Tennessee General Assembly Continues Chipping Away At Tennessee's CON Program

On April 23, the 113th Tennessee General Assembly passed HB2269/SB2009, Public Chapter No. 985 (New CON Law), which significantly overhauls Tennessee's certificate of need (CON) program for a second time less than three years into the implementation of the Tennessee Health Services and Planning Act of 2021 ((2021 CON Reform), summarized in detail here). The legislation, which takes effect incrementally over the next five years, was sponsored by Representative Clark Boyd (R – Lebanon) and Senator Shane Reeves (R – District 14), both sponsors of the 2021 CON Reform. Governor Lee signed the bill into law on May 21, 2024.

The New CON Law is the product of an organized effort by the "CON Reform Working Group," a Republican lawmaker-led group with a shared vision to eliminate the CON program and replace it with "enhanced quality standards for entry into the marketplace." 2024 CON Reform Working Group Report, 5. Although there has been an active and ongoing push to scale back Tennessee's CON program since 2015-2016, this most recent effort began during the summer of 2023 with the release of the CON Reform Working Group's proposal (2024 CON Reform Working Group Report, Attachment C) and various stakeholder meetings that followed. The New CON Law significantly narrows the scope of CON in Tennessee but falls short of total elimination — in part because of staunch opposition from the Tennessee Hospital Association and other Tennessee hospital systems that argued effectively in favor of some continued CON protections.

The summary below highlights the New CON Law's changes to Tennessee's CON program, while the summary chart compares the New CON Law to the current CON law and outlines the various dates the provisions of the New CON Law go into effect.

Significant Changes to Healthcare Institutions & Services Subject to CON

Between July 2024 and December 2029, the New CON Law sharply limits the healthcare institutions and healthcare services requiring a CON. Specifically, the New CON Law makes the following changes:

CON Options for Free-Standing Emergency Departments (FSED)

Beginning July 1, 2025, hospitals will not need a CON to establish an FSED that is within 10 miles of the affiliate hospital's main campus if the FSED is at least 10 miles from another actively licensed acute care hospital or FSED. Unless this or another exception applies, a CON is still required to establish an FSED or a so-called "satellite inpatient facility" at a location other than a hospital's main campus.

CON Exemptions for Projects in Counties Without Acute Care Hospitals

Since 2010, Tennessee has seen the closure of 16 hospitals, including 13 in rural communities. In an effort to curb this trend and further improve access to healthcare in rural areas, the New CON Law expands CON exemptions for projects in counties without an actively licensed acute care hospital. With the exception of the healthcare facilities and services specified below, effective July 1, 2025, projects in the following 21 counties will not require a CON:

Counties Without a Licensed Acute Care Hospital

See 2024 CON Reform Working Group Report, 11; HFC Facility Lookup Tool.

The exception to CON requirements for projects in counties without an actively licensed acute care hospital does not apply to the following healthcare facilities and services:

1. Home Care Organizations unless otherwise exempted from CON requirements.
2. Hospices.
3. Hospital-established FSEDs located away from an affiliate hospital's main campus that are within 10 miles of any actively licensed acute care hospital or FSED in another county.
4. Nonresidential Substitution-Based Treatment Centers for Opiate Addiction.
5. Nursing Homes.
6. Organ Transplantation.
7. Rehabilitation Facilities.

Importantly, the New CON Law retains the CON exemption for all projects occurring in counties that lack an actively licensed acute care hospital and are designated "economically distressed" — currently, Lake and Perry Counties.

CON Exemptions for Intellectual Disability Institutional Habitation Facilities (IDIHF) and Long-Term Care Hospitals (LTCH)

Beginning December 1, 2025, and December 1, 2027, CONs are not required for IDIHFs or LTCHs, respectively. The New CON Law defines LTCH as a hospital primarily focused on patients with longer than 25-day average lengths of stay.

CON Exemption and Enhanced Licensure Requirements for Ambulatory Surgical Treatment Centers (ASTC)

Beginning December 1, 2027, a CON will not be needed to open an ASTC. Leading up to this transition, on July 1, 2024, the Health Facilities Commission (HFC) will begin distinguishing between "hospital-based" ASTCs, or those controlled by an acute care hospital or an affiliate of an acute care hospital, and "non-hospital" ASTCs, encompassing all others outside the hospital-based category.

The New CON Law mandates that the HFC formulate licensure standards for these newly defined ASTC types. Importantly, these licensing standards will necessitate that non-hospital ASTCs participate in TennCare, deliver care to TennCare patients at a level comparable to "similarly situated" hospital-based ASTCs, and provide a commensurate amount of charity care. To assist in the development of these new licensure standards, the HFC must complete, by December 1, 2025, a report analyzing payor mix information by geographical area and type of surgery or procedure for outpatient surgeries, procedures, and treatments performed in hospitals and hospital-based ASTCs.

Elimination of CON for Most Healthcare Services Historically Subject to CON

Between December 1, 2025, and December 1, 2029, the New CON Law gradually eliminates CON requirements for the following healthcare services:

Notably, the New CON Law adds licensure requirements for these services that could, through future rulemaking, be no less comprehensive than current CON requirements for these services, including satisfaction of certain accreditation and quality standards.

Please see the summary chart for additional details.

Changes to CON Process

The 2021 CON Reform made numerous changes to the CON application and appeal process. The New CON Law makes only two notable changes to those processes.

A Remedy for Voided Letters of Intent (LOI)

Effective July 1, 2024, CON filing fees can be applied to a second CON application for the same project if the LOI for the first application is voided and the second application is filed within 90 days of the voided LOI.

Significant Limitation of CON Appeal Rights

To enhance the finality of the CON process, particularly for applicants, the New CON Law further restricts parties' ability to engage in the contested case hearing process to challenge HFC decisions. Effective July 1, 2024, only an applicant challenging the denial of its CON application can file a contested case petition. Other interested parties will not have a right to file contested case petitions after this date. This change is expected to virtually eliminate CON appeals in Tennessee, which are often initiated by parties that have opposed an approved application.

What Remains Subject to CON Requirements After December 1, 2029

After the New CON Law is fully effective in December 2029, several categories of healthcare facilities and healthcare services remain subject to CON requirements. Generally, unless otherwise exempted, these include projects involving:

1. Cardiac Catheterization
2. FSEDs
3. Home Care Organizations & Related Services (including home health and hospice)
4. Hospitals
5. Nonresidential Substitution-Based Treatment Centers for Opiate Addiction
6. Nursing Homes
7. Organ Transplantation
8. Outpatient Diagnostic Centers
9. Rehabilitation Facilities
10. Residential Hospices

The Future of Tennessee's CON Program and Healthcare Licensure

Although the New CON Law will result in major changes to the existing CON program in Tennessee, many details regarding the implementation of the New CON Law have been left to future development. The legislative focus on CON reform will persist as the New CON Law requires the HFC to develop a detailed plan to study, for at least the next six years, the impact of CON reform and facilities licensure on the healthcare industry in the state. The initial plan must be submitted to the House and Senate speakers and chairs of the General Assembly's Health Committees by December 31, 2024.

Then, from December 31, 2026, and each even-numbered year thereafter through 2030, the HFC must submit reports prepared in consultation with the health committee chairs, healthcare providers and community leaders across the state. While the specifics of many of the HFC's new licensure requirements are yet to be determined, the 2024 CON Working Group Report suggests that the updated licensure processes could be CON-like, requiring satisfaction of various service-specific quality standards in order to obtain a license.

With the New CON Law's wide-ranging changes and fluid implementation timeline, Tennessee healthcare providers should remain vigilant as the HFC works to effectuate the New CON Law. This is particularly true for the first implementation milestone on July 1, 2024, which marks not only the date when certain changes under the New CON Law begin to take effect but also the date the HFC is scheduled to complete the consolidation of the CON and licensure divisions into a single 15-member panel. The specific details of this transition are not yet publicly available but are likely to be discussed at the HFC's meeting on June 26, 2024.

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