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.: 5665

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 - Cost

Significant

Significant

Resources of the General Fund

GF - Potential Revenue Gain

Minimal

Minimal

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 results in state cost, potential cost, revenue and potential revenue as detailed below under three separate sections respectively titled, “Interference with a Physician's Practice,” “Expansion of Required CON”2 and “Expansion of CON Considerations.”

Interference with a Physician's Practice

There is a significant cost anticipated to the Department of Public Health (DPH) from the requirement that the agency enforce that (1) a person or entity that manages, owns, operates or conducts a business having a direct or indirect financial interest in a physician's professional practice and (2) any other person shall not substantially interfere with a physician's lawful and competent practice of medicine. While the agency performs physician complaint investigation, it does not oversee what factors may interfere or influence physicians' practice of medicine. What “substantial interference” encompasses is not defined in the amendment. There are currently 17,234 physicians/surgeons licensed by DPH. To the extent that violators of this provision are assessed a civil penalty (established under the amendment) of not more than $3,500 for each violation, a minimal General Fund revenue gain would result.

Expansion of Required CON

The amendment expands required CON to include transfers of ownership of a group practice of eight or more physicians to any entity other than a physician or group of physicians, with an exemption in FY 15. This results in an anticipated cost to 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 less than $4,000 in FY 15 and FY 16.

In 2013, 31 new CON applications were filed with OHCA and 37 decisions were rendered.3 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 how many parties to a transfer will sign a sale agreement on or before 9/1/14 (exempted from CON requirements under the amendment). Further, it is unknown how many transfers involve group practices of eight or more physicians and how many of these are transferred to physicians or physician groups. As such, state costs and General Fund revenue detailed below may be less than what is currently estimated, as these factors may reduce the number of CON applications required and decided by OHCA under the amendment.

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 date4 ($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.

Expansion of CON Considerations

The requirement under the amendment 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 or accessibility to care may result in a cost to OHCA to the extent that the Office needs additional resources to meet these requirements.

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.

Sources:

The State of Connecticut eLicensing Website

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 CON = Certificates of Need

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

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