Alec J. Zavell of Hinshaw & Culbertson

On June 25, Gov. Ron DeSantis signed into law a new bill deregulating the requirements governing the establishment of new health care facilities and programs in the state of Florida. Nonexempt programs, including nursing homes, hospice and specialty hospitals, have not been deregulated by this recent change in the law. Effective July 1, facilities such as general in-patient hospitals and programs such as tertiary services are no longer subject to the highly contested requirements of certificate of need approval by the Agency for Health Care Administration.

The process delineated by the prior certificate of need program required health care facilities to demonstrate an unmet need for a service or facility that was subject to regulation. Applicants for new services or facilities were required to file a detailed application with AHCA evidencing an unmet need in the proposed community or service area. Thereafter, existing health care facilities were entitled to file a statement of opposition to rebut the assertions made by the applicant. AHCA would then issue an initial decision to either approve or deny the application, depending on whether the statutory review criteria were met. After AHCA's preliminary decision, the losing party would then file an administrative challenge with the Division of Administrative Hearings. After the parties presented evidence to an administrative law judge in a process analogous to a nonjury trial, a proposed recommended order would be issued and transmitted back to AHCA. The agency would issue a final order, and the parties could then appeal AHCA's final decision to the district court of appeal.

The certificate of need process was originally enacted in Florida in 1973. It underwent significant changes in the 2004 and 2008 legislative sessions, in an attempt to streamline the process. According to the Florida Hospital Association, only 12 states are entirely deregulated without a certificate of need program. Florida now joins the list of states that are minimally regulated, having removed 18 services and beds.

Proponents of the certificate of need process argue that maintaining significant barriers to entry helps ensure high quality medical care. This is particularly true as it relates to complex medical procedures, where meeting volume thresholds is key to safeguarding patient safety. Proponents also argue that limiting excess capacity stemming from overbuilding leads to reduced health care price inflation. And finally, proponents cite the distribution of care to rural and less affluent areas, where health care facilities often do not seek to establish new facilities or services.

On the other hand, deregulation proponents criticize the certificate of need process for significantly restricting competition. Proponents argue that deregulation and free market economics reduce health care prices and costs. Additionally, proponents cite the political influence that has become deep-rooted in the certificate of need process. By removing the prevalent political influence, proponents argue that more important factors, such as the interests of the community, will influence decision making.

Despite both sides legitimate arguments, it is unquestionable from the process described at the outset that the certificate of need process is costly, highly contested and lengthy. Simply put, this process imposes additional burdens such as litigation fees, poor public relations and decisions that lack finality. Although limiting unproven entrants to the health care market is a valid consideration, the practical result has been existing health care facilities using the certificate of need process offensively, to proactively limit new players from usurping existing market share.

For example, many of Florida's general in-patient hospitals are comprised of large corporations and nonprofit entities that benefit from dominating the market share in their service areas. Under the old regulatory scheme, existing facilities would discourage other hospital systems from entering their market with threats of protracted litigation and absorbent litigation fees in the guise of a lack of need for the proposed service or facility. Even if innovative services or increased levels of charity care to indigent patients were being proposed, existing health care facilities would nonetheless use the certificate of need process to protect existing market share at all costs.

As a result of deregulating much of the certificate of need process in Florida, the requirements to establish a new hospital or provide complex tertiary health care services have been significantly reduced. Now, rather than going through a lengthy and contested process, health care facilities only have to satisfy licensing requirements with AHCA. Importantly, existing health care providers are no longer able to rid the market of competition with their de facto veto power to prevent new systems from entering an existing market.

The ultimate question that has not been resolved by the new law is how AHCA will implement the new licensing process. The bill that DeSantis signed into law does not provide for the applicable licensing requirements; therefore, AHCA will be left to implement administrative rules to govern this process going forward.

Alec J. Zavell is a Fort Lauderdale attorney with Hinshaw & Culbertson where he defends clients in a broad range of civil litigation, focusing on personal injury and property damage matters. Contact him at [email protected].