wish to consult with an experienced CON attorney before starting a project to learn about the new Act and obtain an assessment of the proposed project’s ability to achieve Board approval. The assessment should identify the project’s key benefits and include a strategy to obtain support from at least five of the nine Board members. That is, every potential CON permit applicant should develop an approval strategy that can count to five; meaning, potential applicants should analyze the background and voting history of every Board member, identify facts that could influence a member to support or oppose the project, and develop a strategy that outlines how the applicant will attempt to gain the support of at least five Board members. CON applicants who are well informed about the Board’s rules and procedures, but who also consider the views of each Board member, will enhance their ability to gain project approval.