MEMORANDUM. Commissioner Monica Bharel, MD, MPH and Members of the Public Health Council

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The Commonwealth of Massachusetts Executive Office of Health and Human Services Department of Public Health 250 Washington Street, Boston, MA CHARLES D. BAKER Governor KARYN E. POLITO Lieutenant
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The Commonwealth of Massachusetts Executive Office of Health and Human Services Department of Public Health 250 Washington Street, Boston, MA CHARLES D. BAKER Governor KARYN E. POLITO Lieutenant Governor MARYLOU SUDDERS Secretary MONICA BHAREL, MD, MPH Commissioner MEMORANDUM Tel: TO: FROM: CC: RE: Commissioner Monica Bharel, MD, MPH and Members of the Public Health Council Jay Youmans, Senior Advisor to the Commissioner; Thomas Mangan, Policy Analyst; Nora Mann, Director, Determination of Need Program Rebecca Rodman, Senior Deputy General Counsel Final Proposed Revision of 105 CMR : Determination of Need DATE: January 11, 2017 I. Introduction The purpose of this memorandum is to request final approval for promulgation by the Public Health Council (PHC) of the proposed revision of Department of Public Health (DPH) regulation entitled Determination of Need found at 105 CMR A draft revision of 105 CMR ( DoN regulation ) was brought before the PHC prior to its release for public comment on Tuesday, August 23, Following this initial presentation, the Department held two (2) public hearings in Boston, MA and Northampton, MA. DPH received and reviewed over 100 comments submitted at both the public hearings and during the corresponding 45 day comment period from a wide range of interested parties, from members of the General Court, local public health departments, community coalitions, and academics, to architectural and legal firms, public health advocates, health systems, physicians, and freestanding ambulatory surgery centers. Additionally, DPH held five (5) listening sessions across the state and invited written comments, in order to collect feedback on proposed subregulatory guidelines to be issued in support of the final proposed revision. In total, comments received through these seven (7) public hearings and three (3) public comment periods have informed the final proposed revision, summarized below and attached to this memorandum. The proposed revision was also completed, in part, pursuant to the regulatory review process, mandated by Executive Order 562, which requires the Department of Public Health (DPH) and all other state agencies to review regulations with the goal of streamlining, simplifying, and improving said regulations. The final proposed revision represents a paradigm shift to a 1 modernized, streamlined, and retooled process that puts public health at the core of the Determination of Need ( DoN ) process. II. Background The mission of DPH is to prevent illness, injury, and premature death, to assure access to high-quality public health and health care services, and to promote wellness and health equity for all people within the Commonwealth. This mission has historically been understood to direct DPH to play an active role in 1) measuring population health and wellness, including the identification and understanding of the underlying social determinants of health, and 2) health care delivery system policy and design. Consistent with this understanding, the Massachusetts General Court established the DoN Program within DPH in However, despite significant changes in health care over the past 45 years, the DoN regulation, with few exceptions, has remained substantively unchanged following its initial conception. As such, the Commonwealth s current DoN regulation has been outpaced by a rapidly evolving health care market and is unable to successfully further DPH s ability to incentivize value-based market competition that emphasizes successful implementation of population health strategies. (See Attachment A, August 23, 2016 DPH Staff Memo to PHC). III. High-Level Overview Following a comprehensive year-long review of the current DoN regulation, DPH released an initial proposed revision in August The proposed revision represents a paradigm shift from an antiquated, burdensome regulation to a modernized, streamlined, and retooled regulation that puts public health at its core. To accomplish this, DPH staff proposed seven (7) major areas of revision: Simplification and predictability; Modernization and alignment across state agencies; Increased transparency; Accountability; Redirecting Community Health Initiative (CHI) projects towards the social determinants of health; Revamping of DPH oversight of DoN-Required Equipment and Services; and, Modernization of DPH s review of transfers of ownership. DPH s initial proposed revision largely accomplished these goals by: Reducing the DoN regulation by 57%; Restructuring and reducing regulatory complexity, significantly streamlining the DoN application and review process for regulated parties; Modernizing DoN to reflect today s health care market; looking across systems of care; retooling DoN to incentivize market competition based on value and the successful implementation of population health strategies, all in support of the public health mission; 2 Ensuring increased access and equity by requiring MassHealth participation as a condition of DoN approval, and by creating a requirement that DoN projects must add demonstrable public health value and reasonable assurances of health equity to existing patients; Increasing transparency and predictability of DoN by allowing for a rolling application process, requiring real, meaningful, and continuous community engagement, requiring regular reporting and meaningful accountability by DoN holders; Reforming the state s oversight of equipment and services to support high-value innovation, while limiting market saturation of equipment and services with evidence of having the potential for overutilization; and, Aligning terminology, processes, and policies across relevant state agencies, increasing state government s ability to speak with one voice on important health care policy. DPH s final proposed revision maintains these tenets of reform, while responding to public comments received to-date. IV. Summary of Public Comment and Proposed Department Amendments Following DPH s release of the initial proposed revision to 105 CMR , DPH held two (2) public hearings in Boston, MA and Northampton, MA and has received and reviewed over 100 comments submitted at both hearings and during the 45 day comment period from a wide array of constituencies. Additionally, DPH held five (5) listening sessions across the state and invited written comments on proposed sub-regulatory guidelines to be issued in support of the final proposed revision. Comments received across these seven (7) public hearings and three (3) public comment periods have informed the final proposed revision. In summary, the majority of the feedback DPH received supported DPH s overall approach to the DoN revision, with comments and suggestions for further amendments focused on several specific topic areas. The following topic areas represent the majority of all public comments received by the DPH. Ambulatory Surgery: A majority of the comments received in response to the initial proposed revision by DPH were on this topic. DPH s goal in its initial proposed revision was to balance the needs of patients seeking greater access to ambulatory surgical services, with a thoughtful response to state and national data indicating increases in total medical spending, as well as increased fiscal insecurity for critical access community hospitals associated with the deregulation and expansion of ambulatory surgery centers or ASCs. 1 Specifically the proposed regulation sought to address the impact on community-based hospitals, as they represent important access points for many of the Commonwealth s most vulnerable residents, by providing urgent, emergent, and primary services, regardless of payor. 1 For example, in Ohio there was a 600% increase in ASCs following their deregulation. Additionally, see recent HPC findings highlighting freestanding ASCs as one of several new market innovators contributing to the fiscal insecurity of the Commonwealth s community hospitals. 3 While most commenters supported DPH s overall approach to the DoN revision, they objected to this specific section of the proposed revisions, citing that the ASC provisions failed to take into account the significant savings and quality benefits provided by independent freestanding ASCs. Atrius Health, the Massachusetts Medical Society, independent freestanding ASC operators, trade associations, and Massachusetts payors all provided testimony supporting this position. Beth Israel Deaconess Medical Center (BIDMC), the Conference of Boston Teaching Hospitals (COBTH), Lahey Health System, the Massachusetts Council of Community Hospitals (MCCH), the Massachusetts Health and Hospital Association (MHA), New England Baptist Hospital, Partners Health Care, Dr. Alan Sager (BU School of Public Health or BUSPH ), Shields Health Care Group, Steward Health Care, UMass Memorial Health Care (UMMHC), and Wellforce all provided testimony in support of DPH s initial ASC proposal. MCCH noted through its oral testimony that while freestanding ASCs do in fact provide more affordable options for ambulatory surgical services, they are not required to take all patients, regardless of payor, their facilities have significantly lower-cost requirements, and they only provide higher-reimbursable services in comparison to many of the other necessary, lower-reimbursable services provided by community hospitals (e.g. primary and behavioral health services). Several ASC operators from western Massachusetts noted examples of community hospitals no longer providing hospital-based ambulatory surgical services and seeking freestanding ASCs to fill these gaps in service delivery within their communities. Atrius Health advocated for DPH to use ASCs as a way to incentivize and reward accountable care organizations (ACOs) seeking to take on greater downside risk, citing ACOs connection to actual patient need and value-based services. Dr. Paul Hattis (Tufts University School of Medicine or TUSM ) supported DPH s desired goals, but recommended that DPH redraft these provisions to provide some protection for community hospitals while also allowing for the continued growth of freestanding ASCs in order to encourage these lower-cost, freestanding settings. The amendments proposed by DPH at this time are consistent with its desire to support community hospitals, incentivize the formation of value-driven and patientcentered ACOs, and acknowledge the important cost-saving contributions that the more than 50 existing freestanding ASCs within the Commonwealth have and continue to provide. As proposed, any Health Policy Commission (HPC) certified ACOs (ACOs which have been certified by the Division of Insurance as risk-bearing provider organizations and that have demonstrated to the HPC their ability to meaningfully involve consumers and begin to respond directly to the social determinants of health) can apply for proposed projects that include construction of freestanding ASC capacity (Note: limited exemption for main campus and expansion of existing satellite campus capacity), while grandfathering all existing freestanding ASCs, providing them the opportunity to expand at their existing sites or change ownership activities prohibited under the current moratorium. Construction of a freestanding ASC at a new location must be done by an Applicant working either in joint venture with an HPC-certified ACO or by an existing independent community hospital. Additionally, should an HPC-certified ACO seek to locate a new 4 freestanding ASC location within the primary service area of one of the Commonwealth s 10 remaining independent community hospitals (i.e. independent, non-affiliated), the HPC-certified ACO would be required to either obtain a letter of support from the independent community hospital, or engage in a joint venture/affiliation with the independent community hospital. It should be noted that according HPC s Massachusetts Hospital Cohort Designation and Affiliation Status, only 10 independent community hospitals are currently in operation, limiting this provision s scope, while still providing important protections for these valued and increasingly vulnerable community assets. DPH s proposed amendments recognize the important contributions independent freestanding ASCs and community hospitals, both, have made in reducing the Commonwealth s total medical costs, while reflecting an understanding that the future of health care will rely on providers abilities to better manage total costs and provide a whole health approach to patient care. Transfer of Ownership: The proposed regulation contemplates input from HPC in the context of transfers of ownership, specifically with respect to their Cost and Market Impact Reviews (CMIR). In this respect, DPH received conflicting comments: MHA requested that all references to HPC be struck. Conversely, Blue Cross Blue Shield of MA (BCBSMA), Harvard Pilgrim Health Care, Dr. Paul Hattis (TUSM), the Massachusetts Association of Health Plans (MAHP), the Massachusetts Nurses Association (MNA), Dr. Alan Sager (BUSPH), and UMMHC provided strong endorsements of DPH s proposed revision of the transfer of ownership process and its alignment with HPC. DPH received comments from COBTH and several of its members, including Lahey Health System and Partners Health Care, providing overall support for DPH s proposed revision of transfer of ownership provisions; however, sought additional clarity as to how DPH will consider comments made by HPC. Specifically, commenters asked for assurance that DPH would consider any HPC comments in the context of all applicable DoN Factors. Finally, Lahey, Partners, and BIDMC requested that DPH limit its consideration of any HPC comments submitted to DPH in response to a completed CMIR to only situations where the HPC refers a proposed project to the Massachusetts Attorney General. Additional comments in response to this section spoke to the question of what kind of transaction would amount to a transfer of ownership for the purposes of the regulation. Specifically, representatives of some independent, physician-owned freestanding ASCs requested clarity around the Transfer of Ownership definition as it relates to limited liability partnerships and whether the retirement of one owner and the addition of another new owner would trigger the DoN transfer of ownership process. In the final proposed revision before the Council, DPH has proposed amendments to clarify: that DPH will consider any comments submitted by HPC based upon a completed CMIR within the context of the applicable DoN Factors, and to define Transfer of Ownership to exclude certain limited changes to a partnership s 5 ownership structure, thereby aligning the DoN regulation with proposed definition changes within DPH s licensure regulations. DPH declines to further limit its ability to review transfers of ownership following an HPC review to only those for which an AGO referral has been made, as DPH believes transfers of ownership may warrant further DoN review, for rescission or amendment of the DoN approval, irrespective of a separate decision by HPC to refer a matter to the Massachusetts Attorney General. However, DPH did amend provisions to allow for due process to an applicant should DPH determine a rescission or further amendment to a previously issued DoN is warranted in response to received HPC comments. Accountability: BCBSMA, the Boston Public Health Commission (BPHC), Health Care for All, MAHP, House Majority Leader Ronald Mariano, MCCH, MNA, Dr. Alan Sager (BUSPH), and UMMHC all submitted comments supporting DPH s efforts to infuse transparency and accountability within DoN. While supportive, Dr. Sager believed that DPH did not go far enough. COBTH, while also supportive, requested that due process and consideration of external factors be included within the final revision. MHA believed the transparency and accountability measures were too burdensome and should be struck. DPH agrees that in some circumstances external factors should be considered and has proposed amendments to ensure appropriate process and has allowed applicants to request that certain external factors be considered in the context of compliance with conditions. Proposed Project: Partners Health Care asked whether the definition of a Proposed Project would allow for a Provider Organization to apply for DoN approval for an entire institutional master plan in a single application. DPH has proposed a clarifying amendment to this definition, as both the existing definition of a proposed project and DPH s initial proposed revision allow for any combination of projects, which would allow a Provider Organization to apply for DoN approval for an institutional master plan in a single application. Disaggregation: DPH received comments from MHA, Partners, and Steward requesting greater clarity regarding the definition and scope of Disaggregation. Specifically, commenters requested that parameters, such as a prescribed timeframe or linkage to a facility s capital plan, be placed around the ban on disaggregation, adding greater predictability for regulated parties. Additionally, the MHA requested that the prohibition on disaggregation be limited to only clinical components of a proposed project, allowing for non-clinical projects to be disaggregated from their clinical counterparts. Conversely, DPH received comments from MAHP and its member payors, as well as the Friends of Prouty Garden, a registered Ten Taxpayer Group, commending DPH s continued ban on disaggregation, stressing that this standard should not be weakened as it helps ensure critical transparency and accountability regarding providers capital expenses clinical and non-clinical as they relate to the Commonwealth s Total Health Care Expenditure. 6 DPH staff believe that maintaining the ongoing practice of prohibiting disaggregation gets at the heart of the DoN process, and therefore, consistent with statute, should not be limited to clinical components only. While a specified timeframe could provide additional predictability both for regulated parties and DPH, this approach does not fully reflect that more complex capital projects may result in reasonably related expenses across a multi-year period. Additionally, linking the prohibition on disaggregation to a specific health care facility s capital plans fails to reflect that the applicant under the proposed DoN regulation is the entire system. The prohibition on disaggregation allows DPH to look across systems of care, which is appropriate as Provider Organizations increasingly contemplate capital expenditures across multiple facilities and campuses, all of which are reasonably related and tied to an applicant s vision for providing health care services to its patient panel. As such, DPH strongly recommends retaining its discretion with regards to the prohibition on disaggregation. However, DPH does recommend amendments, at this time, to clarify that for the purposes of Conservation Projects the ban on disaggregation is limited to only projects within the same health care facility. This approach reflects the reality that an applicant may seek a Conservation Project at one health care facility, while pursuing a significant upgrade or addition at a separate health care facility. As proposed, DPH has delineated a systems view for expansions beyond current capacities, but a facilities-based view for Conservation Projects that simply look to maintain current capacities. Conservation Projects: DPH received comments from BIDMC, COBTH, the Massachusetts Business Roundtable, MCCH, MHA, Partners, Steffian Bradley Architects, and Wellforce commending DPH on its inclusion of Conservation Projects. Commenters generally sought clarity on the scope of Conservation Projects, specifically as the definition relates to nationally recognized facility guidelines and whether such recommended and recognized best-practices would be eligible as Conservation Projects. DPH has clarified t
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