What's happening
This bill streamlines and adds new criteria to New York's certificate of need process for healthcare facilities, with changes to ownership transfer rules and experience requirements.
Why it matters
Experience and Ownership Scrutiny. The bill strengthens and clarifies requirements for vetting the experience, character, and competence of individuals seeking to own or operate health facilities. This means more specific standards (such as minimum years of experience and ownership thresholds) can be set by regulation, potentially raising the bar for new entrants and affecting who can acquire or control healthcare facilities.
Facilitates Primary Care Expansion. By allowing certain diagnostic and treatment centers, as well as hospital primary care construction projects, to bypass the traditional "public need" and financial scrutiny, the bill aims to make it faster and easier to open or expand primary care services—potentially increasing access but also reducing local input into whether new services are necessary.
Modernizes Ownership Transfer Rules. The bill updates and expands the rules for how changes in ownership, partnership, or control are reviewed and approved. By including both direct and indirect interests, and requiring more robust notification and approval processes, it seeks to close loopholes and improve oversight of who ultimately controls healthcare entities—important for transparency, accountability, and ensuring continued quality of care.
Potential for Streamlined Approvals. By codifying situations where financial viability and public need reviews can be skipped (e.g., for certain construction or transfer scenarios), the bill could reduce regulatory delays for facility improvements or routine business changes, helping facilities adapt more quickly to market or patient needs—but possibly at the risk of less public oversight in some cases.
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Streamline Hospital Approval Process
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to health
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Streamline Hospital Approval Process
In Assembly Committee · Health · Sponsor Richard Gottfried
Full text
8 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
8395
IN SENATE
May 4, 2018
Introduced by Sen. HANNON -- (at request of the Department of Health) -read twice and ordered printed, and when printed to be committed to the Committee on Health
AN ACT to amend the public health law, in relation to streamlining and adding criteria to the certificate of need process
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subdivision 3 of section 2801-a of the public health law, as amended by section 57 of part A of chapter 58 of the laws of 2010, is amended to read as follows:
3. The public health and health planning council shall not approve a certificate of incorporation, articles of organization or application for establishment unless it is satisfied, insofar as applicable, as to (a) the public need for the existence of the institution at the time and place and under the circumstances proposed, provided, however, that in the case of an institution proposed to be established or operated by an organization defined in subdivision one of section one hundred seventytwo-a of the executive law, the needs of the members of the religious denomination concerned, for care or treatment in accordance with their religious or ethical convictions, shall be deemed to be public need; (b) the character, competence, and standing in the community[,] of the proposed incorporators, directors, sponsors, members, principal members, stockholders, [members] principal stockholders, or operators; with respect to any proposed incorporator, director, sponsor, member, principal member, stockholder, [member] principal stockholder, or operator who is already or within the past [ten] seven years has been an incorporator, director, sponsor, member, principal member, principal stockholder, [principal member,] or operator of any hospital, private proprietary home for adults, residence for adults, or non-profit home for the aged or blind which has been issued an operating certificate by the state department of social services, or a halfway house, hostel or other residential facility or institution for the care, custody or treatment of the mentally disabled which is subject to approval by the department of mental hygiene, no approval shall be granted unless the public health
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14492-01-8
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and health planning council, having afforded an adequate opportunity to members of health systems agencies, if any, having geographical jurisdiction of the area where the institution is to be located to be heard, shall affirmatively find by substantial evidence as to each such incorporator, director, sponsor, member, principal member, principal stockholder, or operator that a substantially consistent high level of care is being or was being rendered in each such hospital, home, residence, halfway house, hostel, or other residential facility or institution with which such person is or was affiliated; for the purposes of this paragraph, the public health and health planning council shall adopt rules and regulations, subject to the approval of the commissioner, to establish the criteria to be used to determine whether a substantially consistent high level of care has been rendered, provided, however, that there shall not be a finding that a substantially consistent high level of care has been rendered where there have been violations of the state hospital code, or other applicable rules and regulations, that (i) threatened to directly affect the health, safety or welfare of any patient or resident, and (ii) were recurrent or were not promptly corrected, unless the proposed incorporator, director, sponsor, member, principal member, stockholder, principal stockholder, or operator demonstrates, and the public health and health planning council finds, that the violations cannot be attributed to the action or inaction of such proposed incorporator, director, sponsor, member, principal member, stockholder, principal stockholder, or operator due to the timing, extent or manner of such affiliation; (c) the financial resources of the proposed institution and its sources of future revenues; and (d) such other matters as it shall deem pertinent.
§ 2. Section 2801-a of the public health law is amended by adding a new subdivision 3-b to read as follows:
3-b. Notwithstanding any other provisions of this chapter to the contrary, the public health and health planning council may approve the establishment of diagnostic or treatment centers to be issued operating certificates for the purpose of providing primary care, as defined by the commissioner in regulations, without regard to the requirements of public need and financial resources as set forth in subdivision three of this section.
§ 3. Section 2801-a of the public health law is amended by adding a new subdivision 3-c to read as follows:
3-c. Notwithstanding any other provisions of this chapter to the contrary, the commissioner is authorized to establish in regulation minimum thresholds for the level of experience that must be met as part of the public health and health planning council's consideration of the character, competence and standing in the community of the proposed incorporators, directors, sponsors, stockholders, members or operators of a residential health care facility pursuant to paragraph (b) of subdivision three of this section. Such thresholds may include but are not limited to: (a) defining the type of prior experience required; (b) establishing a minimum period of time during which such prior experience was obtained; and (c) establishing a minimum percentage of the ownership interest and/or voting rights of the applicant that must be held by an individual who meets such minimum experience requirements.
§ 4. Paragraphs (b) and (c) of subdivision 4 of section 2801-a of the public health law, as amended by section 57 of part A of chapter 58 of the laws of 2010, are amended to read as follows:
(b) [(i)] Any transfer, assignment or other disposition of ten percent or more of [an] direct or indirect interest or voting rights in [a part-
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nership or limited liability company, which is the] an operator of a hospital to a new partner [or], member, or stockholder, or any transfer, assignment or other disposition of a direct or indirect interest or voting rights of such an operator which results in the ownership or control of more than ten percent of the interest or voting rights of such operator by any partner, member, or stockholder not previously approved by the public health and health planning council for that operator shall be approved by the public health and health planning council, in accordance with the provisions of subdivisions two and three of this section, except that: (A) any such change shall be subject to the approval by the public health and health planning council in accordance with paragraph (b) of subdivision three of this section only with respect to the new partner [or], member, or stockholder, and any remaining partners [or], members, or stockholders who have not been previously approved for that facility in accordance with such paragraph, and (B) such change shall not be subject to paragraph (a) of subdivision three of this section. In the absence of such approval, the operating certificate of such hospital shall be subject to revocation or suspension.
[(ii)] (c)(i) With respect to a transfer, assignment or disposition involving less than ten percent of [an] a direct or indirect interest or voting rights in [such partnership or limited liability company] an operator of a hospital to a new stockholder, partner or member, no prior approval of the public health and health planning council shall be required. However, no such transaction shall be effective unless at least ninety days prior to the intended effective date thereof, the [partnership or limited liability company] operator fully completes and files with the public health and health planning council notice on a form, to be developed by the public health and health planning council, which shall disclose such information as may reasonably be necessary for the public health and health planning council to determine whether it should bar the transaction for any of the reasons set forth in item (A), (B), (C) or (D) below. Within ninety days from the date of receipt of such notice, the public health and health planning council may bar any transaction under this subparagraph: (A) if the equity position of the [partnership or limited liability company] operator, determined in accordance with generally accepted accounting principles, would be reduced as a result of the transfer, assignment or disposition; (B) if the transaction would result in the ownership of a [partnership or membership] direct or indirect interest or voting rights by any persons who have been convicted of a felony described in subdivision five of section twenty-eight hundred six of this article; (C) if there are reasonable grounds to believe that the proposed transaction does not satisfy the character and competence criteria set forth in subdivision three of this section; or (D) upon the recommendation of the department, if the transaction, together with all transactions under this subparagraph for the [partnership] operator, or successor, during any five year period would, in the aggregate, involve twenty-five percent or more of the interest in the [partnership] operator. The public health and health planning council shall state specific reasons for barring any transaction under this subparagraph and shall so notify each party to the proposed transaction.
[(iii) With respect to a transfer, assignment or disposition of an interest or voting rights in such partnership or limited liability company to any remaining partner or member, which transaction involves the withdrawal of the transferor from the partnership or limited liability company, no prior approval of the public health and health planning
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council shall be required. However, no such transaction shall be effective unless at least ninety days prior to the intended effective date thereof, the partnership or limited liability company fully completes and files with the public health and health planning council notice on a form, to be developed by the public health and health planning council, which shall disclose such information as may reasonably be necessary for the public health and health planning council to determine whether it should bar the transaction for the reason set forth below. Within ninety days from the date of receipt of such notice, the public health and health planning council may bar any transaction under this subparagraph if the equity position of the partnership or limited liability company, determined in accordance with generally accepted accounting principles, would be reduced as a result of the transfer, assignment or disposition. The public health and health planning council shall state specific reasons for barring any transaction under this subparagraph and shall so notify each party to the proposed transaction.
(c) Any transfer, assignment or other disposition of ten percent or more of the stock or voting rights thereunder of a corporation which is the operator of a hospital or which is a member of a limited liability company which is the operator of a hospital to a new stockholder, or any transfer, assignment or other disposition of the stock or voting rights thereunder of such a corporation which results in the ownership or control of more than ten percent of the stock or voting rights thereunder of such corporation by any person not previously approved by the public health and health planning council, or its predecessor, for that corporation shall be subject to approval by the public health and health planning council, in accordance with the provisions of subdivisions two and three of this section and rules and regulations pursuant thereto; except that: any such transaction shall be subject to the approval by the public health and health planning council in accordance with paragraph (b) of subdivision three of this section only with respect to a new stockholder or a new principal stockholder; and shall not be subject to paragraph (a) of subdivision three of this section. In the absence of such approval, the operating certificate of such hospital shall be subject to revocation or suspension.]
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the public health law, in relation to streamlining and adding criteria to the certificate of need process
Purpose of the bill
To streamline and enhance the Certificate of Need (CON) process by: (1) permitting approval of applications to establish and construct primary care clinics without review of the public need for the facility or the financial resources tied to the project; (2) permitting construction projects to be approved without review of public need or financial resources if they do not involve changes in services or major medical equipment or replacement of a facility; (3) clarifying technical refer- ences related to certain construction applications; (4) rationalizing the character and competence review conducted for establishment applica- tions under Public Health Law (PHL) Article 28; (5) authorizing the Commissioner of Health (Commissioner) to establish minimum experience requirements for proposed owners and operators seeking establishment under PHL Articles 28 and 36; and (6) strengthening provisions related to the review of transfers of ownership interests under PHL Articles 28 and 36.
Summary of provisions
Section 1 of the bill would amend Public Health Law § 2801-a(3) to clar- ify that the list of individuals whose character and competence must be considered by the Public Health and Health Planning Council (PHHPC) during review of an establishment application includes principal members of limited liability companies (LLCs) and principal stockholders of corporations.
Read the full memo (1,876 words)
Section 1 also would reduce the look-back period for the review of char- acter and competence under PHL Article 28 with respect to proposed incorporators, directors, sponsors, members, principal members, stock- holders, principal stockholders, or operators who were previously affil- iated with another licensed facility view from ten to seven years.
Section 1 also would provide that if a proposed incorporator, director, sponsor, member, principal member, stockholder, principal stockholder, or operator was affiliated during the look-back period with a facility that did not provide "a substantially high level of care" due to violations of hospital regulations, the individual can demonstrate, and PHHPC can find, that that the violations should not be attributed to the action or inaction of the individual due to the timing, extent or manner of the affiliation.
Section 2 of the bill would add a new PHL § 2801-a(3-b) to authorize PHHPC to approve the establishment of diagnostic and treatment centers (D&TCs) that provide primary care without an assessment of public need or financial feasibility.
Section 3 of the bill would add a new PHL § 2801(3-c) to authorize the Commissioner to establish in regulation minimum requirements for the experience of individuals associated with an application to establish a nursing home, which will factor into the review of character and compe- tence conducted by PHHPC.
Section 4 of the bill would amend PHL § 2801-a(4)(b) and (c) to elimi- nate distinctions between types of business organizations by providing that: (1) the transfer of more than 10 percent of the voting rights or ownership interest of a partnership, limited liability company (LLC), or corporation to a person or entity not previously approved by PHHPC is subject to PHHPC approval; (2) PHHPC approval is not required for a transfer of less than ten percent of the voting rights or ownership interest, but at least 90 days' notice of the transfer is required and PHHPC can bar the transfer for certain reasons enumerated in the stat- ute; and (3) PHHPC approval is not required for transfers of more than a ten percent interest to persons or entities previously approved by PHHPC, but at least 90 days' notice of the transfer is required and PHHPC can bar the transfer for reasons it specifies.
Section 5 of the bill would amend PHL § 2802(2) to authorize the Commis- sioner to approve applications by general hospitals and D&TCs that provide primary care services to construct a facility without assessing public need. The amendment also would permit the Commissioner to approve construction applications for general hospitals and D&TCs without assessing public need when the application does not involve a change related to: (1) capacity; (2) the types of services provided; (3) major medical equipment; (4) facility replacement; or (5) the geographic location of service.
Section 5 also would amend PHL § 2802(3) to permit, rather than require, the Commissioner to consider an applicant's financial resources and future revenue sources when reviewing the two types of construction applications referenced in the amendment to PHL § 2802(2).
Section 6 of the bill would amend PHL § 3506(4) to authorize the Commis- sioner to establish in regulation minimum competency requirements for proposed operators of home care services agencies.
Section 7 of the bill would amend PHL § 3611-a to eliminate distinctions between operators that are partnerships and LLCs and corporations. In addition, the section would clarify that the requirement of 90 days' notice applies both to transfers of less than ten percent and to trans- fers to persons or entities previously approved by PHHPC.
Section 8 of the bill provides that it would take effect immediately.
Justification
The review of applications for hospital establishment and construction is generally referred to as the Certificate of Need (CON) process, the objectives of which are to align health care resources with community health needs, preserve and promote access to high quality health care, and control utilization to promote cost-effective health care. This bill would promote efficiencies in the CON process by exempting certain projects from the review of public need and financial feasibility, rationalizing and strengthening the review of character and competence, and promoting transparency in the review of transfers of ownership interests for established providers.
First, the bill would add new PHL § 2801-a(3-b) to authorize PHHPC to approve the establishment of D&TCs that provide primary care without requiring a full assessment of public need or financial feasibility. Further, the bill would amend PHL § 2802(2) and (3) to permit the Commissioner to approve construction applications for general hospitals and D&TCs that provide primary care services without assessing public need. These changes would help promote access to primary care.
Second, the bill also would amend PHL § 2802(2) and (3) to permit the Commissioner to approve a construction application submitted by a gener- al hospital or D&TC without assessing public need or financial feasibil- ity when the application does not involve: (1) a change in the provid- er's approved capacity; (2) a change in the types of services provided; (3) the acquisition of major medical equipment; (4) a change in the geographic location where services are provided; or (5) the replacement of a facility. It is generally unnecessary to consider public need or financial feasibility with regard to the type of facility construction that does not involve one of the enumerated changes and therefore it is appropriate to remove these as required areas of consideration. However, the language would still permit the Commissioner to undertake a review of those areas if appropriate.
Third, the bill would further streamline the CON process with respect to the review of character and competence for proposed incorporators, directors, sponsors, members, principal members, stockholders, principal stockholders, and operators previously affiliated with licensed provid- ers, first by amending PHL § 2801-a(3) to shorten the look-back period from ten to seven years. Reviewing older information does not necessar- ily add value to the review process, particularly when the nature of the affiliation may not be direct, and requires the use of Department resources.
Additionally, the bill would amend PHL § 2801-a(3) to provide that proposed incorporators, directors, sponsors, members, principal members, stockholders, principal stockholders, or operators could demonstrate, and PHHPC could find, that violations by a facility with which they were affiliated during the look-back period should not be attributed to them due to the timing, extent or manner of the affiliation. This would prevent proposed incorporators, directors, sponsors, members, principal members, stockholders, principal stockholders, or operators from being tainted by the non-compliant conduct of a provider in cases where, despite the affiliation, they reasonably should not be held responsible for such lack of compliance.
Fourth, the bill would authorize the Commissioner to establish in regu- lation minimum experience thresholds for the individuals connected to the operation of a nursing home or a home care services agency for which establishment approval is sought. Such thresholds may include: (1) defining the type of prior experience required; (2) establishing a mini- mum period of time during which such prior experience was obtained; and (3) establishing a minimum percentage of the ownership interest and/or voting rights of the applicant that must be held by an individual who meets such minimum experience requirements. This would help promote competence in the operation of nursing homes and home care agencies by allowing the Department to clarify the level of experience expected in the ownership and operation of such providers.
Fifth, the bill further would promote transparency and eliminate distinctions between different types of business organizations in regard to the transfer of ownership interests of operators of facilities licensed under PHL Article 28. Specifically, the bill would amend PHL § 2801-a(4)(b) to provide that any transfer of voting rights or ownership interests greater than ten percent to a person or entity not previously approved by PHHPC would be subject to PHHPC approval, regardless of the type of business organization. Under PHL § 280l -a(4)(c), 90 days' notice of transfers of voting rights or ownership interests of less than ten percent would have to be provided to PHHPC, regardless of the type of business entity.
If the transfer is to a person or entity not previously approved by PHHPC, PHHPC could determine to bar the transfer: (1) if it would reduce the facility's equity position; (2) if it would give an interest to a person convicted of certain felonies; (3) if it would raise a question as to character and competence, or (4) upon recommendation of the Department, it would take the aggregate transfers of interest in the facility to more than 25 percent in a five-year period. If the transfer is to a person or entity previously approved by PHHPC, PHHPC could determine to bar the transfer for any reasons that it specifies. The bill would specify than in any case, the failure to obtain approval or provide notice as applicable would subject the provider's operating certificate to revocation or suspension.
Similar amendments to PHL § 3611-a(1) and (2) would eliminate distinctions between types of business organization that operate home care services agencies and clarify that the requirement of 90 days' notice applies both to transfers of less than ten percent and to trans- fers to persons or entities previously approved by PHHPC. Section 8 also would clarify that in the absence of approval by PHHPC or the provision of notice to PHHL as required, the license or certificate of approval shall be subject to revocation or suspension.
Prior legislative history
Versions of this bill were included in the 2013-14 Executive Budget, the 2014-15 Executive Budget (S.6358-B/A.8558-B, Part A, § 18), and the 2015-16 Executive Budget (Part H, § 1), but were not enacted.
Fiscal implications
None of the foregoing proposals are anticipated to result in a direct fiscal impact. However, all may support savings to the overall health system by streamlining administrative processes and facilitating access to primary care.
Effective date
Immediately.
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