States tighten CON laws on outpatient imaging

May 22, 1991

Georgia and Alabama have broadened the scope of their certificateof need laws to encompass outpatient imaging. The CON changesmay slow the flow of medical imaging revenues away from hospitalsand could affect competition between in-house and

Georgia and Alabama have broadened the scope of their certificateof need laws to encompass outpatient imaging. The CON changesmay slow the flow of medical imaging revenues away from hospitalsand could affect competition between in-house and freestandingimaging facilities.

Georgia Governor Zell Miller signed amendments to the state'sCON requirements into law last month. Those amendments bring outpatientdiagnostic imaging centers and other expensive ambulatory servicesunder the health-care cost control program's jurisdiction. A newAlabama law, also enacted in April, will have nearly identicalimpact upon high-tech health-care operators.

All plans for magnetic resonance imaging, computed tomography,biliary lithotripsy, radiation therapy and outpatient cardiaccatheterization or surgery centers must now pass CON muster withthe State Health Planning Agency in Georgia, said spokespersonMichael Clark. The rule applies to fixed and mobile services andto programs underwritten by hospitals or physicians' groups.

The new Alabama law extends CON requirements to freestandingclinics. CON had previously been limited to hospitals. All facilitiesmust now submit a CON application for major medical equipmentpurchases of more than $500,000, said James Sanders, directorof CON review with the Alabama State Health Planning Agency. Existingequipment is exempt.

Physician-owned services had been exempt under the old Georgialaw, creating a huge trade in joint ventures between physiciansand hospitals seeking relief from CON review. The amendment closedthat loophole, according to Paul Bolster, director of governmentrelations for the Georgia Hospital Association.

"CON couldn't do its job before. (This change) makes CONa more effective capital cost-control mechanism," he said.

Existing services can apply for a grandfather exemption toCON, if they operated before April 1990, Clark said.

Developers of planned services can apply to be spared fromCON if 30% of their development costs were spent by April 24 andif patients are served before Jan. 1, 1992.

Applications for exemption will give the planning agency itsfirst peek at exactly how many MRI systems, CT scanners and otherpieces of high-technology medical equipment operate in Georgia,Clark said. The application deadline is July 1.

In Alabama, Sanders anticipates the new rule might slow downthe proliferation of freestanding MR centers, especially thosethat fall short of the 1500 studies a year required for regulatoryapproval.

"The regulation puts hospitals on an equal footing (withfreestanding centers). Doctors are not required to care for indigentsin the way hospitals must. This rule is seen as a way to keepsome revenue in the hospitals," Sanders said.