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Trenton, NJ 08625-0360

For Release:
July 06, 2005

Fred M. Jacobs, M.D., J.D.

For Further Information Contact:
(609) 984-7160

DHSS Proposes to Amend N.J.A.C. 8:33F-2.2 and 2.3, the Rules Governing Certificates of Need for Long-Term Acute Care Facilities


††††††††† The New Jersey Department of Health and Senior Services is proposing to amend N.J.A.C. 8:33F-2.2 and 2.3, which govern certificates of need (CN) for long-term acute care facilities.

The proposed amendments would amend certificate of need requirements for new long-term acute care hospitals (LTACHs) and for all licensed long-term acute care hospitals proposing to alter their licensed bed complement in the future, in order to facilitate the LTACH industry's response to changes in federal rules governing Medicare reimbursement

††††††††† The 1999 Advisory Committee on Hospitals report and the and the 2001 follow-up report of the departmentís Post-Acute Care Work Group were the impetus for establishing rules governing LTACH facilities in New Jersey.††††† The LTACH certificate of need rules became effective in January 2003.During the initial 18-month period permitted for submitting initial expedited review certificate of need applications for new LTACHs, 19 applications were submitted to the Department.To date, 17 have been approved for a total of 618 beds.The two remaining CN applications, which request a total of 56 beds, are currently under review.

Of the 618 approved beds, the Department has licensed 133 as of January 15, 2005 (21.5 percent).Should the Department approve all of the pending applications for LTACH beds, the total number of CN-approved beds would be 674.This represents 75.6 percent of the total LTACH bed need (892 beds), leaving an unmet need of 218 beds statewide.

Existing N.J.A.C. 8:33F-2.3(a) limited the submission of initial LTACH CN applications to address the 892-bed need to an 18-month period.The methodology employed in this initial phase required applicants to assemble from general hospitals sufficient assignments of bed need for a 25-bed hospital-within-hospital LTACH or a 60-bed freestanding LTACH.The Department published for each general hospital a specific LTACH bed need, based on historical utilization data.The Department announced the start of the 18-month application period by public notice in the January 21, 2003 New Jersey Register, at 35 N.J.R. 476(b).(The Department issued a corrected public notice in the February 18, 2003 New Jersey Register at 35 N.J.R. 1157(b)).As a result, the Department permitted applicants to submit LTACH CN applications from April 1, 2003 through September 1, 2004.

In October 2004, the Centers for Medicare and Medicaid Services (CMS) adopted rules (42 CFR 412.534) that limit to 25 percent, the percentage of patients a new hospital-within-hospital LTACH may admit from its host hospital.Because most approved CNs propose a hospital-within-hospital model LTACH, the Department is concerned that the new CMS rules may discourage their implementation.Industry representatives have also expressed interest in reopening the initial phase application period, to allow reconfiguration of current approved proposals into new freestanding LTACH CN applications.Finally, there is still an unmet LTACH need of 218 beds Statewide.

Therefore, the Department believes that it would be appropriate to re-open the LTACH initial CN application period and is proposing to amend N.J.A.C. 8:33F-2.3(a), (b), (d) and (e) to extend the period of time to submit expedited review CN applications to address the initial 892-bed statewide need for a 36-month period that would begin with the adoption date of the proposed amendments.

The proposed amendment at N.J.A.C. 8:33F-2.3(a) would change the period for acceptance by the Department of expedited review applications from all qualified interested parties from the existing 18 months after January 21, 2003 to 36 months after the effective date of the amendments.

The proposed amendment at N.J.A.C. 8:33F-2.3(b) would continue to require the Department to publish a long-term acute care statewide and hospital-specific bed need prior to accepting any expedited review CN applications for the initial application phase, but would change the length of this phase from 18 to 36 months.Subsequent to the 75 percent figure being met, the Department would accept applications for bed additions when a facilityís occupancy exceeds 85 percent for the six most recent quarters prior to submission (N.J.A.C. 8:33F-2.3(e)1).

The proposed amendment at N.J.A.C. 8:33F-2.3(d) would likewise extend the period for initial submission of LTACH CN applications from 18 months after January 21, 2003 to 36 months after the effective date of the amendments.The remainder of this provision would remain unchanged in providing that, after the initial application period, the Department would accept applications only if at least 75 percent of the awarded CN applicants have been licensed.

N.J.A.C. 8:33F-2.3(e) would continue to set standards for CN applications submitted after the initial application phase.A proposed amendment to this subsection would extend the initial phase from 18 months after January 21, 2003 to 36 months after the effective date of the amendments.

The Department proposes to amend existing N.J.A.C. 8:33F-2.2 to reduce the minimum size for a freestanding LTACH from 60 to 50 beds.This reduction in the minimum facility size would facilitate the development of freestanding LTACHs without reducing quality of care.It would be easier for applicants to assemble the requisite bed need assignments for a 50-as compared to a 60-bed LTACH.Applicants would continue to have to document compliance with financial feasibility, bed need and all other certificate of need and licensing requirements as set forth in N.J.A.C. 8:33F and N.J.A.C. 8:43G-38.

In accordance with N.J.A.C. 8:33F-2.3, the Department is required to publish long term acute care statewide and hospital-specific bed need estimates prior to the acceptance of any CN applications under the expedited review process for the first 18 months after January 21, 2003.Because the Department is proposing to extend the original window of opportunity to file applications for an additional 36-month period, the original bed need for each general hospital, calculated based on calendar year 2001 hospital discharge (UB-92) data, in accordance with the need methodology as set forth at N.J.A.C. 8:33F-2.3(b)3, would be re-published at the time of adoption.The Department would approve new long-term acute care beds only when the Department identifies a documented, unassigned bed need during this extended period.Each applicant would be required to demonstrate a need for a facility with the requested number of beds by documenting written agreements with general hospitals assigning all or part of their unassigned bed need to the applicant.

The proposal appears in the July 5, 2005 issue of the New Jersey Register.The public has until September 3, 2005 to comment on the proposal.Persons wishing to comment on the proposal must submit their comments in writing to John A. Calabria, Director, Certificate of Need and Acute Care Licensure Program, New Jersey Department of Health and Senior Services, PO Box 360, Room 403, Trenton, NJ 08625-0360.

Written comments must be postmarked on or before September 3, 2005, which is the close of the 60-day public comment period.

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