Tennessee Certificate of Need (CON) Program

Tennessee Certificate of Need (CON) Introduction

Like many other states, Tennessee has an extensive CON process in place for healthcare services and facilities. Winning approval for a CON application is often a time consuming and difficult undertaking. Working with RPC provides clients with a team of consultants with experience working with CON projects.

When working on a CON project, RPC can prepare the entire CON application or sections of the application as the client prefers. When the client is defining the project and deciding whether to file an application, RPC can help assess the market and regulatory situation to determine the relative likelihood of success for a project. RPC not only works to create a thorough market, need and financial analysis, but also works seamlessly with the client’s staff, architects, engineers and, other outside consultants to create a solid CON application.

RPC is led by Ron Luke, JD, PhD, who has prepared CON applications and presented testimony in CON hearings since 1981 in more than 20 states.  RPC’s work on CON projects includes the opening of new acute care hospitals, hospices, physical rehabilitation and psychiatric specialty hospitals, and nursing homes, the relocation and addition of beds, and the acquisition of major medical equipment. Working with RPC during the CON process gives the applicant the advantage of a skilled expert team that can provide expert advice and produce an effective CON application.

Contents last updated in July 2024

Recent Changes to Tennessee’s CON Program

The Governor of Tennessee recently signed House Bill 2269 into law, creating new exemptions for the state’s certificate of need (CON) process and changing existing CON regulations. Below is a summary of the major legislative changes to Tennessee’s CON process.

Tennessee’s Hospital and ASC Exemptions

The new legislation made a significant change to requirements for freestanding emergency departments. Starting July 1, 2025, hospitals will no longer be required to obtain a certificate of need to establish a freestanding emergency department at a location within ten (10) miles of the hospital’s main campus.  However, the satellite emergency department must be at least ten (10) miles away from any other actively licensed acute care hospital.

The legislation removed the requirement for ambulatory surgery centers (ASCs) to obtain a CON, but the bill added new licensing requirements for ASCs. All ASCs must now participate in the TennCare medical assistance program and provide the same amount of care to patients who are enrolled in TennCare as similarly situated hospital-based ASCs. Additionally, ASCs must now provide an amount of charity care that is comparable to similarly situated hospital-based ambulatory surgical treatment centers. This change takes effect on December 1, 2027.

Other Expanded CON Exemptions

The bill also created these new CON exemptions:

• Positron Emission Tomography (PET). Rather than CON review, a provider must show it has been accredited by the American College of Radiology within two (2) years of the date of licensure. (Effective December 1, 2025)
• Magnetic Resonance Imaging (MRI). Rather than CON review, prospective MRI providers must notify the Commission in writing that services are being initiated and must indicate if MRI will be provided to patients under 14 years old on more than 5 occasions per year. (Effective December 1, 2025)
• The establishment of an intellectual disability institutional habilitation facility, burn unit, and neonatal intensive care units (Effective December 1, 2025)
• Initiation of linear accelerator services (Effective December 1, 2027)
• Initiation of open-heart surgery services (Effective December 1, 2029)

Future Legislation and the Tennessee State Health Plan

The bill mandates the Tennessee Health Facilities commission to study the impact of the certificate of need and facility licensure legislation changes on the healthcare industry. This could potentially present further changes to the CON process and regulations.

In March 2024, the Tennessee Department of Health published the 2024-2026 State Health Plan,[1] presenting 8 recommendations to meet the needs of Tennesseans and improve the health outcomes of the state. The plan gives potential opportunities for health care providers to develop facilities or services to meet the needs outlined.

The Criteria and Standards that guide the development of health care programs and services are available on the Health Facilities Commission website. For many of the CON-regulated services, the criteria and standards include worksheets that include the need formula outlined by the state.

Until the exemptions above take place, CON is still required for the development of the following healthcare providers:

• Hospital;
• Nursing Home;
• Ambulatory Surgical Treatment Center (ASTC);
• Intellectual Disability Institutional Habilitation Facility;
• Home Care Organization (Home Health[2] and Hospice);
• Outpatient Diagnostic Center (ODC);
• Rehabilitation Facility;
• Residential Hospice; and
• Nonresidential Substitution-based Treatment Center for Opiate Addiction

CON Review is also required before initiating any of the following services:

• Burn Unit;
• Neonatal Intensive Care Unit;
• Open Heart Surgery (until exemption takes effect);
• Organ Transplantation;
• Cardiac Catheterization;
• Linear Accelerator (until exemption takes effect)

RPC provides Certificate of Need (CON) services to healthcare providers nationally. Our experience spans 30 years and about as many states. We work closely with the healthcare provider’s staff to assemble information to address the state’s criteria and requirements. We work to anticipate the arguments that opponents and competing applicants will make in the project design and the supporting documentation.

[1] Link to Tennessee State Health Plan: https://www.tn.gov/health/health-program-areas/state-health-plan.html

[2] Note, CON review is not required to establish a home health agency limited to providing services to patients less than 18 years of age.

State Agencies

Tennessee Health Services and Development Agency
The Tennessee Health Services and Development Agency “The Agency” is responsible for administering the CON program in Tennessee. The Agency reviews CON applications and grants or denies CONs. The Agency may also review an ALJ’s order and hear an appeal, although they reserve the right not to do so.

State of Tennessee
Health Services and Development Agency
Andrew Jackson Building, 9th Floor
502 Deaderick Street
Nashville, TN 37243
(615) 741-2364

Administrative Law Judge (ALJ)
A party may request to have the Agency’s decision reviewed by an ALJ. The ALJ conducts a public hearing and then issues an Order.  The ALJ’s initial order may be appealed to the Agency or to Chancery Court.

Chancery Court
Should the Agency refuse to hear an appeal on an ALJ’s order, the aggrieved party may request a hearing with the Davidson County chancery court.  The ruling of the chancery court may be appealed in the Court of Appeals.

Services that Require CON

Tennessee’s CON program is designed to assure the orderly, economical development of health care projects that are consistent with the needs of the people of Tennessee.  The following facilities and services require a CON:

• Acute Care Bed Need Services
• Ambulatory surgical treatment center (“ASTC”)
• Birthing Center
• Burn unit
• Cardiac Catheterization Services
• Comprehensive inpatient rehabilitation services
• Extracorporeal lithotripsy Home health
• Hospice and Residential Hospice Services
• Intellectual Disability Institutional Habilitation Facility
• Linear accelerator
• Long Term Care Hospital Beds
• Magnetic Resonance Imaging
• Megavoltage Radio Therapy
• Neonatal nursery services
• Non-residential substitution based treatment center for opiate addiction
• Nursing home
• Open heart surgery
• Outpatient diagnostic center
• Positron emission tomography (PET)
• Psychiatric (inpatient) Services
• Swing beds
• Modification, renovation, or addition to a hospital in excess of $5 million and other health care institutions in excess of $2 million
• Change in the bed complement of a health care institution
• Relocation or replacement of facilities, major medical equipment or services
• Change of parent office of a home health or hospice agency from one county to another county
• Acquisition of major medical equipment in which the cost exceeds $2 million
• Discontinuation of obstetrics
• Closure of a critical access hospital

Certificate of Need Process Milestones

The Agency’s rules require Tennessee’s review cycle to begin on the first day of each month and last sixty days. Applications to which there is no opposition can be considered for a thirty day review cycle and they meet the three review criteria explained in the section above.  An outline of the review process is included below.

1. File Notice of Intent and CON Application
   A letter of intent must be filed between the first and tenth day of the month. The application and accompanying filing fee must be filed within five days of the publication of the letter of intent.
2. Notice of Opposition
   Any party wishing to contest or oppose a CON application may either file a written letter or appear before the agency 15 days before the Agency’s scheduled meeting. If the contesting party does not contest a CON application within this period, they are responsible for any and all costs of the contested case proceeding and must refund the applicant their filing fee.
3. Fact-Finding Hearing
   Upon written request from any interested party, a local fact-finding hearing will be conducted.
4. Agency Review and Decision
   The Department of Health or Department of Mental Health and Developmental Disabilities will review the CON application(s) during the 60 day review cycle.  The Agency will then consider it at the next regularly scheduled meeting (which usually occurs on the 4th Wednesday of each month). The Agency will then approve or deny an application.
5. Hearing
   Any affected party may request a hearing within fifteen days of the Agency’s CON decision. This hearing will occur in front of an Administrative Law Judge (ALJ). Upon receipt of the request for hearing, the ALJ will convene the parties for a scheduling hearing at which point he or she will ask the parties if they wish to participate in mediation. Should the parties not agree in mediation, the hearing schedule may be set with the hearing completed usually within 180 days, and the initial order within 60 days after the hearing’s completion.
6. Contesting ALJ’s Initial Orders
   The ALJ’s initial orders may be appealed in writing to the Agency. The Agency reserves the right to decline to hear any appeal.
7. Appeal to Chancery Court
   If the Agency declines to hear an appeal, the requesting party may appeal the order to the Davidson County chancery court.  The chancery court’s decision may be appealed to the Court of Appeals.

What criteria are used to review a CON?

Tennessee’s General Review Criteria are published in the Tennessee Rules § 0720-11-.1 and are summarized below.

1. Need in the area to be served
2. Economic Feasibility
   • Availability of Funds
   • Reasonableness of the project costs
   • Anticipated revenue and impact on patient charges
   • Participation in state/federal revenue programs
   • Availability of less expensive and more effective alternatives

3. Contribution to Orderly Development of Effective Facilities and Services
   • Relationship to existing providers/system—transfer agreements, TennCare participation, affiliation with professional schools
   • Effects of project’s competition or duplication of services
   • Availability and accessibility of human resources—both employees and consumers
   • Quality of program

Certificate of Need Application Filing Fee

The fee submitted with a Certificate of Need Application is equal to $2.25 per $1,000 of the total project cost. The minimum fee is $3,000 and the maximum is $45,000. Furthermore, as explained above, all the costs associated with a Contested Case Hearing not requested within 15 days will be paid by the requesting party.

Additional Sources

(links good as of July 2024)

Tennessee Health Services Development Agency
http://www.tn.gov/hsda/

CON Statute (Title 68, Chapter 11, part 16) accessible from
https://law.justia.com/codes/tennessee/2014/title-68/health/chapter-11/part-16/

CON Rules
https://www.tn.gov/hsda/certificate-of-need-information/certificate-of-need-basics.html

State Health Plan 2024 Update
https://www.tn.gov/content/dam/tn/health/program-areas/state-health-plan/2024-2026TNStateHealthPlan.pdf

Criteria and Standards for Certificate of Need
https://www.tn.gov/hfc/certificate-of-need-information/hfc-criteria-and-standards.html

CON Application Forms
https://www.tn.gov/hfc/certificate-of-need-information/con-process-and-how-to-apply.html