OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

SB-35

AN ACT CONCERNING NOTICE OF ACQUISITIONS, JOINT VENTURES AND AFFILIATIONS OF GROUP MEDICAL PRACTICES.

AMENDMENT

LCO No.: 5602

File Copy No.: 419

Senate Calendar No.: 286


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 15 $

FY 16 $

Public Health, Dept.

GF - Potential Cost

See Below

See Below

Public Health, Dept.

GF - Cost

less than 53,452

less than 71,220

State Comptroller - Fringe Benefits1

GF - Cost

less than 19,192

less than 26,073

Resources of the General Fund

GF - Revenue Gain

less than 4,000

less than 4,000

Municipal Impact: None

Explanation

The amendment expands Certificate Of Need (CON) requirements to include transfers of ownership of a group practice to a hospital, hospital system, captive professional entity, medical foundation or other entity that is owned by or affiliated with a hospital with certain exceptions. This results in a net state cost of less than 68,644 in FY 15 and less than $93,293 in FY 16, which reflects an anticipated cost to the Department of Public Health (DPH) of less than $53,452 in FY 15 and less than $71,220 in FY 16, an anticipated cost to the State Comptroller Fringe Benefits of less than $19,192 in FY 15 and less than $26,073 in FY 16 and an anticipated revenue gain to the General Fund of $4,000 in both fiscal years. The amendment also requires that all CON deliberations by DPH's Office of Health Care Access (OHCA) take into consideration and include in its written findings: (1) whether the applicant has satisfactorily demonstrated that the proposal will not negatively impact the diversity of health care providers and patient choice in the geographic region and (2) whether the applicant has satisfactorily demonstrated that any consolidation of market share resulting from the proposal will not adversely affect health care costs. This may result in a cost to OHCA to the extent that the Office needs additional resources to meet these new requirements.

In 2013, 31 new CON applications were filed with OHCA and 37 decisions were rendered.2 OHCA estimates that there were approximately 23 transfers of ownership of a group practice over the past three years or approximately eight annually. It is unknown of these approximate eight transfers annually how many group practice owners will enter into a memorandum of understanding concerning the transfer on or before 7/1/14 (possibly reducing the number of CON applications that would need to be decided under the amendment in FY 15). Likewise, it is unknown whether or not OHCA will chose to presume that a CON is not required for a transfer when an offer was made in response to a request for proposal or similar voluntary offer for sale. As such, state costs and General Fund revenue detailed below may be less than what is currently estimated to the extent that these exceptions reduce the number of CON applications required and decided.

Currently, six OHCA analysts work on CON decisions (analyzing slightly more than five to six CON applications annually), but they are not solely dedicated to the CON program. They are also assigned to process hospital financial filings and support the Connecticut Statewide Health Care Facilities and Services Plan. As such, the cost to DPH reflects only one full-time Health Care Analyst to analyze and decide approximately eight more CONs annually, anticipated under the amendment. The cost for this position reflects a 10/1/14 hire date3 ($52,352 in FY 15 and $71,120 in FY 16), equipment ($1,000 for a computer in FY 15 only) and supplies ($100 annually). The associated State Comptroller - Fringe Benefits cost for this position is $19,192 in FY 15 and $26,073 in FY 16. Revenue of $4,000 annually reflects eight CON applications filed with a fee of $500 each.

Other changes in the amendment do not result in a fiscal impact to the state or municipalities.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 36.66% of payroll in FY 15 and FY 16.

2 Not all decisions are made in the same year that the CON application is filed.

3 The amendment is effective from passage. The hire dates reflect typical hiring delays.