🔒CT revamps approval process for major healthcare investments, deals

Whether it’s expanding a hospital, opening an outpatient surgery center, buying an MRI scanner or selling a large physician practice, many of Connecticut’s most significant healthcare projects and deals can’t move forward without state approval. Beginning this month, those decisions have a new gatekeeper. A major state government reorganization approved by lawmakers this year shifted responsibility for deciding which major healthcare transactions receive state approval, marking the biggest change to Connecticut’s regulatory system since 2018. For hospitals, physician groups and other providers planning major investments, the immediate question isn’t simply who now oversees the approval process. It’s whether a system long criticized as slow and inefficient will improve. State officials say the answer, for now, is continuity. The shift follows the legislature’s decision to eliminate the Office of Health Strategy and transfer oversight of the state’s Certificate of Need program — the review process governing many major healthcare investments — to the Department of Public Health. In an interview with Hartford Business Journal, DPH Commissioner Dr. Manisha Juthani said the first message she wants healthcare organizations filing Certificate of Need applications to hear is that projects will continue moving through the system. “The wheels are still turning and the trains are on time,” Juthani said. That focus on continuity, rather than immediate reforms, is expected to define the next year as DPH absorbs former OHS staff and prepares to implement sweeping changes to the Certificate of Need process that don’t take effect until July 1, 2027. Under the state reorganization, OHS’ 42 employees and roughly $18 million budget were divided among several agencies. DPH assumed responsibility for the Certificate of Need program and health system planning, while healthcare cost benchmarking — the state’s program for tracking and setting spending targets for hospitals and other providers — and other policy functions shifted to the Office of Policy and Management.

Transition year

Although OHS oversaw Connecticut’s healthcare planning functions beginning in 2018, the Certificate of Need program had previously been housed within DPH. Juthani said the department did not object when Gov. Ned Lamont proposed returning the program to her agency. “It certainly is something that is within the description of health departments around the country,” she said, adding that DPH supported the move, provided it received the experienced staff needed to continue the work. The department had about 750 employees before the reorganization and has absorbed 22 former OHS employees. That transition also reunites functions that, behind the scenes, never really left. Juthani noted that DPH already handled many administrative services for OHS — including human resources, information technology and some fiscal functions — because the smaller agency lacked the staff needed to operate independently. She described the transition as, in many ways, bringing those functions “home.”

DPH Deputy Commissioner Adelita Orefice, who now oversees the Certificate of Need program, said the biggest challenge has been untangling OHS’ various responsibilities. “Because OHS was such a small agency, people worked on a number of different activities,” which means individuals had pieces of projects that are now being divided among DPH and OPM, she said. “So there’s been a little detangling, and the same is true for the money.” According to state officials, DPH assumed more than $2.6 million from the former OHS budget, including about $2.4 million in personnel costs and $213,000 in other expenses. Orefice said it will take time to fully separate OHS’ responsibilities. “You’re going to take this year to figure out, ‘OK, did things land in the right place,’” she said.

No immediate changes

While lawmakers substantially reshaped Connecticut’s healthcare regulatory system, providers planning projects shouldn’t expect any immediate procedural changes, Juthani said. Instead, the next year will focus on understanding the existing process, maintaining current operations and preparing for reforms scheduled to begin next July. Among the changes taking effect next year are revised application requirements, broader use of expedited reviews for certain projects and a new decision-making structure. Under the revised law, some applications — including requests to acquire advanced imaging equipment, expand hospital bed capacity or add operating rooms — will be eligible for a faster review process. Qualifying projects could receive proposed decisions within 60 days after an application is deemed complete. The expedited review process grew out of last year’s emergency sale of three financially troubled hospitals formerly owned by California-based Prospect Medical Holdings. After Prospect filed for bankruptcy protection, state officials developed an accelerated approval process to keep the sales moving.

Manchester Memorial and Rockville General hospitals were ultimately acquired by Hartford HealthCare, while Waterbury Hospital was acquired by UConn Health. Juthani said lessons learned from those reviews were incorporated into the new process. The legislation also exempts some behavioral health providers, facility relocations and ownership changes from Certificate of Need review, reducing the number of projects and deals that require state approval. Another major change taking effect next year is who will decide whether major healthcare investments receive state approval. Instead of being made by the head of a single state agency, applications will be decided by a three-member panel consisting of the DPH commissioner, the secretary of the Office of Policy and Management and the commissioner of the Department of Social Services, or their designees. Orefice said the new structure is intended to provide broader statewide perspectives when reviewing major healthcare investments, while addressing concerns that moving the program back to DPH could reduce the independence lawmakers sought when they created the Office of Health Strategy in 2018. Juthani said DPH has separated the Certificate of Need program from its regulatory functions within the agency and is conducting a national search for an executive director to oversee the program’s day-to-day operations. Officials hope to fill the position, which is being advertised with a salary range of $122,155 to $221,942, by the end of August. Juthani said the coming year also will allow DPH to evaluate whether additional staffing or organizational changes are needed while implementing the revised Certificate of Need law and ensuring a smooth transition. “The goal is to keep the process understandable and predictable,” she said. The Connecticut Hospital Association, which initially raised concerns that early versions of the legislation could slow approvals and add regulatory burdens, ultimately participated in negotiations that reshaped the final bill. In a statement emailed to HBJ, CHA officials said they look forward to continuing to work with state leaders and agencies, including through a stakeholder work group established by the legislation, to implement the reforms. CHA officials added that they want “to ensure these reforms and the transition of OHS responsibilities are implemented thoughtfully and effectively to best serve patients and communities.”