Retaliation? Tennessee Board Raises CON Application Fees 400 Percent

Published August 1, 2016

Blunting the effect of certificate of need (CON) reform legislation Tennessee Gov. Bill Haslam (R) signed in May, the state’s CON review board has raised by 400 percent the minimum application fee for hospital operators seeking to expand patient services and improve their facilities.

The CON reform law, sponsored by state Rep. Cameron Sexton (R-Crossville) and state Sen. Todd Gardenhire (R-Chattanooga), removed a requirement that operators of medical facilities obtain a CON before opening a birthing center or drug and alcohol rehabilitation center.

The law also allows more providers to purchase MRI machines without first applying for and obtaining CON approval, and it preapproves hospitals to increase their bed capacity each year by 10 percent in each treatment category.

On July 1, the day the law took effect, the Tennessee Health Services and Development Agency (HSDA) increased the minimum nonrefundable CON application fee from $3,000 to $15,000 and the maximum fee from $45,000 to $95,000, The Tennessean reported.

‘Tit for Tat’

Sexton says the rate hike was a retaliatory measure designed to blunt the impact of the CON reform effort he led.

“I believe that the CON board was advised by their general counsel to raise the fees, and I think a lot of legislators feel like it was due to the law being passed,” Sexton said. “I think there was a tit for tat, an effort to inflict some pain and blame it on the legislature.”

HSDA preemptively increased its CON fees even though lawmakers had appropriated enough money for HSDA to remain solvent while implementing the law, Sexton says.

“The CON board was not self-sufficient like other boards are in the state,” Sexton said. “We were subsidizing them about $300,000 to $400,000 a year without the [legislative] body’s knowledge. When the law went into effect, they had about $300,000 to $400,000 in their account, which would have held them over for three or four months, until they could determine how the law would affect the application process. But they decided to raise the fees.”

Patients Pay the Price

Lindsay Boyd, director of policy at the Beacon Center of Tennessee, says patients pay the price for inflated CON fees in the form of reduced health care access.

“The raising of the fees in particular is really concerning because it tries to counterbalance the reforms that were passed this year,” Boyd says. “It only hurts those who have seen a window open through these reforms, started to plan for future development—perhaps the expansion of hospital beds or the addition of imaging equipment—and then see that these fees increasing might edge them out of the market.”

Boyd says higher CON fees pile onto Tennessee’s already high barriers to entry for patient-centered competitors.

“It only hurts consumers in the end,” Boyd said. “It only protects those powerful hospital cartels and only makes it even more imperative that we come back in future years and either reduce or just completely eliminate CON altogether.”

Ben Johnson ([email protected]) writes from Stockport, Ohio.

Internet Info:

“Rep. Cameron Sexton (TN): Government Regs Hurt Health Care Quality, Raise Costs,” Health Care News Podcast, The Heartland Institute, April 4, 2016:

Matthew Hazelton and Michael Hamilton, “Tennessee Lawmakers Pursue CON Reform,” Health Care News, The Heartland Institute, June 2016:

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