The Challenge: Among four competitive CON applications, help our client win state approval for an all-new, 48-bed hospital in a fast-growing region.
The Background: Our client, a $7 billion nonprofit health system, operated two hospitals plus an outpatient campus in a sprawling, coastal county. With the county population growing by 5% a year, forecasts showed that a small excess of hospital beds in 2025 would turn into a 400-bed deficit by 2030.
To meet the county’s growing healthcare needs, our client was considering a $56 million investment to build an acute care hospital on its existing outpatient campus. But before we decided to formally apply, a competing system filed its CON for a new hospital campus just two miles away. Two other systems quickly signaled plans for competing applications of their own, bringing nearly 250 new beds to the service area – considerably added capacity than the state’s health plan had anticipated.
With regulators unlikely to sign off on all of the additional capacity, we were tasked with proving that our client’s proposed facility would provide the right care in the right place at the right cost, positioning it to prevail in the CON review.
Our Work: Drafting a CON for an all-new hospital would normally take about six months, but a competitive application required that we turn around the application in half that time. Fortunately, we weren’t newcomers to the market: As the client’s longtime strategy consultant, we had worked for years to understand and respond to the county’s healthcare needs, including medical staff development, outpatient services, and a freestanding emergency department.
As other systems scrambled to document the need for their proposed hospitals, we were the first to respond with a CON application that offered extensive data and compelling narrative for each of the state’s eight criteria:
- Community Need
- Distribution/accessibility
- Acceptability
- Record of the applicant
- Cost containment
- Ability to complete the project
- Adverse impact
- Staff resources
Our Findings: If state regulators felt the need to limit hospital construction within a fairly small area, we argued that our client’s project was best suited to meet the community’s needs. Our outpatient campus was routinely referring up to 20 patients a day for hospital admission – patients who would be better served in a facility close to home, by providers they knew and trusted.
With a campus infrastructure already in place, we offered the fastest development time and lowest cost of any proposal – up to 50% less than competing projects on a per-bed basis. Our client also was able to fund the project with no bond issue and no impact on patient charges.
Most of all, we showed that our project best sized and located to meet the needs of area residents. Our client was the first to build a major healthcare campus in the community, so we had historical data plus population trends to support our need assessment. We weren’t reacting to competitive pressure. In fact, we argued that hospital expansion was not a zero-sum game. Based on growth trends, even when our 48 beds were up and running, we would meet only half the need in the community.
The Outcome: Litigation ensued when several competing systems took the opposite tack, insisting that only their applications should be approved, and others denied. The state’s official healthcare plan seemed to support that position, with roughly 150 new beds envisioned for the market. But eventually, our analysis won the day, and all four systems came to agree that population growth would support 250 new beds without undue competitive strain.
With that agreement, a lengthy delay was avoided, and our client announced its new hospital to great acclaim in the community. Development is already underway.
The Takeaway: Regulators in CON states want healthcare capacity that’s right-sized to meet a community’s need – and the “right” level is not always preordained. With strong data, compelling analysis, and deep knowledge of the market, even official forecasts are subject to revision.
