Kentucky Considers Certificate of Need Reforms

Published May 11, 2015

Pointing to a need to “modernize the Certificate of Need program,” the Kentucky Cabinet for Health and Family Services (KCHFS) indicated in a public memo it plans on “exempting services for which [it] is no longer necessary.”

Kentucky’s certificate-of-need (CON) law requires state government approval of any new construction or expansion of medical facilities or the purchase of major medical equipment.

Although KCHFS has yet to state specifically what exemptions could occur, those reforms could have a big impact on cities like Nicholasville. Although it’s less than 20 miles south of Lexington, the town is separated from the state-of-the-art medical facilities in Kentucky’s second-largest city by U.S. 127, a busy thoroughfare that can be a matter of life and death for patients who must be transported.

For years, CON restrictions have blocked Nicholasville from building an acute care hospital.

“How many people have died en route to Lexington on 127 with a heart attack who could have been saved?” asked Dr. Cameron Schaeffer, a pediatric urologist in Lexington. “If the community thinks it can afford a hospital, what gives anyone the right to deny that? This is really all about the hospitals, and quite frankly, it’s evil.”

Better Care, More Jobs

Nicholasville received a license from the state to build an ambulatory care center in 2009, and loosening the commonwealth’s CON restrictions could help that facility expand and serve more patients as an acute care facility.

“We’ve been steadily trying to improve the standard of health care here,” former Nicholasville Mayor John Martin said. “Changes in these restrictions could help us bring good doctors here and create local jobs in the health-care field.”

The ambulatory care center was built by the late railroad tycoon R.J. Coorman.

“[Coorman] used to say there are 26 stoplights between Nicholasville and the nearest hospital,” Martin said.

Dr. Kevin Kavanagh, a Somerset, Kentucky physician who chairs Health Watch USA, says changes are needed to ensure profits gained by hospitals through the integration of health care systems are used to improve affordability.

“Revising the CON or even eliminating it may be one of the ways we can see cost savings,” Kavanagh said. “Insurance premiums are still going up 10 percent annually. The idea of the Affordable Care Act was to reduce costs, and there’s a lot of concern among all that it’s not affordable.”

Hospitals Split on Reform

In addition to written comments, KCHFS officials accepted oral statements at two “listening sessions” on March 16 and 17, and have heard from people on both sides of the issue.

Victor Dipilla, vice president and chief business development officer for the Christ Hospital Health Network, noted in his comments to the cabinet his system’s flagship hospital in Ohio is “only two miles from the Ohio River,” on the other side of which is the Northern Kentucky market and plentiful opportunities for providing care that have yet to be realized.

Dipilla says 14 percent of Christ Hospital’s business comes from consumers living on the Kentucky side of the river, up 2 percent from 2012, which indicates a solid demand for more providers in that part of the Greater Cincinnati market.

“Currently, patients in northern Kentucky do not have much choice, as there is only one health system providing health care in the community,” Dipilla said to KCHFS.

“We have listened to the public, and they are asking for choice—choice of physicians and choice of where they receive their care,” Dipilla said.

Both Reform, Abolition Considered

In its memo, KCHFS indicated it is considering exempting certain CON-required services, citing a recent study by Deloitte of the state’s health care facilities. The Deloitte report recommends the state relax its CON regulations for ambulatory surgery centers (ASC) and “allow more freestanding ASCs to be built in order to increase market competition and provide viable alternatives to hospital based care.”

Kavanagh would like to see the CON process abolished altogether, but if that’s an impossibility, he suggests the state should consider auctioning CON approvals to build new facilities.

“As a very valuable commodity, because it virtually guarantees a market share to a facility, the CON should not be given away by the state,” Kavanagh said. “The money raised from such an auction could be matched with federal funds and put back into patient services.”

Jim Waters ([email protected]) is president of the Bluegrass Institute. 

Internet Info:

“Special Memorandum: Certificate of Need Modernization; Core Principles,” Kentucky Cabinet for Health and Family Services, October 8, 2014: