Rulemaking Hearing Rule(S) Filing Form

Department of State For Department of State Use Only Division of Publications 312 Rosa L. Parks Avenue, 8th Floor Snodgrass/TN Tower Sequence Number: JI -Cf1 - / l,p Nashville, TN 37243 Phone: 615-741-2650 Rule ID(s): ~ 351-(p '3? f' Email: [email protected] File Date: I l /t':J/t [p Effective Date: __;;i."""l-'-p'Q-"C..L..C/l_7 __

Rulemaking Hearing Rule(s) Filing Form

Rulemaking Hearing Rules are rules filed after and as a result of a rulemaking hearing (Tenn. Code Ann. § 4-5-205).

Pursuant to Tenn. Code Ann. § 4-5-229, any new fee or fee increase promulgated by state agency rule shall take effect on July 1, following the expiration of the ninety (90) day period as provided in § 4-5-207. This section shall not apply to rules that implement new fees or fee increases that are promulgated as emergency rules pursuant to§ 4-5-20B(a) and to subsequent rules that make permanent such emergency rules, as amended during the rulemaking process. In addition, this section shall not apply to state agencies that did not, during the preceding two (2) fiscal years, collect fees in an amount sufficient to pay the cost of operating the board, commission or entity in accordance with § 4-29- 121 (b).

Agency/Board/Commission: Health Services and Development Agency Division: NIA Contact Person: Jim Christoffersen, General Counsel Address: Andrew Jackson Bldg ., 9th Fl., 502 Deaderick St., Nashville, TN Zip: 37243 Phone: (615) 741-2364 Email: [email protected]

Revision Type (check all that apply): X Amendment New Repeal

Rule(s) (ALL chapters and rules contained in filing must be listed here. If needed, copy and paste additional tables to accommodate multiple chapters. Please make sure that ALL new rule and repealed rule numbers are listed in the chart below. Please enter only ONE Rule Number/Rule Title per row)

------Chapter Number Chapter Title 0720-10 Certificate of Need Pro ram - Scope and Procedures Rule Number - Rule Title - -- 0720-10-.03-- Standard Procedures for Certificate of Need ---

Chapter Number I Cha~ter Title 0720-13 Rules of Procedure for Hearing Contested Cases Rule Number Rule Title 0720-13-.02 Contested Cases Before Administrative Jud es Sittin Alone

SS-7039 (June 2016) 1 RDA 1693 (Place substance of rules and other info here. Please be sure to include a detailed explanation of the changes being made to the listed rule(s). Statutory authority must be given for each rule change. For information on formatting rules go to http://sos.tn .qov/sites/default/files/forms/Rulemakinq Guidelines August2014.pdf)

Amendments

0720-10-.03(5) is deleted in its entirety and substituted with the following:

(5) Examination Filing Fee.

(a) The amount of the initial fee shall be equal to $5. 75 per $1,000 of the estimated capital expenditure involved, but in no case shall this fee be less than $15,000 nor more than $95,000.

(b) Any unpaid balance of litigation costs previously assessed against the applicant or any related entity of the applicant by the Tennessee Health Services and Development Agency may be offset against any filing fees paid. An application will not be deemed complete until the full filing fee, as well as such off set amounts, are paid in full.

(c) A final fee will be determined upon The Agency's receipt of the final project report. The amount of the final fee shall be the difference between the initial fee and the total fee based on actual final project costs, as such fee is calculated based on $5. 75 per $1,000 of project costs, but in no case shall the total fee be less than $15,000 nor more than $95,000.

Authority: T.C.A. §§ 68-11-1605; 68-11-1606, 68-11-1607; and 2016 Tenn. Pub. Acts Ch. 1043.

0720-13-.02(2) is deleted in its entirety and substituted with the following:

(2) In all cases, whether heard by an Administrative Judge sitting alone, or by the full Agency, the petitioner and other parties with the exception of The Agency shall bear the cost for all court reporters and transcriptions, and charges billed to the Agency for the Administrative Judge's work/time; in a contested case where the petition is dismissed, whether voluntarily or involuntarily, the petitioning party or parties shall be considered a "losing party" under TCA § 68-11-1610. The original transcript and one copy of the transcript for each member of The Agency shall be provided to The Agency by the other parties, if the case is to be reviewed by the full Agency.

Authority: T.C.A. §§ 4-5-314; 68-11-1605; 68-11-1609; 68-11-1610; and 2016 Tenn. Pub. Acts Ch. 1043.

SS-7039 (June 2016) 2 RDA 1693 * If a roll-call vote was necessary, the vote by the Agency on these rulemaking hearing rules was as follows:

Board Member Aye No Abstain Absent Signature (if required) Robert S. Doolittle X Thom Mills X Joe Grandy X Corey Ridqway X Martin D. Fleming X Jaclyn Hardinq X Lisa Jordan X Keith Gaither X Todd Taylor X Paul Korth X

I certify that this is an accurate and complete copy of rulemaking hearing rules, lawfully promulgated and adopted by the Health Services and Development Agency on 10/26/2016, and is in compliance with the provisions of T.C.A. § 4-5-222.

I further certify the following :

Notice of Rulemaking Hearing filed with the Department of State on: 09/01/2016

Rulemaking Hearing(s) Conducted on: (add more dates). 10/24/2016

Date: November 2, 2016

\\I II I I If Signature: 1 1 , "' ~\'\Of,. FINc; , ,' ~" •1(1, ,, ...,' ~ .... ············ ... ~ '..-... Name of Officer: Melanie M. Hill f / STATE \ :. - : OF ': - Title of Officer: Executive Director : TENNESSEE : :. NOTARY : ~ .., ·.. PUBLIC / .. -:., ···...... - ,~ubscribed and sworn to before me on: November 2, 2016 ,..,,,~17os~~-~ou~'',' Notary Public Signatur; -=-J)~fi-.-cm-~d-a.._?1_.....,/,._.. I\I _ C_ t_)_ll-~----- ,,,,,,,,, .....6 ...... 1-,----- ~~--- -...... _~_.____ _ My commission expires on: t}{ Cl!J l,,, 2 CJ I=}

All rulemaking hearing rules provided for herein have been examined by the Attorney General and Reporter of the State of Tennessee and are approved as to legality pursuant to the provisions of the Administrative Procedures Act, Tennessee Code Annotated, Title 4, Chapter 5.

Department of State Use Only

Filed with the Department of State on : ---~I.._.I {~I ~-"-t-"(1 __10 ______

SS-7039 (June 2016) 3 RDA 1693 Effective on : f 4i1 -----'-'::.;,._,,,____..~,.,.__,.. ~-T-re-Ha-rge-tt

Secretary of State

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SS-7039 (June 2016) 4 RDA 1693 Public Hearing Comments

One copy of a document containing responses to comments made at the public hearing must accompany the filing pursuant to T.C.A. § 4-5-222. Agencies shall include only their responses to public hearing comments, which can be summarized. No letters of inquiry from parties questioning the rule will be accepted. When no comments are received at the public hearing, the agency need only draft a memorandum stating such and include it with the Rulemaking Hearing Rule filing. Minutes of the meeting will not be accepted. Transcripts are not acceptable

SS-7039 (June 2016) 5 RDA 1693 Regulatory Flexibility Addendum

Pursuant to T.C.A. §§ 4-5-401 through 4-5-404, prior to initiating the rule making process, all agencies shall conduct a review of whether a proposed rule or rule affects small business.

1. These rules do not overlap, duplicate, or conflict with other federal, state, and local governmental rules. 2. These rules have clarity, conciseness, and lack of ambiguity. 3. These rules do not establish flexible compliance and reporting requirements for small businesses. 4. These rules do not establish friendly schedules or deadlines for compliance and reporting requirements for small businesses. 5. These rules do not consolidate or simplify compliance or reporting requirements for small businesses. 6. These rules do not establish performance standards for small businesses as opposed to design or operational standards required in the proposed rule; and 7. These rules do not create unnecessary entry barriers or other effects that stifle entrepreneurial activity, curb innovation, or increase costs. The examination filing fees in these rules were adopted by the Health Services and Development Agency members after running different scenarios to determine the minimum fees necessary to provide for the cost of administering the implementation and enforcement of this state's certificate of need laws while being fiscally self-sufficient, as is required by Chapter 1043 of the Public Acts of 2016.

STATEMENT OF ECONOMIC IMPACT ON SMALL BUSINESSES

1. Most certificate of need applicants are either hospitals, surgery centers, outpatient diagnostic centers, nursing homes, mental health hospitals, intellectual disability institutional habilitation facilities; home care organizations, or physicians' practices. Most applicants are not small businesses. Since there is much money to be made from many services requiring a certificate of need, which applicants should be considered small businesses is a grey area (e.g., certain physicians' practices, certain home health agencies). The smallest physicians' practices and the smallest home care organization applicants would feel the effect of increased fees the most, whereas it is expected that larger applicants could easily absorb increased fees while appreciating the trade-off with Chapter 1043 of the Public Acts of 2016's otherwise reducing the number of services requiring applications. 2. The proposed rule should not affect projected reporting, recordkeeping and other administrative costs, including the type of professional skills necessary for preparation of the report or record. 3. The probable effect on impacted small businesses and consumers should be minimal, because few potential applicants are so small as to be deterred by fee increases in the proposed rule, given the relation to capital expenditures of most health care projects. If consumers need services that require a certificate of need, there is little doubt that an applicant would come forward, due to the profitability of most covered services. 4. There is no less burdensome, less intrusive or less costly alternative method of achieving the purpose and objective of the proposed rule that may exist, because it is necessary to comply with Chapter 1043 of the Public Acts of 2016. 5. There is no federal counterpart, and the reformation of this state's certificate of need laws through the Act makes comparisons to other states "apples and oranges." 6. The possible exemption of small businesses from all or any part of the requirements contained in the proposed rule would necessitate the fees to be increased further on remaining applicants.

SS-7039 (June 2016) 6 RDA 1693 Impact on Local Governments

Pursuant to T.C.A. §§ 4-5-220 and 4-5-228 "any rule proposed to be promulgated shall state in a simple declarative sentence, without additional comments on the merits of the policy of the rules or regulation, whether the rule or regulation may have a projected impact on local governments." (See Public Chapter Number 1070 (http://state.tn. us/sos/acts/106/pub/pc1070. pdf) of the 2010 Session of the General Assembly)

The proposed rule amendments should not have a financial impact on local governments.

SS-7039 (June 2016) 7 RDA 1693 Additional Information Required by Joint Government Operations Committee

All agencies, upon filing a rule, must also submit the following pursuant to T.C.A. § 4-5-226(i)(1 ).

(A) A brief summary of the rule and a description of all relevant changes in previous regulations effectuated by such rule;

The rule raises the filing fee for a certificate of need application from $2.25 per $1,000 of the estimated capital expenditure involved to $5. 75 per $1,000 of the estimated capital expenditure involved, the minimum filing fee from $3,000 to $15,000, and the maximum filing fee from $45,000 to $95,000. It also clarifies that the agency may recoup certain costs in contested cases that are voluntarily dismissed; TC.A.§ 68-11-1610 provides "All costs of the contested case proceeding, including the administrative law judge's costs and deposition costs, such as expert witness fees, shall be assessed against the losing party in the contested case. If there is more than one losing party, the costs shall be divided equally among the losing parties. No costs shall be assessed against the agency."

(B) A citation to and brief description of any federal law or regulation or any state law or regulation mandating promulgation of such rule or establishing guidelines relevant thereto;

Chapter 1043 of the Public Acts of 2016 ("Act") amended the Tennessee Health Services and Planning Act of 2002, T.C.A. § 68-11-1601, et seq. (CON statute}, which amendments included the elimination of certain activities from the state's certificate of need (CON) requirement and the significant revenue generated by those applications annually. The Act requires the agency to develop quality standards and enforce annual reporting requirements on such standards for applications approved after July 1, 2016, while providing no funding for such activities. The Act requires the agency to be fiscally self-sufficient, which means no longer receiving monies from the General Fund above fees generated by CON applications. The Act requires the agency to prescribe fees in an amount that provides for the cost of administering the implementation and enforcement of the CON statute by the aqency, and adjust fees as necessary to provide that the account is fiscally self-sufficient.

(C) Identification of persons, organizations, corporations or governmental entities most directly affected by this rule, and whether those persons, organizations, corporations or governmental entities urge adoption or rejection of this rule;

I CON applicants and litigants

(D) Identification of any opinions of the attorney general and reporter or any judicial ruling that directly relates to the rule or the necessity to promulgate the rule;

NIA

(E) An estimate of the probable increase or decrease in state and local government revenues and expenditures, if any, resulting from the promulgation of this rule, and assumptions and reasoning upon which the estimate is based. An agency shall not state that the fiscal impact is minimal if the fiscal impact is more than two percent (2%) of the agency's annual budget or five hundred thousand dollars ($500,000), whichever is less;

Chapter 1043 of the Public Acts of 2016 ("Act") eliminates approximately half of the agency's revenue, while requiring the agency to adjust fees to become self-sufficient. This requires the agency to look at budget cuts and adjust fees to cover the rest of its $1.2 million budget. The agency's fiscal note detailed the revenue foregone by the Act, and noted that the only way to make the bill revenue-neutral would be siqnificant fee increases.

(F) Identification of the appropriate agency representative or representatives, possessing substantial knowledge and understanding of the rule;

J Melanie Hill, Executive Director, and Jim Christoffersen, General Counsel

(G) Identification of the appropriate agency representative or representatives who will explain the rule at a scheduled meeting of the committees;

J Melanie Hill, Executive Director, and Jim Christoffersen, General Counsel SS-7039 (June 2016) 8 RDA 1693 (H) Office address, telephone number, and email address of the agency representative or representatives who will explain the rule at a scheduled meeting of the committees; and

Andrew Jackson Bldg., 9th Fl., 502 Deaderick St., Nashville, TN 37243 (615) 741-2364 [email protected] [email protected]

(I) Any additional information relevant to the rule proposed for continuation that the committee requests.

SS-7039 (June 2016) 9 RDA 1693 STATE OF TENNESSEE HEAL TH SERVICES AND DEVELOPMENT AGENCY 502 Deaderick Street, 9th Fl. Nashville, Tennessee 37243 (615)741-2364

MEMORANDUM

RE : RESPONSE TO ORAL AND WRITTEN COMMENTS REGARDING THE PROPOSED RULEMAKING RULES AMENDING 0720-10-.03 AND 0720-13-.02

DATE: 11/2/2016

1. The proposed fees were calculated by the Health Services and Development Agency ("HSDA") members at its public hearing on 6/22/2016 to comply with Chapter 1043 of the Public Acts of 2016 ("Act"}, with the goal being the minimum fees increases as necessary to provide for the cost of administering the implementation and enforcement of this state's certificate of need laws by while being fiscally self-sufficient. The fees are not intended to enhance the operating budget, which will be reduced by cost-cutting measures to help offset revenue lost due to the Act.

2. The proposed fees are not expected to jeopardize innovation and expansion of healthcare in Tennessee, because most applicants will not be deterred by the fees, and most services requiring a CON are lucrative. The proposed fees are still but a small fraction of the overall capital expenditure for most health care projects; new-entrants to the home care business are likely the most-affected, but the state health plan's criteria and standards that guide certificate of need decisions show no need for new home care organizations in most counties.

3. Projections were based upon looking back at a three-year Fiscal Year period; FY 15/16 was not one of the years examined, because the number of ICF/ID home applications necessitated by the closure of Greene Valley Developmental Center renders the numbers for that year a red-herring, as few ICF/ID applications are expected in the next several years. The number of applications received during the three-year Fiscal Year period reviewed by the HSDA members varied from the forties to sixties, which underscores unpredictability of revenue. HSDA members ran several scenarios at its 6/22/2016 meeting, to ensure its budget would be covered even during the leanest Fiscal Year year of the period examined.

4. The HSDA had not performed calculations as to whether the proposed $15,000 minimum fee equates roughly to ½ percent of a project cost at $2.6 million.

5. It is noted that an attendee commented that while there is uncertainty regarding the impact of the Act's changes to the certificate of need laws, the certainty of fewer things subject to review, and therefore fewer application fees, consultant fees, and appeal fees, provides greater certainty even with the higher fees on remaining applications.

6. The proposed rule changes only pertain to 0720-10-.03 and 0720-13-.02. Further Rulemaking is in the pipeline for other changes necessitated by the Act. RULES OF TENNESSEE HEALTH SERVICES AND DEVELOPMENT AGENCY

CHAPTER 0720-10 CERTIFICATE OF NEED PROGRAM- SCOPE AND PROCEDURES

TABLE OF CONTENTS

0720-10-.01 Private Professional Practice Exemption 0720-10-.02 Activities Requiring Notification - Miscellaneous Provisions 0720-10-.03 Standard Procedures for Certificate of Need 0720-10-.04 Emergency Certificate of Need 0720-10-.05 Consent Calendar 0720-10-.06 Expiration, Revocation, and Modification of Issued Certificates

0720-10-.03 STANDARD PROCEDURES FOR CERTIFICATE OF NEED.

(5) Examination Filing Fee. (a) The amount of the initial fee shall be equal to~ $5.75 per $1 ,000 of the estimated capital expenditure involved, but in no case shall this fee be less than ~ $15,000 nor more than $95,000. $45,000.

{b) Any unpaid balance of litigation costs previously assessed against the applicant or any related entity of the applicant by the +em1essee l=lealth i::acilities Commission or the Tennessee Health Services and Development Agency may be offset against any filing fees paid. An application will not be deemed complete until the full filing fee, as well as such off set amounts, are paid in full.

(c) A final fee will be determined upon The Agency's receipt of the final project report. The amount of the final fee shall be the difference between the initial fee and the total fee based on actual final project costs, as such fee is calculated based on~ $5.75 per $1 ,000 of project costs, but in no case shall the total fee be less than $J,OOO $15,000 nor more than $95,000.$4-arOQQ,.

RULES OF TENNESSEE HEALTH SERVICES AND DEVELOPMENT AGENCY

CHAPTER 0720-13 RULES OF PROCEDURE FOR HEARING CONTESTED CASES

TABLE OF CONTENTS 0720-13-.01 General Procedures for Contested Cases 0720-13-.02 Contested Cases Before Administrative Judges Sitting Alone 0720-13-.03 Agency Review of Initial Orders 0720-13-.04 Declaratory Orders

0720-13-.02 CONTESTED CASES BEFORE ADMINISTRATIVE JUDGES SITTING ALONE.

whether voluntarily or involuntarllv, the petitioning party or parties shall be considered a "losing partt under TCA 68-11-1610. The original transcript and one copy of the transcript for each member of The Agency shall be provided to The Agency by the other parties, if the case is to be reviewed by the full Agency.-Othei:-oost&-e-f-.tho preseeei-Ag; lneh,1oin9-tl:le- Aemif1istfati.ve-J.l:f<:i9e!s-Gest&-st:1all-Ge-a668SSed~y The-AgeAGY---4r-i aGGGr