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Healthcare Essentials

October 20, 2017

N.C. State Health Coordinating Council Tweaks Operating Room Methodology in Proposed 2018 SMFP

By Carrie A. Hanger

Earlier this month, the North Carolina State Health Coordinating Council (“SHCC”) held its final meeting of the year.  Chief among the topics of discussion was the Proposed North Carolina 2018 State Medical Facilities Plan (“SMFP” or the “Plan”).[1] 

In addition to adjusting a few need determinations contained in the proposed Plan, the SHCC also made small but interesting tweaks to some of the SMFP’s methodology relevant to operating rooms (“ORs”).  These changes, which were based upon the recommendations of the North Carolina Department of Health and Human Services, Division of Health Service Regulation (the “Agency”), include the following:

  1. Calculation of Charity Care Percentages:  The SHCC changed how the percentage of required charity care revenue is calculated for the 2010 Demonstration Project sites (i.e., the three separately licensed, single specialty ambulatory surgery centers provided for under the 2010 SMFP).  Those sites must have at least seven percent (7%) of their revenue come from self-pay and Medicaid patients.  Previously, this percentage was calculated using the demonstration site’s total collected revenue.  In response to a petition of OrthoCarolina, the 2018 SMFP requires these facilities to calculate the percentage from their total earned revenue instead.  (OrthoCarolina’s petition was not entirely successful, however; the SHCC denied its companion request to reduce the required percentage from seven percent to five percent.)
  2. Projected Surgical Growth for Negative Population Growth: The SHCC also granted Cape Fear Valley Medical Center’s petition to adjust the OR methodology so that “projected growth rate for surgical cases [is] held constant when population growth is negative.”  This change better aligns the Plan’s OR methodology with its acute care bed methodology.
  3. Definition of a Health Care System for Which OR Surpluses Are Aggregated:  In response to comments from Duke University Health System, the SHCC clarified in the 2018 SMFP that the definition of “health system” includes leased facilities as well as owned facilities.  To address the potential impact on future need determinations of an OR that is in the process of being transferred or relocated, the SHCC also clarified that need determinations will be issued only after a transferred or relocated OR is licensed in its new location.  The revised section reads as follows:

Assumptions of the Methodology

A “health system” includes all licensed or approved health service facilities with operating rooms located in the same service area that are owned or leased by:

  1. the same legal entity (i.e., the same individual, trust or estate, partnership, corporation, hospital authority, or the State or political subdivision, agency or instrumentality of the State); or
  2. the same parent corporation or holding company; or
  3. a subsidiary of the same parent corporation of holding company; or
  4. a joint venture in which the same parent; holding company; or a subsidiary of the same parent or holding company is a participant and has the authority to propose changes in the location or number of ORs in the health service facility.

A health system may consist of only one health service facility.  In the event that a need for additional operating rooms is generated by the relocation or transfer of operating rooms to a different health system, the need determination will not appear until the relocated or transferred operating rooms are licensed in their new location.

For the Proposed 2018 State Medical Facilities Plan, when a need is calculated, the minimum need determination for operating rooms is set to two, after rounding.  In addition, the maximum operating room need determination in a service in a single year will not exceed six, regardless of the deficit calculated.  The Agency will reevaluate these two adjustments in 2018 to recommend whether to continue them.

Certificate of Need applications for new operating rooms are not restricted to the entity(ies) that generated the deficits.

Although limited in their scope, these changes are likely to be carried over to the next year’s Plan and could have lasting impact.

[1] Developed annually by the North Carolina Department of Health and Human Services, Division of Health Service Regulation, under the Direction of the SHCC, the SMFP projects the need for various regulated health care services and facilities in the State of North Carolina.  Where the projected need for a regulated facility or service exceeds the number either developed or in development, the SMFP makes a need determination to allow the development of a specific number of units of that facility or service in identified geographic areas within the state.  .

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