Special Report on the Illinois Certificate of Need (CON) Program

July 13, 2010

Health Facilities and Services Review Board Issues Revised CON Review Thresholds

The Illinois Health Facilities and Services Review Board (HFSRB) issued new CON review thresholds on July 1, 2010. Based on a provision in Public Act 96-31, the HFSRB is required to revise its capital expenditure thresholds annually. In accordance with this statute, the thresholds were adjusted for inflation and increased by 0.05 percent. As a result, certain construction or modification projects made by a healthcare facility may not require a CON if the project’s capital expenditures would not exceed the applicable revised amount. However, certain transactions, such as the establishment of a new category of service or a discontinuation of a covered healthcare facility, may still require a CON even if the transaction’s cost is below the capital expenditure minimum. The following chart lists the new capital expenditure thresholds:

Capital Expenditure Thresholds – Effective July 1, 2010

Review Category Prior Threshold Revised Threshold 7/1/10
Hospitals $11,500,000 $11,505,750
Long Term Care $6,500,000 $6,503,250
All Other Provider Types $3,000,000 $3,001,500
Major Medical Equipment $3,000,000 $3,001,500

A covered healthcare facility must also consider the HFSRB’s definition of a “capital expenditure” to determine the type of expenditures that must be included when estimating a proposed project’s cost. According to the CON statute, a “capital expenditure” is an expenditure (a) made by or on behalf of a healthcare facility (as such a facility is defined in the statute) and (b) that under generally accepted accounting principles is not properly chargeable as an expense of operation and maintenance, or is made to obtain by lease or comparable arrangement any facility or part thereof or any equipment for a facility or part, and exceeds the capital expenditure minimum.

The statute adds that the cost of any studies, surveys, designs, plans, working drawings, specifications, and other activities essential to the acquisition, improvement, expansion, or replacement of any plant or equipment with respect to which an expenditure is made, must be included in determining if such expenditure exceeds the capital expenditure threshold. 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 the issuance of a single debt instrument shall not be grouped together as one project.

In addition, donations of equipment or facilities to a healthcare facility which if acquired directly by such facility would be subject to review under the statute are considered capital expenditures, and a transfer of equipment or facilities for less than fair market value will also be considered a capital expenditure for purposes of this statute if a transfer of the equipment or facilities at fair market value would be subject to review.

For more information about this topic or to learn more about the Illinois CON program in general, please contact the authors.