Tennessee Passes Legislation to Modify the State's Certificate of Need Rules

Tennessee Gov. Bill Lee signed legislation into law on May 21, 2024, that modifies Tennessee's certificate of need (CON) requirements.

The law makes several changes to the existing CON law, including exempting more healthcare providers from needing to apply, while keeping most of the current CON requirements in place for providers and services such as home health, hospice, outpatient diagnostic centers, cardiac catheterization and others.

Newly Exempted Healthcare Providers and Services

Among newly exempted healthcare providers are intellectual disability institutional habilitation facilities, ambulatory surgery centers, long-term care hospitals, freestanding emergency departments and linear accelerators. Additionally, the following healthcare services or providers no longer have CON requirements: burn units, neonatal intensive care units (NICUs) and open heart surgery. The CON requirement for the initiation of MRI services or increasing the number of MRI services was also removed.

• Freestanding Emergency Department Facility. The bill removes the requirement for a CON for a hospital to establish a satellite emergency department facility at a location that is within 10 miles of the affiliate hospital's main campus provided that such location is 10 miles or more from another actively licensed acute care hospital or satellite emergency department facility. This change will take effect on July 1, 2025.
• Ambulatory Surgery Centers (ASC). The bill removes the requirement for an ASC to obtain a CON; however, the law adds additional licensing requirements. Regulations will need to be promulgated, but essentially nonhospital ASCs will be required to 1) participate in TennCare and provide an amount of care to patients who are TennCare enrollees that is comparable to similarly situated hospital-based ASCs and 2) provide an amount of charity care that is comparable to similarly situated hospital-based ASCs. Both requirements will take into account the types of outpatient surgeries, procedures and treatments being performed in the ASC. This change will take effect on Dec. 1, 2027.
• Positron Emission Tomography (PET). Currently, the law requires a CON for PET services in counties with populations of less than 175,000. The new bill modifies that requirement. To establish PET services without a CON under the new bill, the provider only needs to become accredited by the American College of Radiology within two years of being licensed. This change will take effect on Dec. 1, 2025.
• Magnetic Resonance Imaging (MRI). The bill removes the requirement to initiate MRI services or increase the number of MRI machines but requires a notification to the Tennessee Health Facilities Commission when initial MRI services will begin. The notice must indicate whether patients under age 14 will be treated. This change will take effect on Dec. 1, 2025.

The changes to the CON law have a number of different effective dates. The removal of the requirement for an intellectual disability institutional habilitation facilities takes effect on Dec. 1, 2025, and the CON requirement for linear accelerators will be removed on Dec. 1, 2027. The CON requirement for burn units and NICUs will be removed effective Dec. 1, 2025, and the CON requirement for open heart surgery will not be removed until Dec. 1, 2029.

The bill mandates that the Tennessee Health Facilities Commission create a plan to study, for at least six years, the impact of CON reform and facilities licensure in the healthcare industry, which could foreshadow further reform efforts by the legislature.

For additional information, please contact the authors. To receive Holland & Knight's monthly Tennessee Certificate of Need Update, please subscribe here.

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