• Revised Licensure Rules for Colorado Hospitals: The New Regulatory Landscape
  • December 1, 2010 | Author: Gerald A. Niederman
  • Law Firm: Faegre & Benson LLP - Denver Office
  • Concluding a year-long process, on November 17, 2010 the Colorado Board of Health approved significant revisions to the state's facility licensure law.  The Board's action reversed earlier (March, 2010) rule revisions deemed highly objectionable by the Colorado Hospital Association (CHA) and its constituent members.  Among other infirmities, the prior rules would have imposed substantial additional costs related to construction and renovation of many hospitals' off-campus locations (OCLs) without countervailing patient safety or other justifications.

    The national trend towards expanded ambulatory care is an important component of the contemporary health care environment.  Many health systems are developing OCLs to provide cost-effective, high-quality diagnostic and therapeutic services away from a hospital's main campus, thereby enhancing access to care in urban and rural communities.  Such expansion correlates with the parallel movement towards greater hospital/physician integration and the growing emphasis on delivery of accountable care, regardless of site of service.

    Unfortunately, the Board's earlier rulemaking did not adequately assess the negative impact of the March, 2010 regulations on health care delivery and innovation in the health care marketplace.  In this regard, one principal flaw was the agency's decision to apply an unreasonably strict and unprecedented level of National Fire Protection Association Life Safety Code requirements to licensure of OCLs than had historically been applied.  Specifically, a two-hour fire-rated separation wall, floor or ceiling assembly ("Two-Hour Firewall") requirement would have been demanded for a broad range of ambulatory facilities when new construction or renovation occurred.  The consequence was to threaten the viability of various hospitals' existing and planned development activities in numerous communities throughout Colorado.

    Responding to tangible hospital concerns and a potential threat to patient access in many instances, in May 2010, CHA, along with several member hospitals and health systems, filed suit in Denver District Court against the Colorado Department of Public Health and Environment (CDPHE) to enjoin implementation of the contested OCL requirements and several other ill-considered provisions of the March, 2010 enactments. 

    Concurrently, in a fortuitous development finally responding to hospital concerns, CDPHE agreed to defer enforcement of the challenged rules while CHA and its members discussed the matter further with the agency and pursued a mutually-acceptable settlement of differences.  A series of negotiating sessions were held concerning the scope and breadth of the previously-adopted provisions, and new proposals were drafted and exchanged.  By August, 2010, a preliminary agreement was reached, and, with the assent of CHA, CDPHE proposed newly revised regulations responding materially to hospital concerns.  Those new rules, which will be codified at Chapter II and Chapter IV of 6 CCR 1011-1 are intended to take effect January 1, 2011 (subject to final approval by the Colorado attorney general), and were in turn approved by the Board of Health at its November 17, 2010 public hearing.

    Highlights of the newly-adopted provisions include:

    1.Removing burdensome and unwarranted Life Safety Code requirements for OCLs; the new rules now limit the requirement for OCLs to have a Two-Hour Firewall to those facilities containing an anesthetizing location;
    2.Limiting CDPHE's discretion to disapprove increases in hospital bed capacity, which will accurately reflect Colorado's established status as a non-certificate of need state;
    3.Clarifying hospitals' obligations to communicate prospective charge information and restating the required patient billing format to better reflect contemporary practice;
    4.Codifying the actual process for building plan review related to facility design and expansion; and
    5.Creating a new public-private dispute resolution mechanism to expedite the informal disposition of disagreements and promote prompt approval and licensure of new and renovated hospital facilities.

    CHA intends to review the status of the overall matter, including the still-pending litigation, following the anticipated January 1, 2011 effective date of the revised rules.  On a related track, CHA is also responding to recent directives from the federal Centers for Medicare and Medicaid Services regarding parallel Life Safety Code requirements in the context of Medicare certification.  It is hoped that the state-approved resolution of such issues in the licensure context will ultimately facilitate a successful accommodation on the federal compliance front as well.