Is the CON Physician Office Exemption in Jeopardy?


There is an ongoing discussion among healthcare provider associations regarding the appropriateness of the Physician Office Exemption ("POE") under the Certificate of Need ("CON") Program. For years, the State Health Planning and Development Agency ("SHPDA"), the state agency overseeing the CON process, has allowed for an exemption to CON review for services performed by a physician office meeting certain statutory requirements. In its current form, in order to take advantage of the POE, the following requirements must be satisfied:

  • The services are provided, and related equipment used, exclusively by the physicians identified as owners or employees of the physicians' practice for the care of their patients;
  • The services are provided, and related equipment used, at the office of such physicians;
  • All patient billings related to such services are through, or expressly on behalf of, the physicians' practice; and
  • The equipment is not used for inpatient care, nor by, through, or on behalf of a healthcare facility.

Over the past few years, the POE has been used more frequently by physician offices seeking Letters of Non-Reviewability confirming that the performance of interventional and therapeutic procedures within the office is not subject to CON review, as long as the above-stated requirements are satisfied.

In September, by way of a letter to SHPDA, the Alabama Hospital Association ("AlaHA") expressed concerns with physician offices utilizing the POE to perform interventional/therapeutic procedures within their offices. In its letter, AlaHA expressed concerns with patient safety and quality when such procedures are performed in a physician office, as opposed to a general acute care setting. According to AlaHA, the trend of requesting Letters of Non-Reviewability for interventional procedures performed within a physician office "blurs the lines between diagnostic procedures that can be safely performed within a physician's office setting and more risk based interventional/therapeutic procedures that originally could only be performed in a hospital setting."

In October, by way of a letter to SHPDA, the Medical Association of the State of Alabama ("MASA"), and 450 of its member physicians, filed a response to the concerns expressed by AlaHA in its September letter. MASA's response noted that the POE needs no adjustment, as it is established statutory law. Further, MASA responded that the Alabama Board of Medical Examiners, the state physician licensing body, has the authority to address potential safety concerns for services offered in a physician office, not SHPDA.

In response to these filings, SHPDA and the Certificate of Need Review Board ("CONRB") requested an update on the discussions between AlaHA and MASA on the use of the POE for interventional/therapeutic procedures. Representatives from AlaHA and MASA appeared at a recent CONRB meeting to provide an update "for informational purposes only."

At the recent meeting, the CONRB expressed that it has become increasingly concerned by the intensity level of care provided in physicians' offices. Further, it has concerns that the Letter of Non-Reviewability process and the POE is being used in a manner not contemplated by the exemption. MASA and AlaHA were encouraged by the CONRB to come to a consensus on adding a patient safety/quality measure to the POE or to the applicable CON regulations. However, as of the writing of this article, nothing has been agreed upon or formalized.

Thus, for now, the POE remains intact, and no action has been taken with regard to the use of the POE for interventional/therapeutic procedures performed within a physician's office. However, all physician practices currently providing services pursuant to the POE, or desiring to provide such services in the near future, should stay tuned. The recent actions may signal future regulatory action concerning the POE.

Kelli Fleming is a Partner at Burr & Forman LLP practicing exclusively in the firm's healthcare industry group.


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