iSignificantly Increased CON Thresholds and a “Shot Clock” on the Expiration of CONs
In recent months we have provided updates regarding the status of various legislative efforts to amend North Carolina’s certificate of need law (“CON Law”). One effort was successful: Session Law 2021-129 (Senate Bill 462) was signed into law by Governor Roy Cooper on August 30, 2021, and the provisions described below become effective October 1, 2021. While Session Law 2021-129 narrows the scope of the CON Law’s reach, as discussed below, many services remain regulated by the CON Law.
Cost Threshold Increases
Effective October 1, 2021, the dollar thresholds for diagnostic centers, major medical equipment, and capital expenditures for new institutional health services will increase as follows:
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Diagnostic Centers: cost threshold increases from $500,000 to $1,500,000;
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Major Medical Equipment: cost threshold increases from $750,000 to $2,000,000; and
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New Institutional Health Services: cost threshold doubles from $2,000,000 to $4,000,000.
These new thresholds will be indexed for inflation and will be adjusted each year beginning September 30, 2022.
The “Shot Clock” Provision
Session Law 2021-129 also includes a “shot clock” provision that provides for the expiration of CONs. The “shot clock” provision is also effective as of October 1, 2021. The “shot clock” is triggered based on when the CON was issued and its capital cost. Notably, the “shot clock” applies only to CONs for the construction of “health service facilities,” which includes hospitals, nursing homes, adult care homes, diagnostic centers, and kidney disease treatment centers, among others. The “shot clock” does not apply to CONs for the purchase of equipment subject to CON regulation or expansion of existing services.
For CONs issued on or after October 1, 2021 where the capital costs exceed $50 million:
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The contract for design services must be signed within four years after the decision to approve the CON becomes final.
For CONs issued on or after October 1, 2021 where the capital costs are $50 million or less:
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The contract for design services must be signed within two years after the decision to approve the CON becomes final.
For CONs issued before October 1, 2021 where the capital costs exceed $50 million:
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The contract for design services must be signed by October 1, 2025.
For CONs issued before October 1, 2021 where the capital costs are $50 million or less:
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The contract for design services must be signed by October 1, 2023.
Session Law 2021-129 further provides that if a CON was issued prior to October 1, 2021 and has a specific deadline by which the contract for design services must be executed, that deadline controls, and the CON will not expire unless the CON holder fails to execute or commit to contract for design services by the deadline specified in the CON. Finally, there is a savings provision that allows the deadline to be extended due to circumstances beyond the CON holder’s control or for “other good cause.” For those who are applying for CONs to construct health service facilities in the remaining review cycles of 2021 and later, special attention should be given to the development of the timetable.
What Session Law 2021-129 Doesn’t Change
While the capital cost threshold increases and “shot clock” provisions are significant changes for many projects, it is important to recognize that the CON Law continues to regulate many services, regardless of cost. A non-exhaustive list of regulated services includes MRI scanners, linear accelerators, cardiac catheterization equipment, gamma knife, heart-lung bypass machines, linear accelerators, lithotripters, PET scanners and simulators. Operating rooms, increases in bed capacity, hospice, home health and endoscopy rooms in licensed health service facilities also continue to be regulated, among other services.
