File No. 450

Senate, April 20, 2005

The Committee on Public Health reported through SEN. MURPHY of the 16th Dist., Chairperson of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT CONCERNING THE CAPITAL EXPENDITURE THRESHOLD FOR THE REGULATION OF EQUIPMENT ACQUISITIONS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subdivision (4) of subsection (a) of section 19a-638 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2005):

(4) [Each] Except as provided in sections 19a-639a to 19a-639c, inclusive, as amended by this act, each applicant, prior to submitting a certificate of need application under this section, section 19a-639, as amended by this act, or under both sections, shall submit a request, in writing, for application forms and instructions to the office. The request shall be known as a letter of intent. A letter of intent shall include: (A) The name of the applicant or applicants; (B) a statement indicating whether the application is for (i) a new, replacement or additional facility, service or function, (ii) the expansion or relocation of an existing facility, service or function, (iii) a change in ownership or control, (iv) a termination of a service or a reduction in total bed capacity and the bed type, (v) any new or additional beds and their type, (vi) a capital expenditure over one million dollars, (vii) the [acquisition] purchase or lease of major medical equipment [, imaging equipment or a linear accelerator costing over four hundred thousand dollars] costing over four hundred thousand dollars, (viii) a CT scanner, PET scanner, PET/CT scanner, MRI scanner, cineangiography equipment, a linear accelerator or other equipment utilizing technology that is new or being introduced into the state, or (ix) any combination thereof; (C) the estimated capital cost, value or expenditure; (D) the town where the project is or will be located; and (E) a brief description of the proposed project. The office shall provide public notice of any complete letter of intent submitted under this section, section 19a-639, as amended by this act, or both, by publication in a newspaper having a substantial circulation in the area served or to be served by the applicant. Such notice shall be submitted for publication not later than fifteen business days after a determination that a letter of intent is complete. No certificate of need application will be considered submitted to the office unless a current letter of intent, specific to the proposal and in compliance with this subsection, has been on file with the office at least sixty days. A current letter of intent is a letter of intent [which] that has been on file at the office up to and including one hundred twenty days, except that an applicant may request a one-time extension of a letter of intent of up to an additional thirty days for a maximum total of up to one hundred fifty days if, prior to the expiration of the current letter of intent, the office receives a written request to so extend the letter of intent's current status. The extension request shall fully explain why an extension is requested. The office shall accept or reject the extension request [within] not later than five business days from the date it receives such request and shall so notify the applicant.

Sec. 2. Subsection (a) of section 19a-639 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2005):

(a) Except as provided in sections 19a-639a to 19a-639c, inclusive, as amended by this act, each health care facility or institution, including, but not limited to, any inpatient rehabilitation facility, any health care facility or institution or any state health care facility or institution proposing (1) a capital expenditure exceeding one million dollars, [or the acquisition] (2) to purchase, lease or accept donation of major medical equipment requiring a capital expenditure, as defined in regulations adopted pursuant to section 19a-643, in excess of four hundred thousand dollars, or (3) to purchase, lease or accept donation of a CT scanner, PET scanner, PET/CT scanner, MRI scanner, cineangiography equipment, a linear accelerator or other equipment utilizing technology that is new or being introduced into this state, including the [leasing] purchase, lease or donation of equipment or a facility, shall submit a request for approval of such expenditure to the office, with such data, information and plans as the office requires in advance of the proposed initiation date of such project.

Sec. 3. Subdivision (3) of subsection (b) of section 19a-639 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2005):

(3) The office shall comply with the public notice provisions of subdivision (4) of subsection (a) of section 19a-638, as amended by this act, and shall hold a public hearing with respect to any complete certificate of need application filed under this section, if: (A) The proposal has associated total capital expenditures or total capital costs that exceed twenty million dollars for land, building or nonclinical equipment acquisition, new building construction or building renovation; [or] (B) the proposal has associated total capital expenditures per unit or total capital costs per unit that exceed one million dollars for the purchase or lease of major medical equipment; [, imaging equipment or] (C) the proposal is for the purchase or lease of scanning equipment, cineangiography equipment, a linear accelerator [,] or other equipment utilizing technology that is new or being introduced into the state; or [(C)] (D) three individuals or an individual representing an entity comprised of five or more people submit a request, in writing, that a public hearing be held on the proposal. At least two weeks' notice of such public hearing shall be given to the applicant, in writing, and to the public by publication in a newspaper having a substantial circulation in the area served by the applicant. At the discretion of the office, such hearing shall be held in Hartford or in the area so served or to be served.

Sec. 4. Subsection (c) of section 19a-639 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2005):

(c) [Notwithstanding section 19a-639a or 19a-639b, each] Each person or [facility] provider, other than a health care or state health care facility or institution subject to subsection (a) of this section, proposing to [acquire] purchase, lease, accept donation of or replace [imaging equipment or a linear accelerator, requiring a capital expenditure, as defined in regulations adopted pursuant to section 19a-643, in excess of four hundred thousand dollars, including the leasing or donation of such equipment and facility and including all capital expenditures, as defined in regulations adopted pursuant to said section, associated with the provision of the imaging service or operation of a linear accelerator] (1) major medical equipment with a capital expenditure in excess of four hundred thousand dollars, or (2) a CT scanner, PET scanner, PET/CT scanner, MRI scanner, cineangiography equipment, linear accelerator or other equipment utilizing technology that is new or being introduced into the state, shall submit a request for approval of any such [imaging equipment or linear accelerator acquisition] purchase, lease, donation or replacement pursuant to the provisions of subsection (a) of this section. In determining the capital cost or expenditure for an application under this section or section 19a-638, as amended by this act, the office shall use the greater of [(1)] (A) the fair market value of the equipment as if it were to be used for full-time operation, whether or not the equipment is to be used, shared or rented on a part-time basis, or [(2)] (B) the total value or estimated value determined by the office of any capitalized lease computed for a three-year period. Each method shall include the costs of any service or financing agreements plus any other cost components or items the office specifies in regulations, adopted in accordance with chapter 54, or deems appropriate.

Sec. 5. Section 19a-639a of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2005):

(a) Except as provided in subsection (c) of section 19a-639, as amended by this act, or as required in subsection (b) of this section, the provisions of section 19a-638, as amended by this act, and subsection (a) of section 19a-639, as amended by this act, shall not apply to: (1) An outpatient clinic or program operated exclusively by, or contracted to be operated exclusively for, a municipality or municipal agency, a health district, as defined in section 19a-240, or a board of education; (2) a residential facility for the mentally retarded licensed pursuant to section 17a-227 and certified to participate in the Title XIX Medicaid program as an intermediate care facility for the mentally retarded; (3) an outpatient rehabilitation service agency that was in operation on January 1, 1998, that is operated exclusively on an outpatient basis and that is eligible to receive reimbursement under section 17b-243; (4) a clinical laboratory; (5) an assisted living services agency; (6) an outpatient service offering chronic dialysis; (7) a program of ambulatory services established and conducted by a health maintenance organization; (8) a home health agency; (9) a clinic operated by the Americares Foundation; (10) a nursing home; or (11) a rest home. [However, the] The exemptions provided in this section shall not apply when a nursing home or rest home is, or will be created, acquired, operated or in any other way related to or affiliated with, or under the complete or partial ownership or control of a facility or institution or affiliate subject to the provisions of section 19a-638, as amended by this act, or subsection (a) of section 19a-639, as amended by this act.

(b) Each health care facility or institution exempted under this section shall register with the office by filing the information required by subdivision (4) of subsection (a) of section 19a-638, as amended by this act, for a letter of intent at least ten business days but not more than sixty calendar days prior to commencing operations and prior to changing, expanding, terminating or relocating any facility or service otherwise covered by section 19a-638, as amended by this act, or subsection (a) of section 19a-639, as amended by this act, or covered by both sections or subsections, except that, if the facility or institution is in operation on June 5, 1998, said information shall be filed not more than sixty days after said date. Not later than ten business days after the office receives a completed filing required under this subsection, the office shall provide the health care facility or institution with written acknowledgment of receipt. Such acknowledgment shall constitute permission to operate or change, expand, terminate or relocate such a facility or institution or to make an expenditure consistent with an authorization received under subsection (a) of section 19a-639, as amended by this act, until the next September thirtieth. Each entity exempted under this section shall renew its exemption annually by filing current information each September.

(c) Each health care facility or institution that proposes to purchase or lease a CT scanner, PET scanner, PET/CT scanner, MRI scanner, cineangiography equipment or a linear accelerator shall be exempt from certificate of need review pursuant to sections 19a-638 and 19a-639, as amended by this act, if such facility or institution (1) provides to the office satisfactory evidence that it purchased or leased such equipment on or before July 1, 2005, and such equipment was in operation on or before said date, or (2) obtained, on or before July 1, 2005, from the office, a certificate of need or a determination that a certificate of need was not required for the purchase or lease of such equipment.

Sec. 6. Section 19a-639c of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2005):

Notwithstanding the provisions of section 19a-638, as amended by this act, or section 19a-639, as amended by this act, the office may waive the requirements of those sections and grant a certificate of need to any health care facility [,] or institution or provider or any state health care facility [,] or institution or provider proposing to replace major medical equipment, [imaging equipment] a CT scanner, PET scanner, PET/CT scanner, MRI scanner, cineangiography equipment or a linear accelerator if:

(1) The health care facility [,] or institution or provider has previously obtained a certificate of need for the equipment [or accelerator being] to be replaced;

(2) The replacement value or expenditure for the replacement equipment [or accelerator] is not more than the original cost plus an increase of ten per cent for each twelve-month period that has elapsed since the date of the original certificate of need; and

(3) The replacement value or expenditure is less than two million dollars.

The following fiscal impact statement and bill analysis are prepared for the benefit of members of the General Assembly, solely for the purpose of information, summarization, and explanation, and do not represent the intent of the General Assembly or either House thereof for any purpose:

OFA Fiscal Note

State Impact:

Note: GF=General Fund

Municipal Impact: None

Explanation

Passage of the bill may result in an increase in the number of certificate of need (CON) applications filed with the Office of Health Care Access (OHCA). While the exact number of additional CON reviews held each year cannot be determined in advance, it is expected that any resulting costs to the agency will be minimal and can be accommodated within its anticipated budgetary resources.

Pursuant to Section 19a-643(c), regulations of the OHCA must include a fee schedule for CON review under Section 19a-639 CGS. The fee schedule must (1) contain a minimum filing fee for all applications, (2) be based on a percentage of the requested authorization in addition to the minimum filing fee, and (3) apply to new requests and requests for modification of prior requests.

It cannot be determined at this time what fee would be imposed upon CON applications involving equipment costing less than $400,000, as OHCA regulations presently do not address this potentiality. However, applicants currently filing CON requests under Section 19a-639 CGS are subjected to filing fees of $400 when CON requests involve capital expenditures for major medical equipment, imaging equipment or a linear accelerator costing more than $400,000 but less than or equal to $1 million. A filing fee of $1,000 plus .05 percent of the total project cost is paid when an applicant seeks to make a capital expenditure in excess of $1 million.

A potential cost would result for the University of Connecticut Health Center to the extent that it may be subjected to CON review, and applicable filing fees, related to the purchase or lease of equipment meeting criteria specified in the bill that would not presently be subject to CON review.



OLR Bill Analysis

sSB 1207

AN ACT CONCERNING THE CAPITAL EXPENDITURE THRESHOLD FOR THE REGULATION OF EQUIPMENT ACQUISITIONS

SUMMARY:

This bill amends the certificate of need (CON) process by eliminating the capital expenditure threshold of $400,000 for CON review of proposals involving the purchase or lease of various types of scanning equipment and linear accelerators. The bill specifies that equipment acquisitions involving CT scanners, PET scanners, PET/CT scanners, MRI scanners, cineangiography equipment, linear accelerators, or equipment with technology that is new or being introduced into the state will be subject to CON review, regardless of the proposed capital expenditure or capital cost associated with the CON proposal.

The bill provides exemptions and waivers from CON for the specific type of equipment listed above under certain conditions.

CON is a regulatory process, administered by the Office of Health Care Access (OHCA), for reviewing certain proposed capital expenditures by health care facilities, acquisition of major medical equipment, institution of new services or functions, termination of services, transfer of ownership, and decreases in bed capacity. Generally, CON approval is a formal statement by OHCA that a health facility, medical equipment purchase, or service change is needed.

EFFECTIVE DATE: July 1, 2005

CERTIFICATE OF NEED

CON for Certain Types of Medical Equipment

By law, Connecticut health care facilities need to obtain a CON from OHCA prior to developing, expanding, or terminating certain services and expending more than $1 million on a capital project. Additionally, a CON is required when a facility proposes to acquire major medical equipment, imaging equipment, or linear accelerators with a capital cost in excess of $400,000.

This bill retains the $400,000 threshold for CON review of major medical equipment acquisition but subjects the purchase, lease, or donation of specific types of medical equipment to CON review regardless of cost. This equipment includes a CT scanner, PET scanner, PET/CT scanner, MRI scanner, cineangiography equipment, a linear accelerator, or other equipment utilizing technology that is new or being introduced into the state.

By law, the CON process begins when the applicant submits a letter of intent (LOI) to OHCA. Once the LOI is filed, the applicant receives a CON application form and is notified of the filing window for the application. The applicant must file the CON application between the 60^th and 120^th day from the LOI filing. A one-time 30-day extension may be requested by the applicant, extending the filing date to the 150th day. The bill specifies that OHCA must accept or reject the extension request within five business days from the date it receives the request.

Public Hearings

By law, OHCA must hold a public hearing on a completed CON application if (1) the proposal has associated total capital expenditure or total capital costs exceeding $20 million for land, building, or non-clinical equipment acquisition; new building construction; or building renovation; (2) the proposal has associated total per-unit capital expenditures or capital costs exceeding $1 million for major medical equipment, imaging equipment, or linear accelerators that use new technology or technology being introduced to the state; or (3) three individuals or one person representing an entity of five or more people submit a request in writing for a public hearing.

Under the bill, a public hearing must be held on completed CON applications involving scanning equipment, cineangiography equipment, linear accelerators, or any other equipment using technology that is new or being introduced into the state, regardless of the capital costs.

Exemption From CON

The bill provides an exemption from CON review for health care facilities proposing to purchase or lease the scanning or cineangiography equipment, or linear accelerator if the facility (1) provides OHCA with satisfactory evidence that it purchased or leased the equipment before July 1, 2005 and it was operating before that date or (2) obtained from OHCA, before July 1, 2005, a determination that a CON was not required for the purchase or lease of the equipment.

Waiver of CON

By law, a waiver of CON is considered when major medical equipment, imaging equipment or a linear accelerator that was previously authorized under a CON needs replacement. A waiver authorizes the replacement of the equipment without an additional CON. OHCA must review the request and supporting evidence, which must include the previously obtained CON for the equipment being replaced, documentation that the replacement cost is less than $2 million, and a replacement expenditure not more than the original cost plus an increase of 10% for each 12 month period since the original CON. This bill specifies that OHCA may provide such waivers for replacement of scanning, cineangiography, and linear accelerator equipment.

BACKGROUND

Related Bills

SB 1143 redefines “affiliate” for purposes of CON review and establishes a deadline by which a person seeking a public hearing on a CON application must make a request to OHCA. The Public Health Committee favorably reported this bill.

sSB 1145 makes several changes in the dates by which hospitals and other health care providers must submit applications or data to OHCA, who must submit data, and the data they must submit. It extends penalties for failure to file to a wider range of entities. It revises OHCA’s authority concerning hospital funds and eliminates a report OHCA must make on graduate medical education. The Public Health Committee favorably reported this bill.

Scanning and Cineangiography Equipment

“Cineangiography equipment” records sequential x-ray images of the heart and arteries after the selective injection of iodinated contract medium. It is used to evaluate morphology, dimensions and function of the heart, and morphology of the great arteries. Cineangiography employs a cine camera to record the images from the image intensifier onto cine film.

A “CT (computerized tomography) scanner” is a special kind of x-ray machine. Instead of sending out a single x-ray through the body as with ordinary x-rays, several beams are sent simultaneously from different angles. CT scans are far more detailed than ordinary x-rays.

A PET (positron emission tomography) scanner” is a device that produces cross-sectional x-rays of metabolic processes by means of positron emission tomography. A PET scan combines CT and nuclear scanning. During a PET scan, a radioactive substance called a tracer is combined with a chemical (such as glucose); this mixture is generally injected into a vein. The tracer emits tiny positively charged particles (positrons) that produce signals. A PET scan can be used to study the brain’s blood flow and metabolic activity for example. It is also used to detect and evaluate cancer.

An “MRI (magnetic resonance imaging) scan” produces pictures of the inside of the body. Unlike an x-ray, an MRI scan does not use radiation. Rather, a magnetic field is used to make the body’s cells vibrate. They then give off electric signals which are interpreted by a computer and turned into very detailed images of “slices” of the body.

A “linear accelerator” is used for external beam radiation treatments for patients with cancer. It delivers a uniform dose of high-energy x-ray to the region of the patient’s tumor. These x-rays can destroy the cancer cells while sparing the surrounding normal tissue.

COMMITTEE ACTION

Public Health Committee

Joint Favorable Substitute